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Facts
The assessee, an individual running a trading business, filed an income tax return for AY 2017-18 declaring total income of Rs. 7,23,460. The Assessing Officer (AO) assessed the total income at Rs. 27,73,460 by adding Rs. 20,00,000 as undisclosed income under Section 69A r.w.s. 115BBE and Rs. 50,000 for non-verifiable expenses. The CIT(A) upheld the AO's order. The assessee challenged this before the ITAT.
Held
The ITAT held that the AO's action of rejecting the books of account and applying Section 145(3) was not justified as the assessee had provided sufficient documentation and evidence to support the transactions. The Tribunal also found that Section 69A and Section 115BBE were not applicable in this case. The ITAT observed that the lower authorities failed to discharge the burden of proof and that the additions were made on a 'choose and pickup' basis without tangible material.
Key Issues
Whether the rejection of books of accounts by the AO and addition of Rs. 20,00,000/- as undisclosed income from demonetized notes (SBNs) was justified. Whether Sections 69A and 115BBE were applicable.
Sections Cited
145(3), 69A, 115BBE, 143(2), 142(1), 131, 269ST
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC’’ JAIPUR
Before: Hon’ble SHRI SANDEEP GOSAINvk;dj vihy la-@ITA No. 211/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 24-11-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2017-18 wherein the assessee has raised the following grounds of appeal.
1. That on the facts and in law the Id. CIT(A) erred in sustaining AO's action of rejecting Books of accounts, applying provisions of section 145(3), treating, out of total SBN'S of Rs. 26,00,000/- deposited by the assessee in his bank account during Demonetization period i.e. 08/11/2016 to 31/12/2016,
2 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR SBN'S of Rs. 20,00,000/- as undisclosed income and adding the same i.e. Rs. 20,00,000/- u/s. 69A r.w.s. 115BBE in the total taxable income of the assessee, which sustaining by CIT(A) of AO's action of rejection of Books of accounts, application of provisions of section 145(3), treatment, out of total SBN'S of Rs. 26,00,000/- deposited in the bank by the assessee, SBN'S of Rs. 20,00,000/- as undisclosed income and consequently adding the same i.ec. Rs. 20,00,000/-u/s. 69A r.w.s. 115BBE in the total taxable income of the assessee are most arbitrary, unjust and untenable and in the alternative highly excessive w.r.t. facts and circumstances of the case.
2. That the learned CIT(A) failed to appreciate that the AO failed to discharge the burden of proof which squarely lay upon him for treating, out of total SBN'S of Rs. 26,00,000/- deposited by the assessee in his bank account during Demonetization period i.e. 08/11/2016 to 31/12/2016, SBN'S of Rs. 20,00,000/- as undisclosed income of assessee and consequentially adding the same i.e. Rs.20,00,000/-u/s. 69A r.w.s. 115BBE in the total taxable income of the assessee.
3. That the learned CIT(A) failed to take into consideration various papers and documents including the under mentioned papers and documents produced/furnished during assessment proceedings before the AO:- a. Details, in the format provided by the AO, of cash sales and cash deposit in bank during F.Y. 2015-16 (relevant to A.Y. 2016-17) and F.Y. 2016-17 (relevant to A.Y. 2017-18) b. Producing computer generated books of accounts including Cash Book, Journal Bank Book, Sale Bill, Purchase Bill, Vouchers of expenses, Bank Statement, sale book before the AO c. Copy of VAT assessment order for the period 01/04/2016 to 31/03/20017 passed by Commercial Taxes Officer, Circle N, Region Jaipur III Govt. of Rajasthan d. Audited Final Accounts i.e. Trading A/c P & L A/c, Balance sheet with all schedules and Annexure, Books of A/c e. Furnishing various details, information, supporting papers and documents in compliance to summon u/s. 131 of the Act during assessment proceedings.’’
