JEEWAN NATH JAGAN NATH,VPO KUNIHAR, HATKOT vs. DCIT ACIT, CIRCLE PARWANOO

Aggrieved by the assessment order, an appeal was preferred before the CIT(A). Written submissions were made by the assessee wherein it was contended that all cash transactions were duly recorded in the books of account, and cash receipts during festive seasons were higher by the nature of the business. Reliance was placed on various judicial pronouncements.

After considering the submissions, it was observed by the CIT(A) that the cash sales bills produced were not verifiable. The explanation furnished by the assessee regarding the cash in hand and the surge in cash sales remained unsubstantiated by credible evidence.

It was further held by the CIT(A) that as per the settled position of law laid down by the Hon'ble Supreme Court in the cases of Chuharmul vs. CIT and Shashi Garg vs. PCIT, the burden to explain the nature and source of the cash deposits lies upon the assessee. Since the assessee failed to discharge this burden satisfactorily, the addition made by the Assessing Officer was confirmed.

The assessee filed an appeal against the order of the CIT(A). The assessee challenged the confirmation of the addition made by the Assessing Officer, arguing that the cash receipts were genuine and supported by business practices during the festive season.

The Ld. AR for the assessee submitted that during the period of demonetization, the total cash deposit made by the assessee amounted to Rs. 2,53,99,000/-, which was duly recorded in the books of account. Out of the said amount, cash deposits to the tune of Rs. 1,14,65,702/- were accepted by the 4 Assessing Officer, and the balance amount was added to the income of the assessee.

It was further contended by the Ld. AR that the assessee was engaged in the same line of business, namely trading of food grains, and the assessee's turnover during the year under consideration exceeded Rs. 31 crores. The Ld. AR submitted that the cash deposited in the bank account was on account of seasonal sales arising during the Diwali festival, which coincided with the demonetisation period. It was submitted that the assessee had provided party- wise details of cash received and payments made before the Ld. Assessing Officer as well as the Ld. CIT(A). It was contended that the entire money was deposited in one go in the bank account and utilised for making vendor payments.

The Ld. AR also submitted that all the entries pertaining to the cash deposits were duly reflected in the books of account. Therefore, the view taken by the lower authorities in making the addition under Section 68 of the Act was not justified. It was contended that once the books of account had been accepted, there was no basis for making a separate addition in respect of the cash deposits merely because they were made during the demonetisation period.

It was further submitted that the conclusions drawn by the lower authorities were without any cogent basis, as no comparable instances had been cited or placed before the Tribunal to justify such addition. The Ld. AR submitted that the assessee had been regularly filing VAT returns every month, and there was a continuous and consistent pattern of sales and purchases over the past years, with no abnormal spike during the year under consideration. Therefore, it was submitted that the addition made by the lower authorities was unjustified and liable to be deleted.

On the other hand, the Ld. DR supported the orders of the lower authorities and submitted that the additions made were justified and should be confirmed.

We have heard the rival contentions and perused the material available on record. It is not in dispute that the Assessing Officer has accepted the books of account filed by the assessee. The turnover of the assessee was Rs. 31 crores, and during the demonetization period, cash sales amounting to Rs. 2,53,99,000/- were recorded. The Assessing Officer, based on certain calculations, concluded that there was inflation of sales to the extent of Rs. 1.40 crores and proceeded to make an addition on the assumption that cash deposits were made out of demonetized currency.

However, there is no material on record to show that the sales were inflated or that the deposits were made out of unaccounted cash. It is noted that the assessee’s cash book, stock register, and VAT records were duly produced and verified, and no discrepancies were pointed out therein. It is also noted that the festive season of Diwali, which generates higher sales, coincided with the demonetization period, unlike the preceding year when the timing differed. Therefore, a mere comparison with previous years' figures without considering the seasonal impact is not sufficient to draw an adverse inference.

Further, the cash on hand as per the books prior to the demonetization period was verifiable and matched with the records filed, and no adverse findings have been recorded by the lower authorities on this aspect. In such circumstances, when the turnover, stock records, and cash flow are duly explained and supported by evidence, and no purchaser has been disbelieved, the addition made on mere assumptions and conjectures is not sustainable.