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Income Tax Appellate Tribunal, DELHI BENCH “SMC”: NEW DELHI
Before: SHRI KUL BHARAT
O R D E R PER KUL BHARAT, JM:
This appeal, by the assessee, is directed against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 22.01.2024, pertaining to the assessment year 2017-18. The assessee has raised following grounds of appeal:
“1. That the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) has erred both in law and on facts in upholding an addition made of Rs. 31,85,570/- out of Rs. 32,34,000/- representing alleged unexplained cash deposits in the bank account of the appellant company during the period of demonetization and brought to tax under section 68 of the Act read with section 115BBE of the Act 1.1 That, the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that the learned Assessing Officer having accepted the cash sales and taxed income thereon could not by any stretch of imagination either legally or logically hold that cash deposited is unexplained and taxable as income of the assessee u/s 68 of the Act. 1.2 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that once the sales are duly recorded in the books of accounts and have been made out of stock available in the books of accounts then both logically and legally, such sales could not be separately assessed to tax as bogus sales and unexplained cash credit u/s 68 of the Act. 1.3 That the learned Commissioner of Income Tax (Appeals) has also erred both in law and on facts in upholding the addition by failing to appreciate that once books of accounts are correct and complete and therefore, the sales as recorded in the books of accounts out of stock available with the appellant could to be regarded as cash sales merely on statements without disregarding the factual matrix/evidence tendered by the appellant 1.4 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the purchases declared in the books of accounts were duly accepted then no subjective assumption and presumption could be made a basis to subjective assumption and presumption could be made a basis to assume, allege and conclude that sales made out of such purchases were unexplained credit under section 68 of the Act. 1.5 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in recording various adverse inferences which are contrary to the facts on record, material placed on record and, are otherwise unsustainable in law and therefore, addition so sustained is absolutely unwarranted.
That without prejudice to the above and in the alternative, even otherwise, the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in holding that amount deposited in the bank by the appellant is taxable as income under section 68 of the Act and thereafter computed the demand in accordance with the rates specified in section 115BBE of the Act as amended by Taxation Laws (Second Amendment) Act, 2016.”
2. Facts giving rise to the present appeal are that assessee company filed its return for relevant assessment year 2017-188 on 11.10.2017 declaring income of Rs. 3,24,840/-. The case was taken up for scrutiny through CASS on limited parameter. The reason for selection of scrutiny is stated to be abnormal increase in cash deposits during demonetization period as compared to pre demonetization period. During assessment proceedings the Assessing Officer noticed that there was abnormal increase in cash deposits during the demonetization period. The Assessing Officer issued statutory notices to the assessee to explain the source of such cash deposits. However, there was no compliance, hence he made addition of the cash deposited in the bank account and assessed income at Rs. 35,58,840/- against declared income of Rs. 3,24.840/-. Aggrieved by this the assessee carried the matter before learned CIT(Appeals) who partly allowed the appeal. Thereby out of the total addition of Rs. 32,24,000/- he reduced it to Rs. 31,85,570/-. Aggrieved against this the assessee is in appeal before this Tribunal.
Learned counsel for the assessee reiterated the submissions as made in the written synopsis. For the sake of convenience the written synopsis is reproduced as under:
“MAY IT PLEASE YOUR HONOURS: 1 This appeal arises from an order dated 22.1.2024 of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. 2 That appellant is a private limited company incorporated on 27.7.1993 under the Companies Act 1956 and, is engaged in the business of trading of fabrics. 3 Grounds 1 to 1.5 and 2 relate to addition made of Rs. 31,85,570/- out of Rs. 32,34,000/- representing alleged unexplained cash deposits in the bank account of the appellant company during the period of demonetization and brought to tax u/s 68 of the Act read with section 115BBE of the Act.