3 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR 2.1 During the course of hearing, the Bench noted that there is delay of 34 days in filing the appeal by the assessee for which the assessee filed the application for condonation of delay and also affidavit narrating the submissions therein as under:-
‘’Sub: Application seeking condonation of delay in filing appeal by the appellant, namely Satish Chand Guptal, Prop” M/s. Subh Laxmi Trading Company Near Tonk Phatak Tonk Road, Jaipur 302015, Rajasthan PAN: ABTPG9248A for 2017-18 against the order dated 24/11/2023 passed by the Commissioner (Appeals) NFAC, Delhi u/s. 250 of the Income Tax Act, 1961 . With reference to above it is humbly submitted as under:-
That above named, Satish Chand Gupta, the appellant and an individual, is above 60 years of age and little educated 2. That I do not know how to operate Email, Now a days I am not keeping well. Moreover from last more than two months I am particularly suffering from three ailments, namely. Spinocord disorders, PVO (Pulmonary Veno-occlusive disease) and RTI (Respiratory Tract infections) and on account of it confined to bed. In support of it copy of two medical prescriptions inter alia containing advice of bed rest is enclosed. In the first week of January 2024, I coincidently re-collected that I had filed an appeal 4 years ago against an order of Income Tax Officer, ward 6(2), Jaipur for FY 01/04/2016 to 31/03/2017 relevant to A.Y. 2017-18 wherein a heavy demand was raised against me. 3. That thereafter I enquired about it and came to know that this appeal was dismissed by the Commissioner (Appeal) on 24/11/2023. I further say that I did not receive any such order of dismissal of appeal from the ends of Income Tax Department
4 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR till date. Now after knowing this fact that my above mentioned appeal is dismissed by the Commissioner of Income Tax (Appeal) I am belatedly, separately and simultaneously filing appeal against this order of Commissioner of Income Tax (Appeal) before the hon'ble Income Tax Appellate Tribunal, Jaipur Bench and it is humbly prayed that delay in filing appeal may kindly be condoned. I further say that I shall ever remain grateful to the hon'ble Bench for this act of kindness. An Affidavit in support of it is enclosed.’’ 2.2 On the other hand, the ld. DR objected to such delay made by the assessee in filing the appeal. 2.3 The Bench has heard both the parties and perused the affidavit of the assessee and feel that there is a merit in the submission of the assessee and thus in view of the affidavit of the assessee, the delay in filing the appeal by the assessee is condoned. 3.1 Brief facts of the case are that he assessee, an individual, carries on sole proprietary business under the name and style of M/s. Shubh Laxmi Trading Company. The said concern deals in tobacco and its products, paan masala etc. The return of income for the assessment year 2017-18 was filed on 7-11-2017 declaring total income of Rs.7,23,460/-. The case of the assessee was selected for scrutiny through CASS. Notice u/s. 143(2) was issued. Subsequently notices u/s. 142(1) along with questionnaires were issued from time it time and in compliance to these notices assessee e-Filed/uploaded requisite information and details. The 5 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR A.O. assessed the total income of the assessee at Rs. 27,73,460/- against the declared income of Rs. 7,23,460/-, by making addition u/s. 69A r.w.s 115BBE at Rs. 20,00,000/- and addition for non-verifiable expenses at Rs. 50,000/- i.e. total addition of Rs. 20,50,000/-. 3.2 Aggrieved by the order of the AO, the assessee preferred an appeal before the ld. CIT(A) who dismissed the appeal of the assessee. 3.3 Now aggrieved by the order of the ld. CIT(A), the assessee preferred present appeal before this Bench raising the above mentioned grounds of appeal s. 3.4 At the outset of the hearing, the ld. AR of the assesee reiterated the same arguments as made before the revenue authorities and also relied upon the following written submissions relating to above grounds of appeal. ‘’SUBMISSIONS IN REGARD TO ALL THE GROUNDS OF APPEAL GROUND OF APPEAL NO. 1 &
3. In both these grounds of appeal the appellant has challenged sustenance by the ld. CIT(A) of, (1) rejection of books of accounts and application of provisions of section 145(3) by the AO and, (2) treating by the AO SBN’s of Rs. 20,00,000/- as undisclosed income out of total SBN’s of Rs. 26,00,000/- deposited by the assessee in his bank account during demonetization period 09//11/2016 to 31/12/2016 and consequently adding by the AO Rs. 20,00,000/- in the total income of assessee u/s. 69A r.w.s. 115BBE of the I.T. Act. In support of both these grounds of appeal it is respectfully submitted as under:- (1) Rejection of books of accounts and application of provisions of section 145(3) by the AO,
1. Both the lower authorities erred in ignoring various papers, documents, details and information including under mentioned papers, documents, details information etc. e-Filed by the appellant and complete books of accounts including cash book, bank book, purchase/sales bills and vouchers, journal, ledger, bank statements produced before the AO in the course of assessment proceedings:- a. Tax Audit Report and Audited final accounts with Annexure and schedules for the year under appeal. b. Month wise details of sales and purchases.
