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Facts
The assessee, proprietor of M/s. Hari Om Traders, filed an ITR for AY 2017-18. During assessment, it was found that the assessee deposited Rs. 98 lacs in a bank account between November and December 2016. The AO made an addition of Rs. 90,27,979/- as unexplained cash sales during the pre-demonetization period (October-November 2016) under Section 68 of the Income Tax Act. The CIT(A) subsequently deleted this addition.
Held
The ITAT upheld the decision of the CIT(A), ruling that there was no reason to interfere with the deletion of the addition. The tribunal found that the assessee had provided sufficient evidence for cash sales, stock availability, and purchases made through banking channels before demonetization, establishing the genuineness of the transactions. The AO had not disputed the availability of stock or pointed out specific defects in the submitted details.
Key Issues
Whether cash deposits made during the demonetization period, attributed to cash sales, constitute unexplained cash credit under Section 68 of the Income Tax Act, and whether the CIT(A) was justified in deleting such an addition.
Sections Cited
Section 143(3) of the Income Tax Act, 1961, Section 68 of the Income Tax Act, 1961, Section 115BBE of the Income Tax Act, 1961, Section 143(2) of the Income Tax Act, 1961, Section 142(1) of the Income Tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI
Before: SH. M. BALAGANESH
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI) BEFORE SH. M. BALAGANESH, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER DCIT Central Circle Vs. Harish Gupta 1171/14, 11 -7 Delhi Floor, Kucha Mahajani Chandni Chowk, Delhi11006 PAN AFZP0134P Appellant Respondent Appellant by Sh. Vivek Kumar Upadhyay, Sr. DR Respondent by Sh. Manoj Gupta, CA Sh. Pransshu Gupta, CA Date of Hearing 15/04/2024 Date of Pronouncement 30/04/2024 ORDER PER MADHUMITA ROY, JM:
The instant appeal filed at the behest of the assessee is directed against the order dated 17.10.2023 passed by the CIT(A)- 24, New Delhi arising out of the order dated 26.12.2019 passed by the ACIT, Circle – 47 (1), Delhi under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2017-18 whereby and whereunder the addition made to the tune of Rs.90,27,979/- on account of unaccounted income brought in the books through bogus cash sales u/s. 68 r.w.s. 115BBE of the Act has been deleted.
The brief facts leading to the case is this that of the assessee, the proprietor of M/s. Hari Om Traders, electronically filed the return of income for A.Y. 2017-18 declaring taxable income of Rs.33,58,710/-. Upon selection of the matter under CASS, notice under Section 143 (2) of the Act was issued on 27.08.2018. and served upon him. In fact, it was found during the course of the assessment proceedings, that the assessee between 09.11.2016 to 31.12.2016 had deposited Rs.98 lacs in one Axix bank current account whereupon by and under a notice dated 28.09.2019 issued under Section 142(1) of the Act, the assessee was asked to explain the source of such cash deposit.
Further the assessee was directed to furnish following documents : - Date wise details of cash deposits during FY 2016-17 Copy of ledger account of cash for FY 2015-16 and FY 2016-17 with running balance Copies of all bank statements for FY 2016-17, highlighting the cash deposits Details indicating name, PAN, contact details and address of parties from whom the said cash was received Copies of all invoices of cash sales
Copy of sales ledger for the year under consideration month-wise details of purchases, sales, cash sales and cash deposits for the year under consideration Name, address, PAN of beneficiary to whom RTGS NEFT has been made immediately after the cash deposit and justify the purpose of such a transfer immediately after cash deposit.
In response thereto, assessee by and the reply dated 09.09.2019 submitted following details :- Date wise details of cash deposits during FY 2016-17 Copy of ledger account of cash for FY 2015-16 and FY 2016-17 with running balance Copies of all bank statements for FY 2016-17, highlighting the cash deposits parties from whom the cash was received-explanation month-wise details of purchases, sales, cash sales and cash deposits for the year under consideration list of beneficiary (one) to whom RTGS/NEFT has been made immediately after the cash deposit and justification of the purpose of such a transfer immediately after cash deposit.
Further notice dated 31.01.2019 u/s. 142 (1) of the Act was issued directing the assessee to furnish the further following documents :-
Month-wise details of Sales and Purchases as per format AY 17-18 & AY 16-17 Month-wise Cash Sales and Cash Deposits from 01-04- 2015 to 31-03-2016 Month-wise Cash Sales and Cash Deposits from 01-04- 2016 tο 31-03-2017 Details of top ten parties to whom the Sales are made (including Cash Sates) Details of top ten parties from whom the Purchases are made To furnish month-wise details of Stock giving opening stock of each month purchases and sales in each month. To furnish copy of Stock Register or Stock
On 05.11.2019 monthwise details of sale and purchase for the period of A.Y.2016-17 and 2017-18 was furnished by the assessee alognwith explanation to this effect that there was increase in cash sale F.Y. 2016-17 of F.Y. 2015-16 due to festivals and marriage seasons. Monthwise cash sales and cash deposit for the period 01.04.2015 to 31.03.2016 and 01.04.2016 to 31.03.2017 as per format was duly furnished. The details of 10 parties to whom sales and purchase were made along with the details of stock of each month, Purchase and Sales of each month as per format were furnished. Monthwise purchase, sales of F.Y. 2016-17 showing opening stock, purchase, total sales, cash sale, credit sale, closing stock, were submitted by the assessee before the Ld. AO. Retails sales of jewellery and cash sales worth of Rs.90,27, 979/- was made only in the month of October-November, 2016 and an amount attributed to cash sale of Rs.98 lacs was deposited in the bank during demonetization period as also contended out by the assessee with corroboration evidences. So far as the cash sale is concerned it was submitted by the assessee that cash transaction was also done earlier year, declared in the Return of Income and in audited financial statement with Tax Audit Report From 3CB-3CD which was already on record with the department. This was placed by the assessee while replying the show cause dated 27.11.2019. when he personally appeared before the Ld. AO.
