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Facts
The assessee, a jewellary firm, reported significant cash sales just before demonetization on 28/10/2016, followed by substantial cash deposits in November 2016. The Assessing Officer (AO) considered these cash sales as bogus to explain the cash deposits, deeming them as unexplained cash credit. The CIT(A) upheld the AO's decision.
Held
The Tribunal held that the cash sales, though concentrated on a single date prior to demonetization, were not inherently bogus. The assessee provided supporting documentation for purchases and stock, and the sales were also subject to VAT. The AO's decision was based on suspicion rather than concrete evidence.
Key Issues
Whether the cash sales made by the assessee just before demonetization are genuine, and if so, whether the corresponding cash deposits can be treated as unexplained cash credit.
Sections Cited
143(3), 133(6), 68, 69, 114E, 153C, 292C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “B” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SANDEEP SINGH KARHAIL
This appeal by the assessee is directed against order dated 19.01.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2017-18, raising following grounds:
Briefly stated facts of the case are that the ass Briefly stated facts of the case are that the ass Briefly stated facts of the case are that the assessee is a limited liability partnership (LLP) firm, which has been incorporated limited liability partnership (LLP) firm, which has been incorporated limited liability partnership (LLP) firm, which has been incorporated on 12/10/2015. The assessee firm is engaged in retail trading on 12/10/2015. The assessee firm is engaged in retail trading on 12/10/2015. The assessee firm is engaged in retail trading activity of finished studded activity of finished studded jewellary products for its domestic and products for its domestic and international customers. For the year under international customers. For the year under consideration, the consideration, the assessee filed return of income assessee filed return of income on 29/11/2017 declaring total 2017 declaring total income at ₹ 24,14,650/ 650/-. The return of income filed by the assessee . The return of income filed by the assessee was selected for scrutiny through computer was selected for scrutiny through computer-assisted selection assisted selection process mainly for the reasons process mainly for the reasons inter-alia, large cash deposits in rge cash deposits in bank accounts during the monetization period, abnormal increase bank accounts during the monetization period, abnormal increase bank accounts during the monetization period, abnormal increase in sales with decreasing profitability compared to preceding year. in sales with decreasing profitability compared to preceding year. in sales with decreasing profitability compared to preceding year. The Assessing Officer issued statutory notices under the Income-tax The Assessing Officer issued statutory notices under the Income The Assessing Officer issued statutory notices under the Income Act, 1961 (in short short ‘the Act’) which were duly served on the were duly served on the assessee. The Assessing Officer also gathered relevant bank assessee. The Assessing Officer also gathered relevant bank assessee. The Assessing Officer also gathered relevant bank statement of the assessee from the bank invoking authority under statement of the assessee from the bank invoking authority under statement of the assessee from the bank invoking authority under section 133(6) of the section 133(6) of the Act. The Assessing Officer asked details of ct. The Assessing Officer asked details of cash deposit and Cash sales for the year cash deposit and Cash sales for the year under consideration before under consideration before and after 08/11/2016 ( i.e. the date on which currency notes of 2016 ( i.e. the date on which currency notes of 2016 ( i.e. the date on which currency notes of rupees thousand and five hundred were held to be invalid and rupees thousand and five hundred were held to be invalid and rupees thousand and five hundred were held to be invalid and withdrawn from circulation by the G hdrawn from circulation by the Government of India). Similar overnment of India). Similar details of cash deposits and cash sales details of cash deposits and cash sales for preceding assess for preceding assessment years were also called for. years were also called for. From the details furnished by the From the details furnished by the assessee, the Assessing Officer observed assessee, the Assessing Officer observed that in the preceding in the preceding assessment year , there was no cash sales or cash deposit but in there was no cash sales or cash deposit but in there was no cash sales or cash deposit but in the year under consideration, in the week immediately prior to the the year under consideration, in the week immediately prior to the the year under consideration, in the week immediately prior to the date of the demonetization date of the demonetization i.e. 8/11/2016, the assessee shown , the assessee shown cash sales of ₹ 34, 50, 000/ 34, 50, 000/-and after the said date, assessee shown and after the said date, assessee shown cash deposits of ₹ 32, 95, 500/ 32, 95, 500/-from 08/11/2016 to from 08/11/2016 to 30/11/2016 and then cash deposits of ₹ 1, 54, 500/- was shown for the period and then cash deposits of shown for the period from 01/12/2016 to 31/12/2016. From the details filed by the from 01/12/2016 to 31/12/2016. From the details filed by the from 01/12/2016 to 31/12/2016. From the details filed by the assessee, the Assessing Officer observed abnormal increase in cash assessee, the Assessing Officer observed abnormal increase in cash assessee, the Assessing Officer observed abnormal increase in cash sales in the year under consideration as compared to the preceding e year under consideration as compared to the preceding e year under consideration as compared to the preceding year. The Assessing Officer found it abnormal that the assessee had year. The Assessing Officer found it abnormal that the assessee had year. The Assessing Officer found it abnormal that the assessee had no cash sales throughout the financial year 2015 throughout the financial year 2015-16 and 2016 16 and 2016-17 except for one day i.e. 28/10/2016. In the opinion of the Assessing except for one day i.e. 28/10/2016. In the opinion of the Assessing except for one day i.e. 28/10/2016. In the opinion of the Assessing Officer, the trend of the cash deposit clearly indicated that the the trend of the cash deposit clearly indicated that the the trend of the cash deposit clearly indicated that the assessee had artificially booked bogus sales on one particular day assessee had artificially booked bogus sales on one particular day assessee had artificially booked bogus sales on one particular day to justify unaccounted cash with it on 08/11/2016 i.e. the day on to justify unaccounted cash with it on 08/11/2016 i.e. the day on to justify unaccounted cash with it on 08/11/2016 i.e. the day on which demonetization demonetization was declared. The Assessing Officer was declared. The Assessing Officer asked the assessee by way of show cause notice dated 14/12/2019 to the assessee by way of show cause notice dated 14/12/2019 to the assessee by way of show cause notice dated 14/12/2019 to explain the steep increase in cash sales in October 2016. In view of explain the steep increase in cash sales in October 2016. In explain the steep increase in cash sales in October 2016. In no compliance on the part of the assessee, the Assessing Officer in no compliance on the part of the assessee, the Assessing Officer no compliance on the part of the assessee, the Assessing Officer the assessment order dated 16/12/2019 pass the assessment order dated 16/12/2019 passed under s ed under section concluded the cash deposits of ₹ ₹ 34,50,000/-as 143(3) of the Act concluded the cash deposits of unexplained cash credit unexplained cash credit in terms of section 68 of the A in terms of section 68 of the Act.