3.1 In this regard, it is submitted that appellant has deposited cash amounting to Rs. 32,34,000/- during demonetization period i.e. 08.11.2016 to 31.12.2016 which is tabulated hereunder: Sr. Bank Name Account Number (Pages Date Total Amount of No. of paper book) deposit (pages of Paper Book) i) Oriental bank of 50965015001957 (39- 11.11.2016 1,24,000 (53) commerce 60) 12.11.2016 1,26,000 (53) 15.11.2016 2,45,000 (53) 22.11.2016 2,40,000 (53) 02.12.2016 1,10,000 (56) 02.12.2016 1,00,000 (56) 08.12.2016 1,30,000(56) ii) Union Bank of India 532701010034398 (61- 10.11.2016 1,25,000 (68) 76) 11.11.2016 1,26,000 (68) 12.11.2016 1,23,000 (68) 13.11.2016 2,20,000 (68) 16.11.2016 60,000 (68) 16.11.2016 1,80,000 (68) 18.11.2016 2,40,000 (68) 19.11.2016 80,000 (68) 19.11.2016 30,000 21.11.2016 1,00,000(68) 23.11.2016 1,00,000(68) 25.11.2016 80,000 (69) 28.11.2016 20,000 (69) 29.11.2016 1,00,000(69) 30.11.2016 2,25,000 (68) 01.12.2016 80,000 (70) 02.12.2016 80,000(70) 03.12.2016 20,000 (70) 07.12.2016 50,000 (70) Total 08.12.2016 1,20,000 (70) 32,34,000 Note: Copy of detail of cash deposited by appellant company during the FY 2016-17 is placed at Page 113 of paper book. 3.2. It is submitted that appellant has deposited the aforesaid cash out of cash in hand available out of withdrawals made from bank account and cash sales, the breakup of which is as under Sr. No Particulars Amount (Rs) i) Opening Cash 34,466 01.04.2016 to 07.11.2016 ii) Cash withdrawal 3,30,000 iii) Cash Sales 32,28,701 iv) Other cash receipt 28,186 v) Less: Cash deposits in bank 2,800 vi) Less: Cash Expense 2,09,443 vii) Closing Balance as on 07.11.2016 34,09,110 08.11.2016 to 31.12.2016 viii) Cash Sales 0 ix) Cash withdrawal 1,70,000 x) Less: Cash Expenses 40,172 xi) Cash available for deposit 35,38,938 xii) Cash deposit during 08.11.2016 to 31.12.2016 32,34,000 xiii) Closing Balance as on 31.12.2016 3,04,938 It is submitted that appellant has withdrawn cash amounting to Rs. 3,30,000/- during 01.04.2016 to 07.11.2016 and Rs. 1,70,000/- during 08.11.2016 to 31.12.2016 which is tabulated hereunder: Sr. Bank Name Account Number Date Amount (Rs) No. (Pages of paper (pages of book) Paper Book) 01.04.2016 to 07.11.2016 12.09.2016 45.000 (50) i) Oriental bank 50965015001957 (39- 12.09.2016 40,000 (50) of commerce 60) 14.09.2016 50,000 (50) 26.09.2016 10,000 (49) 30.09.2016 35,000 (49) 03.10.2016 25,000 (52) 03.10.2016 45,000 (52) 10.10.2016 40,000 (52) 13.10.2016 40,000 (52) Total 3,30,000 08.11.2016 to 31.12.2016 ii) Oriental bank 50965015001957 (39- 06.12.2016 10,000 of commerce 60) 16.12.2016 10,000 10,000 21.12.2016 10,000 22.12.2016 iii) Union 532701010034398 14.11.2016 20,000 bank of (61-76) 19.11.2016 30,000 India 24.11.2016 20,000 01.12.2016 10,000 02.12.2016 10,000 06.12.2016 10,000 16.12.2016 10,000 19.12.2016 10,000 21.12.2016 10,000 Total 1,70,000 3.4 It is further submitted that appellant has made cash sale amounting to Rs. 32,28,701/- during 01.04.2016 to 07.11.2016 is tabulated hereunder: Sr. No. Date Amount (Rs) Pages of Paper Book i) 02.05.2016 1,89,588 131 ii) 09.05.2016 1,94.712 132 18.05.2016 1,98,751 133 iv) 24.05.2016 1.97.159 135 v) 02.06.2016 1,98,319 136 vi) 07.06.2016 1,90,613 137 Vii 23.06.2016 1,99,620 138 viii) 30.07.2016 1,55,570 139 ix) 09.08.2016 1.82.323 140 x) 01.09.2016 1,79,415 141 xi) 06.09.2016 1,95,432 142 xii) 31.10.2016 1,90,456 143 xiii) 31.10.2016 1,98,436 134 xiv) 01.11.2016 1,72,710 144 xv) 01.11.2016 1,99,775 145 xvi) 02.11.2016 1,94,218 156 xvii) 02.11.2016 1,91,604 147 Total 32,28,701 3.5 It is submitted that appellant has submitted the following evidences in support of genuineness of claim made by the appellant: (I) ACKNOWLEDGMENT OF RETURN OF INCOME, COMPUTATION OF INCOME, TAX AUDIT REPORT AND AUDITED FINANCIAL STATEMENT a) Copy of acknowledgment of return of income along with computation of income, tax audit report and audited financial statement of AY 2017-18 (Page 1-23 of paper book)
(II) EVIDENCES OF CASH WITHDRAWALS i) Copy of bank statement of following banks: a) Oriental bank of commerce A/c No. 50965015001957 for the period from 01.04.2016 to 31.03.2017 (Page 39-60 of paper book) b) Union Bank of India A/e No 532701010034398 for the period from 01.04.2016 to 31.03.2017 (Page 61-76 of paper book) ii) Copy of bank book of following banks: a) Oriental bank of commerce A/c No. 50965015001957 for the period from 01.04.2016 to 31.03.2017 (Page 77-84 of paper book) b) Union Bank of India A/c No 532701010034398 for the period from 01.04.2016 to 31.03.2017 (Page 85-88 of paper book) iii) Copy of cash book for the period from 01.04.2016 to 31.03.2017 (Page 89-98 of paper book) (III) EVIDENCES OF CASH SALE i) Copy of cash sale invoices (Page 131-147 of paper book) ii) Copy of sales A/c (Page 148-152 of paper book) (IV) OTHER EVIDENCES a) Copy of response sheet filed regarding cash deposit during demonetization period alongwith source of cash deposit (Online filed, available on ITBA) (Page 128-130 of paper book) 4 The appellant in support of above submits as under: Sr. No. Particulars para of this submission i) That once audited books of accounts are accepted as such no addition is permissible ii) That once cash sales have already been offered as 6-6.1 income, cash deposited in the bank out of such cash sales cannot be taxed under section 68 of the Act as that tantamount to double taxation. iii) That once cash deposits are duly explained from the 7 withdrawals made from the bank accounts, no adverse inference can be validly drawn; and addition made is illegal, invalid and unsustainable iv) That rebuttal to the adverse observations made in the 8 order of CIT(A) to uphold the impugned addition v) That section 68 of the Act does not apply to a sum already 9-9.1 disclosed as income vi) That section 68 of the Act does not apply to revenue 10-10.4 transaction.
