TaxTMI 
TaxTMI 
2026 (10) TMI 999
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....sment year 2017-18. The appeal arises from the assessment order dated 26.12.2019 passed under section 143(3) of the Income-tax Act, 1961, in which the Assessing Officer made an addition of Rs.17,37,823 under section 68 by treating a portion of the assessee's recorded cash sales as inflated, and also disallowed Rs.55,021 out of motor-car depreciation and vehicle expenses on account of alleged personal use. The assessee has challenged both additions before the Tribunal. 2. During the assessment proceedings, the Assessing Officer called upon the assessee to explain cash deposits aggregating to Rs.44,85,500 made in its bank account during the demonetisation period. The assessee stated that the deposits were sourced from cash generated in the....
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....ales were a regular feature of the textile business, particularly in dealings with small traders and buyers in the grey market, and that the sales were duly recorded in the books and supported by the stock and other business records. The assessee also disputed the Assessing Officer's method of estimating cash sales by applying a ratio drawn from earlier years, submitting that sales patterns could vary with demand, supply, market conditions, seasonal factors and the nature of the goods. It relied, inter alia, on the comparative chart showing cash in hand of Rs.46,03,311.60 as at 8 November 2016 and bank deposits of Rs.44,85,500 from 9 November to 31 December 2016. As regards the vehicle-related disallowance, the assessee maintained that the ....
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....d as a reasonable benchmark, and the addition of Rs.17,37,823 was confirmed. The learned CIT(A) also upheld the Rs.55,021 disallowance, observing that vehicle expenses and depreciation could involve an element of personal use and that the assessee had not produced log books or other verifiable records establishing exclusive business use. 5. At the hearing before us, the learned counsel did not press the ground relating to the ad hoc disallowance of Rs.55,021. The said ground is accordingly dismissed as not pressed. The principal issue requiring adjudication is therefore the addition of Rs.17,37,823 made under section 68 in respect of the alleged inflation of cash sales. 6. We have considered the rival submissions and examined the mate....
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....ance recorded as available on that date. The orders below do not identify a discrepancy in this cash-book balance, a mismatch with the bank entries, or any particular deposit that remained unexplained after accounting for the cash available. 8. The chart also shows why the timing of deposits should not be considered in isolation. In FY 2015-16, the assessee deposited Rs.14,00,000 between 1 April and 8 November and Rs.17,00,000 between 9 November and 31 December. In FY 2016-17, deposits during the first period were nil, while Rs.44,85,500 was deposited in the latter period. That difference in timing is accompanied by a substantial cash balance recorded immediately before 9 November 2016. The chart further records higher cash sales in FY 2....
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....nsidered. A departure from an earlier pattern may call for scrutiny, and the decisions in CIT v. Durga Prasad More (82 ITR 540) and Sumati Dayal v. CIT (214 ITR 801) permit the authorities to look beyond the form of entries and assess the surrounding circumstances. Those principles, however, do not dispense with an appraisal of the particular records and explanation before the authorities. Here, the assessee relied on its cash book, sales and stock records and bank entries. The orders below do not identify any quantitative discrepancy in the stock records, any inconsistency between recorded sales and the available stock, or other material demonstrating that the sales were fictitious. Nor do they explain why the cash balance of Rs.46,03,311.....