6 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR c. Details of month wise cash sale and cash deposit in bank. d. Periodical details of cash sales, cash deposited in bank and cash balance. e. Comparative details of cash deposit in banks and cash sales during different periods of financial years 2015-16 and 2016-17 relevant to assessment years 2016-17 and 2017-18 respectively. f. Copy of VAT Returns filed with VAT Department of Govt. of State of Rajasthan for the period 01/04/2016 to 31/03/2017 relevant to year under appeal and VAT assessment order for F.Y. 01/04/2016 to 31/03/2017 relevant to A.Y. 2017-18. g. Ledger accounts of purchases for the period 01/04/2016 to 08/11/2016 accompanied with purchase invoices. h. Copy of ledger accounts of dealers to whom payment made after 08/11/2016. i. Copy of cash book, ledger, journal, bank statement and invoices manually given to the AO in response to summon u/s. 131 of the I.T. Act issued to the assessee by the AO during assessment proceedings. j. Copy of delivery challans furnished by the assessee. k. Explanation of source of SBN’s of Rs. 26,00,000/- deposited in bank during the period 08.11.2016 to 31.12.2016 l. G.P. Chart confirming the fact that G.P. rate in the year under appeal i.e. A.Y. 2017- 18 is higher as compared to G.P. rate of preceding assessment years.
2. That, both the lower authorities also erred in not taking into consideration following facts and circumstances of the case:- a. All the books of accounts are duly audited by a Chartered Accountant and there is no adverse observation/comment of the auditors at any stage. b. There is no change in the method of accounting nor in the method of valuation of closing stock. c. That each and every entry in the books of accounts is supported by bills & vouchers. d. That the assessee has regularly kept and maintained books of accounts consisting of Cash Book, ledger, journal, bills and vouchers, purchase and sales registers, bank statements and other relevant records.
3. That, above mentioned actions of the A.O. in making additions on the basis of, ‘choose and pickup method’ without any tangible material and supporting evidence in hand and also of the learned CIT(A) in upholding such arbitrary additions without any justifiable basis whatsoever are in utter disregard of law and particularly against the CBDT instructions No. 03/2017 dated- 21/02/2017 which clearly say that the assessing officer is required to take into consideration the record of the assessee, bank statements, VAT Return etc. before arriving at a conclusion in relation to assessments involving issues of demonetization period.
4. That both the lower authorities have not pointed out any inherent defects in the books of accounts and as against that the relevant assessment order has rather been framed by the AO by taking the figures of net profit on the basis of assessee’s audited books of accounts. 5. That judicial consensus is that merely because of difference in ratio of cash sales between two periods of the previous year of the year under assessment or difference in ratio of preceding assessment years as compared to the year under assessment an AO cannot have resort to the provisions of section 145 and 68/69A/115BBE etc. of the Act for 7 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR making additions in the total income. In its support reliance is placed on various judgments including that of hon’ble ITAT, Jaipur Bench, Jaipur which form part of judicial pronouncements annexed herewith.
