TaxTMI 
TaxTMI 
2026 (6) TMI 1393
X X X X Extracts X X X X
X X X X Extracts X X X X
....demonetization. 2. The Ld. CIT(A) has erred in law and on facts in holding that mere furnishing of sales invoices and names of alleged customers discharged the onus cast upon the assessee, without appreciating that almost all notices issued u/s 133(6) were returned unserved, thereby rendering the sales unverifiable. 3. The Ld. CIT(A) has failed to appreciate that the AO rightly rejected the books of accounts u/s. 145(3) after recording specific defects, namely (i) all sales on 8.11.2026 were structured below Rs. 2 lakh to avoid reporting under section 269ST, (ii) the assessee could not have physically generated such a large number of bills in the limited time available, and (iii) the alleged buyers could not be traced or verified. 4. The Ld. CIT(A) has erred in disregarding the AO's finding that the assessee artificially inflated sales on the date of demonetization to justify subsequent cash deposits, which constitutes accommodation entries and unexplained money assessable u/s. 68 of the Act. 5. The Ld. CIT(A) has wrongly applied judicial precedents such as CIT vs. Orissa Corporation Pvt. Ltd. and Lalchand Bhagat Ambica Ram vs. CIT, which are dis....
X X X X Extracts X X X X
X X X X Extracts X X X X
....te as prescribed under section 115BBE of the Act, which resulted in an overall assessed income of Rs. 3,06,67,430/-. The assessee has appealed against this addition and the consequent tax liability before the Ld. CIT(A). Ld. CIT(A) has partly allowed the appeal of the assessee. 4. Aggrieved, the Revenue is in appeal before us. 5. We have heard both the sides and perused the records. Ld. DR relied upon the order of the AO. However, Ld. AR for the assessee relied upon the order of the CIT(A) and requested to uphold the same wherein, Ld. CIT(A) has held as under:- 4.1. Adjudication of Ground Nos. 1, 3, 4, 5, 6, 7, and 8: Substantive Addition under Section 68 and Rejection of Books of Account The appellant, in these grounds, argues that the AO's order is flawed in both fact and law. The addition of Rs.2,40,20,465/- is contested on the basis that it was made without providing sufficient evidence or a sound legal basis, and was instead a product of conjectures and surmises. The appellant asserts that the cash deposits in question were fully accounted for in its books of account and were sourced from genuine cash sales made in the normal course of business. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is a drastic step that must be justified with specific, cogent defects. The AO's order makes no mention of any irregularities in the stock register or purchase details. The fact that the purchases were accepted and the stock position reconciled with the sales undermines the rejection of the books. A mere suspicion of "abnormal sales" on a single day, particularly in the unique context of the demonetization announcement, is not a legally tenable reason to reject the entire book of accounts and resort to a best judgment assessment. The appellant's argument that such a large sales volume on a single day is commercially plausible given the circumstances, and citing a large sales team of 25 persons and historical data of issuing over 238 invoices on other dates, is a valid counterpoint to the AO's arbitrary estimation. The judicial principle, as articulated in cases like Laichand Bhagat Ambica Ram v. CIT (37 ITR 288) (SC), is that suspicion or conjecture cannot be a substitute for evidence, and an addition made on such a basis is perverse and unsustainable in law. The ITAT has upheld that sales cannot be rejected on the ground that sales for a particular period are higher c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Taxation Laws (Second Amendment) Act, 2016, which received Presidential assent on 15.12.2016, should not apply to transactions that occurred prior to this date, such as the sales on 08.11.2016. The appellant's position is that the higher rate of tax should be applicable from A.Y. 2018-19, not A.Y. 2017-18. The Taxation Laws (Second Amendment) Act, 2016, specifically amended Section 115BBE with effect from 01.04.2017, making the enhanced rates applicable for A.Y. 2017-18 and onwards. The judiciary has consistently held that while charging provisions of an Act cannot be applied retrospectively, the tax rate for any given assessment year is determined by the annual Finance Act and can be specified to apply to the entire corresponding financial year. The amendment to Section 115BBE, for the purpose of tax rate determination, is considered a procedural aspect that is applicable to the entirety of the financial year 2016-17. Consequently, the AO's action of applying the higher tax rate for A.Y. 2017-18 is in accordance with the law as clarified by various judicial pronouncements. However, the appellant also challenges the charging of interest under Sections 234....