TaxTMI 
TaxTMI 
2026 (8) TMI 943
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.... leave to add or amend any one or more of the grounds of appeal as stated above as and when need for doing so may arise. 3. Ld. CIT(A) has erred in law and facts in deleting the addition of 3 Rs. 2,64.19.000/- on account of cash deposits u/s. 68 of the Income Tax Act 1961. 4. Ld. CIT(A) has erred in law and facts by not appreciating that u/s. 68 the AO is not required to reject the books of accounts. The only requirement is that, if the explanation offered by the assessee is not, in the opinion of the Assessing Officer satisfactory, the sum (cash sales) so credited can be charged to income-tax as the income of the assessee of that previous year." 2. The facts of the case are that during the demonetization period, the assessee deposited cash of Rs. 2,83,19,000/- in its accounts at Punjab National Bank, YES Bank and HDFC bank. In the course of assessment, the ld. Assessing Officer asked the assessee to furnish details containing the sources of such cash deposits duly supported with documentary evidences. A response was submitted and from the same, the ld. AO deduced that the entire cash deposit of Rs. 2,83,19,000/- was in specified bank notes and had been claimed....
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....nsaction had taken place that could not have entitled the assessee to claim the benefit under law. He pointed out that in the A.Y. 2016-17 only 4% of the assessee's turnover was in cash and previously such huge cash sales had never been made but in the A.Y. 2017-18, when the turnover was only 5,98,56,167/-, the total cash sales were Rs. 3,62,31,285/- and of this in the month of October 2016 alone, cash sales had been shown at Rs. 1,37,21,025/-which went to prove that bogus sales had been credited in the books of accounts to accommodate unaccounted sales. The ld. AO also pointed out that purchase was an important factor and therefore, the purchase pattern had also been verified from the purchase register that was made available during assessment proceedings. He noted that as per the purchase register, the last purchase had been made on 29.09.2016 of Rs. 7,16,000/- from M/s Shivam Masala and thereafter no purchases were evident in the month of October. Thereafter, between 1.11.2016 and 5.11.2016, total purchases of Rs. 1,55,11,009/- had been made and thus examination of this purchase register revealed that the entire purchases were claimed only to have been made from related concerns....
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....ad substantial cash in hand was not acceptable and only Rs. 19,00,000/- of the amount of Rs. 2,83,19,000/- was explained. Therefore, he disallowed the balance of Rs. 2,64,19,000/- and added the same back under section 68 of the Income Tax Act. 3. Aggrieved with the said order passed by the ld. AO, the assessee filed an appeal before the NFAC. The ld. CIT(A), NFAC observed that the AO had drawn up a chart without any proper basis and on the basis of imaginary figures of sales and cash in hand to show that the assessee had no cash in hand as on 1.09.2016. On the other hand, the assessee had filed a detailed chart showing cash sales, cash withdrawal from bank, cash deposit in bank, cash incurred against expenses and cash in hand which made out that it had total cash in hand of Rs. 50,29,805/- as on 1.04.2016. Furthermore, the assessee had filed a chart before him which demonstrated that there was sufficient cash in hand for making the deposit in the bank account. The ld. CIT(A) noted that as such the source of the cash deposit was explained by the books of accounts. He also noticed that the assessee had filed the details of purchases and sales and also the VAT returns but the AO ha....
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....of the huge cash sales and in response, the assessee furnished a comparative charts alongwith the cash book, sales register and VAT returns. But the AO rejected the genuineness of huge sale figures prior to demonetization on the basis of lower sales figures in the previous years. He had not doubted about the books of accounts meticulously maintained by the assessee alongwith the VAT returns and sales figures, he had not rejected the books of accounts and had therefore, not disputed the purchases and sales turnover and when the VAT sales returns figures had been accepted by the other Revenue authority, then there was no room left to doubt the actual sales figure. He, therefore, held that adding back the same sales receipts was a clear act of double taxation not permissible in law and stating this he deleted the addition of Rs. 2,64,19,000/- that was made under section 68 of the Act. 5. The Revenue is aggrieved at this order of the ld. CIT(A) and has accordingly come in appeal before us. Sh. Amit Kumar, Addl CIT DR (hereinafter referred to as the ld. DR) representing the Department pointed out that the ld. CIT(A) had erred in law and facts by not appreciating that under section 68....
