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Facts
The Revenue filed an appeal against the order of the CIT(A) that deleted the addition of Rs. 8,41,81,000/-. The assessee, a dealer in gold and diamond jewelry, deposited cash during the demonetization period. The Assessing Officer (AO) added this amount to the assessee's income, alleging that cash sales were bogus.
Held
The Tribunal held that the cash sales were supported by documentary evidence and were part of the assessee's books of accounts. The AO failed to provide concrete evidence to disprove the assessee's claims, and therefore, the addition was not sustainable. Section 69A of the IT Act could not be invoked as the cash generated from sales was already credited in the books.
Key Issues
Whether the addition made by the AO on account of alleged bogus cash sales during demonetization, which were deposited in the bank, is sustainable when the assessee has provided documentary evidence and offered the sales to tax.
Sections Cited
Sec. 143(3), Sec. 69A, Sec. 115BBE
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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & HON’BLE SHRI S.R. RAGHUNATHA
(अपीलाथ�/Appellant) (��यथ�/Respondent) अपीलाथ� क� ओर से/Appellant by : Shri Nilay Baran Som, IRS, CIT. ��यथ� क� ओर से/Respondent by : Shri N. Arjun Raj, Advocate सुनवाई क� तारीख/Date of Hearing : 29.10.2024 घोषणा क� तारीख/Date of Pronouncement : 10.01.2025 आदेश /O R D E R PER MANU KUMAR GIRI (Judicial Member) This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in order No.ITBA/NFAC/S/250/2022-23/1045921169(1) dated 24.09.2022. The assessment was framed by the Income Tax Officer, Corporate Ward 4, Coimbatore for the assessment year 2017-18 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 24.12.2019.
At the outset, it is noticed that the appeal filed by the Revenue is time barred by 460 days. The affidavit filed by the Revenue is as under:- ‘N. KARTHICK, presently working as the Deputy Commissioner of Income tax Corporate Circle-
1. 1. Coimbatore de solemnly affirm as under 2 I am the Assessing Officer having jurisdiction over the case of Mis Viswa and Devji Diamonds Pvt. Ltd., New No.
16. Old No. 239, T.V. Swamy Road (East RS Poram, Coimbatore- 641002 (PAN AACCV4942M) 3 It is seen from this office records that the last date for filing Appeal against the order passes by the La CIT(A) NFAC in DIN & Order No ITSANFAC/6/250/2022/23/10459211661) dated 24 09 2022 in the above case the assessment year 2017-18 has expired on 23.11.2022 (ie sixty days from the date of the order) The Appeal is filed before the Hon'ble ITAT on 06 02.2024 There is a delay of 440 days (from 23. 11.2022 to 06 02 2024) 4 The delay in filing the Income tax Appeal has happened due to a technical glitch within the TBA system due to which the order dated 24 09 2022 of CIT(A) was not reflected on the portal as and when it was passed The events and circumstances that led to the delay caused in identifying the case are as follows Post the introduction of National Faceless Appeals Centre all the orders passed un 250 gets updated in the ITBA portal, available to he downloaded for the officers holding jurisdiction over the assessed. These orders are to be reflected in the respective module in ITBA portal on the same day in which it generated and digitally signed Hence as a matter of practice for the purpose of reckoning limitation date for fliing further appeal date-of-order itself is taken as the date in which order is received O/o PCIT Order of CIT(A) in the instant case is dated 24 09 2022 As such the smitation date for filing of further appeal before ITAT fails on 23 11 2022 (50 days from the date in which order is received in the Old PCIT) During the month of September 2022 a total of 19 appellate orders including the instant case) were passed by NFAC Delhi Necessary actions wherever necessary, in myoect of all the other 18 cases barring the instant case were taken within the respective que dates. However in the case of Mis Viswa and Devji Diamonds Pvt. Ltd. due to technical glitch the said order (appellate order for 2017-18 dated: 24/09/20221 did not account the aponи! module till 31/09/2022 or till a later stage Hence the said order could not be downloaded or brought to the awareness of the incumbent for further action at a time when the same was to be performed. Communication, enclosing the list of appellate cases for the month of September 2022, received via e-mail from the O/o PCIT-1 Cbe may be perused in this connection (copy enclosed) It can be observed that the list of cases is devoit of the instant case. Le M/s Viswa and Devji Diamonds Pvt. Ltd. This omission of the appellate case from the report downloaded esa concurrent jurisdictional office from the appropriate module testifies the technical error that is being discussed. The disposal of this appeal was identified only when the assessee approached this office seeking actions as per the directions in the order The delay in filing the Appeal before the Hon'ble Tribunal is neither wilful wanton Hence in the interest of justice the Hon'ble Tribunal may kindly condone the delay It a prayed that the delay of 440 days in filing the income tax Appeal before the Hon'ble ITAT Chennai for the assessment year 2017-18 may kindly be condoned and admitted When these facts were confronted to the assessee, he objected for condoning the delay. We find the cause as reasonable and hence, condone the delay and admit the appeal for adjudication.
