TaxTMI 
TaxTMI 
2026 (1) TMI 65
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....ided Scrutiny Selection (CASS). During the course of assessment proceeding, detailed questionnaire was issued. A specific format (on page 2 to 6 of the questionnaire) was given to the assessee to fill in and submit. The assessee submitted the filled in proforma on cash deposits. The same has been examined. The learned Deputy Commissioner of Income Tax, Circle 1, Ranchi has not accepted the cash sales made during the year together with payment of taxes on sales and VAT returns filed. Further the learned Deputy Commissioner of Income Tax, Circle 1, Ranchi has treated the deposit of cash in bank as unaccounted cash credit u/s 68 when the same is duly recorded in books of accounts. Written Submission Anand Choudhary proprietor of M/s Anand Hardware and Tools filed his original Return of Income for the A.Y. 2017-18 relevant to the Previous Year 2016-17, vide e-filing acknowledgement no. 936389201260717 on 26.07.2017 declaring a total income of Rs. 45,26,480/-. The return was processed u/s 143(1) of the Income-tax Act, 1961. Subsequently, the case was selected for Scrutiny through Computer Aided Scrutiny Selection (CASS). Accordingly, a notice u/s 143(2) of the....
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....oncluded that the assessee having retained the unaccounted money had deposited the same and trying to show it as an accounted part from its sale proceeds. All details required were submitted however with a predetermined mind addition of part of the cash deposits made in the bank have been treated as unexplained. It is judicially well settled under the Income tax law and also under the Indian Evidence Act that books of account maintained in the regular course of business, backed by supporting evidence, do carry substantial evidentiary value. They can't be rejected on the basis of mere disbelief or on suspicion and surmises or speculation. While passing the order assessing officer ignored the comparative details of 3 years submitted, from the perusal of the same it can be seen that the assessee has a 44% increase in sales and a 250% increase in net profit from the retail trade, which gives credence to our submission regarding utilizing the period of Diwali for clearance and additional incentive allowed on cash sales. All purchases as well as sales are duly recorded in the Books and auditors have also not pointed out any defect in the books of accounts maintained in the T....
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....SC) Commissioner of Income-tax Vs. Ram Narain Goel 224 I.T.R. 180 (Punjab & Haryana). The decision is based on the principle decided by the Honorable Supreme Court of India in a plethora of cases. In the case of Vijay Kumar Arora Vs. State Govt. of NCT of Delhi in Criminal Appeal No. 125 of 2009 dt. 13.01.2010 it was held that "The law relating to circumstantial evidence is well settled. In dealing with circumstantial evidence, there is always a danger that conjecture or suspicion lingering in the mind may take the place of proof. Suspicion, howsoever, strong cannot be allowed to take the place of proof, and therefore, the court has to be watchful and ensure that conjecture and suspicion do not take the place of Legal proof. The doctrine of benefit of the doubt applies - The court should exclude each and every hypothesis. Supreme Court judgment decided on 24.8.2012 in the case of Subramanian Swamy Vs. A. Raja (2G spectrum case) honorable Supreme Court - "Held, Suspicion, however strong, could not take place of legal proof" Suspicion however high cannot be a substitute for legal proof Roop Singh Nagir Vs. Punjab National Bank (2009) 2 SCC 570 (Par....
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....ine the 'real income', permissible expenses are required to be set off. When the assessing officer has not doubted the genuineness of purchases or opening stock and has not rejected the books of accounts u/s 145(3), then the Assessing Officer cannot deny the source of cash deposit out of cash sales and thus he cannot make any addition under section 68 of the Act. Before taking any adverse view regarding sales as declared by the assessee resulting in the accumulation of cash in books of account of the assessee it has to be established beyond doubt that there are no sales and cash is generated out of any other undisclosed source, only then Sections 68 comes into play. It is to be noted that the provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only. There is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, the corresponding sales cannot be disturbed without giving any co....