On further appeal, the assessee filed detail submissions and On further appeal, the assessee filed detail submissions and On further appeal, the assessee filed detail submissions and explained source and nature of the credit of ₹ 34,50, explained source and nature of the credit of 34,50,000/-in its books of accounts, but the Ld. CIT(A) rejected the contention of the books of accounts, but the Ld. CIT(A) rejected the contention of the books of accounts, but the Ld. CIT(A) rejected the contention of the assessee and upheld the fi assessee and upheld the finding of the Assessing Officer, observing nding of the Assessing Officer, observing as under:
7.1.2 During the appellate proceedings, in his written submissions, the 7.1.2 During the appellate proceedings, in his written submissions, the 7.1.2 During the appellate proceedings, in his written submissions, the appellant has given content appellant has given contention to justify the cash sales. The Ld. AO has ion to justify the cash sales. The Ld. AO has made a logical analysis in which he proved that cash sales were made made a logical analysis in which he proved that cash sales were made made a logical analysis in which he proved that cash sales were made only during the specific period and no cash sale was made both before only during the specific period and no cash sale was made both before only during the specific period and no cash sale was made both before and after the said period. On the other hand, the appellant tried to ju and after the said period. On the other hand, the appellant tried to ju and after the said period. On the other hand, the appellant tried to justify that the cash sales was due to festive season that the cash sales was due to festive season. As can be seen from the As can be seen from the submissions of the appellant, the process of cash deposit started on the submissions of the appellant, the process of cash deposit started on the submissions of the appellant, the process of cash deposit started on the date of 10.11.2016 and ended on 19.12.2016. After that no cash was date of 10.11.2016 and ended on 19.12.2016. After that no cash was date of 10.11.2016 and ended on 19.12.2016. After that no cash was deposit. The appellant also furnished f deposit. The appellant also furnished few cash memos valuing less than 2 ew cash memos valuing less than 2 lacs to prove that the details of buyers in case of cash sales is not lacs to prove that the details of buyers in case of cash sales is not lacs to prove that the details of buyers in case of cash sales is not required. The appellant further take contention that all the cash sales are required. The appellant further take contention that all the cash sales are required. The appellant further take contention that all the cash sales are recorded in books of accounts and the stock register is also maintained. recorded in books of accounts and the stock register is also maintained. recorded in books of accounts and the stock register is also maintained. The appellant did not enclose the cash register during the appellant appellant did not enclose the cash register during the appellant appellant did not enclose the cash register during the appellant proceedings. As noted by the AO and held in these proceedings the so proceedings. As noted by the AO and held in these proceedings the so proceedings. As noted by the AO and held in these proceedings the so- called cash sale during demonetization period was bogus and the cash called cash sale during demonetization period was bogus and the cash called cash sale during demonetization period was bogus and the cash sale ledger and books were fabricated. These books a sale ledger and books were fabricated. These books are now rejected u/s re now rejected u/s 145 of the Act. 145 of the Act. 1965. The financial result such as profit and loss arising 1965. The financial result such as profit and loss arising out of such books are also rejected. The so out of such books are also rejected. The so-called cash sales is treated as called cash sales is treated as unaccounted income / asset of the appellant; hence, held falling u/s 68 unaccounted income / asset of the appellant; hence, held falling u/s 68 unaccounted income / asset of the appellant; hence, held falling u/s 68 and 69 of the Act. The findings of the AO are Act. The findings of the AO are confirmed. The ground of the confirmed. The ground of the appellant is dismissed. appellant is dismissed.
