KEWAL KRISHAN,YAMUNANAGAR vs. INCOME TAX OFFICER, YAMUNANAGR

The assessee had filed its return of income declaring total income of ₹8,94,290/-. The case was selected for complete

Aggrieved, the assessee carried the matter before the Ld. CIT(A). During the appellate proceedings, the assessee furnished additional documentary evidence including the cash book, sale bills, ledger accounts, bank statements, VAT returns and sales register in support of the explanation regarding the impugned cash deposits and bank credits. Since these documents had not been produced before the Assessing Officer, the Ld. CIT(A) called for a remand report from the Jurisdictional Assessing Officer. In the remand proceedings, the Assessing Officer accepted the explanation regarding bank credit entries of ₹1,19,40,000/- by holding that ₹36,45,000/- represented transfers between the

The learned Authorised Representative submitted that the authorities below have erred in sustaining the addition of ₹30,10,000/- under section 69A despite the fact that the entire cash deposits were fully supported by the regularly maintained books of account. It was contended that the assessee is engaged in the business of jewellery where cash transactions constitute a substantial portion of business receipts and the cash deposited during the demonetisation period was sourced from the opening cash balance and genuine cash sales duly recorded in the books of account. The learned AR submitted that the cash book, sale bills, sales register, VAT returns and other statutory records were produced before the appellate authority and the opening cash

It was further submitted that the remand proceedings had substantially accepted the correctness of the books of account and the genuineness of the business transactions, inasmuch as the Assessing Officer himself accepted the source of bank credits aggregating to ₹1,19,40,000/- after detailed verification. It was argued that once the books of account were accepted and the sales recorded therein were not rejected under the provisions of the Act, the cash generated from such recorded sales could not selectively be disbelieved merely because the sales had increased prior to demonetisation. The learned AR contended that increase in business receipts, particularly in the jewellery trade during the relevant period, by itself could not constitute evidence of fictitious sales in the absence of any material establishing that the books of account were false or fabricated. It was accordingly prayed that the addition sustained by the Ld. CIT(A) be deleted.

The learned Departmental Representative strongly supported the order of the Ld. CIT(A) to the extent the addition of ₹30,10,000/- had been sustained. It was submitted that during the remand proceedings, the Assessing Officer had undertaken a detailed examination of the books of account and found significant abnormalities in the pattern of cash sales immediately

The learned DR further submitted that the remand report had specifically recorded that the assessee failed to furnish any convincing explanation for such an extraordinary increase in cash sales and cash balance. Therefore, the Ld. CIT(A) was fully justified in relying upon the detailed findings recorded in the remand report while sustaining the addition of ₹30,10,000/- under section 69A. As regards the deletion of ₹1,19,40,000/-, the learned DR fairly submitted that the remand report had accepted the genuineness of those credit entries after verification and the Ld. CIT(A) had rightly granted relief to the assessee on that issue. Accordingly, it was prayed that the order of the Ld. CIT(A) sustaining the addition of ₹30,10,000/- be upheld

It is an admitted position that the assessee is engaged in the business of jewellery and has been regularly maintaining books of account. The assessee has explained that the impugned cash deposits were made out of the cash generated from its business activities, which stood duly reflected in the books of account and the income and expenditure account maintained in the ordinary course of business. The revenue has not brought any material on record to establish that the books of account maintained by the assessee suffer from any defect or infirmity. Significantly, neither the Assessing Officer nor the Ld. CIT(A) has rejected the books of account in accordance with the provisions of the Act.

Once the books of account have been accepted and not rejected, the entries recorded therein cannot be selectively discarded without bringing any cogent material on record to establish that they are false or manipulated. Merely because there was an increase in cash sales during the period preceding demonetisation, the same, by itself, cannot constitute sufficient

It is further pertinent to note that the Assessing Officer himself has accepted that the assessee had no source of income other than its regular business. There is no material to suggest that the cash deposited in the bank emanated from any undisclosed or unexplained source. The explanation furnished by the assessee regarding the source of cash deposits is supported by the regular books of account and the business records maintained in the ordinary course. In such circumstances, in the absence of rejection of books of account, the addition merely on the basis of suspicion arising from an increase in cash sales cannot be sustained.

In our considered opinion, the assessee has satisfactorily demonstrated the source of the cash deposits, and the Revenue has failed to discharge the burden of establishing that the

Accordingly, we direct the Assessing Officer to delete the addition of ₹30,10,000/- made under section 69A of the Act. The grounds raised by the assessee are allowed.

In the result, appeal of the assessee is allowed.