The sole ground raised by the Revenue before us is that the ld.CIT(A) has erred in deleting the addition of Rs.8,41,81,000/- u/s. 69A r.w.s. 115BBE of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).
4. The brief facts are that, the assessee M/s. Viswa and Devji Dimonds pvt ltd. is a company deriving income from business of retail sales of Gold and diamond jewellery and filed its return of income for the assessment year 2017-18 on26.10.2017, admitting an income of Rs.1,29,33,200/-. The case was selected for scrutiny under CASS. Accordingly, notices u/s. 143(2) and 142(1) of the Act were issued to the assessee calling for details of cash deposits during demonetization period. In response to notices, the assessee filed the details through e-proceedings. In support of the demonetization deposits the assessee submitted sales ledger, cash book, stock and VAT returns along with detailed statement of month wise cash deposits to the bank account and corresponding cash sales during the assessment proceedings. However, the ld.AO was not satisfied with the explanation furnished by the assessee,made an addition of total of cash deposits of Rs.8,41,81,000/- to tax u/s. 69Ar.w.s. 115BBE of the Act and completed the assessment u/s. 143(3) of the Act on 24.12.2019 by holding as under. ‘’2.5 As laid down in CIT v Durga Prasad More [(1971)] 82 ITR 540], the apparent must be considered as real until it is shown that there are reasons to believe that the apparent is not the real and the tax authorities are entitled to look at the surrounding circumstances to find out the realities and the matter has to be considered by applying the test of human probabilities. Considering all the facts detailed above, it is opined that the cash sales entered in the cash book and sales register was bogus. Cash was introduced into the books in the form of cash sales, supported by sales voucher and declared in the VAT return. The cash sales were created fictitiously by the assessee company, merely to build an explanation for the cash deposits in to the bank accounts. 2.6 However, it is also true that sales happened in Jewellery shops all over India when demonetisation was declared by the Hon'ble Prime Minister during the night of 8th November. Considering the submissions made by the assessee company in reply to the show cause letter, 25% of the sales made on 08.11.2016 amounting to Rs.3,01,01,500/- is assessed to have been made (25% of 644 sales in Coimbatore shop 161 and out of 94 sales in Chennai Shop = 24, which is considered possible within the 3 hours available on 08.11.2016 under extraneous circumstances). 2.7 Section 68 of the IT Act is for taxing the unexplained credits, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year. Since the credits are bogus and fictitious, the money deposited is not brought to tax u/s 68 of the IT Act. 2.8 However, money was deposited into the bank account of the assessee company and therefore was the owner of the money. Under section 69A of the IT Act 1961, where in any financial year the assessee is found to be the owner of any money, bullion, jewelry or other valuable article and such money, bullion, jewelry or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewelry or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewelry or other valuable article may be deemed to be the income of the assessee for such financial year. 2.9 It is also brought on record that the Department need not locate source of receipt- Where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assessee, it is not necessary for the department to locate its exact source as held in CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC). 2.10. In the circumstances, the cash deposit of amounting to Rs. 8,41,81,000/- (11,42,82,500-3,01,01,500) in SBN's is brought to tax as unexplained money u/s 69A and charged to tax u/s 115BBE of the IT Act 1961. Penalty proceedings u/s 271AAC is initiated separately. 3.0 Since the cash sales amounting to Rs.8,41,81,000/- is bogus and fictitious, the Gross Profit admitted in the return of income for the year towards these fictitious sale is reduced. The G.P admitted