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....day and had therefore, generated vouchers of cash sales at his will taking advantage of his huge stock and business. But he had not been able to show that the huge cash sale was not irregular and was a part and partial of business. Since, the pattern of cash sales was not in accordance with the pattern exhibited by him over a period of time, the AO was justified in coming to the conclusion that the sales were manipulated. The AO had calculated the actual amount of likely sales on the basis of the assessee's own trends and determined the amount of cash that was unexplained. He had also computed that the assessee could not have cash in hand as on 1.09.2016 as claimed by him and therefore, had brought sufficient material on record for sustaining the said addition. Accordingly, he prayed that the order of the ld. CIT(A) may kindly be over turned and the additions made by the AO may be upheld. 6. Responding to the aforesaid arguments, Sh. Swarn Singh, C.A. (hereinafter referred to as the ld. AR) submitted that the assessee was a Private Limited Company engaged in the business of Supari and Kattha. It's turnover was above the prescribed limit for audit under section 44AB and its accou....
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....had not been done. During the course of assessment proceedings, the assessee had submitted the details of opening stock, purchases, sales, closing stock and expenses relating to the trading business and none of these had been refuted by the AO. It was submitted that the ld. CIT(A) had considered that these were fully verifiable and therefore, the genuineness of cash sales were proved. The ld. AR placed reliance on the decision of the Delhi Bench of the ITAT in the case of Satya Pal Shiv Kumar vs. ACIT (2025) 173 taxman.com 317 Delhi, wherein it was submitted that on identical facts, the Hon'ble Bench had held that once opening stock, sales and closing stocks have been duly disclosed by the assessee and the same had been accepted in audit, unless deficiency or inaccuracy in inventories was cited by the AO, the rejection of the assessee's books only on entry of cash deposits during demonetization period was not justified if the other components of trading results and profit margins had been accepted. The ld. AR also placed reliance on the decision of the ITAT Chennai Bench in the case of Dy. CIT vs. Vishwa and Devji Diamonds P. Ltd. (2025) 171 taxman.com 474 (Chennai-Trib) in which t....
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....h Prasad (1969) 72 ITR 194 wherein the Hon'ble Supreme Court had held that even if a cash credit represented income, it was always open to the assessee to show that it was income from a source which had already been taxed. Since, the assessee had already offered the amount for taxation, therefore, there could not be any question of taxing it again. The ld. AR also invited our attention to two other decisions passed by this Bench in the case of Tack Exim Pvt. Limited vs. Asstt. Commissioner of Income Tax, Kanpur (ITA No. 324/LKW/2024) in which this Bench had held that where the sales had been accepted by the AO, he could not have legally brought to tax the cash deposited in the bank being the balance of sale proceeds as this would tantamount to double taxation and our order in ITA No. 351/LKW/2020 and ITA No. 431/LKW/2020 in the matter of M/s Motor Fab Sales P. Ltd. vs. The DCIT/ACIT wherein it had been held that where the book results declared by the assessee had been accepted without any defect having been pointed out, the AO had proceeded on mere suspicion while treating the sale as bogus and making the impugned addition under section 68 of the Act. Accordingly, it was prayed tha....
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....ers concerns only so as to create a channel of purchase and sales to explain the deposit of money. He comes to this conclusion on account of the fact that he was unable to relate payment for such purchases to the actual purchases made. We again note that the suspicion could only be a starting point for further investigation and the purchase of goods on credit cannot in itself be a ground to reject the genuineness of the purchase. We further note from the assessee's submission that the AO had issued notices under section 133(6), but could not find anything adverse in this regard. On the contrary, we note from the paper book filed by the assessee that the assessee had inventories amounting to Rs. 4,61,89,436.20/- as on the first day of the accounting year and that the assessee is able to explain an opening stock of worth Rs.4.40.89.630.13/- as on 1st October, 2016 as per the perpetual inventory method, prepared on the basis of its VAT returns filed upto September, 2016, which we note had been filed on 20.10.2016 i.e. before the date of demonetization. In the circumstances, there do not appear to be any reasons to question the sales made by the assessee in the month of October, 2016 w....