5 THAT ONCE AUDITED BOOKS OF ACCOUNTS ARE ACCEPTED AS SUCH NO ADDITION IS PERMISSIBLE: It is submitted that once audited books of accounts are accepted and, it is not disputed that sales are duly recorded in books of accounts and consequently income thereof has been offered as taxable income by reflecting the same in the trading and profit and loss account appellant. It is submitted that in these circumstances no addition is permissible on account of cash deposit arising out of sale proceeds and cash withdrawals and, appellant in this regard seeks to place reliance upon following judicial pronouncements: i) 315 ITR 185 (P&H) CIT vs. OM Overseas ii) 320 ITR 116 (All) CIT vs. Mascot India Tools & Forgings (P) Ltd. 64 DTR 409 (Jai) Asstt. CIT vs. Shankar Exports iv) 325 ITR 13 (Del) CIT vs. Paradise Holidays (extract at page 175 of Paper Book and pages 10-13 of JPB) v) dated 03.08.2010 CIT vs. M/s Rice India Exports Pvt. Ltd. (extract at page 175 of Paper Book) vi) dated 31.10.2012 ACIT vs. Dewas Soya Ltd. (extract at page 176 of Paper Book) vii) ITA No. 165/2010 dated 04.05.2017 CIT vs. M/s PashupatiNath Agro Food Products (P) Ltd viii) ITA No. 352/D/2021 dated 9.6.2023 DCIT vs. Bawa Jewellers (P) Ltd. (pages 78- 102 of Paper Book in para 10 at pages 95-96)
(Del) dated 2.1.2024 Brijwasi Diamonds v. ITO (pages 129-134 of Paper Book in para 14 at page 133) xii) dated 14.12.2023 JCII v. M/s Pari Agencies (P) Ltd. (pages 145-152 of Paper Book in para 11 at page 150) xiii) ITA No. 1011/Del/2022 dated 8.8.2023 DCIT v. Manuvel Malabar Jewellers (P) Ltd. (pages 153-164 of Paper Book in para 11 at page 161) xiv) ITA No. 2727/D/2022 dated 10.3.2023 Vivek Garg v. ITO (pages 165-169 of JPB in para 8 at page 168) xv) ITA No. 3934/D/2023 dated 23.2.2024 Bharat Agro Industries v. DCIT (pages 175- 182 of JPB in paras 8 to 9 at pages 179-181) 6 THAT ONCE CASH SALES HAVE ALREADY BEEN OFFERED AS INCOME, CASH DEPOSITED IN THE BANK OUT OF SUCH CASH SALES CANNOT BE TAXED UNDER SECTION 68 OF THE ACT AS THAT TANTAMOUNT TO DOUBLE TAXATION: It is submitted that aforesaid evidences manifestly demonstrate the source of cash deposit in bank account which are evidently out of cash sales made by the appellant prior to the period of deposit of cash pursuant to demonetization on 08.11.2016. In fact the cash sale has been accepted as income in the order of assessment and also supported by books of accounts maintained by appellant company. It is submitted that books of accounts are duly audited under Companies Act' 2013 as well as u/s 44AB of the Act. In fact once books of accounts are accepted and, cash sales taxed as income, then source of cash sale is explained from the cash book which too stands accepted. In such circumstances, finding of learned Assessing Officer that no specific explanation regarding source of cash deposited was submitted is not only factually incorrect, also fundamentally misconceived, wholly unjustified and thus unsustainable 6.1 It is submitted that addition made on the basis that cash deposit is not explained by cash sales tantamount to double taxation. It is submitted that once the cash deposit is taxed through cash sales then taxing the cash deposits separately amount to double taxation of income. Thus, once cash sales have already been offered as income then money available as a result of such cash sales which have been deposited in the bank cannot be taxed under section 68 of the Act as that tantamount to double taxation. It is submitted that double taxation is not permissible in law. Reliance is placed on the following judgments: i) 72 ITR 291 (SC) CIT v. Laxmi Pat Singhania vs. CIT ii) 118 ITR 50 (SC) State of Uttar Pradesh vs. Raja Buland Sugar Co. Ltd. iii) 344 ITR 294 (MP) CIT v. Jaora Flour and Foods (P) Ltd. (pages 6-87 of JPB) iv) ITA No. 995/Ahd./2014 dated 6.1.2020 Shree Sanad Textiles