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Facts
The assessee, a diamond trading company, faced additions during assessment for AY 2017-18 following a search operation. These additions pertained to cash deposits during demonetization, alleged unaccounted cash sales, and unsecured loans, which the Assessing Officer treated as unexplained income after rejecting the assessee's books of account. The Ld. CIT(A) largely deleted or restricted these additions, against which the Revenue filed an appeal.
Held
The Tribunal confirmed the CIT(A)'s decision, holding that the assessee's cash sales and deposits were regular and adequately explained, thus not warranting additions under Section 68 or 115BBE. For unaccounted cash sales, only the gross profit, not the entire sales value, could be taxed, acknowledging corresponding purchases. The addition related to unsecured loans was also correctly deleted as the loan was repaid with no adverse findings.
Key Issues
The key legal issues were the validity of additions for cash deposits during demonetization and unaccounted cash sales under Sections 68 and 115BBE, and the treatment of unsecured loans where genuineness was disputed.
Sections Cited
Section 145, Section 132, Section 68, Section 115BBE, Section 69A, Section 80IC, Section 44AB
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Income Tax Appellate Tribunal, DELHI BENCH “B” NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & DR. B.R.R. KUMAR
आदेश /O R D E R PER C.N. PRASAD, J.M.
This appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-27, New Delhi dated 18.08.2022 for the AY 2017-18. The Revenue raised the following grounds: -
2. Briefly stated the facts are that the assessee company is in the business of trading in diamonds. A search and seizure operation u/s 132 of the Act was conducted at various residential and business premises of the assessee by the Investigation Wing of the Department on 14.12.2016. The assessee filed its return of income declaring return of income on 30.03.2018 declaring income of Rs.8,47,55,540/-. The assessment was completed on 24.12.2018 determining the income of the assessee at Rs.46,01,57,480/- 2 observing that the assessee could not attend the hearings on the dates issue. The additions have been made on account of disallowance of expenses, unsecured loans, sundry creditors, cash, unaccounted cash sales.
3. On appeal the Ld.CIT(A) deleted the additions made on account of cash deposit of Rs.16.29 crores, cash sales to the tune of Rs.1.75 crores.
4. Aggrieved by the order of the Ld.CIT(A) the Revenue filed appeal before the Tribunal.
Before us the Ld. DR strongly supported the orders of the Assessing Officer (AO) and on the other hand, the Ld. Counsel for the assessee supported the order of the Ld.CIT(Appeals).
We observe that during the assessment proceedings the assessee failed to appear before the AO and the AO made the addition of Rs.16,23,99,500/- on account of cash deposited during demonetization. The assessee company during appellate proceedings filed additional evidences before the Ld.CIT(Appeals) under Rule 46A and the Ld.CIT(A) duly accepted and considered the additional evidences filed before him. The Ld.CIT(A) deleted the addition on the ground that the AO has accepted the stock as per the books of accounts while arriving the undisclosed stock and accepted the profit earned thereof. Therefore, the Ld.CIT(A) held that the AO cannot blow hot and cold and thus, the addition was deleted. We have gone through the entire material placed before us. The data of the total sales, cash sales and cash deposits in the bank account are as under:
The comparative data of cash sales to total sales is also examined and the same is tabulated as under: -
From the examination of the above data the following emanates:
In the case of CIT Vs. Kailash Jewellery House in the Hon’ble Delhi High Court held as under: -
Similar issue has been considered by the coordinate bench of the Tribunal in the case of ACIT Vs. Heera Panna Jewellers in and the Tribunal held as under: -
From the above, it can be held that as per data the assessee had sufficient stock which is being sold in cash regularly and the stock available and the sales in cash during the year has not been in dispute. All the cash sales have duly been reflected in the regular books of account. The cash sales do not show any abnormal trend when compared month-wise cash sales during the period of three years. The allegations of higher cash sales is neutralized by the same level of cash sales in the month of April, May, August and it is a fact on record that the VAT returns have been filed even before the date of search. It is not in dispute that the AO has accepted the 12 stock as per books of account while arriving the undisclosed stock and applied same GP as declared by the assessee while calculating the profit element on the sales which have already been part of the books of account. No defects have been identified in the books of accounts and no rationale has been given by the AO.
Therefore, keeping in view the entire facts and circumstances in this case. We hold that the Ld.CIT(A) gave a finding rightly that the assessee company had been making regular cash sales in preceding as well as succeeding assessment years. Furthermore, the assessee company is also depositing all these cash sales in its regular bank accounts.
In the result, the order of the Ld.CIT(Appeals) is affirmed on this issue and the grounds 1 to 5 raised by the Revenue are dismissed.
Coming to ground nos. 6 & 7 i.e. in respect of unaccounted cash sales. The AO made addition of Rs.1.19 crores on the basis of seized material. The AO treated the amounts mentioned in the seized material as unaccounted sales. The Ld.CIT(A) duly considered the remand report and determined gross profit at 8.51% on the unaccounted sales. The ratio of the Ld.CIT(A) was that when the assessee sold goods/jewellery which is unaccounted there must 13 have been unaccounted purchases also. Hence, the profit derived by the assessee on the transaction is only to be taxed. We find the ratio of the Ld.CIT(A) is acceptable as no sales can be affected without corresponding purchases. Thus, we decline to interfere with the order of the Ld.CIT(A) on this issue and reject ground no.6 & 7 of the Revenue.
Coming to ground no. 8 of the grounds of appeal of the Revenue which is in respect of unsecured loans of Rs.11,08,000/- taken from M/s Annie Apparels Pvt. Ltd. We observe that the AO made addition owning to non-compliance of the assessee on this issue. The Ld.CIT(A) has called for a remand report from the AO and found that the loan has been duly repaid on 01.07.2018. Since the amounts have been repaid and even in the remand report no adverse finding has been given by the AO and since no other contention has been brought to our notice, we decline to interfere with the order of the Ld.CIT(A) on this issue and the grounds raised by the Revenue on this issue is rejected.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on 25/10/2024