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....Korlay Trading Co.,. Ltd. (1998) 232 ITR 820 (Cal). □ Kamal Motors v. CIT [2003] 131 Taxman 155 (Raj.). □ CIT v. R.S. Rathore [1995] 212 ITR 390 (Raj.), □ Life Insurance Corporation of India vs. CIT (1996) 219 ITR 410 (SC) □ CIT vs. Metachem Industries (2000) 245 ITR 160 (MP) □ CIT vs. Oasis Hospitalities Pvt. Ltd., 333 ITR 119 (Delhi)(2011). The statement of the assessee is further supported by the audited books of account of the assessee, bank-wise summary of cash deposits, copies of the bank statement, and details of monthly cash sales and cash deposits. Further, even out of Rs. 192.68 Lacs, deposits of Rs. 25 lacs were in new currency notes and non-demonetized old currency notes (Rs. 10/20/50/100). This inference gets strengthened when the Assessing officer accepts most of the deposits as related to business but goes on to treat the balance deposits as unexplained money without proving the contrary. With respect to the deposit of the cash on hand with the bank, the explanation of the assessee that the bank was not accepting huge cash in one go, and therefore assessee had to deposit the ....
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....o.327/Agra/2017, dtd.31.5.19] Agson Global Pvt Ltd vs ACIT: ITA No.3741/Del/2019 (Del Trib.) Held that once the books of account were accepted by the Department and the cash sales recorded therein were considered in arriving at the assessed income of the assessee, the cash deposited in banks against such cash sales could not be treated as undisclosed income of the assessee under section 68 without bringing on record any credible evidence/material. Meeran Mohideen vs ITO: ITA No. 2423/Chn/2018 (Chennai Trib.) Where no fault in the accounts of the assessee was pointed out and profits were made in the earlier year simply because huge cash deposits were made during demonetisation, addition is unsustainable Various courts have held that presumption, however, strong, cannot be a substitute, nor can it take the place of evidence, and the rule of estimation is no substitute for HIGH COURT OF ALLAHABAD in the case of Kanpur Steel Co. Ltd. v. CIT [1957] 32 ITR 56 (All), approved in Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) held that "Once the assessee is able to explain the sources of deposits in the bank based on the cash ....
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....ted out any defect in the books of accounts. Therefore, the Assessing Officer cannot treat the cash generated from sales duly recorded in books of account from unexplained/unaccounted sources unless books of account are rejected based on valid reasons. Polepalli Srinivasulu Gupta vs DCIT I.T.A. No.240, 241, 242, 243, 244, 245 & 246/Viz/2021 dated 28/06/2022 The Income Tax Appellate Tribunal (ITAT), Visakhapatnam bench has deleted an addition under section 69A of the Income Tax Act, 1961 by holding the deposit of banned notes received by the assessee from cash sales during demonetization period is legally valid. Bench has relied on the judicial pronouncement in the case of Principal Commissioner of Income Tax vs. Agson Global (P) Ltd, and held that the cash sales made by the assessee deposited in the bank account are in accordance with law and hence the addition made by the AO is deleted. 2. Asst. Commissioner of Income Tax Vs M/s Hirapanna Jewellers I.T.A. No.253/ Viz/ 2020 dated 12/05/2021 The Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench ruled that no cash inflow involved due to demonetization as the assessee explains the reason for....
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....ly of sales and corresponding stock - Addition undersection 68 on account of cash deposits could not be made simply on reason that during demonetization period, cash deposits vis-a-vis cash sales ratio was higher - Whether once, it had been established that sales representing outflow of stocks was duly accounted in books of account and there was no abnormal profit during year, then there was no justification to treat deposits made in bank account out of cash sales to be income from undisclosed sources 5. M/s Suresh Chand Subhash Chand Vs I.T.O. Ward 14(1), New Delhi I.T.A .No.-101/Del/2015 Bench held that we are of the considered view that the assessee has been able to explain the source of cash deposited in SBN during the period of demonetization and already paid taxes on the income earned from the cash sales which was the immediate source of such deposit, therefore, no further addition could be made towards such cash. 6. J.R. Rice India Pvt. Ltd vs ACIT ITA No.2852/Del/2022 31.07.2023 The Bench comprising of Saktijit Dey, Vice-president and M. Balaganesh, Accountant Member observed that the nature and source of credit being sale proceeds receiv....