Industries Ltd. Vs. DCIT (extract pages 170-171 of Paper Book) v) ITA 8761/D/2019 dated 10.7.2020 A.K. Lumbers Ltd. vs. ACIT (extract page 171-172 of Paper Book and pages 19-37 of JPB) vi) ITA 1329/Kol/2018 dated 26.2.2020 New PoojaJewellers vs. ITO (extract page 172 of Paper Book) vii) ΙΤΑ 2614/Kol/2019 dated 29.5.2020 Bhagwant Merchants (P) Ltd. Vs. ПО (extract page 172 of Paper Book) vii) dated 18.5.2018 ITO vs. Shaik Zameer (extract pages 172- 173 of Paper Book) viii) ITA No. 48/bang/2019 dated 27.2.2019 Shri Ashok Desingnaik vs. ITO (extract page 173 of Paper Book) ix) I.T.A. No. 88/Gau/2020 dated 17.02.2021 NilkanthaSahaVs ITO (extract pages 173- 175 of Paper Book) x) ITA No. 995/Ahd/2014 dated 6.1.2020 Shree Sanad Textiles v. DCIT (pages 103-128 of JPB in para 9.3 at page 119-121) THAT ONCE CASH DEPOSITS ARE DULY EXPLAINED FROM THE WITHDRAWALS MADE FROM THE BANK ACCOUNTS, NO ADVERSE INFERENCE CAN BE VALIDLY DRAWN; AND ADDITION MADE IS ILLEGAL, INVALID AND UNSUSTAINABLE: It is submitted that it is well settled law that once cash deposits are duly explained from the withdrawals made from the bank account, no adverse inference can be validly drawn: and addition made is illegal, invalid and unsustainable. The assessee seeks to place reliance on the following judgments: i) 291 ITR 36 (Del.) CIT vs. Kulwant Rai (extract at pages 164-165 of Paper Book) ii) 302 CTR 241 (Del) Jaya Agarwal v ITO (extract at pages 165-166 of Paper Book) iii) 121 TTJ 366 (Del.) ACIT vs. Baldev Raj Charla & Ors (extract at pages 166 of Paper Book) It may be stated here that the aforesaid conclusion was accepted by the revenue and not challenged before the High Court as would be evident from the judgment in the case of CIT vs. Baldev Raj Charla reported in 334 ITR 129 (Del) iv) 127 ITR 807 (Kar) S.R. Venkata Ratnam vs. CIT (extract at pages 166- 167 of Paper Book) v) 300 ITR 98 (MP) Mansuklal Ratanlal Jain (Chopra) vs. Union of India (extract at page 167 of Paper Book) vi) 117 DTR 78 (Raj) Sind Medical Stores vs. CIT (extract at pages 167- 169of Paper Book) vii) dated 26.08.2011 ACIT vs. Sh. Joginder Singh Assessment Year 2005-06 viii) ITA No. 3471/3/2010 dated 19.08.2011 ITO vs. Smt. Neha Jain Assessment Year 2007-08 ix) ITA No.4429/Del/2010 dated 08.08.2013 ITO vs. Smt. Narwada Assessment Year 2009-10 x) IΤΑ Νο. 1867/10/2011. Α.Υ. 2007-08 18.10.2013 Shri Yoginder Singh Dalal vs. ITO xi) ITA No. 1439/Del/2017 AY 2011-12 dated 11.12.2017 Rajinder Singh v. ACIT (extract at pages 169-170 of Paper Book) 8 THAT REBUTTAL TO THE ADVERSE OBSERVATIONS MADE IN THE ORDER OF CIT(A) TO UPHOLD THE IMPUGNED ADDITION Sr. Adverse observation of the Submission of assessee No. learned Commissioner of Income Tax (Appeals) i) Rs. 3,30,000/- was withdrawn from It is submitted that merely because OBC during i 12.9.2016 to 13.10.2016, there was a time gap between i.e.. about 27 to 60 days before first withdrawal of cash and cash deposits date of cash deposit on 10.11.2016. explanation of the appellant could not Those too were withdrawn in small be rejected. Reliance is placed on the amounts of Rs. 10,000/- to Rs. 50,000/- following judgments: i) ITΑ Νο. 5660/Del/2012 ITO V. in 9 (nine) instalments. Obvious question arises, did the assessee really Deepali Sehgal withdraw small amounts at regular intervals during Sehgal these two ii) 88 Taxman.com 382 (Ahd- Trib.) months of September and October only Sudhirbhai Pravinkant Thaker V. ITO ii) to hold at hand and deposit entire amount later in bank instead of iii) 99 ITD 227 (Ahd) Anand Autoride spending? Generally, such iii) Ltd. Vs JCIT withdrawals are made for day to day expenses of the establishment. Assessee iv) 126 ITR 263 Shiv Charan Dass Vs has claimed that it iv) withdrew total CIT amount of Rs. 5,00,000/- and v) v) ITΑ Νο. 734/Chd/2014 ACIT VS deposited entire amount back to bank.