We have heard rival submissions of the parties and perused have heard rival submissions of the parties and perused have heard rival submissions of the parties and perused various documents filed by the assessee in the paper-books various documents filed by the assessee in the paper various documents filed by the assessee in the paper containing pages 1 to 165 and containing pages 1 to 165 and 1 to 76. The ground No. one of the d No. one of the appeal was not pressed and therefore same is dismissed as appeal was not pressed and therefore same is dismissed as appeal was not pressed and therefore same is dismissed as infructuous. The ground Nos. 2 to 4 of the appeal are related to the infructuous. The ground Nos. 2 to 4 of the appeal are related to the infructuous. The ground Nos. 2 to 4 of the appeal are related to the issue of cash deposits of issue of cash deposits of ₹ 34,50,000/-held by the Assessing Officer held by the Assessing Officer as unexplained cash credit as unexplained cash credit under section 68 of the A of the Act. Out of the cash of ₹ 34,50,000/ 000/-, the assessee deposited ₹ 32, 95, 500/ 32, 95, 500/- into the bank account from the bank account from 10/11/2016 to 30/11/2016 and 2016 and deposited ₹ 1,54,500/- on 19/12/2016 . The relevant part of the cash book of on 19/12/2016 . The relevant part of the cash book of on 19/12/2016 . The relevant part of the cash book of the assessee available on paperbook p the assessee available on paperbook pages 144 and 145 is 144 and 145 is reproduced as under: under:
1-11-2016 To Opening Balance Opening Balance 34,50,500.00 10-11-2016 By Ву State Bank of India State Bank of India 8 1,95,000.00 1,95,000.00 32,55,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 11-11-2016 By Ву State Bank of India State Bank of India 9 1,98,000.00 1,98,000.00 30,57,000.00 Dr 35409029868 35409029868 Contra Being cash deposited in Being cash deposited in bank By Axis Axis 916020010932245 916020010932245 10 1,95,000.00 1,95,000.00 28,62,000.00 Dr Contra Being cash deposited in Being cash deposited in bank 12-11-2016 By State State Bank Bank of of India India 11 1,92,000.00 1,92,000.00 26,70,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 13-11-2016 By State State Bank Bank of of India India 12 1,90,000.00 1,90,000.00 24,80,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 15-11-2016 By State State Bank Bank of of India India 13 1,95,000.00 1,95,000.00 22,85,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 16-11-2016 By State State Bank Bank of of India India 14 1,95,000.00 1,95,000.00 20,90,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 17-11-2016 By Ву State Bank of India State Bank of India 15 1,92,000.00 1,92,000.00 18,98,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 18-11-2016 By State State Bank Bank of India 16 1,95,000.00 1,95,000.00 17,03,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 19-11-2016 By State State Bank Bank of of India India 17 1,92,000.00 1,92,000.00 15,11,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 21-11-2016 By State State Bank Bank of of India India 18 1,93,000.00 1,93,000.00 13,18,000.00 Dr 35409029868 35409029868 Contra Being cash deposited in Being cash deposited in bank 22-11-2016 By State State Bank Bank of of India India 19 1,95,000.00 1,95,000.00 11,23,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 23-11-2016 By State State Bank Bank of of India India 20 1,94,000.00 1,94,000.00 9,29,000.00 Dr 35409029868 Contra 35409029868 Contra Being cash Being cash deposited in bank 24-11-2016 By State State Bank Bank of of India India 21 1,94,500.00 1,94,500.00 7,34,500.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 25-11-2016 By State State Bank Bank of of India India 22 1,95,000.00 1,95,000.00 5,39,500.00 Dr
35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 28-11-2016 By State State Bank Bank of of India India 23 1,92,000.00 1,92,000.00 3,47,500.00 Dr 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank Carried Over Carried Over 34,50,000.00 31,02,500.00 31,02,500.00 Bina Goenka The Jeweller LLP Cash Book : 1-Apr-2016 to 31-Mar Mar-2017 Date Partic Vch Type Vch Type Vch No Debit Credit Credit Balanace ulars Brought Forward 34,50,000.00 31,02,500.00 31,02,500.00 31-11-2016 By State State Bank Bank of of India India 24 1,93,000.00 1,93,000.00 1,54,500.00 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 34,50,000.00 32,95,500.00 32,95,500.00 By Closing Balance Closing Balance 1,54,500.00 1,54,500.00 34,50,000.00 34,50,000.00 34,50,000.00 1-12-2016 To Opening Balance Opening Balance 1,54,500.00 19-12-2016 By State State Bank Bank of of India India 25 1,54,500.00 1,54,500.00 35409029868 Contra 35409029868 Contra Being cash deposited in Being cash deposited in bank 1,54,500.00 1,54,500.00 1,54,500.00
