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Facts
The assessee, engaged in trading and manufacturing gold and diamond jewellery, deposited Rs. 3,67,06,700/- in cash during the demonetization period. The Assessing Officer (AO) added Rs. 3,62,56,700/- to the assessee's income under Section 69A and taxed it under Section 115BBE, considering these deposits as unexplained. The CIT(A) upheld the AO's order.
Held
The Tribunal held that the cash deposits were explained as arising from cash sales made prior to the demonetization period. The assessee had maintained proper books of accounts, which were audited and not rejected by the AO. The cash sales constituted a small percentage of the total turnover, and the AO's addition was based on presumption without corroborative evidence.
Key Issues
Whether cash deposits during the demonetization period can be added as unexplained income when they are explained as cash sales supported by audited books of accounts and not rejected by the AO.
Sections Cited
250, 143(3), 142(1), 69A, 115BBE, 44AB, 145(3), 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI
Before: SHRIB.R. BASKARANAND SHRI ANIKESH BANERJEE
The instant appeal of the assessee was filed against the order of the National Faceless Appeal Centre, Delhi (NFAC)(for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act’) for Assessment Year 2017-18, date of order 24/06/2024. The impugned order was emanated from the order of the Learned Commissioner of Income-tax, Circle M/s Vijay Jewellers 19(3), Mumbai (for brevity the Ld. AO), order passed under section 143(3) of the Act, date of order 24/12/2019.
The brief facts of the case are that the assessee’s case was selected for scrutiny under CASS. The assessee is engaged in business of trading and manufacturing in gold, diamond jewellery and has dealt in number of items as per specific action of customers. During the impugned assessment year, the assessee deposited cash amount to Rs.3,67,06,700/- in various bank accounts between 09/11/2016 to 30/12/2016 as reported by the Ld.AO.During the assessment proceedings, the notice under section 142(1) of the Act was issued and assessee had explained the source of cash deposits as from the sale of stock of goods. The assessee submitted the details of purchase of stock related to the sale of goods during the time of October and November during demonetization. The Ld.AO, without considering the same, passed the order and added back the cash deposits in this specified period amount to Rs.3,62,56,700/- under section 69A of the Act and taxed under section 115BBE of the Act. Balance amount of Rs. 4,35,000/- deposited for the period from 01/02/2016 to 08/11/2016 and was not added back in total income of the assessee. The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld.CIT(A), after considering the submission of the assessee upheld the assessment order. Being aggrieved on the appeal order, the assessee filed an appeal before us.
3. In argument, the Ld.AR vehemently argued and filed the written submission, which is kept in the record. The Ld.AR argued that the assessee has credited cash deposits in the books of accounts maintained by it along with its source and offered the same as an Income as Cash Sales in the audited Books of Accounts.The Assessee had maintained regular cash book, its accounts were M/s Vijay Jewellers audited, and deposit made is explained by the assessee during the course of assessment proceedings. In the Assessee's case, since the cash sales occurred during the auspicious day of Dhanteras which fell on 28th October, 2016 there was a hike in the current years cash sales as compared to the cash sales figures of the preceding years as the assessee had come up with various incentives and offers on small gold coins / jewellery during Diwali and taken strategical decision to develop with retails counter in a big way by sale of smaller items which resulted in a boost of cash sales for the year under consideration. In support of the above claims the assessee also submitted that the cash balance accounted as per the cash book of the assessee was having cash balance as on 31-03- 2016/01- 04-2016 of Rs.43,05,854/- as per the audited financials. The assessee maintains on average cash-in-hand balance of appx 40 lakhs to 50 lakhs at any point of time. The cash balance accounted as per the cash book of the assessee as on 30-09- 2016 is amount to Rs.70,97,337/-, which is increased to Rs.3,61,21,541/- as on 30- 10-2016 and further to Rs.3,63,00,088/- as on 04-11-2016. Such cash deposit made is out of cash sales and the said cash sale is a part of total sales made during the year under consideration which have already been offered for taxation.The whole cash deposits made by the assessee during the demonetisation period is pertaining to the Cash Sales which have been made prior to the demonetisation period. During demonetisation period there have been miniscule sales.
The books of accounts maintained by the Assessee were audited u/s 44AB of the Act. The Ld. AO had not doubted the purchases and corresponding sales made during the year i.e. the purchases and sales were accepted by the Ld. AO.The purchases and sales as held genuine and being directly linked to the stock, the M/s Vijay Jewellers stock was also reduced on account of the sales made during the impugned financial year.The books of accounts maintained by the assessee were not rejected by the AO u/s 145(3) of the Act.Out of Total sales of Rs.86.52 Crores for the alleged year, the Cash sales component consists of Rs.3.58 Crores, which is merely forming 4.19% of the consideration total turnover for the year under consideration.