If it was true, if entire amount Shri Joginder Paul deposited back, how did the vi) assessee meet day-to-day expenses of vi)
ITO VS. Sh. the business establishment? (Para 7.1 Ashok Kumar Jain page 10) vii) Sh. Karnail Singh VS DCIT VS. Chandan Nijjer viii) 63 CCH 0048 Jodh-Trib Krishna Agarwal vs. ITO ii) It is further submitted that the cash transactions are very common in the business activity. Assessee as per needs of his business did the transactions. Further the assessee established the withdrawal and deposit made by him in the Written Submission filed (Pg.4 & 5 of WS) before the Hon'ble CIT(A), wherein the assessee duly explained the source and provided the bank's statement.
It is very clear that the closing balance of the assessee as on 07.11.2016 was Rs. 34,09,110/-, Ld CIT(A) without acknowledging the same and without any adverse finding that cash was not available with the assessee grossly made addition. (Judgment relied upon 291 ITR 36 (Del.) CTT vs. Kulwant Rai) iii) Even the assessee was unaware of the fact that the Demonetization kind of thing will ever happen. iii) It is pertinent here that the principle of i) It is very Evident that when the law of evaluation of direct evidence assessee filed its ITR, Audit reports versus circumstantial evidence and bank account statements, which including human probability has been the Ld. CIT(A) can easily examine the laid down by the Supreme Court in the surrounding circumstances too. But cases of Sumati Dayal vs CIT [1995] the Ld. Authorities failed to do so and 214 ITR 801 (SC) and CIT v. Durga Proceeded with the addition in hands Prasad More (1971) 82ITR 540, pp. of the asseseee.
545, 547). The law pronounced by the Supreme Court is binding under Article ii) In CIT v. Durga Prasad More: In 141 of Constitution of India. The this case the issue before the Hon'ble Supreme Court held in Sumati Dayal vs Court to decide in which hand the CIT [1995] 214 ITR 801 (SC) that income from property be taxed human probability is very much whether in individual assessee's hand important in deciding whether a or as trust property. Here the facts of transaction is real. (Para 7.4 page 11) the case are altogether and not at all relevant in present appellant's case. iii) In Sumati Dayal v. CIT: In this case assessee shown certain amounts in capital account in books claiming same to be winning from horse races. For this contention she filed sworn statement. Assessing Officer disbelieved her version and Settlement Commission upheld the assessment order holding that it was reasonable to infer, on facts that assessee did not participate in races but purchased winning tickets after events with unaccounted money. It is submitted that in the above case assessee only filed sworn statement to justify the amount shown credited in capital account however in the appellant's case the sales made during the demonetization period are evidenced with sale insaices (pe 131-14 of 15) and sales ais placed pg. 145- 152 of 715) etc. iv) All invoices are between Rs. It is submitted that no addition, can 155.570- to Rs. 1,99,775, ie, below Rs. be male solely on the basis of the 2 lakh which seems to be intended to mere Suspicions. Reliance is placed avoid mentioning PAN as required on the following judgments under Bale 1148 of Income Tax Rules, 26 ITR 736 (SC) Dhirajlai 1962, on the one hand and achieving Gindharilal the targeted cash sale figure necessary CIT, Bounthay 26 ITK 775 (SC) to explain cash deposits on the other Dhakeswari Cotton Mills in CII hand. Otherwise, why not a single (extract at page 195 of Paper Book) customer did transaction of more than 30 IIR 181 (SC) Mehta, Parikh & Bs. Two lakh or less Book) than Rs. Co. vs. CIT (extract at page 195 of One lakh out of assessee's turnover of i Paper Book) about Rs. 3 cmone? (para 8(1) page 37 ITR 1STSC) Omar Salay
13) Mohammad Sait v CIT 37 IIR 288 (SC) Lal Chand BhagatAmbica Ram vs. CIT v) In spite of the fact that there was space for name, is address, TIN of buyers on the invoices, these were not 37 ITR 2716SC) Uma Charan Shaw & Bros. Co. v. CIT reported in mentioned in invoices as a result of 42 ITR 689 (All) Sri Ram Tandon, vs. which these are not verifiable. Such CIT (extract at pages 195-196 of omission seems deliberate, (para (iv) page 13) Paper Book) 91 ITR 8 (SC) CIT Calcutta Discount Company Ltd. It is submitted that admittedly it cannot be said that in the case of cash sales, the appellant is bound to keep record of names and address of the buyers as held in the following judgments Ahd/2011, dated 20.7.2012 M/s Nitisha. Silk Mills (P) Ltd., v. ITO (pages 135-141 of JPB in para 10 at pages 139-141) dated 8.8.2023 DCIT v. Manuvel Malabar Jewellers (P) Luck (pages 153-16-4 of JPB in para 9.2 at page 160)
In the present case the reason for disbelieving the cash invoices below Rs. 2lakh in every transaction, that lead to the conclusion of the Assessing Officer that the same has been done to avoid the application of provision of rule 114B. The said observation made by the Assessing Officer without any material in his hand. There is no prohibition under law to make sale transaction below Rs. 2hakhs as such the assessee had at liberty to manage his own affairs. From the action of the assessee in raising the sales bill below Rs. 2lakhs the Assessing Officer cannot interpret as the sale are bogus only to give colour to non- genuine transaction as genuine transaction. The evidence brought on record by the Assessing Officer are not enough to hold that sales were not genuine. Moreover, when the books of account not rejected:- The books of account were accepted by