6. It is further submitted that there is no finding by the lower authorities that in issuing cash invoices the appellant has disregarded the provisions of Income Tax Act including section 269ST of the Act which interalia says that it will be infringement of law if an individual cash invoice exceeding Rs. 2,00,000/- is issued at one point of time. (2) Sustainment by the ld. CIT(A) of the action of the AO whereby he (the ld. AO) treated an amount of Rs. 20,00,000/- as undisclosed income out of total SBN’s of Rs. 26,00,000/- deposited by assessee in his bank account during demonetization period 09//11/2016 to 31/12/2016 and consequently adding by the AO Rs. 20,00,000/- in the total income of assessee u/s. 69A r.w.s. 115BBE of the I.T. Act.
1. Section 69A is not applicable in this case because there are proper entries in the books of accounts of the assessee in relation to cash sale, cash balance and cash deposit (SBN’s) in bank.
2. That sale transactions in cash cannot be taxed u/s. 69A of the Act because the sales against cash and deposit of such cash in assessee’s bank account cannot be called unexplained money. Cash memos were immediately issued to the buyer and delivery was made then and there against SBN’s/cash and thus sales are recorded properly in the books of accounts. Just because the amounts were received from the buyers in cash (i.e. SBN),the appellant cannot be penalized because there is no restriction under the Act to accept cash against sale upto Rs. Two lakh at one point of time. It is reiterated that in appellant’s case none of the individual cash sale transaction exceeded the limit of Rs. Two lakh and it is quite evident from the books of accounts particularly cash book of the assessee which stand filed before the AO. 3. Further the SBN’s were received against sale of tobacco products, Pan Masala etc. dealt by the assessee in his regular course of business activities. 4. That by making cash sales, withdrawing money from the bank and having opening cash balance and deposit of these sale proceeds etc. in bank as per details filed during assessment proceedings the assessee has not made infringement of any provision of Income tax Act, 1961 including the Demonetization law. 5. That full compliance was made by the assessee to various notices issued during assessment proceedings to him u/s 142(1) or 143(2) and/or show cause notice. 6. The lower authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed to disprove the purchases and/or the sales. Moreover the disallowance/ addition made by the AO and sustained by the CIT(A) is based on surmises, conjectures and on estimate basis. Moreover additions made by the AO and sustained by the ld. CIT(A) are not based on any positive material/evidence. Higher courts have more than once held that suspicion howsoever strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence. The assessee craves leave to refer to and rely upon various judicial pronouncements given in the annexed list. 7. That the total sales during F.Y. 2016-17 relevant to year under appeal i.e. AY 2017- 18 have duly been included in the VAT returns filed by the assessee before the state government authorities and assessee has deposited VAT on these sales. Copy of all the VAT returns filed by the assessee online in RVAT Act stood filed 8 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR before the A.O. The Hon’ble bench will kindly appreciate that there is no difference between the turnover as per RVAT returns/assessment order and the books of accounts of the assessee. In other words total sales including cash sales made by the assessee as per his books of accounts duly tallies with the turnover assessed by the VAT authorities of state Govt.
That as regards adverse observations of the AO in the assessment order particularly in para 3.5 of the assessment order that there has been abnormal increase in cash sales as well as cash balance during the period prior to demonetization period the assessee craves leave to submit that increase or decrease of sales depends on various factors including behavior of the customers coming to the shop of the assessee and specific time prevailing at the time of visit of the customer to the assessee shop i.e. time of festivals like Navratri, Diwali etc. It is respectfully submitted that number of customer walking to the shop of the assessee and the volume of goods purchased by each such customers is not in the control of businessman (here the appellant) and rather it is beyond his control.
That the appellant craves leave to submit that during the immediately preceding previous year i.e. 2015-16 relevant to AY 2016-17 the assessee’s cash sales were of Rs. 6,09,73,170/- and during the previous year relevant to year under appeal i.e. A.Y. 2017-18 the cash sales are to the tune of Rs. 8,27,27,576/- which are slightly higher as compared to immediately preceding assessment year i.e. AY 2016-17 and hence the apprehension of the learned AO is unfounded , baseless and based on surmises and conjectures and it cannot become a basis for treating the deposit of SBN’s of Rs. 20,00,000/- as unexplained cash deposit.