The assessee were maintaining the series of invoices as per continuous serial numbers for issuance of sales invoices. The assessee had made credit card sales and sales through cheques as well during this period of cash sales. Tax invoices of sales for the month of October 2016 were in continuous number for all type of sales i.e.cash sales, credit sales and also sales by credit cards. The total sales in October 2016 were Rs.12,37,16,956/-. Out of the same Rs.2,94,91,965/- were cash sales and Rs.2,62,094/- were credit card sales and balance credit sales of Rs.9,39,62,897/- 6. The Ld.AR argued and stated that evidence was submitted before the Ld.AO and the Ld.CIT(A). Further, the documents were submitted through the paper book containing pages 1 to 1088. The list of documentsis reproduced as below: - Sr.No. Particulars APB Page No.
Letter dated 22-08-2018 filed online on 22-08-2018 before the AO 21-41 against notice dated 17-08-2018 issued u/s 143(2) of the Act during the course of assessment proceedings wherein the following details were submitted – Acknowledgement of Income Tax Return filed on 04-11- 2017 for AY 2017-18. Tax Computation for the year ended 31-03-2017. Audited annual financials for the year ended 31-03-2017 2. Letter dated 16-05-2019 filed online on 17-05-2019 before the AO 42-361 during the course of assessment proceedings wherein the following Details of cash deposited for FY 2015-16 and FY 2016-17 is submitted vide Annexure 2 of the said letter. Copy of cash ledger for FY 2015-16 and FY 2016-17 is submitted vide Annexure 2 of the said letter. Copies of all the bank statement for FY 2015-16 and FY 2016-17 is submitted vide Annexure 3 of the said letter. Month Wise breakup of sales for the year under consideration along with day wise break-up of the month of November and December,2016 is submitted vide Annexure 4 of the said letter.
Letter dated 23-12-2019 filed online on 24-12-2019 before the AO 362-892 against the Show Cause Notice dated 19-12-2019 during the course of assessment proceedings wherein the following details were submitted- The summary of Total Sales and summary of Cash sales for the FY-2016-17 and FY-2015-16 vide Annexure-1 of the said letter.
Cash Transaction 2016 statement submitted to department vide Annexure-2 of the said letter.
Confirmations from the parties from whom purchases were made vide Annexure-3 of the said letter.
Stock Register of Gold Coins, Stock books of Golds, Diamond Jewellery Register, 14KT Diamond Jewellery Register, Jadav Ornaments Register reflecting the quantity of Opening balance, receipts during the year, issued during the year and closing balance for various items for the FY-2016-17 vide Annexure-4 of the said letter.
Copies of Tax invoices for the FY-2016-17 vide Annexure-5 of the said letter.
M/s Vijay Jewellers Statement of Reconciliation of an amount of Sales and Purchases as per Profit and Loss Account viz-a-viz as per VAT return along with the copy of Quarterly VAT returns vide Annexure-6 of the said letter.
We have heard the rival submissions and examined the documents available on record. The Ld. AO presumed, without any corroborative evidence, that the assessee-firm introduced unaccounted money into the business during the demonetization period through an increase in sales. Furthermore, the Ld. AO assumed that the cash deposits during the demonetization period were not commensurate with the cash sales and cash deposits reported during the preceding two assessment years2015-16 and AY 2016-17. We note that the assessee disclosed its entire sales, with receipts being realised through both cash and banking channels. The assessee derived no undue benefit from the said transactions. The stock of goods and purchases was duly accepted in the assessment order, and the books of accounts of the assessee were not rejected.The assessee also submitted copies of quarterly VAT returns filed under the Maharashtra VAT Act and an item-wise stock register, which were placed on record before the Ld. AO. No objections were raised regarding the veracity of the evidence submitted. We further observe that, out of the total sales of Rs.86.52 crore for the relevant financial year, the cash sales component amounted to Rs.3.58 crore, forming only 4.19% of the total turnover. Reliance is placed on the order of the Coordinate Bench of the ITAT, Delhi, in the case of Nita Taneja vs. ITO [ITA No. 4958/Del/2018, dated 29.03.2019], wherein it was held that documents neither M/s Vijay Jewellers rebutted nor rejected cannot serve as the basis for addition merely because the sales were affected during the demonetisation period. The books of accounts demonstrate that the assessee had an opening balance of cash in the relevant financial year and that the sales were adequately supported by sufficient purchases and stock-in-trade. We respectfully rely on the findings in Nita Taneja (supra) as applicable to this appeal. Considering above, we set aside the impugned appellate order and quash the addition of Rs.3,62,56,700/-.