Before us, the learned counsel for learned counsel for assessee explained that assessee explained that the source of cash deposits source of cash deposits was cash sales made by the assessee on as cash sales made by the assessee on 28/10/2016, details of which is available in cash book. The 28/10/2016, details of which is available in cash book. The 28/10/2016, details of which is available in cash book. The relevant part of said cash book (paper book page 141 to 144 ) is relevant part of said cash book (paper book page 141 to 144 ) relevant part of said cash book (paper book page 141 to 144 ) reproduced as under: :
28-10-2016 To (As per details) (As per details) Sales BG/16-17/034 1,95,000.00 1,95,000.00 1,95,000.00 Dr. Net Sales (Jewellery) Net Sales (Jewellery) 1,92,688.00 Cr Mvat Sales 1.20% Mvat Sales 1.20% 2,312.00 Cr Being Jewellery Sales Being Jewellery Sales Pendant-8585(1) 8585(1) Diamond 0.43 Cts, Diamond 0.43 Cts, Pearls Pearls 12.35 12.35 Cts, Cts, Gold Wt 4.25 gms Gold Wt 4.25 gms against Inv No. BG against Inv No. BG 16-17-040 040 Dt: 28/10/2016 Dt: 28/10/2016 To (as per details) (as per details) Sales BG/16-17/035 1,98,000.00 1,98,000.00 3,93,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,95,652.00 Cr Mvat Sales 1.20% Mvat Sales 1.20% 2,348.00 Cr Being cash Jewellery Being cash Jewellery Sales Pendant Sales Pendant- PD
-8585(2) 8585(2) Diamond Diamond 00.52 00.52 Cts, Cts, Pearls Pearls 12.32 Cts, Gold Wt 12.32 Cts, Gold Wt 4.59 gms against Inv No. BG /16 No. BG /16-17/035 Dt: 28/10/2016 Dt: 28/10/2016 To To (as per details) To (as per details) Sales BG/16-17/035 1,95,000.00 1,95,000.00 5,88,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,92,688.00 Cr Mvat Sales 1.20% Mvat Sales 1.20% 2,312.00 Cr Being cash Jewellery Being cash Jewellery Sales Ring Sales Ring-RG-370(4) Diamond 01.93 Cts Diamond 01.93 Cts, Gold Wt 3.87 gms Gold Wt 3.87 gms against against Inv Inv No. No. BG/16-17/036 17/036 Dt: Dt: 28/10/2016 28/10/2016
Carried Over Carried Over 5,92,500.00 4,500.00 4,500.00 Bina Goenka The Jeweller LLP Cash Book : 1-Apr-2016 to 31-Mar Mar-2017 Date Particulars Vch Type Vch No. Debit Credit Balance Brought Forward 5,92,500.00 4,500.00 28-10-2016 To (as per details) Sales BG/16-17/037 1,92,000.00 7,80,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,89,723.00 Cr Mvat Sales 1.20% 2,277.00 Cr Being cash Jewellery Being cash Jewellery Sales ER-8171(1) 8171(1) Diamond Diamond 0.19 0.19 Cts, Cts rubies rubies 3.08cts, 3.08cts, Emeralds Emeralds 3.70 3.70 cts, cts, Gold Wt 08.37 gms Gold Wt 08.37 gms against against Inv Inv No. No. BG/16-17/037 17/037 Dt: Dt: 28/10/2016 To (as per details) Sales (as per details) Sales Sales BG/16-17/038 1,90,000.00 9,70,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,87,747.00 Cr Mvat Sales 1.20% 2,253.00 Cr Being cash Jewellery Jewellery Sales Pendant -PD8585(3) Diamond PD8585(3) Diamond 0.42 Cts, Pearls 12.55 0.42 Cts, Pearls 12.55 cts, Gold Wt 04.09 cts, Gold Wt 04.09 gms against Inv No. gms against Inv No. BG 16-17-038 038 Dt: Dt: 28/10/2016. To (as per details) Sales (as per details) Sales Sales BG/16-17/039 1,95,000.00 11,65,000.00 Dr Net Sales (Jewellery) Jewellery) 1,92,688.00 Cr Mvat Sales 1.20% 2,312.00 Cr Being cash Jewellery Being cash Jewellery Sales Nose Pin 11(1) Sales Nose Pin 11(1) Diamond Diamond 2.05 2.05 Cts, Cts, Ruby 0.25 cts, Gold Ruby 0.25 cts, Gold Wt 00.77 gms against Wt 00.77 gms against Inv Inv No. No. BG/16- BG/16 17/039 17/039 Dt: Dt: 28/10/2016 To (as per details) Sales (as per details) Sales Sales BG/16-17/040 1,95,000.00 13,60,000.00 Dr