the Id AO and provisions of section 145(3) has not been applied. The Id. AO herself accepted such sales as genuine and the profit embedded is such sales has been taken in trading a/e and considered for working out the taxable income. Thus, adding to such entire sales as income of the assessee is tantamount to double addition. vi) There was no cash sale at all in It is submitted that the accounts of the preceding FY 2015- 16 and there was appellant have been accepted by lower no cash sale during succeeding FY authorities, thus once lower 2017-18 except Rs. 10,763/- in April authorities has accepted the sales of and Rs. 5,86,904/- in May which shows the appellant; naturally corollary assessee's profile as one who did not would be that the learned Assessing trade with customers in cash. With that Officer accepted the sales made in background, doing cash sale of as cash also. It is therefore respectfully much as Rs. 32 lakh by such an submitted that source of cash deposits assessee during or near the ought to have been treated as demonetization period goes explained. Reliance is placed on the inexplicably contrary to that. Question judgment of Hon'ble Delhi Bench of arises and remains unanswered as to Tribunal in the case of Bharat Agro why did assessee do cash sales only Industries v. DCIT in and near that period? (para 3934/D/20223 dated 23.2.2024 (pages 8(ii) page 13) 175-182 of JPB in para 8 at page 179) vii) Assessee's invoices bear the words From the Table given @3.3 on Pg. No. "wholesale cloth merchants" and all 4 of written submission before the Id. payments were in cheques as is CIT(A), before the Demonetization ie. 08.11.2016, assessee did cash sales of practice in wholesale businesses. Rs. 32,38,701/-. Assessee did not explain what prompted sudden change for a brief Assessee made these transaction since period. Therefore, claim of cash sale is the inception of the FY which is very unusual and improbable (para 8(iii) evident from the Table 3.5 placed @ pg. 5 of WS. page 13) iii) Therefore, Ld. CIT(A) without looking into the facts of the case and submission placed on record concluded that assessee did cash sales during the time of demonetization which is clearly arbitrary in nature. iv) That the cash sale has been accepted as income in the order of assessment and also supported by books of accounts maintained by appellant company. It is submitted that books of accounts are duly audited under Companies Act 2013 as well as u/s 44AB of the Act. In fact, once books of accounts are accepted and, cash sales taxed as income, then source of cash sale is explained from the cash book which too stands accepted. v) Further, every business is unique and their cannot be one shoe fit all approach and Ld. CIT(A) should not decide how a business men should do his business. In such circumstances, finding of Ld. CIT(A) that cash sale was unusual and improbable is vague and incorrect. viii) In Para 9.3 of its submission, as FACTUALLY INCORRECT mentioned in Para 5.7(v) supra, i) It is submitted that the accounts of appellant cited the case law of CIT v. the appellant have been accepted by Kailash Jewellery House, authorities, thus once lower 613/2010 (Del) dated 9.4.2010. I find authorities has accepted the sales of that in that case the jurisdictional the appellant'; naturally corollary hon'ble Delhi High Court held that the would be that the learned Assessing cash deposited out of sales cannot be Officer accepted the sales made in treated as income u/s 68 of the Act cash also. It is therefore respectfully once the sales are not disputed by the submitted that source of cash deposits revenue. But here the sales are ought to have been treated as disputed and so the case law does not explained. Reliance is placed on the apply (para 11.2 page 15) judgment of Hon'ble Delhi Bench of Tribunal in the case of Bharat Agro Industries v. DCIT in dated 23.2.2024 (pages 175-182 of JPB in para 8 at page 179) ii) Cash Sale was already declared as the income of the income, once income of the assessee was assessed, further addition tantamount to the double addition. Ld. CIT(A) without acknowledging the facts that cash sale was duly declared as the income of the assessee and disclosed, which are not in the dispute. iii) Furthermore, there is no adverse finding that assessee had any back date entries and Ld. CIT(A) did not advert to the fact that the books of accounts were either correct or incomplete. ix) As mentioned in Para 5.7(iii) supra, LEGALLY MISCONCEIVED appellant also argued that once audited i) It is submitted that Hon'ble Delhi books of accounts are accepted as such Bench of Tribunal in the case of DCIT no addition is permissible or, in other v. Manuvel Malabar Jewellers (P) Ltd. words, addition u/s 68 cannot be made in daed 8.8.2023 without rejecting books of account. (pages 153-164 of JPB) wherein it has Also that, sections 68 of the Act does been held as under: not apply to a sum already disclosed as income. I do not agree because section "We find that similar issue was also 68 is outside the chapter-IVD (Sections considered by the Hon’ble 28 to 44BD) of the Act. This addition is Jurisdictional High Court in the case unlike additions u/s 36, 37 etc which of CTT vs Kailash Jewellery House in come under the head business and ITA 613/2010 wherein it was held that profession. Rejection of books of the cash deposited out of sales cannot account comes under section 145(3) be treated as income u/s 68 of the Act while 145(1) provides that it is for once the sales are not disputed by the computation of income under the heads revenue. Similarly in the context