M/S. RUKMANI AGENCIES ,KOLKATA vs. ITO, WARD - 47(4), KOLKATA , KOLKATA

The assessee’s former substantive ground challenges correctness of both the lower authorities’ action treating his bank deposits of Rs.1,57,65,000/- as unexplained cash credits during the course of assessment as affirmed in the lower appellate proceedings. The CIT(A)’s detailed discussion to this effect reads as under: “4.1 Addition of an amount of Rs.1,57,65,000/- as unexplained cash credit The appellant firm engages in the business of being a distributor of consumer goods, in the business of sale of potatoes and claims to be a trader of fabrics sarees. During the previous year relevant to the assessment year, a survey operation was carried out in the business premises of the appellant on 18th of January 2012. During the survey it was noticed that even though there were entries in the books of accounts in respect of purchase of sarees and fabrics but no corresponding entries of all the alleged sales have been recorded. Moreover, no physical stock or inventory of sarees or fabrics could be found on the date of survey. On the date of survey, the survey team generated the P&L account and balance-sheet from M/s Rukmani Agencies the books of accounts maintained in the computer of the appellant. It was observed by the survey team that the appellant had shown opening stock of a fabrics at Rs. 33,83,756, purchase of fabrics at Rs. 94,77,420, sales of fabrics at rupees 26,07,500 and closing stock or fabrics at Rs 1,03,87,762 as on 31.12.2011 in the said P&L Account and balance sheet. However, from the date -wise transactions book i.e., the day book, it was observed that there was only one instance of sale of saree for an amount of Rs.1,20,000. No sale bill or vouchers for saree or fabrics sale were found by the survey team. The appellant could not produce any evidence with respect to the sale of the fabrics. In the survey statement, in reply to question number 7, Mr. Ritesh Agarwal, the main partner of the firm stated "actually all stock of fabrics/sarees has been sold out". In reply to question number 8, on being asked to produce the sales bills and relevant entries with respect to the fabrics in the books, he further stated "we are unable to produce any sales bill in this regard. In fact, the sale proceeds of fabrics/sarees have not been accounted for in the books of accounts." During the course of assessment proceedings also the appellant was unable to produce any evidence in the nature of sales bills or challans to prove the claim of sales. Therefore, the Assessing Officer concluded that the appellant was only an entry operator in saree market and has given entry of purchase of saree only and hence, there was no corresponding sales bills of sarees and no physical stock of sarees as such. During the course of assessment proceedings, the AO further noted, that an, amount of Rs.75,65,000 was deposited in cash in the Account Number 151502000000431 maintained with Indian Overseas Bank during the period from 21st of November 2011 to 31st of March 2012. All this amount has been subsequently transferred to another CC Account Number 151502000000303 maintained with the same bank. It was also observed that an amount of Rs 82,00,000 were deposited in a cash in addition to the sum mentioned above in the Bank Account number 15102000000303 maintained with Indian Overseas Bank. Therefore, the AO enquired the appellant to offer its explanation in respect of such huge amounts of cash deposits totaling to Rs.1,57,65,000. The appellant in reply submitted that the cash deposited in the bank accounts have duly been recorded in the books of accounts. It is further submitted by the appellant that the source of such cash deposit was the sale proceeds of fabrics or sarees which were sold in cash. It was also submitted that such cash sales have duly been accounted for in appellant's books. However, the AO noted at the time of survey even though the partner of the firm stated that all the sarees were sold out yet he was unable to produce any sales bills for the same. He also noted that the P&L account as on the date of survey revealed a closing stock of sarees at Rs 1,03,87,762 which is contradictory to the stated position that all the sarees have been sold as on the said date. The AO further noted that during the course of assessment proceedings the AR of the assessee admitted during the course of hearing vide order-sheet noting dated 17th of February 2015 that the assessee will not be able to produce any challan or sales bills in respect of sales of saree. He therefore, did not accept the explanation that the source of the cash deposited was in fact the alleged saree sale made in cash and treated the amount of cash deposits as unexplained. He proceeded to add the said unexplained cash credit of an amount of Rs 1,57,65,000 under section 68 of the IT Act. During the appellate proceedings, the appellant reiterated its submissions made before the AO. It is further contended that as the survey team noted the bills of purchases, the purchases have been proved and therefore, the only way that the stocks could vanish at the time of survey was by way of sales. It is also contended as the Assessing Officer has not rejected the books of account, the contents of the books cannot be disbelieved in toto. The appellant's contentions were carefully analyzed from all angles. 4.1.1. On going through the gamut of facts, I observe, that cash deposits of an amount of Rs 1,57,65,000 have been made in appellant's bank accounts during the period of 21st of November 2011 to 31st of March 2012. The onus squarely rests on the appellant to prove the source of these credits, creditworthiness of the creditors and the genuineness of the transaction. As the AO noted these cash credits in the bank accounts and he gave notice to the appellant with intent to consider the same for addition as unexplained cash credit, it is the bounden onus on the appellant to prove all the 3 facets of the transaction to the hilt to the satisfaction of AO. I observe, even though the assessee contends that it had sold the fabrics or sarees in cash and that is the source of these credits, yet neither during the survey proceedings nor during the assessment and nor even in the appeal proceedings, the appellant has come out clean with respect to the parties to whom the sales have been made. No evidence with respect to sales bill, sales challan have been produced as evidence of sale. It is contended that at the time of survey there was no inventory of stock because every item has been sent to the purchase parties for approval. And, as the approval has not yet been obtained till then, the recognition of the sales have not been made in the books. Convincing though it may appear, but even with regard to this the appellant has not come up with any proof as to who were the parties to whom such goods have been sent for approval. No proof with respect to movement register evidencing movement of goods, receipt acknowledgement or lorry/auto receipts evidencing such movement of goods to the purchase parties have ever been provided to the survey team, to the authorities below or even before me. The contention that purchases have been not controverted and therefore, sales must have taken place also is irrelevant to the issue under consideration because for addition under section 68 the onus is on the appellant to prove the identity of the creditor rather than to show by long-drawn conclusion as to how a transaction could have taken place. Thus, the appellant abysmally fails in proving the identity of the creditors in this case. Now, with regard to the creditworthiness of the creditors, the appellant has failed again as it does not want to show the identity itself of the alleged creditors. Therefore, the question of proving their creditworthiness does not arise. The final aspect of genuineness of transaction remains gravely in doubt as the appellant has not produced any proof with respect to the credit transaction out of a sale by way of any sales bill or challan evidencing the same. Thus, all the 3 legs of cash credit remain unproved. The contention that books of accounts have not been rejected and hence they are to be believed is also devoid of any merit as the addition under sec 68 or under sec 69 of the IT Act does not necessarily Page | 2