Legal consensus in this regard is that the additions based on suspicion should not be sustained.
That there is not an iota of evidence with the lower authorities to prove that the sales are unverifiable and accordingly additions of Rs. 20,00,000/- on adhoc basis is without any lawful justification.
That the learned A.O. has accepted the purchases shown by the assessee in his books of accounts. It is respectfully submitted that once the purchases have been accepted then the corresponding sales cannot be disturbed without there being any conclusive evidence/finding in the hands of the A.O.
That it is not in dispute that cash sales are credited in the sale account and after deducting the cost as well as direct expenses from the sales, resultant gross profit is credited to Profit and Loss Account and the net profit so arrived at after deducting indirect expenses from the gross profit forms part of the total income and the same is disclosed by the assessee in its return of income filed u/s 139(1) of the IT Act. As against this correct factual position as per audited books of accounts, the AO has arbitrarily, in adhoc manner, estimate basis, without any scientific manner and rather wrongly subjected to tax u/s 69A of the IT Act an amount of cash deposit of SBN’s of Rs. 20,00,000/- out of total cash deposit in the form of SBN’s of Rs. 26,00,000/- in bank accounts during 09/11/2016 to 31/12/2016 and thus it amounts to double additions once as sale duly forming part of assessee’s regular book of accounts and again as unexplained money u/s 69A. Under such facts and circumstances amount of cash sales cannot be treated as undisclosed income because no duplicate addition can be made in law in respect of the same transaction once as sales forming part of trading account and again as disallowance/ addition u/s 69A of the IT Act. Reliance is placed in this regard on various judgments mentioned in the annexed list forming part of judicial pronouncements herewith.
9 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR 14. In the instant case the assessee duly explained the source of cash deposit which is out of cash sales effected by him upto 08/11/2016 i.e. much before the date of amendment of section 115BBE on 15/12/2016, opening cash balance as on 01/04/2016 and cash withdrawn from the banks during the period 01/04/2016 to 08/11/2016.
The provisions of section 115BBE are applicable only on the income taxable u/s. 68, 69, 69A, 69B, 69C or 69D of the Act. But in the present case source of cash deposit in Bank is income from business and as such section 115BBE is not applicable.
It is further submitted that treatment of SBN’s deposited of Rs. 20,00,000/- (Out of total SBN’s deposited of Rs. 26,00,000/- during demonetization period) as unexplained income and consequentially adding it in the total income of assessee u/s. 69A of the IT Act is in utter disregard of provisions of section-4 of the IT Act which says that levy of Income tax is not on gross receipts but it is on profits and gains properly so called. GROUND OF APPEAL NO. 3
1. That the lower authorities failed to note that the appellant has duly discharged the initial burden of proof which lay upon him by explaining that source of SBN’s deposited at Rs. 26,00,000/- during demonetization period is out of cash sales made by him and duly credited such cash sales in his regular books of accounts. In its support he has duly filed and furnished entire cash book for F.Y. 01/04/2016 to 31/03/2017.