Aggrieved by the assessment order of the AO, the assessee preferred an appeal before the ld.CIT(A). Before the ld.CIT(A), the assessee reiterated that it was carrying on the business of trading in Goldjewellery and diamonds and assessed to TNVAT Act. The assessee maintained regular books of accounts along with stock inventory. The assessee furnished purchase bills, sales register, cash book and demonstrated that the cash was deposited in SBN was out of sales proceeds of stock on hand. The assessee also relied on the following judgments: (i) CIT vs Devi Prasad Vishwnath Prasad [1969] 72 ITR 194 (SC) (ii) CIT vs Kailash Jewellery House – ITA 613/2010 Delhi HC (iii) Kishore Jeram Bhai Khaniya vs ITO – ITA 1220/Del/2011, ITAT Delhi (iv) CIT vs Vishal Exports Overseas Ltd –TA No. 2471 of 2009 Guajarat HC (vi) Singham Exim P Ltd vs ITO – ITAT Delhi (vii) Sri Sanand Textile Industries Ltd vs DCIT-ITA No.995/AHD/2014, ITAT Ahmedabad (vii) Anantapur Kalpana vs ITO - ITAT Bangalore and pleaded to delete the addition made by the AO. The ld.CIT(A), after considering the submissions made by the assessee and case laws relied upon by the assessee, held that the assessee’s submissions with regard to cash deposits during demonetization period is supported with documents and evidences and case laws relied upon by the assessee are applicable to the facts of the present case. Accordingly, the ld.CIT(A)deleted the additions made by the ld.AO u/s. 69 r.w.s. 115BBE of the Act by holding as under:- ‘’As can be seen the facts discussed in the above order of the ITAT Vishakhapatnam are same in the case of the assessee. Assessee is engaged in the business of jewellery trading. Assessee has deposited the sum of Rs.8,97,50,000/- in high denominations bank notes (SBNs) post demonetization. The assessee has explained the sources of cash deposits as cash sales received on 08.11.2016 against the sales. In support of it's explanation, the assessee also produced the sale bills and books of accounts before the AO. There was a survey u/s 133A by investigation wing where also the assessee explained its purchases sales and stock. These explanation were given before the AO also. However, the AO was not satisfied with the assessee's explanation of sales citing the reason that the assessee could not furnish proper KYC documents of the buyers during the course of survey, the average sales of the firm was not matching with peak and non-peak season. In the present case there was no survey or any other development. AO had do document except the suspicion that assessee must have manupulated the sales as the quantum of sales is extraordinary. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case and considering the decisions in similar cases by various courts as discussed above, I have no hesitation to hold that the cash receipts represent the sales which the assessee has admitted as income. When there was sufficient stock to effect the sales and no defect has been found in the stock as well as the sales and purchases and since, the assessee has already admitted the sales as revenue receipt, there is no case for considering cash deposit as not explained and adding the same u/s 68. The addition of cash deposit as income of the assessee is hereby deleted. In the facts of the case in Form35 (column 11 of Form35) the assessee has stated that AO has vide an order u/s 154 has given reduction of Rs. Being GP on admitted sales. While giving effect to this order the AO will take into account that reduction already made. 3.0 Appeal is allowed’’ Aggrieved by the impugned order of the ld.CIT(A), the Revenue preferred an appeal before us.
The Ld. DR, assailed that the ld.CIT(A) erred in deleting the addition made u/s.69A r.w.s. 115BBE of the Act,even though the assessee has failed to substantiate the sales made on one day i.e. 08.11.2016 without having proper infrastructure to make bills of 783 nos. within 3 to 4 hours. Further, the ld.DR challenged the factual finding of the ld.CIT(A) that AO has noticed only the suspicious features of the transactions. Further, the ld.DR argued that the ld.CIT(A) has erred by ignoring the availability of infrastructure and practicality of making 768 invoices which works out to making every invoice within 17 seconds, collection of corresponding sales proceeds in cash and delivery of such articles within 3 to 4 hours before the demonetization commences at midnight of 08.11.2016. The ld.DR also raised a point that the ld.CIT(A) to appreciate that recording of transactions below Rs.2.00 Lakhs in order to by pass the provisions of Rule 114C(2) r.w. Sl.No.18 of Rule 114B of the Income Tax Rules, 1962. The ld.DR also relied on the decision of CIT Vs.Durga Prasad More – [1971] 82 ITR 540(SC) and Calcutta Discount Co.LtdVs.ITO (1961) – 41 ITR 191 (SC) in support of human probability and cash sales and prayed for dismissing order of the Ld.CIT(A).