of "Profits and gains of business and cash deposits male during profession" or "Income from other demonetization period, the co-ordinate sources”. Therefore, addition under bench of Vizag Tribunal in the case of section 68 is not addition under the Hirapanna Jewellers reported in 128 head business or profession and hence taxmann.com 291 had decided these in section 145(3), i.e., rejection of books favour of the assessee. The ld. CIT(A) of account is not necessary So, it is had duly appreciated these factual and rejected (para 12 page 16) legal contentions of the assessee and granted relief to the assessee, on which we do not find any infirmity. The relevant operative portion of the order of the ld. CIT(A) had already been reproduced supra." There is no allegation of change of any accounting practice by the assessee. There was no enquiry about the transactions reported in financials to corroborate there was any significant irregularity which made books inaccurate. ii) is a settled law held that in the absence of any material pointing towards falsehood of the books of accounts and no particular defect or discrepancy being pointed in the books of accounts, resort could not be made to rejecting the books of accounts by invoking sec. 145(3), specially where same were duly audited by a statutory auditor. iv) Further Sec. 68 deals with cash credit and not with the method of accounting, When assessee duly recorded business income in his books, then it is very essential to deny books of account. v) Further reliance is placed on the Hon'ble High Court of Allahabad in the case of Dr. Prabhu Dayal Yadav v CIT (2018) 80 taxmann.com 126/253 Taxmann 191 (All), had observed, that the rejection of the books of account is unsustainable where the assessee had maintained his account and recorded his professional receipts and there is no evidence to doubt the correctness or completeness of the books of account. Our aforesaid View that existence of infirmities and discrepancies in the account maintained by the assessee is a pre- requisite for invoking the provisions of See. 145 of the Act and the AO has to show that the account are either incomplete or incorrect is supported by the judgment of the Hon'ble High Court of Himachal Pradesh in the case of CIT v. Swastik Food Products [2015] 61 taximann.com 83/275 CTR 109 (HP).
9 THAT SECTION 68 OF THE ACT DOES NOT APPLY TO A SUM ALREADY DISCLOSED AS INCOME Apart thereof and, without prejudice to above it is submitted that section 68 of the Act does not apply to a sum already disclosed as income as held by the judgment of Hon'ble Delhi High Court in the case of DIT vs. Keshav Social & Charitable Foundation reported in 278 11R 152 wherein Hon'ble Court has held that section 68 of the Act has no application in respect of income from charitable trust are concerned (extract page 176 of Paper Book). The aforesaid judgment is also affirmed by Apex Court in the case of DIT V. Keshav Social and Charitable Foundation reported in 394 1TR 496 (extract at page 177 of Paper Book) 9.1. It is also submitted that similar view has been expressed in the following cases:
ITA Νο. 827/2011 dated 7.07.2011 CIT vs Sadhana Foundation i) ii) ITA No(s), 1754/2010, 1755/2010 and 206-2011 (Del) dated 7.07.2011 CIT vs. O P. Suri Memorial Education Society upholding decision of ITAT in the case of DCIT vs. Sadhana Foundation in dated 08.10.2010 iii) 298 ITR 190 (Del) DIT vs. MotiBagh Mutual Aid Education iv) dated 13.05.2009 DIT vs Akhil Bhartiya Mahajan Siromani Sabha which has been SLP dismissed by the Hon'ble Supreme Court in SLP (C) (CC 385/2010 in the case of DIT vs. Akhil Bhartiya Mahajan Siromani Sabha dated 11.02.2010 v) 364 ITR 398 (All) CIT vs Uttaranchal Welfare Society vi) ITA No. 2957/D/2010 dated 14.01.2011 Hans Raj Samarak Society vs. DIT vii) ITA No. 776/LKW/2014 (Luck) dated 17.6.2015 ITO vs. M/s Saraswati Educational Charitable Trust 10 THAT SECTION 68 OF THE ACT DOES NOT APPLY TO REVENUE TRANSACTION: Moreover, it is submitted that section 68 of the Act does not apply to revenue transaction. In other words, once a sum has already been offered as income as part of sales then such sum cannot again be taxed under section 68 of the Act. It is submitted that section 68 of the Act (extract at page 178 of Paper Book)
10.1 It will be apparent from the above that said provision provides that where any sum is found credited in the books of an appellant maintained for any previous year. and the appellant offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the appellant of that previous year. In other words, what the statue provides is that the sum which is credited in the books of appellant firm and no explanation has been offered or explanation offered is not in the opinion of the Assessing Officer satisfactory, such sum can be regarded as income under section 68 of the Act. However, it is absolutely clear that what can be taxed is income under section 68 of the Act and should not have been an income already declared by the appellant. Thus the submission of the appellant is that what is already an income cannot again be deemed an income under section 68 of the Act. It is thus submitted that revenue count transaction which is being offered as income by the appellant cannot be made a basis to resort to section 68 of the Act. It is therefore, respectfully submitted that since cash sales have already been offered as income, section 68 of the Act has no application. Reliance is placed on the judgment of Gujarat High Court in the case of CIT vs. Vishal Export Overseas Ltd. in dated 3.7.2012 (extract at page 179 of Paper Book).