2. That after discharging of initial burden by the appellant, the next burden of proof is shifted to the AO. The learned AO failed to discharge this burden of proof which squarely lay upon him. Moreover he failed to mention a single supporting evidence in describing the genuine cash sales and SBN’s of Rs. 20,00,000/- (out of total SBN’s deposited in bank at Rs. 26,00,000/- during the period 01/04/2016 to 08/11/2016) as an afterthought act of the assessee to introduce his unaccounted money. 3. That the burden of proof of not accepting the apparent as real lies on the AO but he has failed to discharge this burden of proof. So much so the AO has not given a single instance of issuing non genuine sales invoice. 4. The appellant has given necessary evidence on the basis of its books of accounts, sale/purchase invoices, cash book, journal, ledger, bank statements and other relevant records that the cash deposited by him in bank accounts upto 31.12.2016 were out of sale proceeds in cash and the cash in hand as per books of accounts as on 01.04.2016 and cash withdrawals made from the banks before 08.11.2016 and as such the assessee should be deemed to have discharged the primary onus which lay upon him and there after onus is shifted on the department to prove that cash amount deposited in bank represent assessee’s undisclosed income and the humble appellant craves leave to submit that the learned AO has fully failed to discharge the burden of proof which squarely lay upon him. Reliance is placed on the judgment of Apex Court in the leading case of CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78.’’ 3.5 During the course of hearing, the ld. AR of the assessee relied on decisions of different judicial authorities which are mentioned as under having annexure No. written submissions. May it please your honors, SOME OF THE JUDICIAL PRONOUNCEMENTS REFERRED TO AND RELIED UPON BY THE APPELLANT ASSESSEE IN ADDITION TO JUDGMENTS MENTIONED IN THE WRITTEN SUBMISSIONS GROUNDS OFAPPEALNO.1&3 Sr.No Citation Parties to the case Brief narration 1 a. Central The Hon’ble jurisdictional 161/JP/2022 for A.Y. Circle-2,Jaipur Vs. Income Tax Appellate Tribunal 2017-18 M/s Motisons i.e. ITAT, Jaipur Bench. vide the Jewellers Ltd common appellate order dated 29/09/2022 dismissed the & department appeal no. Motisons Jewelle ers 161/JP/2022 by observing that ltd. Vs . sale is duly reflected in the Centra l 2,Jaipur invoice issued, assessee having b. ITA No. 178/JP/2022 sufficient stock in the books and for A.Y. 2017-18 the sales is duly reflected in the books of accounts supported by payment of VAT Simultaneously the honorable Income Tax Appellate Tribunal, Jaipur Bench, Jaipur vide the common appellate order dated 29/09/2022 allowed assessee’s appeal no. 178/JP/2022 by observing that the assessee maintains proper books of accounts audited by chartered accountants and the profit may be derived from the audited books of accounts therefore there is no justification in estimation of income by applying NP Rate and accordingly the lower authorities are directed to delete the addition of rs. 47,72,297/- sustained by learned CIT(Appeal).
11 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR 2 2021 (5) TMI 447 ITAT Asst. Commissioner of The hon’ble ITAT observed that Visakhapatnam Income Tax, Central assessee had deposited the sum Circle-1 Visakhapatnam in high denominations of specified Versus M/S Hirapanna bank notes (SBNs) post Jewellers(Vice-Versa)) demonetization - CIT-A deleted the addition - HELD THAT:- The assessee produced the newspaper clippings of The Hindu, The Tribune and demonstrated that there was huge rush of buying the jewellery in the cities consequent to declaration of demonetization of ₹ 1000 and ₹ 500 notes on 08.11.2016. As cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon’ble Delhi High Court in the case of Kailash Jewellery House [2010 (4) TMI 1070 - DELHI HIGH COURT], and Vishal Exports Overseas Ltd.