Thereafter the assessee was further directed to furnish the documentary evidences of new unsecured loans, Cash Ledger and Sales Register for next F.Y.2017-18. whereupon documentary evidences of unsecured loans of Harish Gupta (HUF) and Smt. Poonam Gupta, monthly Cash Summary and Cash Book for next F.Y. 2017-18, Sales Register and Stock Register for next F.Y. 2017- 18. were furnished. Apart from that the bank statement of Smt. Poonam Gupta was duly submitted.
The Learned AO finally made an addition of Rs.90,27,979/- as 100% cash sales during October,2016 to November,2016 (pre- demonetization) on account of cash deposited during the demonetization period holding the same unexplained cash credit under Section 68 of the Act.
Being aggrieved by and /or dissatisfied with the said order passed by the Ld AO an appeal was preferred by the assessee before the First Appellate Authority which was allowed upon deletion of addition.
After taking into consideration the entire aspect of the matter of the CIT(A) with the following observations deleted the impugned addition.
We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on records. 12. The crux of the submission made by the assessee is this that as there was a fall in the business during the first six months i.e. April to September 2016 when the turnover declined sharply from 49.19 crores to 9.20 crores the assessee modified his business pattern by additional activity of retail sale, re-sale of jewellery and trading in commodity derivatives upon discontinuation of commission business. As a result of the same, there was substantial increase in volume of business during the second half year of the Financial Year 2016-17 particularly during the festival and marriage season which is an established fact from the details tabulated here in below:-
S.No. Particulars FY 2016-17 FY 2015-16 ( Rs.) 1. Total Sales for 77.53 crores 26.11 crore Oct to March (6 month) 2 Total sales for 7.32 crore 6.22 crore October month 3. Total sales for 30.29 crore 8.17 crore Nov month Assesee’s total business, income and taxes paid increased this year as compared to the preceding year : S.No. Particulars FY 2016-17 FY 2015- (Rs.) 16(Rs.) 1. Total turnover 86.77 crore 75.40 crore 2. Gross profit 22.76 lakh 4.54 lakh 3. Gross profit rate 0.26% 0.06% 4 Net profit 20.37 lakh 11.21 lakh 5 Net profit rate 0.23% 0.15% 6 Income from Business 20.32 lakh 11.12 lakh 7 Income from Business 7.24 lakh 1.19 lakh
In fact the cash deposit out of the cash sales made in October 2016 and November 2016 to the tune of Rs. 90,27,989/-is the issue in dispute before us. We note that this particular deposit made during the demonetisation period some cash deposit made by the assessee even after demonetisation period during February 2017 and March, 2017( 7.65 lacs, 2.50 lacs respectively) being part of his turnover for the year under consideration. Upon perusal of the entire set of documents which was duly submitted before the LD. CIT(A) and also before us it appears particularly from the bank statement that cash deposit amounting to Rs. 25 lacs, 50 lacs and 23 lacs on 11.11.2016, 12.11.2016 and 15.11.2016 respectively was made in Axis Bank account being No 911020032216878. Apart from that the assessee duly submitted the cash invoices evidencing cash sales being accounted for in the books of accounts. Further that from the details of purchase, sales, cash sales cash deposits and month wise details as annexed to the paper book filed before us establishes the fact that during the months of October and November, the assessee made a total sale of Rs.37,60,90,851/- (Rs.7,31,71,101/- and Rs.30,29,19,750 for the month of October and November respectively) out of which the cash sales made was Rs. 90,27,979/- (Rs.44,05,841/- and 4,65,22,138 for the month of October and November respectively out of which 98 lacs was deposited in the month of November. The details of purchase, stock and sales, sales verified from the documents placed before us which was already been verified by Ld. CIT(A) establishes the fact of genuineness of the cash sale made by the assessee. Relevant to mention that the cash deposited by 15.11.2016 was by old currency as new currency was not available in the market in these quantities till 15.11.2016. The cash deposit made by the assessee cannot be questioned particularly taken into consideration the fact already narrated here in above. It is a fact that substantial large sale was made though in the month of October and November can lead to suspicion but cannot be the sole cause of making addition. If that be so, then the same would be a product of only surmise and conjecture. Further that the Ld. AO has not taken the trouble to verify the availability of stock rather not disputed the issue of availability of stock of subsequent sales during October, November, 2016. Neither the bills were verified for its correctness nor specific defects have been pointed by the Ld. AO. Not only that, but also the Ld. AO did not make any adverse comment on the details submitted by the assessee. We find that unavailability of stock and genuineness of purchases has not been disputed by the Ld. AO and thus it is an established and undisputed fact that adequate stock was available for making sales before demonetization. We also keep note that the purchase was also made through banking channel prior to 1.10.2016 evidencing paid stock as on 1.10.2016. Thus, having regard to the facts and circumstances of the case, we do not find any reason to interfere with order of the deletion of the addition to the impugned amount of Rs.90,27,979 by the ld. CIT(A) without any ambiguity. The same is, thus found to be just and proper. The appeal filed by the revenue, is, thus found to be not devoid of any merit and thus, dismissed. Order pronounced in the open court on 30th April, 2024.