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Facts
The assessee, a dealer in silver and gold bullion, deposited cash during demonetization. The Assessing Officer (AO) added these deposits to income, alleging they were sourced from unaccounted income due to inflated sales.
Held
The CIT(A) deleted the addition, holding that the sales were genuine, reflected in VAT returns, and supported by proper books of accounts. The Tribunal concurred, stating that the revenue failed to discharge its onus to disprove the assessee's claim and that additions cannot be made on suspicion.
Key Issues
Whether the cash deposits made by the assessee during demonetization were sourced from unaccounted income, and if the AO was justified in making additions based on statistical inferences and allegations of inflated sales.
Sections Cited
143(3), 153A, 68, 115BBE, 143(2)
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Income Tax Appellate Tribunal, “DB” BENCH, AGRA
Before: HON’BLE SHRI SATBEER SINGH GODARA, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रणवष� / Assessment Year: 2017-18) ACIT (Central Circle) Shri Bipin Babu Agarwal बनाम/ Agra Brijwasi Complex Vs. Opp. Dharam Kanta, Mathura - 281001 �थायीलेखासं./जीआइआरसं./PAN/GIR No. AAWPA-0864-C (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Dr. Arun Kumar Yadav – Ld. CIT-DR ��थ�कीओरसे/Respondent by : Shri M.M.Agrawal (CA) – Ld. AR सुनवाईकीतारीख/Date of Hearing : 19-02-2025 घोषणाकीतारीख /Date of Pronouncement : 28-03-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2017-18 arises out of an order of Commissioner of Income Tax (Appeals), Kanpur [CIT(A)] dated 28-06-2022 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 153A of the Act on 30-09-2021. Having heard vehement arguments of both the sides and upon perusal of case records, the appeal is disposed-off as under. During the year, the assessee being resident individual carried out business activities in proprietorship concern namely M/s Parshant Silver Handicrafts. Assessment Proceedings 2.1 The assessee’s return of income was initially processed u/s 143(1). However, pursuant to search action on in the case of R.S. Bullion and Jewellers Group of cases at Mathura on 19-07-2018 which included the assessee, notice u/s 153A was issued to the assessee on 24-09-2020. 2.2 During the course of assessment proceedings, it was noted by Ld. AO that the assessee deposited cash in the form of Specified Bank Notes (SBNs) during demonetization period. Accordingly, the assessee was directed to substantiate the source of the same along with financial data. It was observed by Ld. AO that huge cash sales was made at Agra and Mathura and considering the volume of bills, it was not possible to make such sales. Therefore, it was alleged that the cash deposits were sourced out of unaccounted income. The assessee controverted the same and stated that the proposed addition was based on mere presumption, conjecture and surmise. The assessee being regular dealer in silver and gold bullion, maintained regular books of accounts including quantitative details of trading items. The sales were assessed under VAT and the cash deposits were sourced out of sales made by the assessee which was evident from cash book of the assessee. However, by drawing statistical inferences, Ld. AO maintained that the sales were inflated artificially and accordingly, the cash deposits of Rs.933.32 Lacs was added u/s 68 r.w.s. 115BBE. The Ld. AO also made minor addition under the head income from house property which is not the subject matter of present appeal before us. Appellate Proceedings 3.1 During appellate proceedings, the assessee raised pertinent legal ground and stated that the impugned additions were not based on any incriminating material as found during the course of search proceedings However, Ld. CIT(A) rejected the same on the ground that the time limit to issue notice u/s 143(2) had not expired. Accordingly, Ld. CIT(A) proceeded to adjudicate the issue on merits after careful consideration of Ld. AO’s findings as well as in the light of elaborate written submissions as made by the assessee. The adjudication of Ld. CIT(A) is contained at paras 8.4 onwards of the impugned order. 3.2 The Ld. CIT(A) observed that the assessee was a dealer in silver and gold bullion and it was duly registered under VAT laws. The assessee was regular Income Tax Assessee and it maintained regular books of accounts including stock records. The books were duly audited u/s 44AB. The sales made by the assessee were subjected to VAT. The cash was deposited in regular bank accounts and duly disclosed in the return of income as filed by the assessee on 22-07-2017 i.e., much before the date of search on 19-07-2018. The Ld. AO accepted the books results and did not tinker with the book results in any manner including purchases made and availability of stock. The addition could not be made on mere probabilities. The Ld. AO did not make addition of sales amount despite alleging it to be non-genuine and therefore, the provisions of Sec.68 could not be applied to the facts of the case since the amounts were realized from the available stock. The Ld. AO doubted 560 bills made by the assessee on 08-11-2016 but did not dispute 541 bills made on 07-11-2016 for nearly similar amounts. Similar were the facts for sales made at Agra. It was quite evident that cash sales were normal feature in the business of bullion. In fact, cash sales were in the range of more than 65% of total sales in earlier years in comparison to 37% in this year. The assessee reported total sales of Rs.814.44 Crores. Considering all these facts, the impugned addition was deleted against which the revenue is in further appeal before us.
Our findings and Adjudication 4. From the facts, it clearly emerges that the assessee is a dealer in silver and gold bullion and the business model of the assessee is such that it regularly carries out cash sales. This is normal feature of assessee’s business. In fact, in earlier years, cash sales constitute more than 65% of total sales whereas in this year, cash sales are only to the extent of 37% of total sales. Pertinently, the sales made by the assessee are subjected to VAT and the sales are duly reflected in the VAT returns. Apparently, no fault has been found in the sales made by the assessee. Considering the volume of business, the assessee is required to maintain proper books of accounts as well as quantitative details of stock etc. which, in fact, has been done by the assessee. These books of accounts have duly been audited under law and the same were furnished to Ld. AO during the course of assessment proceedings. The books have not been rejected and no single effect has been pointed out in the same. The assessee has duly furnished stock register as well as cash book which would show that corresponding entry of purchase and sales was made therein and the same were duly recorded in the books of accounts. The assessee had sufficient closing cash-in-hand as on 08-11-2016 to make impugned deposits in the bank accounts. The sales are supported by sales invoices. The sales made by the assessee were duly credited in the Profit & Loss Account and a separate addition thereof would amount to double taxation which is impermissible.
It could also be seen that the assessee has furnished plethora of documents in support of its submissions. The same include Tax Audit Report, audited financial statements and books of accounts including stock details. The cash in hand as available with the assessee has been utilized to make the impugned deposits during demonization period. On all these facts, it could be well said that the assessee had duly discharged the initial onus of establishing the source of cash deposit and the onus was on revenue to controvert the same. However, this onus, in our considered opinion, has remained to be discharged by the revenue by bringing on record adverse evidences to disprove the claim of the assessee. The Ld. AO has merely drawn statistical inferences and alleged that the sales were artificial and inflated. The Hon’ble High Court of Madras in the case of CIT vs. Anandha Metal Corp. (152 Taxman 300) has held that return accepted by commercial tax department is binding on Income Tax Authorities. It is trite law that the additions could not be made merely on the basis of suspicion and probabilities.
It could also be seen that Ld. AO did not make addition of sales amount despite alleging it to be non-genuine and therefore, the provisions of Sec.68 could not be applied to the facts of the case since the amounts were realized from the available stock. We concur with the adjudication of Ld. CIT(A) on this aspect also.
In the light of all these facts and circumstances of the case, we would hold that Ld. CIT(A) has clinched the issue in correct respective and arrived at correct conclusion. Therefore, we find no reason to interfere in the impugned order.
The appeal stands dismissed. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.