TaxTMI 
TaxTMI 
2025 (12) TMI 1915
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.... out, confirmed the findings of the AO that the cash deposited during the said period remained unexplained but at the same time considered the assessee's argument that this cash deposit had already been accounted for in sales and profits thereon declared for taxation, therefore he directed the AO to exclude the gross profit associated with these purported sales and accordingly recompute the addition to be made to the income of the assessee. 4. The AO, it was pointed out, had also levied tax on the addition so made to the income of the assessee u/s. 69A of the Act at the rate of 60% applying the provisions of Section 115BBE of the Act. This was also challenged before the ld. CIT(A) who confirmed the action of the AO. 5. Aggrieved by the above, the assessee has come up in appeal before us raising the following grounds :- "1. The Ld. CIT(A), NFAC has erred on facts and in law in confirming the addition of Rs. 81,19,256/- (94,49,786 -13,30,530) u/s 69A of IT Act by holding that cash deposit during the demonetization period is unexplained money by directing the AO that since the cash deposit have already been accounted for in sales and profits declared for taxation, t....
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....reating the cash deposit in his bank account during demonetization period amounting to Rs. 94,49,786/-, as being unexplained, and making addition of the same as unexplained money u/s. 69A of the Act. The learned counsel for the assessee during the course of hearing before us, pointed out that the entire case of the authorities below was based on mere assumptions and presumptions. In this regard, he drew our attention to the order of the AO pointing out that the reason for him treating the source of cash deposit in the bank account during demonetization period as being suspect was on account of the following :- "(1) The AO noted abnormal increase in cash sales during the impugned year as compared to the preceding year, which according to him was not possible for any business or profession more particularly in the gold and diamond jewellery business in which the assessee was engaged." Our attention was drawn to the findings of the AO at para 3.2 and 3.3 of the order as under :- "3.2 During the course of assessment proceedings, the assessee, against the source of such cash deposits, relevant details were called for. On examination of the said details of the assess....
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.... exceptional increase in cash sales is not possible. Abnormal increase of cash sales and cash deposits in the bank account as compared to last year was found suspicious as smell a rat and looking to the trend of business of the assessee, it has been found not in order." "(2) The AO found the assessee's explanation of the cash deposit being out of cash sales to be unexplainable since majority of the sales was found to be made below Rs. 2 lacs and the bills contained no details of the customers to whom it was sold making it impossible for the Department to verify the genuineness of the transaction." In this regard our attention was drawn to the para 3.4 of the assessment order as under :- "3.4 The assessee has claimed the source of said cash deposit out of cash sales. While going through the details of such cash sales it has been noticed that almost all such sales are below Rs. 2,00,000/-. However, in almost all cases the identity of the customer is not clear as relevant details like Father's name, address, PAN, Mobile number etc. of the customers are not mentioned. Thus, the said sales are not open for verification. It is pertinent to mention here that i....
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.... have deposited cash amounting to Rs. 36,92,000/- only, thus deviating from the modus operandi of its business or for that matter any business. He further noted cash sales for the period 01.11.2016 to 08.11.2016 to be Rs. 88,25,707/-, while the cash deposited in the bank was only Rs. 10 lacs. His findings in this regard, he pointed out, were contained at para 3.4(b) as under :- "b) On comparison of Cash deposited during the FY 2016-17 and Cash deposited during the FY 2015-16, it has been noticed that in the FY 2015-16, the assessee regularly deposits bank notes so received from cash sales in the bank accounts on day-to-day basis and which is general modus-operandi of any business, which are based on the cash sales. Similarly, in the FY 2016-17, the assessee was also maintaining such modus-operandi of deposits bank notes so received from cash sales in the bank account on day-to-day basis up to September, 2016. Even if, it assumes that the assessee made huge cash sales in the month of October, 2016, then why the assessee did not deposit bank notes in the bank account, as up to September, 2016, the assessee was maintained modus-operandi for depositing day-to-day cash deposits....
