TaxTMI 
TaxTMI 
2026 (5) TMI 663
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....uced any cogent evidences to prove that the cash deposits made in the Bank Accounts represent the business receipts. ii. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) has not appreciated that during the course of assessment proceedings on being provided ample opportunity of being heard the assessee could not explain the sources of cash deposits and in absence of the same the AO has rightly rejected the books of account of the assessee. iii. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that during the year under consideration the assessee has paid interest of Rs. 1,61,87,004/- on loan taken from bank and also the bank loan has been increased from Rs. 11,54,14,686/- in FY 2015-16 to Rs. 19,23,28,766/- in FY 2016-17 which shows that the explanation of the assessee w.r.t. huge cash balance is not reliable. iv. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer." 3. The brief facts of the case are that the assessee is a partnership firm engaged in retail trading of readyma....
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....ed cash as claimed was not available with the assessee on books, and the books have been recast and manipulated to show cash on 08.11.2016. The AO also held that the fact that the appellant has made cash withdrawals even on 28,10.2016 indicates that the cash-on-hand would not be available to the extent claimed by the appellant The AO held that if there were cash available with the appellant, such sums would not have been withdrawn from the Bank. 6.2 The AO also held that the appellant has failed to explain the day-to-day usage of huge cash balance. Very little cash withdrawals/usage have been made during the year. Therefore, the cash build-up has not been for purpose of business and 'rt is fictitious. The AO held that during the course of assessment proceedings, the appellant failed to produce full name, verifiable address, PANo. of the so-called cash-givers. etc. The cash-book is unverifiable as discussed in the para above. The AO held that as there is no verifiable evidence as regards to the cash balance and the cash book is just a list created by the appellant, in regards to the cash-on-hand, it is just the version of the appellant versus the version of any person, ....
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.... the average amount of a single bill per customer works out to Rs. 6,612. It is a general practice in retail sale of garments in a show room, there is neither any practice to ask for the name, address and PAN of the customer, nor there is any requirement under the Act to maintain the name, address and PAN of the customers to whom retail sales are made, unless the individual bill amount exceeds Rs. 2 lacs. in the case of the appellant firm, not a single sale bill is exceeding the limit of Rs. 2 lacs and AO has also not brought out evidences against it. Therefore, the said observation of the AO that the absence of the name, address, PAN and signature of the retail customers of garments, is a serious defect which makes the proviso to section 145 applicable, is incorrect and not sustainable. 6.4 The Hon'ble High Court of Bombay in the case of R.B. Jessaram Fatehchand (Sugar Dept.) Vs. CIT (.1970) 75 ITR 33 (Bom) has held that there was no necessity whatsoever for the assessee to maintain address of cash customers and therefore, the rejection of the accounts of the assessee on the assessee's inability to supply address of parties who, had purchased goods in cash from it....
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....13 6.6 Thus, the sales of the appellant firm, the cash in respect of which has been deposited in the bank account, are verifiable with the VAT / sales tax returns filed with the sales tax l VAT department, prior to demonetisation. The Hon'ble Amritsar Bench of the Tribunal in the case of Balwinder Kumar Vs. ITQ (2023) 151 Taxmann.com 338 (Amritsar-Trib.) has held that where assessee deposited cash sales made during demonetization period in his bank account and admitted such sales as revenue receipts and books of account of assessee clearly reflected sufficient stock to affect such sales and the revenue authorities had accepted the opening stock, closing stock, purchases, direct expenses, sundry debtors. sundry creditors. all VAT returns without pointing out any defect therein, the AO could not blow hot and cold at the same time by partly rejecting the books of accounts and partly accepting the same, which was bad in law, there was no case of making addition u/s. 69A towards alleged cash deposits in the bank account, The Hon'ble Chandigarh Bench of the ITAT in the case of Smt Charu Aggarwal Vs. DCIT (2022) 140 Taxmann.com (Chandigarh-Trib.) has held that w....
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....fession or "income from other sources shall subject to the provisions of sub- section (2) be computed In accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144'. 6.10 The Hon'ble jurisdictional High Court of Gujarat in the case of CIT Vs" Vikram Plastics (1999) 239 ITR 161 (Guj) wherein it has been held that the books of accounts maintained by the assessee were not found by the AO to be incorrect or incomplete and that no material was brought on record by him to prove that purchases and expenses had be....
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....cash in hand with the assessee. He has noted that in the absence of any expenses to be incurred in cash, there was no reason for the assessee to maintain such cash in hand and he presumed, therefore, that these were all bogus entries of cash sales with the only purpose of introducing the unaccounted income of the assessee for facilitating deposit of it in bank account of the assessee during the demonetization period. There is not a single whisper about any discrepancy noted by the Assessing Officer in the sales recorded by the assessee. All evidences relating to which were admittedly placed before the Assessing Officer. The assessee had also stated all sales to be duly corroborated with corresponding purchases made of the same. All evidences relating to the purchase was also placed before the Assessing Officer. The assessee had also presented his stock register for examination before the Assessing Officer, but not a single document or evidence was examined or investigated by the Assessing Officer. Admittedly, no discrepancy in the books of accounts maintained by the assessee was pointed out before rejecting the books of accounts, and since it is settled law that the rejection of bo....