[2012 (7) TMI 1110 - AHMEDABAD HIGH COURT] and M/s. Singhal Exim Pvt. Ltd. vs ITO (ITA No. 6520/Del/2018 decided by ITAT Delhi on 12/04/2019 3 CIT v/s Kothari (1971) 82 ITR 794, 802 The Hon’ble Supreme Court (S.C.)] . held that under the I.T. Act charge is created on income element only and gross receipts are not taxable under the Act. In other words levy of Income tax is not on gross receipts but on profits and gain properly so called 12 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR 4 ITA No. 3741, 3742, Agson Global Pvt. Hon’ble Delhi tribunal held that Ltd. vs. ACIT 3743, 3744, 3745, merely difference in ratio of cash 3746/Del/2019 sales cannot be made sole ground for making an addition u/s. 68 of the Act. The hon’ble Tribunal further held that the assessee had regular cash sale and deposit of cash in bank account and if nothing incriminating is found contrary than addition u/s.68 of such cash sale would tantamount to double taxation 5 ITA No. 336/IND/2012 Dewas Soya Ltd., Hon’ble ITAT, Indore Bench held, Ujjain vs. ITO “the claim of the appellant that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed (after deducting gross profit from sale price ultimately credited to profit and loss account” and on the other hand amount received from above parties has also been added u/s. 68 of the IT Act. 6 (1966) 59 ITR 733 Chhabildas In this case it is held that (Supreme Tribhuvandas Shah an assessee who Court) vs. CIT maintains regular account books which are not found to be incorrect, the mere fact that a stock register is not maintained and book profit is considered by the AO as low may provoke an enquiry, but they may not be sufficient to justify action u/s. 145. 7 26 ITR 159 Pandit Brothers vs. The AO cannot say that merely CIT because there is no stock register the account books must be false. 8 (1973) 87 ITR 395 (SC) CIT vs .K.S. Kannan The hon’ble supreme court held, Kunhi “where explanation of the assessee was not absurd and it was capable of being examined, I.T. authority acted arbitrarily in rejecting the explanation without 13 ITA NO. 211/JP/2024 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR making proper enquiry. Further, it may be noted that A.O. merely disbelieved but not disproved the facts stated by the appellant in respect of the said creditor.” 9 (1956) 30 ITR 228 Lajwanti Sial vs. The finding that cash credits or (Nag.) CIT high denomination notes encased upon demonetization represent undisclosed income, would be rejected by the court if there is no evidence to support it.
10 (i) 26 ITR 775, (ii) (a) Dharkeshwari In these cases Hon’ble Supreme 37 ITR 151 and (iii) Cotton Mills Ltd vs. Court has set aside the 37 ITR 288 all the CIT (b) Omar Salay assessment on the ground that it three are Supreme Mohammed vs. CIT was based on bare suspicion Court Judgment conjectures and surmises. and (c) Lal Chand Bhagat Ambica Ram vs. CIT respectively 11 CIT vs. The Hon’ble Delhi High Court In KailashJewellery House decided by the the facts of this case cash sales Hon’ble Delhi High of Rs. 24,58,400/- was deposited Court on 09/04/2017 in bank account. The A.O. made the addition on the grounds that nexus of such deposit was not established with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the profit and loss account. The A.O. has verified the stock and cash position as per books and has accepted the assessee’s record and no discrepancy was pointed out. On this basis CIT (Appeal) deleted the addition and the same was confirmed by the Tribunal by inter alia observing that it is not in dispute that sum of Rs. 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return of 14 ITA NO. 211/JP/2024 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR income and therefore cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The hon’ble high court dismissed the appeal filed by the department. 12 Do Income Tax CIT vs. Vishal Exports Appeal No. 2471 Overseas Ltd. of 2009 decided by Hon’ble Gujarat High Court on 03/07/2012 13 ITA No 419/JP/2010 ACIT Circle-1 Jaipur “Making some sales in cash is Order dated 25/03/2011 Vs M/s Uttam Chand also no ground for rejecting the of ITAT, Jaipur Bench Deshraj books of account. There should be some material that cash sales made by assessee either on account of sale on a lower price or sale made out of the material which is not shown in the books of account. There is no instance that cash sales have been made on lower rate than prevailing market price. 