MANISH N. AMIN,AHMEDABAD vs. THE ITO, WARD-3(3)(2), AHMEDABAD

There was a delay of 135 days in filing this appeal. The assessee has filed a condonation application explaining the reason for delay. It has been stated that the appellate order was communicated on e-mail id and the matter was entrusted by the assessee to his chartered accountant,

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2017-18 on 13.10.2017 declaring total income of Rs.5,37,900/-. The case was selected for complete scrutiny under CASS. In the course of assessment, the AO noticed that the assessee had made cash deposit of Rs.47,16,000/- in his bank account with HDFC during demonetisation period. The assessee had explained that this cash deposit mainly represented cash sales of Rs.39,88,590/- made in the month of October 2016. The AO, however, was not convinced with the explanation of the assessee and treated the entire cash deposit of Rs. 47,16,000/- as unexplained. The assessment was completed u/s. 143(3) on 14.12.2019 at total income of Rs.52,53,900/-.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the learned CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

Per Contra, Shri Prateek Sharma, the Ld. SR-DR submitted that the assessee did not show any cash sales in the months of April to July 016, in December 016 and also in the months of February and March 017. The cash sales shown in the month of August’16 was Rs.1,26,319/- only

We have carefully considered the rival submissions. All the grounds taken by the assessee pertain to addition of Rs.47,16,00/- on account of unexplained cash deposit in the bank account. A copy of the bank statement of the assessee has been brought on record in the paper-book. It is found that apart from cash deposit of Rs. 47,16,000/- in the bank account on 11.11.2016 there were only two other cash deposits during the entire financial year 2016-17, being Rs. 20,000/- on 02.06.2016 and Rs. 40,000/- on 04.03.2017. At the same time, there is no cash withdrawal made from the bank account of the assessee. From the details of month wise cash sales filed before the AO, it is found that there were no cash sales at all in the month of April, May, June, July, December’16 and in February and March 2017. The cash sales shown by the assessee in the other months were as under:

It is thus evident from the above chart that cash sales was not a regular feature of the business model of the assessee. Considering the fact that the cash sales shown in the other months was nominal, the assessee did not explain the reason for abnormally high cash sale of Rs.39,88,590/- in the month of October’16. Merely because the sales were disclosed in the books of account and that the books of accounts were audited, this does not establish the genuineness of the cash sales. The auditor doesn’t verify the correctness or genuineness of transactions. Therefore, merely because the books were audited, doesn’t establish that the sales were genuine. The assessee had also contended that on the date of demonetisation many customers had rushed to the shop and made purchases in cash, which was ultimately deposited in the bank account on 11th Novmber’16. Even this explanation of the assessee is found to be fallacious, as the demonetization was announced on 08.11.2016 and the

Merely because the assessee has produced the cash bills and the memos for the cash sales, this does not establish the genuineness of the cash sales. The assessee has filed an application under Rule 19 of ITAT Rules for producing additional evidences in the form of Aadhar/identity confirmation of certain buyers and also affidavit/confirmation of the buyers. It is found that the assessee has merely attached certain Aadhar and PAN Nos. without linking them with the actual sale bills and no confirmation of any of the parties is found enclosed with the application. Further considering the generic nature of cash memos in which the name of the buyer, their address and contact no. was not appearing, these additional evidences could not have been linked with the sale details. These documents are bereft of any evidentiary value and, therefore, the request of the assessee to admit the additional evidences is rejected. Considering the trend of cash sales disclosed by the assessee in the other months of the year, the AO had rightly rejected the genuineness of cash sales of Rs.39,88,590/- shown by the assessee in the month of October’16. Having rejected the explanation of the assessee, the AO was

At the same time, the AO was not correct in treating the entire cash deposit of Rs. 47,16,000/- in the bank account made on 11.11.2016 as unexplained, even if the cash sales of Rs.39,88,590/- in Oct.’16 was treated as not genuine. The assessee had shown cash sales of Rs. 1,26,319/- in August’16 and Rs. 3,27,498/- in the month of September’16, which was not disputed. Considering the trend of cash sales in the earlier months, there would have been some cash sales in the month of Oct’16 as well; and it will be reasonable to estimate total cash sales of the assessee to the extent of Rs. 10,00,000/- till the date of demonetisation. In addition, the cash deposit of Rs. 5,00,000/- on account of past personal savings of the assessee and his family members may also be treated as explained. Accordingly, the cash deposit to the extent of Rs. 15,00,000/- is held as explained on account of cash sales prior to demonetization and the past savings. Therefore, the assessee is allowed relief to the extent of Rs. 15,00,000/- and the addition on account of unexplained cash deposit is confirmed to the extent of Rs. 32,16,000/-.

In the result, the appeal of the assessee is partly allowed.