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....netization period are normal business receipts and therefore, the amount of Deposits during Demonetisation period to the tune of cash sale on 08.11.2016, represented income from undisclosed sources. The AO held that the appellant has manipulated cash book and unexplained sums have been accommodated in various past months. The AO held that the sales shown by the appellant and the cash deposited have been sourced from unexplained sources and that the appellant has failed to discharge it onus u/s 68 to establish genuineness of the transaction, the identity' and creditworthiness of customers. The appellant's cash book as well as the quantum of cash-on- hand as on 08.11.2016, was rejected by the AO, and only amount of Cash on hand was given credit to being the opening cash of Rs. 1,40,92,171 for the year. Hence, the amount of Rs. 5,09,33,829 [65026000-14092171] was added to the income of the appellant as unaccounted sources and unexplained cash on hand. 7.2 The appellant during the-course of appellate proceedings submitted detailed submissions which have been reproduced in para 5.1 of this order. I have carefully considered the facts and evidences on record. The followi....
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....r :- 7.5 From the above table, it is seen that the current year, the total cash sale has reduced to Rs. 35.71 crores from Rs. 43.48 crores in the earlier year and thus, there is a total reduction of -17,86% in the total cash sales in the current year, the total cash sale for the period 1st April to 8th November has reduced to Rs 24 42 crores from Rs 26 36 crores In the earlier year and thus there Is a reduction of - 7 34% in the cash sales prior to demonetization. 7.6 The month-wise summary of cash, giving the detail of cash sales, cash deposited in the bank, closing cash balance at the end of each month etc. for the current year as also for the earlier year upto 31st December, are as under :- A. Y. 2017-18 (Current year) Detail of Month-wise Cash Sales & Cash Deposit from Apr.16 to Dec.16 Month Opening Cash on Hand Cash Sales Cash Withdrawal from Bank Sale of Vehicle Cash Deposited in Bank Other Payments (Withdrawal by Partner, Payment of Exp. etc.) Closing Cash on Hand Apr-16 1,40,92,171 2,53,19,541 20,000 - 1,94,60,000 56,55,532 1,43,16,180 May-16 1,43,16,180 1,67,80,281 - - 87,....
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....posit during 9th November to 31st December 8,08,65,718 8,99,96,305 6,50,26,000 7,67,21,950 New Notes deposited during 9th November to 31st December -- -- 1,65,98,000 -- 7.8 From the above data, in the current, the cash sales for the period 1st April to 31st December was the lowest as compared to the earlier 2 years i.e. A. Y. 201 5-16 & A.Y. 2016-17 as also to the subsequent year Lea A.Y. 2018-19. In the current year, the total cash deposited in the bank for the entire year was also the lowest as compared to the earlier 2 years Le. A.Y. 2015-16 & A. Y. 2016-17 as also to the subsequent year i.e. A.Y. 2018-19. ln the current year, the total cash deposited in the bank for the period 1st April to 8th November and from 9th November to 31st December was also the lowest as compared to the earlier 2 years i.e. A.Y. 2015-16 & A.Y. 2016-17 as also to the subsequent year i.e. A. Y. 2018-19. Therefore, I find that there was no irregularity in the cash deposited by the appellant firm during the demonetisation period and the same was in fact lower in the current year. 7.9 The AO added the whole cash deposit during 9th November to 31st December after ....
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.... deposited in bank by assessee during demonetization period was out of cash sales and realization from trade debtors which was duly shown in books of account and Assessing Officer did not point out any specific defect in books of account maintained by assessee and no inflated purchases or suppressed sales were found, such cash deposit could not be treated as unexplained money of assessee was to be deleted. 7.12 The appellant submitted that in the SCN as issued by the Assessing Officer during the course of assessment proceedings, wherein no explanation has been called for in respect of the cash on hand at the end of each month of the current year and the earlier year. The appellant firm has proved that the sales tax VAT returns for the month of April 2016 to September 2016 were already filed prior to demonetisation and the cash sales as per the said sales tax l Vat returns fully tallies with the cash book and hence, there is no question of any recasting or manipulation. With regards to the deposition of cash in 10 instalments, the appellant submitted that in view of the speech given by the Hon'ble Prime Minister of India on 08-11-2016, where the citizens of the country ....