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....s. 46,01,586/-. Our attention was drawn to the explanation of the assessee as above was recorded by the AO at para 4 of his order as under :- "4. During the course of assessment proceedings, the opportunity of being heard was given to the assessee and vide his letter dated 21/11/2019, the assessee has stated reason for variation in figure is due to following :- That assessee was having opening cash balance on 08/11/2016 Rs. 53,85,250/-. It was due to Deepawali festival season, could not be deposited into bank in whole. Further there was cash sale on 08/11/2016 for Rs. 46,01,586/- and closing balance as on 08/11/2016 was Rs. 99,86,826/- in firm M/s Chandani Jewellers. Further it is submitted that assessee has shifted his small shop at Bob Building Khatipura Road to present shop in 09/11/2015. Old shop was having 10x10=100 Sq. feet area while new shop is having 1500 Sq. feet area measuring (15x25) basement, ground floor, first and second floor. Earlier assessee's sale in FY 2015-16 was Rs. 1,50,76,276/-and in FY 2014-15 was Rs. 79,96,775/-. So, these figures will not be comparable even though your honour will find 25% of sale is done in Oct and Nov Month." 12....
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.... date wise position of opening cash balance, sale receipts, payment made and deposited in the Bank account and closing cash balance from 01.11.2016 to 08.11.2016 as under :- "2. It is to further submit that the date wise position of the opening cash balance, sales receipt, payment made, deposit in bank account and closing cash balance from 01.11.2016 to 08.11.2016 is as under: - Date Opening Cash balance Sales receipt/ other receipt Payment made Deposit in bank Closing cash balance 01.11.2016 23,59,754 3,89,236 1,625 0 27,47,365 02.11.2016 27,47,365 3,45,602 1,30,000 0 29,62,967 03.11.2016 29,62,967 5,44,596 0 0 35,07,563 04.11.2016 35,07,563 6,44,585 0 5,00,000 36,52,148 05.11.2016 36,52,148 3,33,608 67,000 5,00,000 34,18,756 06.11.2016 34,18,756 11,65,272 d 0 0 45,84,028 07.11.2016 45,84,028 8.01.222 0 0 53,85,250 08.11.2016 53,85,250 46,01,586 0 0 99.86,836 From the above table, it can be noted that cash sales between 01.11.2016 to 07.11.2016 was Rs. 42,24,121/- and on 08.11.2016 is Rs. 46,01,586/-. Th....
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.... The cash balance available as per books is verifiable from the entries made in the cash book which is duly supported by bills and vouchers. The assessee has also regularly deposited the cash in the bank account. Even in the month of October, 2016, cash of Rs. 36,90,000/- was deposited by 26.10.2016. Thereafter because of Deepawali rush, the cash could not be deposited in the bank account. Thereafter on 04.11.2016 and 05.11.2016 which was Friday and Saturday cash of Rs. 5,00,000/- each was deposited in the bank account. After this deposit the cash balance available as per cash book on 05.11.2016 was Rs. 34,18,756/-. On 06.11.2016 which was Sunday there was cash sale of Rs. 11,65,272/-, on 07.11.2016 cash sales was Rs. 8,01,222 and on 08.11.2016 cash sales was Rs. 46,01,586/- for the reasons explained in Para 3 above. Accordingly, the cash balance as per the cash book 08.11.2016 was Rs .99,86,836/- out of which Rs. 98,50,000/- was deposited in the bank account on 12.11.2016. Therefore, on the basis of sales/cash availability as per cash book from April 2016 to September 2016 and from January 2017 to March 2017 cannot be compared with the sales/cash availability in the month of Octob....
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....he RBI and government during the demonetisation period. Consequently, the appellant's explanation for the cash deposits does not align with its historical business practices or with reasonable expectations and human probability. I therefore find no basis to interfere with the conclusion reached by the assessing officer regarding the determination of unexplained cash deposits amounting to Rs. 94,49,786, and accordingly, this finding is confirmed. Accordingly, the ground No. 1 is dismissed. The decisions cited by the appellant have been reviewed; however, they do not appear to be pertinent to the appellant's case. The appellant claimed purported sale of jewellery in exchange for demonetized currency, which is a highly unlikely occurrence. Moreover, the cases referred by the appellant involve distinct factual circumstances." Referring to the above, he stated that the ld. CIT(A) made no attempt at all to find any infirmity in the factual contentions made by the assessee, pointing out the fallacies in the observations made by the AO which led to the finding that the cash deposit in the bank account of the assessee remained unexplained. 17. He pointed out that the ....