DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, LUDHIANA , LUDHIANA vs. NV ENTERPRISES, LUDHIANA

During first appeal, the assessee vehemently opposed the action of Ld. AO by way of written submissions which have already been extracted in the impugned order. The Ld. CIT(A), at para 5.1.3, rendered factual finding and inter-alia, observed that the source of Rs.44.80 Lacs was well explained by the assessee to be out of cash sales. The sales were subjected to GST. The assessee furnished cash book containing entries of cash sales, GST returns, copy of audited financial statements. However, no defect was pointed out by Ld. AO as to stock tally or in the books of accounts of the assessee-firm. The statement of Shri Vikas Vats as made before GST department stood retracted within 2 months. Further, this statement was not before Income Tax Authorities but before GST authorities. Shri Vikas Vats maintained a consistent stand that cash of Rs.36 Lacs belonged to him which was not accepted by Ld. AO. The Ld. Assessment Year 2021-22 AO only acted under suspicion that there was surge in cash sales during the months preceding GST search action but he did not dispute the availability of stock as per audited books of accounts and the books were not rejected. Accordingly, the impugned addition was deleted against which the revenue is in further appeal before us.

From the facts, it clearly emerges that the whole basis of impugned addition is the statement of Shri Vikas Vats as made to GST authorities. The said statement is not before any Income Tax Authorities and therefore, no reliance could be placed on the same in Income Tax proceedings. Moreover, Shri Vikas Vats has maintained a consistent stand that the amount of Rs.36 Lacs belonged to him only and not to the assessee-firm. This being so, the stated amount could not be added in the hands of the assessee-firm since there is no evidence before Ld. AO to hold that this cash, in fact, belonged to assessee-firm. So far as the remaining cash is concerned, the assessee duly furnished its cash book to show availability of sufficient cash on the date of cash seizure. The assessee’s books of accounts were duly audited and the sales were subjected to GST. The books have not been rejected and no defect has been noted in the stock tally of the assessee-firm. By furnishing cash book containing entries of cash sales, GST returns, copy of audited financial statements, the assessee, in our considered opinion, had duly discharged the onus of proving the source of cash seizure and in the absence of any contrary evidence on record to that effect, this explanation is to be accepted. Therefore, we do not find any fault in the adjudication of Ld. CIT(A).