Per contra, the ld.AR for the assessee asserted the action of the ld.CIT(A) and stated that the ld.CIT(A) is justified in deleting the addition made by the AO in assuming the capacity of the assessee to conduct such volume in 3 to 4 hours of time. The Ld.AR stated that, the assessee is having two showrooms i.e. at Coimbatore and other at Chennai. The assessee is having infrastructure of two floors building at Coimbatore showroom, consisting of one reception, Cash counter and 6 sales counters, which were also converted as billing cum cash counter on 08.11.2016 due to extraneous circumstances raised on account of demonetization announced by the Hon’ble Prime Minister, to cater extra ordinary demand from the huge number of customers. Further, the ld.AR stated that the customers were in hurry to pick their articles and prepared to accept the jewellery without even checking at the price, design and quality, such was the magnitude of the sales. Further, the Ld. Counsel for the assessee, stated that the assessee has maintained proper books of accounts, stock records and have been furnished during the assessment proceedings. The assessment was concluded by the Assessing Officer without finding any defect in the books of accounts presented and accepted the same. The ld.AR also stated that the following documents were produced before the AO and that of ld.CIT(A) in support of the genuineness of the transactions carried out during the A.Y. 2017-18 including the demonetisation period in paper book Volume -I consisting of 1 to 676 pages: Sl.No Date Particulars Page No 1 17.11.2023 Return of Income and Financials 1 2 24.09.2018 Notice under Section 143(2) of the 19 Act 3 07.08.2019 Notice under Section 142(1) of the 23 Act 4 --- Reply to Notice under Section 30 142(1) of the Act 5 19.08.2019 Notice under Section 142(1) of the 31 Act 6 03.09.2019 Reply to Notice under Section 33 142(1) of the Act 7 --- Details of Bank Accounts 35 8 --- Bank account ledger for AY: 2017- 36 18 9 --- Bank account statement in HDFC 100 Bank for AY: 2017-18 10 --- Details of claim of depreciation 165 11 --- Cash Book of the appellant 166 12 --- Sales ledger for AY: 2017-18 313 13 --- VAT Returns for AY: 2017-18 424 14 --- Details of Secured Loans 522 15 --- Details of advances received 523 16 --- Reply to Notice under Section 575 142(1) of the Act 17 28.11.2019 Notice under Section 142(1) of the 581 Act 18 02.12.2019 Reply to Notice under Section 583 142(1) of the Act 19 --- Purchase Ledger 584 20 --- Stock Ledger for AY: 2017-18 586 21 05.12.2019 Notice under Section 142(1) of the 593 Act 22 07.12.2019 Reply to Notice under Section 595 142(1) of the Act 23 --- Details of CST Purchases 596 24 --- Details of Purchase returns 599 25 --- Details of RD Purchase 600 26 --- Details of URD Purchase 604 27 05.12.2019 Show Cause Notice issued under 613 Section 143(3) of the Act 28 --- Show Cause Notice issued under 614 Section 143(3) of the Act 29 --- Details of Purchase for April 2016 & 615 May 2016 30 06.12.2019 Notice under Section 142(1) of the 616 Act 31 --- Reply to Notice under Section 618 142(1) of the Act 32 --- Details of Veekay Diamants 619 purchase 33 12.12.2019 Notice under Section 142(1) of the 623 Act 34 18.12.2019 Reply to Notice under Section 625 142(1) of the Act 35 --- Form WW-Audit Report under 626 Section 63A of The Tamil Nadu Value Added Tax Act, 2006 36 --- Sales Invoices 636 37 20.12.2019 Show Cause Notice issued under 673 Section 143(3) of the Act 38 21.12.2019 Show Cause Notice issued under 675 Section 143(3) of the Act In this paper book the ld.AR drew our attention to particularly the documents submitted before the AO, the assessee’s bank accounts and the statement / ledgers thereon along with the Cash book, sales ledger, VAT returns, Purchase ledger, Stock registers, Purchase returns, RD purchases, Annual audit report under TNVAT Act, Sales Invoices for the A.Y. 2017-18. The AO has verified all the documents and has not rejected the books of accounts filed along with tax audit report of the assessee and not doubted the stock and purchases but with the assumption of impracticability of sales made on a particular day as unexplained and brought to tax, which is against provisions of the Act. Further, the assessee also filed a paper book volume II Gems (Page Nos.1 to 17), Diamond (Page Nos.18 to 130) and Gold (Page Nos.131 to 262) for the F.Y. 2016-17 along with all the invoices raised on 08.11.2016 (Page Nos.263 to 281) having item name, bar code, gross weight, net weight, carrot, value, Discount, vat and bill amount of each item sold and summary of yearwise cash deposits (page No.282). Therefore, the action of the ld.CIT(A) cannot be interfered and prayed for dismissing the appeal of the revenue. Further, the ld.AR also brought to our notice of gazette notifications on demonetisation and certain case laws in support of the ld.CIT(A) order, comprising of paper book volume III - page nos.1 to 47 and prayed for considering the same and dismiss the appeal of the revenue.