Net Sales (Jewellery) Net Sales (Jewellery) 1,92,688.00 Cr Mvat Sales 1.20% 2,312.00 Cr Being cash Jewellery Being cash Jewellery Sales Pendant-8585(4) 8585(4) Diamond Diamond 0.40 0.40 Cts, Cts, Pearls 11.80ts, Gold Pearls 11.80ts, Gold Wt 04.05 gms against Wt 04.05 gms against Inv No. BG 16-17-040 040 Dt: 28/10/2016. To (as per details) Sales (as per details) Sales Sales BG/16-17/041 1,92,000.00 15,52,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,89,723.00 Cr Mvat Sales 1.20% 2,277.00 Cr Being cash Jewellery Being cash Jewellery Sales Earrings -ER ER -8171(2) 8171(2) Diamond Diamond 0.21 0.21 Cts, Cts, Rubies Rubies 03.05ts, 03.05ts, Emaralds Emaralds 3.74 3.74 cts, cts, Gold Gold Wt Wt 08.40 gms against Inv 08.40 gms against Inv No. BG/16-17/041 17/041 Dt: 28/10 /2016. To (as per details) Sales (as per details) Sales Sales BG/16-17/042 1,95,000.00 17,47,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,92,688.00 Cr Mvat Sales 1.20% 2,312.00 Cr Being cash Jewellery Being cash Jewellery Sales Cuff Link Cuff Sales Cuff Link Cuff -34(1) Diamond 2.99 34(1) Diamond 2.99 Cts, Black Oneyx 6.38 Cts, Black Oneyx 6.38 cts, Gold Wt 10.57 cts, Gold Wt 10.57 gms against Inv No. against Inv No. BG /16-17/042 Dt: 17/042 Dt: 28/10/2016 To (as per details) Sales (as per details) Sales Sales BG/16-17/043 1,92,000.00 19,29,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,89,723.00 Cr Mvat Sales 1.20% 2,277.00 Cr Being cash Jewellery Being cash Jewellery Sales ER-8171(3) 8171(3) Diamond Diamond 0.20 0.20 Cts, Cts Rubies Rubies 3.04 3.04 cts, cts, Emeralds Emeralds 3.62 3.62 Cts, Cts, Gold Wt 08.30 gms Gold Wt 08.30 gms against against Inv Inv No. No. BG/16-17/043 17/043 Dt: Dt: 28/10 /2016. 19,43,500.00 4,500.00 Carried Over Bina Goenka The Jeweller LLP Cash Book : 1-Apr-2016 to 31-Mar-2017 2017 Date Particulars Vch Type Vch No. Debit Credit Balance Brought Forward 19,43,500.00 4,500.00 28-10-2016 To (as per details) Sales BG/16-17/044 1,93,000.00 21,32,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,90,711.00 Cr Mvat Sales 1.20% 2,289.00 Cr Being cash Jewellery Being cash Jewellery Sales Ring-5503(1) 5503(1) Diamond Diamond 0.12 0.12 Cts, Cts, Rubies Rubies 3.07 3.07 cts, cts, Emeralds Emeralds 3.69 3.69 Cts, Cts, Gold Wt 8.860 gms Gold Wt 8.860 gms against against Inv Inv No. No. BG/16-17/044t: 28/10/2016. To (as per details) Sales BG/16-17/045 1,95,000.00 23,27,000.00 Dr
Net Sales (Jewellery) Net Sales (Jewellery) 1,92,688.00 Cr Mvat Sales 1.20% 2,312.00 Cr Being cash Jewellery Being cash Jewellery Sales Sales Pendant Pendant- 8585(5) Diamond 0.48 8585(5) Diamond 0.48 Cts, Pearls 12.35cts, Cts, Pearls 12.35cts, Gold Wt 4.510 gms Gold Wt 4.510 gms against against Inv Inv No. No. BG/16-17/045 17/045 Dt: Dt: 28/10/2016. To (as per details) Sales BG/16-17/046 1,94,000.00 25,21,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,91,700.00 Cr Mvat Sales 1.20% 2,300.00 Cr Being cash Jewellery Being cash Jewellery Sales ER-8171(4) 8171(4) Diamond Diamond 0.22 0.22 Cts, Cts, Rubies Rubies 3.125cts, 3.125cts, Emeralds Emeralds 3.69 3.69 Cts, Cts, Gold Wt 8.37 gms Gold Wt 8.37 gms against against Inv Inv No. No. BG/16-17/046 17/046 Dt: Dt: 28/10/2016 To (as per details) Sales BG/16-17/047 1,95,000.00 27,16,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,92,688.00 Cr Mvat Sales 1.20% 2,312.00 Cr Being cash Jewellery Being cash Jewellery Sales Earing -5184(5) 5184(5) Diamond Diamond 2.71 2.71 Cts, Cts, Gold Wt 4.96 gms Gold Wt 4.96 gms against against Inv Inv No. No. BG/16-17/047 17/047 Dt: Dt: 28/10 /2016. To (as per details) Sales BG/16-17/048 1,95,000.00 29,11,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,92,688.00 Cr Mvat Sales 1.20% 2,312.00 Cr Being cash Jewellery Being cash Jewellery Sales Er-8171(5) 8171(5) Diamond Diamond 0.21 0.21 Cts, Cts, Rubies Rubies 3.10 3.10 Cts, Cts, Emeralds Emeralds 3.65 3.65 Cts, Cts, Gold Wt 8.45 gms Gold Wt 8.45 gms against against Inv Inv No. No. BG/16-17/048 17/048 Dt: Dt: 28/10 /2016. To (as per details) Sales BG/16-17/049 1,92,000.00 31,03,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,89,723.00 Cr Mvat Sales 1.20% 2,277.00 Cr Being cash Jewellery Being cash Jewellery Sales Diamond 0.12 Sales Diamond 0.12 Cts, Rubies 3.07 Cts, Cts, Rubies 3.07 Cts, Emeralds Emeralds 3.69 3.69 Cts, Cts, Gold Wt 8.86 gms Gold Wt 8.86 gms against against Inv Inv No. No. BG/16-17 /049 Dt: 17 /049 Dt: 28/10/2016 To (as per details) Sales BG/16-17/050 1,93,000.00 32,96,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,90,711.00 Cr Mvat Sales 1.20% 2,289.00 Cr Being cash Jewellery Being cash Jewellery Sales Sales Earring Earring Er- Er 8171 8171 (6) (6) Diamond Diamond 0.22 Cts, Rubies 3.12 , Rubies 3.12 Cts, Cts, Emeralds Emeralds 3.69 3.69 Cts, Gold Wt 8.37 Cts, Gold Wt 8.37 gms against Inv No. gms against Inv No.