10.2 Reliance is also placed on the following judgments:
DELHI HIGH COURT (Del) dated 9.4.2010 CIT v. Kailash Jewellery house (extract at pages 179-180 of Paper Book and page 9 of JPB) ii) 177 Taxman 29 (Del) CIT v. Goverdhan India (P) Ltd. (extract at page 180 of Paper Book)
INCOME TAX APPELLATE TRIBUNAL DELHI BENCH AY 2014-15 M/s Singhal Exim (P) Ltd. (extract at pages 180-181 of Paper Book)
AY 2006-07 Kishore JeramBhai Khaniya (extract at page 181 of Paper Book) iii) 55 ITD 159 (Del) Racmann Springs (P) Ltd. v. DCIT (extract at page 181-182 of Paper Book)
AHMEDABAD BENCH Shri Pavan kumar Bhagatram (extract at page 182-183 of Paper Book)
HYDERABAD BENCH AY 2006-07 dated 13.11.2013 S.B.Steel Industries (extract at page 183 of Paper Book)
10.3 Apart from the above, at this juncture, the appellant also seeks to rely upon the decision in the case of J.M. Wire Inds vs CIT in ITA 96 of 1989 dated 15.07.2010 (extract at pages 183-185 of Paper Book and pages 142-144 of JPB))
10.4 Reliance is also placed on the following judgments:- i) dated 30.11.2018 DCIT v. Smt. Veena Awasthi (extract at page 185 of Paper Book) ii) ii) dated 25.11.2019 Neeta Breja (extract at page 186 of Paper Book) iii) 126 ITR 263 (P&H) Shiv Charan Dass v. CIT (extract at page 187 of Paper Book) iv) 99 TTJ 250 (Ahd) Anand Autoride Ltd. v. JCIT affirmed by Kerala High Court in the case of CIT v. K.J. Sridharan reported in 201 ITR 1010 v) ITA No.253/Viz/2020 Dated: 12.05.2021 ACIT Vs M/s HirapannaJewellers (extract at page 187 of Paper Book)
11 In light of the aforesaid, addition made of Rs. 32,34,000/-may kindly be deleted.
12 It is therefore, prayed that it be held addition made and upheld by the learned Commissioner of Income Tax (Appeals) be deleted and appeal of the appellant be allowed.’ 4. On the other hand, learned Sr. DR opposed the submissions and supported the orders of authorities below. Learned DR submitted that the assessee could not prove the cash sales. Even in past therefore was no such cash deposits.
I have heard rival submissions and perused the material available on record. Learned counsel for the assessee vehemently drawn my attention to the paper book to buttress the contention that the Revenue has not rejected the claim regarding cash sales. Once cash sales have been accepted, therefore, the cash deposited in the bank account represented the sale consideration. It is undisputed fact that the Assessing Officer has accepted sale and purchase and has not doubted the same.
The AO has accepted the profit declared by the assessee. The lower authorities have not commented upon the stocks of the assessee. If the stock remains undisturbed and no adverse finding is recorded, merely because the assessee has disclosed sales in cash this year would not be sufficient to tax such amount u/s 68 of the Act. In my considered view the lower authorities have not made any independent inquiry regarding correctness of claim of the assessee. If there is no mismatch in the sales and corresponding purchases, in my view, making addition purely on the basis of conjecture and surmises cannot be sustained. I hold accordingly. The AO is hereby directed to delete the impugned addition. Grounds of appeal are allowed.
Appeal of the assessee is allowed.
Order pronounced in open court on 11th September, 2024.