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....huge amount of cash instead of depositing the cash in the bank to earn interest. However, I find that cash on hand out of cash sales is a regular feature the appellant firm's business of retail sales of garments from year to year and is not only an abnormal feature in the current year as can be seen from the details given in the following table. Detail of cash sales Detail of cash in hand Particulars Earlier year A.Y. 15-16 Earlier year A.Y. 16-17 Current year AY, 17-18 Subsequent year A.Y; 18-19 Cash Sales from 1st April to 31st December 37,28,78,705 33,59,18,900 27,07,90,882 39,28,77216 Particulars 31-3-2014 31-3-2015 3,1-3/42016 08-11-2016 31-3-2018 Cash on hand showroom 73,64,591 78,31,563 1,40,92,171 6,45,59,583 40,28,181 Cash in safe deposit vault 1,00,00,000 3,30,00,000 -- -- 3,00,00,000 Total cash on hand 1,73,64,591 4,08,31,563 1,40,92,171 6,45,59,583 3,40,28,181 7.15 Further, the AO in the last para on Pg. 10 of the assessment order has held that she is not considering the sales of the appellant firm as unexplained or u....
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.... huge interest to the bank and that the amount of loan taken by it from the bank has increased from Rs. 11,54,14,686 in the F.Y. 2015-16 to Rs. 19,23,28,786 in the F.Y. 2016-17 meaning that the appellant was in need to funds and hence, had taken more loan from the bank. Therefore, the AO has held that on one hand, the appellant is taking more loan from the bank, paying more interest and at the same time, keeping huge cash in hand which is neither earning nor saving any money. the AO has stated that in the year under consideration, the appellant has paid interest of Rs. 1,61,87,004 to the bank despite the fact that it was having opening cash of Rs. 1,40,92,171 and maximum cash in hand of Rs. 6,45,59,583 during a single day, during demonetisation period. The AO has held that had there being actual cash in hand of such huge amount then any prudent business entity would have deposited the same into the bank account and saved the cost of interest. 7.20 In response, the appellant submitted the following data of the total cash sales of the earlier 2 years. the current year and the subsequent year showing the following - Average cash sales per day, and. the No. of days of cash sal....
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....in the assessment order that the appellant had not furnished the sales bill during the assessment proceedings, inspite of the same being called for by the then AO. ln Para 7.3 on Pg 4 of the remand report, the AO has stated that the appellant vide its letter dated 15-07-2023, on its own has set a principle that nobody in a retail showroom issues a bill with the name and address of the customer and its mobile number, However, as discussed earlier, in practice, in the retail showroom of sale of garments, no person at the cash counter obtains the full name, verifiable address and PAN of the customer buying the garments in cash unless the bill amount exceeds Rs. 2 lacs per bill. There is also no requirement under the Income Tax Act to maintain the name, address and PAN of the customers to whom retail sales are made, unless the individual bill amount exceeds Rs. 2 lacs and it is even an accepted fact by the AO in Para 7.8(c) on Pg. 23 of the assessment order that not a single cash sale bill in the case of the appellant is exceeding Rs. 2 lacs. ln Para 7.4 on Pg. 4 of the remand report, the AO has stated that the claim of the appellant that as per para 7.8(c) on Pg. 23 of the assessment ....
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....pellant had stated that over and above the cash lying in the safe deposit vault, it had cash of Rs. 1,59,42,881 in its showroom, however, the said amount of cash is the opening balance as on 01-05-2015 instead of 01-04-2015 which has been mistakenly mentioned from the above table. 7.26 The AO in the remand report stated that there is no mention of safe deposit vault in the ROI. In this regard, the relevant extract of the cash and bank balance as forming part of the audit report of the appellant along with the breakup of the cash and the balance with the banks for the year ended 31-03-2015 and the earlier year ended 31-03-2024 shows that that the cash on hand as at the yearend lying at the showroom was Rs. 78,31,563 and the balances with the banks was a total amount of Rs. 5,05,48,582. On going through the breakup of the balances with the banks, it can be seen that cash of Rs. 3,30,00,000 has been lying in the safe deposit vault. 7.27 I am of the considered view that when the purchases were accepted, the and the respective sales including cash sales accepted, then addition u/s 68 of the Act cannot be made in respect of the amount which were found to be properly rec....
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....onetization period and the invoice contains, name and address etc. Further there is no significant increase in the cash sales out of total sales, whereas for F.Y.2016-17 it is @ 31.27% and in comparison to F.Y. 2015-16 @ 31.44%, the Ld.AR referred to the cash flow statement, cash book and demonstrated the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs. 68.07 crs for the F.Y 2015-16 and for F.Y 2016-17 it was maintained at Rs. 65.38 crs and the cash sales are part of the stocks maintained which is not disputed. Further the addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the cash sales proceeds/receipts received from 11 the customers are reflected in the Audited Profit & Loss account as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. The AO has not pointed out any specific adversity but made a generalize addition without considering the factual aspects and primary evidences.....