BG/16-17/050 17/050 Dt: Dt: 28/10/2016
Carried Over 33,00,500.00 4,500.00 Bina Goenka The Jeweller LLP LLP Date Particulars Vch Type VcH No. Debit Credit Balance Brought Forward Brought Forward 33,00,500.00 4,500,00 28-10-2026 To (as per details) Sales BG/16-17/05 1,54,00.00 34,50,000.00 Dr Net Sales (Jewellery) Net Sales (Jewellery) 1,52,174.00 Cr Mvat Sales 1.20% Mvat Sales 1.20% 1,826.00 Cr Being cash Jewellery Sales Ring RG Being cash Jewellery Sales Ring RG-5503( 4) Diamond 0.10 Cts. Rubles 1.72 Cts, 4) Diamond 0.10 Cts. Rubles 1.72 Cts, Emeralds 3.54 Cts, Gold Wt. 7.75. gms Emeralds 3.54 Cts, Gold Wt. 7.75. gms Against Inv No. BG/16-17/051 Dt: 28/10/2026 Against Inv No. BG/16 By Closing balance Closing balance 34,54,500.00 4,500 34,50,000.00 34,54,500.00 34,54,500.00 34,50,000.00 The explanation in relation to the cash deposit of ₹ 6. The explanation in relation to the cash deposit of The explanation in relation to the cash deposit of 34,50,000/-of the assessee has not been found to be satisfactory by of the assessee has not been found to be satisfactory by of the assessee has not been found to be satisfactory by the Assessing Officer and therefore he treated the credit in books of the Assessing Officer and therefore he treated the credit the Assessing Officer and therefore he treated the credit corresponding to cash deposit of ₹ accounts corresponding 34,50,000/-as unexplained cash credit unexplained cash credit in terms of section 68 of the A in terms of section 68 of the Act. Therefore, the issue in dispute precipitated precipitated before us is whether the cash sales is whether the cash sales shown by the assessee in its books of accounts on 28/10/2016, shown by the assessee in its books of accounts on 28/10/2016, shown by the assessee in its books of accounts on 28/10/2016, amounting to ₹ 34,50, 34,50,000/-to explain the source of the cash to explain the source of the cash deposits are genuine or not. deposits are genuine or not.
We find that firstly irstly, the Assessing Officer held the 7. he Assessing Officer held the cash sales as source of cash deposits cash deposits as unexplained for the reason that all the as unexplained for the reason that all the cash sales of ₹ 34,50, 34,50,000/-has been booked in the books of has been booked in the books of accounts on 28/10/2016 i.e. one date and no other cash sales are accounts on 28/10/2016 i.e. one date and no other cash sales are accounts on 28/10/2016 i.e. one date and no other cash sales are appearing in the book appearing in the books of accounts either prior or after this date, s of accounts either prior or after this date, which according to the Assessing Officer was not believable in which according to the Assessing Officer was not believable in which according to the Assessing Officer was not believable in normal course of conduct of business. The normal course of conduct of business. The learned counsel for learned counsel for assessee however has explained that the firm was constituted only however has explained that the firm was constituted only however has explained that the firm was constituted only ssessment year, having sales of ₹ 136.19 lakhs in the preceding assessment year, having sales of ssessment year, having sales of and no long history of sales for comparison with the sales for the and no long history of sales for comparison with the sales for the and no long history of sales for comparison with the sales for the year under consideration. year under consideration. He further explained that those cash explained that those cash sales of ₹ 34,50,000/ 000/-was made on 28/10/2016 in view of the was made on 28/10/2016 in view of the ‘Diwali’ festival. He also He also explained that said cash sales of explained that said cash sales of Rs. 34,50, constituted 1.74% of the total turnover of ₹ 000/-constituted 1.74% of the total turnover of 1978.87 lakhs during the year. According to the . According to the learned counsel for learned counsel for assessee cash sales being included in the total turnover of the assessee for the being included in the total turnover of the assessee for the being included in the total turnover of the assessee for the year under consideration, sales offered to value consideration, sales offered to value-added tax (VAT) as added tax (VAT) as per the invoices issued and the assessee paid tax liability and no per the invoices issued and the assessee paid tax liability and no per the invoices issued and the assessee paid tax liability and no loss has been caused caused to the coffers of the revenue either VAT or to the coffers of the revenue either VAT or the source of the deposit of ₹ 34,50,000/- Income-tax, hence, tax, hence, the source of the deposit of stands explained. 7.1 Secondly, the Assessing Officer noticed that all the cash sales , the Assessing Officer noticed that all the cash sales , the Assessing Officer noticed that all the cash sales were below ₹ 2 lakhs but aggregate of which being more than 2 lakhs but aggregate of which being more than ₹ 2 2 lakhs but aggregate of which being more than lakhs, the assessee ha , the assessee has not complied to Rule 114E of Income s not complied to Rule 114E of Income-tax rules, 1962, according to which the assessee was required to report rules, 1962, according to which the assessee was required to report rules, 1962, according to which the assessee was required to report cash transactions exceeding the specified sum of cash transactions exceeding the specified sum of ₹ 2 lakh for sale of 2 lakh for sale of the goods or services. However the assesse the goods or services. However the assessee referred to Central e referred to Central Board of Direct Taxes (CBDT), circular axes (CBDT), circular dated 22/12 dated 22/12/2016 and submitted that said limit was applicable for submitted that said limit was applicable for each transaction each transaction and not on aggregate cash sales, and not on aggregate cash sales, and therefore, therefore, there was no requirement for reporting such requirement for reporting such cash sales under rule 115E of cash sales under rule 115E of Income tax rules,1962. ncome tax rules,1962. 