We have heard both the parties, perused materials available on record, all the paper books and gone through orders of the authorities below. The fact with regard to the impugned dispute are that the assessee has deposited a sum in specified bank notes during demonetization period to the bank account. It is admitted from the records that the assessee is engaged in trading business of gold and diamond jewellery. The case was selected for scrutiny to verify the source for cash deposited and called for certain details. The assessee deposited cash of Rs.11,42,82,500/-, after Government of India. The assessee deposited cash out of sale proceeds of gold and diamond jewellery collected from its customers which was less than Rs.2.00 lakhs per person and there was no requirement on the part of the assessee to obtain details like name, address and PAN of the buyers. In response to notice u/s. 142(1) of the Act, the assessee had furnished cash book, sales register, purchase register, bank statements along with stock registers for the relevant period. The stock moved out of the books on account of sales made by the assessee has established from stock registers. The VAT returns and annual audit report under TNVAT Act for the relevant period reflected such sales which have been accepted by the VAT authorities. The assessee has maintained proper books of accounts which are subjected to tax audit u/s. 44AB of the Act. The assessee also maintained quantitative details of the stock of Gems, Gold and Dimond separately and furnished before the lower authorities, which have not been rejected. The books of accounts of the assessee have been accepted by the lower authorities while framing the assessment and not rejected by pointing out any defects.
On perusal of the records and facts and circumstances of the case, we are of the considered opinion that when the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation, which is impermissible in law. The cash sales made by the assessee have been credited in the books of accounts and the same form part of the assessee’s cash book. On these facts, it could be very well said that the assessee claim was backed up by relevant evidences. Thus, the assessee has discharged the burden of proving the source of the cash/SBN deposited in the bank and the Assessing Officer failed to rebut the same. Further, we also note that the assessee has sold only 17.50% on 08.11.2016 out of the stock held before the demonetisation day. The allegations/statistics relied upon by Assessing Officer to take an adverse view is not backed up by relevant evidence/material and therefore the action of AO, which has been rightly set aside by the ld.CIT(A) and hence cannot be interfered. The finding of the AO that such abnormal sales could not be achieved immediately upon announcement of demonetization by the Governmentare bereft of any concrete evidence to prove otherwise on record. It is trite law that no addition could be made merely on the basis of suspicion, conjectures and surmises.Moreover, since cash generated out of sales has been credited in the books of accounts, the provisions of section 69A could not be invoked in the present case. The assessee’s reliance on the coordinate bench decision in the following cases which are identical to the present are taken into consideration:
Ganapathy Palaniyappan Vs DCIT in dated 04.01.2023 - M/s.Micky Fireworks Industries Vs.ACIT in dated 26.07.2023 - R R Foods Vs.ITO in ITA No.1359/Chny/2023, dated 03.07.2024 Further, the coordinate bench decision in the case of Smt. Durga Devi Mundhra vs ITO in ITA No. 1228/Chny/2023, dated 25.04.2024 is applicable to the present case on hand, wherein the Tribunal held as under: “6. We are of the considered opinion that when the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation which is impermissible in law. The cash sales proceeds have been credited in the books of accounts and the same form part of assessee's cash book. On these facts, it could very well be said that the assessee's claim was backed up by sufficient documentary evidences. The allegation of Ld. AO is that such abnormal sales could not be achieved by the assessee immediately upon announcement of demonetization by the Government. However, such allegations are bereft of any concrete evidence on record. It is trite law that no addition could be made merely on the basis of suspicion, conjectures and surmises. In the present case, the assessee has duly discharged the burden of establishing the source of cash deposit and the onus was on Ld. AO to disprove the same. However, except for mere allegation and few statistics, there is nothing on record to support the conclusions drawn by Ld. AO that the cash deposited by the assessee was her unaccounted money. There is no finding by Ld. AO that any particular sales affected by the assessee exceeded threshold limit which cast an additional obligation on the assessee to obtain requisite particulars from the customers. Since cash generated out of sales has been credited in the books of accounts, the provisions of Sec.69A could not be invoked in the present case. Therefore, on the given facts, the impugned additions are not sustainable. By deleting the same, we allow corresponding grounds raised by the assessee.” \
10. Therefore, on the given facts, the impugned additions are not sustainable in the eyes of law and hence, we are of the considered view that the action of the ld.CIT(A) in deleting the addition need not be interfered and hence we dismiss the grounds raised by the Revenue.
In the result, appeal filed by the Revenue stands dismissed. Order pronounced in the open court on 10th day of January, 2025 at Chennai.