INCOME TAX OFFICER WARD-3(1), LUDHIANA vs. MOHINDER PAL , LUDHIANA

It transpired that the assessee deposited cash of Rs.225 Lacs in its bank accounts during demonetization period. The assessee carried on its business of cloth under proprietorship concern namely M/s Jippy Textiles and it stated that cash was deposited out of business receipts. The assessee tabulated month-wise cash sales and cash deposits for this year as well as for preceding year. The cash balance as on 08-11- 2016 was reflected as Rs.230.54 Lacs out of which impugned deposits were made. The Ld. AO noted that the assessee made huge cash sales of Rs.201.39 Lacs during 01-10-2016 to 08-11-2016 as against total cash sales of Rs.218.51 Lacs from 01-04-2016 to 08-11-2016. The sales of Rs.190.41 Lacs were made from 01-11-2016 to 08-11- 2016. The sale could not be attributed to large rush of customers due to declaration of demonetization. The field inspector reported that the assessee was not having any retail counter on which cash sales to retail customers could be made. The sales invoices were without name and address of the customers and therefore, the same could not be verified. The assessee maintained its stand that the cash was deposited out of sales proceeds and there was jump in sales at the time of announcement of demonetization. However, Ld. AO alleged that the assessee failed to substantiate the cash sales with sales bill either by furnishing name and address or by producing the alleged purchaser. The assessee had cash balance of Rs.29.14 Lacs as on 01- 10-2016 which could be considered to be genuine and accordingly, the remaining deposit of Rs.195.85 Lacs was added u/s 68.

During first appeal, the assessee vehemently assailed the conclusion of Ld. AO and cited various judicial pronouncements to support its contentions. The Ld. CIT(A), applying the decision of Chandigarh Tribunal in the case of Smt. Charu Aggrawal & ors. (140 Taxmann.com 588) held that Ld. AO did not question the sales as made by the assessee. The Ld. AO also accepted purchases and stock as shown by the assessee. The Ld. AO only relied on human probability to give a finding that the assessee could not have made such huge cash sales within short period of time. The Ld. AO did not reject the books of accounts. Therefore, the impugned addition was deleted against which the revenue is in further appeal before us.

From the facts it clearly emerges that the assessee is engaged in cloth business in proprietorship concern namely M/s Jippy Textiles. This is the regular business for the assessee and the assessee has maintained proper book of accounts as well as quantitative details of stock as required under law. The books have duly been audited as required by the statute. The assessee has furnished cash book and party-wise purchases, monthly stock details as well as other financial details as called for by Ld. AO. The opening stock for this year was Rs.344.62 Lacs which has been liquidated during the year. The cash book of the assessee would show that it had sufficient cash balance of Rs.230.54 Lacs as on 08-11-2016 and the impugned cash has been deposited out of this cash balance as available with the assessee. The sales proceeds have been offered to tax and adding the same amount again without reducing the sales turnover would amount to double addition which is impermissible. The Ld. AO has not rejected the books of accounts nor pointed out any defect in the books as maintained by the assessee. The stock has moved out of the assessee books of accounts. It is trite law that no addition could be made on mere suspicion or presumptions. The profit rates are in consonance with the profits rates of earlier years. In our opinion, the onus was on Ld. AO to disprove the claim of the assessee but this onus has remained to be discharged. There is no concrete evidence to support the allegation of Ld. AO. The case law as cited by Ld. CIT(A) duly supports the case of the assessee. On these facts, the adjudication of Ld. CIT(A) could not be faulted with. We order so.

The appeal stand dismissed. Order pronounced on 20-05-2025.