7.2 Thirdly, the learned counsel for the learned counsel for the assessee submitted that the assessee submitted that all the comparative details of cash deposit all the comparative details of cash deposit and cash and cash sales, copy of cash memo in respect of cash sales, ledger account of purchases cash memo in respect of cash sales, ledger account of purchases cash memo in respect of cash sales, ledger account of purchases corresponding to the cash sales, stock of finished goods for the corresponding to the cash sales, stock of finished goods for the corresponding to the cash sales, stock of finished goods for the entire previous year correspon entire previous year corresponding to the assessment year under ding to the assessment year under consideration, copy of cash book was filed before the lower consideration, copy of cash book was filed before the consideration, copy of cash book was filed before the authorities, but the Ld. CIT(A) recorded incorrectly that no cash authorities, but the Ld. CIT(A) recorded incorrectly that no cash authorities, but the Ld. CIT(A) recorded incorrectly that no cash book for the period was filed book for the period was filed and he sustained the addition for this sustained the addition for this reason. 7.3 In view of observation of the facts in the case of the assessee, In view of observation of the facts in the case of the assessee, In view of observation of the facts in the case of the assessee, we are of the opinion that the only basis for treating the cash we are of the opinion that the only basis for treating the cash we are of the opinion that the only basis for treating the cash deposit as unexplained cash credit by the Assessing Officer is cash deposit as unexplained cash credit by the Assessing Officer is cash deposit as unexplained cash credit by the Assessing Officer is cash sales recorded in the books of accounts immediately prior to the sales recorded in the books of accounts immediately prior t sales recorded in the books of accounts immediately prior t demonetization period as compared to no cash sales either before or monetization period as compared to no cash sales either before or monetization period as compared to no cash sales either before or after that period. Therefore the addition has been mainly on the after that period. Therefore the addition has been mainly on the after that period. Therefore the addition has been mainly on the suspicion that cash sales are bogus or non suspicion that cash sales are bogus or non-genuine. genuine. In our opinion just because no other cash sales were recorded in the previous just because no other cash sales were recorded in just because no other cash sales were recorded in year, it cannot be presumed that such cash sales year, it cannot be presumed that such cash sales made in made in the year under consideration under consideration are bogus. The Assessing Officer has ignored The Assessing Officer has ignored the fact that cash sales are out of stock genuinely held and the fact that cash sales are out of stock genuinely held and the fact that cash sales are out of stock genuinely held and acquired by the assessee through purchase invoices, which were acquired by the assessee through purchase invoices, acquired by the assessee through purchase invoices, duly produced before the Assessing Officer, but same were not duly produced before the Assessing Officer, but same duly produced before the Assessing Officer, but same doubted by him. The learned DR also c doubted by him. The learned DR also could not controvert the ould not controvert the copy of purchases corresponding to the sales and stock register, filed by of purchases corresponding to the sales and stock register, filed by of purchases corresponding to the sales and stock register, filed by the assessee in the paper book. the assessee in the paper book. Probably, the Assessing Officer ssessing Officer suspected on the cash sales for the reason that same are below ₹ 2 suspected on the cash sales for the reason that same are below suspected on the cash sales for the reason that same are below lakhs and made on the same date, however in our opinion in view of and made on the same date, however in our opinion in view of and made on the same date, however in our opinion in view of the festival season of the festival season of ‘Diwali’, such cash sales cannot be ruled out , such cash sales cannot be ruled out unless proved to be otherwise. otherwise. It is for the Assessing Officer to bring for the Assessing Officer to bring on record evidences to support his allegations. s to support his allegations. The finding of the The finding of the Assessing Officer is based on the merely suspicion and no Assessing Officer is based on the merely suspicion and no Assessing Officer is based on the merely suspicion and no documentary evidence have been brought on record by the documentary evidence have been brought on record by the documentary evidence have been brought on record by the Assessing Officer to establish that suc Assessing Officer to establish that such cash sales were not h cash sales were not genuine. In our opinion, suspicion, how genuine. In our opinion, suspicion, howsoever strong, cannot take ever strong, cannot take place of the evidences. place of the evidences. Similar finding has been given by the Similar finding has been given by the Alchemist Coordinate Coordinate Coordinate Bench Bench Bench of of of Tribunal Tribunal Tribunal in in in the the the case case case of of of Touchnology Vs ACIT in Touchnology Vs ACIT in .ITA No. 1689/Del/2022 which is reproduced as under: reproduced as under: “10. We find that from perusal of the records, there is no evidence 10. We find that from perusal of the records, there is no evidence 10. We find that from perusal of the records, there is no evidence to prove that the „amounts sent to prove that the „amounts sent‟ shown in the hard disk is shown in the hard disk is actually amounts sent by assessee company in hawala route actually amounts sent by assessee company in hawala route actually amounts sent by assessee company in hawala route which had ultimately found its way in the form which had ultimately found its way in the form of share capital of share capital and share premium under FDI route. The revenue had completely and share premium under FDI route. The revenue had completely and share premium under FDI route. The revenue had completely addressed this issue and made an addition purely on suspicion addressed this issue and made an addition purely on suspicion addressed this issue and made an addition purely on suspicion and surmise without any basis thereby making the addition and surmise without any basis thereby making the addition and surmise without any basis thereby making the addition totally unsustainable in the eyes of law. On the contrar totally unsustainable in the eyes of law. On the contrar totally unsustainable in the eyes of law. On the contrary, the assessee had stated that LGF had sent 19500000 USD from assessee had stated that LGF had sent 19500000 USD from assessee had stated that LGF had sent 19500000 USD from Cyprus and after deduction of LC charges and other overseas Cyprus and after deduction of LC charges and other overseas Cyprus and after deduction of LC charges and other overseas bank charges , the assessee could ultimately receive only bank charges , the assessee could ultimately receive only bank charges , the assessee could ultimately receive only 18621973.93 USD equivalent to Rs 100 crores in India under FDI 18621973.93 USD equivalent to Rs 100 crores in India under FDI 18621973.93 USD equivalent to Rs 100 crores in India under FDI route as share capital and share premium. In support of this, the re capital and share premium. In support of this, the re capital and share premium. In support of this, the assessee had duly provided all the necessary documents as assessee had duly provided all the necessary documents as assessee had duly provided all the necessary documents as listed above. The assessee from the inception had always taken listed above. The assessee from the inception had always taken listed above. The assessee from the inception had always taken the stand that it had not sent any monies abroad in hawala the stand that it had not sent any monies abroad in hawala the stand that it had not sent any monies abroad in hawala route. The assessee ca route. The assessee cannot be asked to prove the negative. It is nnot be asked to prove the negative. It is for the revenue to prove the same with cogent evidences, which is for the revenue to prove the same with cogent evidences, which is for the revenue to prove the same with cogent evidences, which is not done in the instant case. We find that the revenue had merely not done in the instant case. We find that the revenue had merely not done in the instant case. We find that the revenue had merely proceeded to make the addition on suspicion. It is trite law that proceeded to make the addition on suspicion. It is trite law that proceeded to make the addition on suspicion. It is trite law that suspicion howso suspicion howsoever strong would not partake the character of ever strong would not partake the character of legal evidence and hence a greater onus is casted on the revenue legal evidence and hence a greater onus is casted on the revenue legal evidence and hence a greater onus is casted on the revenue to bring on record cogent evidences to justify its suspicion, which to bring on record cogent evidences to justify its suspicion, which to bring on record cogent evidences to justify its suspicion, which is conspicuously absent in the instant case. The only material is conspicuously absent in the instant case. The only material is conspicuously absent in the instant case. The only material that is relied upon by the revenue is the hard disk seized during d upon by the revenue is the hard disk seized during d upon by the revenue is the hard disk seized during search which only contained Page | 9 search which only contained Page | 9 Alchemist Touchnology the Alchemist Touchnology the details of „amounts sent details of „amounts sent‟ and „amounts received‟. Nowhere the . Nowhere the said material even suggested that the amounts were sent by said material even suggested that the amounts were sent by said material even suggested that the amounts were sent by assessee company in assessee company in illegal route which in turn had surfaced illegal route which in turn had surfaced back in the form of share capital and premium under FDI route back in the form of share capital and premium under FDI route back in the form of share capital and premium under FDI route from Cyprus. Though the presumption from Cyprus. Though the presumption u/s 292C of the Act would of the Act would go in favour of the revenue, it cann go in favour of the revenue, it cannot be brushed aside that the ot be brushed aside that the said presumption is a rebuttable presumption and assessee had said presumption is a rebuttable presumption and assessee had said presumption is a rebuttable presumption and assessee had duly discharged its onus on the same. Moreover, the present duly discharged its onus on the same. Moreover, the present duly discharged its onus on the same. Moreover, the present assessee herein is an assessee proceeded assessee herein is an assessee proceeded u/s 153C u/s 153C of the Act and hence it is all the more necessary for the revenue to arrive at and hence it is all the more necessary for the revenue to arrive at and hence it is all the more necessary for the revenue to arrive at the satisfaction that income or materials or documents does not the satisfaction that income or materials or documents does not the satisfaction that income or materials or documents does not belong or pertain to the searched person and indeed belongs to belong or pertain to the searched person and indeed belongs to belong or pertain to the searched person and indeed belongs to third person (i.e 153C assessee). Viewed from thi third person (i.e 153C assessee). Viewed from this angle, it could s angle, it could be safely concluded that presumption be safely concluded that presumption u/s 292C of the Act would of the Act would apply only to the person proceeded apply only to the person proceeded u/s 153A of the Act and not of the Act and not for the assessee the assessee u/s 153C of the Act.” 7.4 In view of facts of instant case, respectfully, following the In view of facts of instant case, respectfully, following the In view of facts of instant case, respectfully, following the coordinate bench (supra), we reject the coordinate bench (supra), we reject the finding of the lower finding of the lower authorities that cash sales of the asses cash sales of the assessee are not not genuine. Once the cash sales are accepted to be genuine, the cash received the cash sales are accepted to be genuine, the cash received the cash sales are accepted to be genuine, the cash received thereon and later deposited into bank account by crediting the cash thereon and later deposited into bank account by cred thereon and later deposited into bank account by cred and debiting the bank account satisfactorily explain the credit entry ting the bank account satisfactorily explain the credit entry ting the bank account satisfactorily explain the credit entry in the books of accounts and in the books of accounts and therefore no addition therefore no addition in terms of section 68 of the Act is warranted ct is warranted for corresponding cash deposit of corresponding cash deposit of ₹ 34,50,000/-in the case of the assessee. in the case of the assessee. The ground Nos. 2 to 4 of The ground Nos. 2 to 4 of the appeal of the assessee accordingly allowed. the appeal of the assessee accordingly allowed.
In the result, the appeal of the a In the result, the appeal of the assessee is partly allowed. ssessee is partly allowed.