14 ITA 1383 and 1384 on Smt. Teena Bethala On a reading of section 69A vs. ITO (supra), it is clear that the onus is 28/08/2019 ITAT Bangalore upon the AO to find the assessee to be the owner of any money, bullion, jewellery or valuable article and such money, bullion, jewellery or valuable article was not recorded in the books of account, if any, maintained by the assessee for any source of income. In these circumstances, the AO can resort to making an addition under section 69A of the Act only in respect of such monies / assets / articles or things which are not recorded in the assessee's books of account. In the case on hand, the cash deposits are recorded in the books of account and are reportedly made on the receipt from a creditor. Further, the PAN and address of the creditor as well as ledger account copies of the 15 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR creditor in the assessee's books of account have also been field before the AO. In these circumstances, it is evident that the AO has not made out a case calling for an addition under section 69A of the Act. Probably, an addition under section 68 of the Act could have been considered; but then that is not the case of the AO. The assessee, apart from raising several other grounds, has challenged the legality of the addition being made under section 69A of the Act. In support of the assessee's contentions, the learned AR placed reliance on the decision of the ITAT - Mumbai Bench in the case of DCIT Vs. Karthik Construction Co. in ITA No.2292/Mum/2016 dated 23.02.2018, wherein the Bench at para 6 thereof has held that addition under section 69A of the Act cannot be made in respect of those assets / monies / entries which are recorded in the assessee's books of account. In ITA Nos.1383 and 1384/Bang/2019 my considered view, the aforesaid decision of the ITAT - Mumbai Bench (supra) is squarely applicable to the facts of the case on hand, where the entries are recorded in the assessee's books of account. In this view of the matter, I am of the opinion that the addition of Rs.6,30,000/- made under section 69A of the Act is bad in law in the facts and circumstances of the case on hand and therefore delete the addition of Rs.6,30,000/- made there under. The AO is accordingly directed. 15 74 ITR 279 (Mys. H.C.) Vijay Traders vs. CIT The Hon’ble Mysore High court held that sanctity of regular books to be disturbed where it is impossible to compute profits there from 16 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR (1970) 75 ITR 33 R.B. Jessaram The Hon’ble Bombay High court 16 Fatehchand (Sugar held that,’ in the case of a cash Department) vs. CIT, transaction where delivery of Bombay city II goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser. The account books of an assessee cannot therefore be rejected and an assessment made u/s. 13 of the I.T. Act,1922, merely on the ground that the addresses of the assessee are not mentioned in the case of cash transactions 17 ITA No. 49 of 1999, CITvs. Jawaharlal Oswal The Hon’ble High Court held that judgment delivered on & others there is a consensus of judicial 29/01/2016- Hon’ble opinion that a deeming provision Punjab and Haryana High enables the revenue to raise an Court inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions. 18 (1959) 37 ITR 288 (SC) Lal Chand In this case the Hon’ble Apex BhagatAmbica ram v/s Court decided the matter in CIT favour of the assessee on the ground that it was clear on the record that the assessee maintained the books of accounts according to the mercantile system and there was sufficient cash balance in its cash book and the books of accounts of the assessee were not challenged by the assessing officer. The Apex court further held that if the entries in the books of accounts are genuine and the balance in cash is matching with the books, it can be said that the assessee has explained the nature and source of such deposit.
19 [1959] 35 ITR 416 (SC) Lakhmichand Baijnath The Hon’ble Apex Court held that Vs. CIT amount credited in business books is presumed as business receipt. When an amount is 17 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR credited in business books, it is not an unreasonable inference to draw that it is a receipt from business. 20 ITANo.264/Hyd/ 2011 In the case of M/s. S.B. Hon’ble Hyderabad Bench “A”, of Steel Industries. income tax appellate Tribunal held that it is an established fact that only cash credits can be considered u/s. 68 and not trade receipts.
GROUND OF APPEAL
NO. 2 1 159 ITR
78. Orissa The Hon’ble Apex Court in the leading case of CIT vs. Orissa Supreme Corporation Corporation Pvt. Ltd. 159 ITR 78, finally concluded the Court Pvt. Ltd. vs. judgment after mentioning that, “in the premises, if the CIT Tribunal came to the conclusion that the respondent has discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law arose. The High court was right in refusing to state a case.
3.6 On the other hand, the ld. DR relied upon the orders of the authorities below and strongly refuted the arguments raised by the assessee . It was also contended by the ld. DR that there are no merits in the arguments of the ld. AR and the orders passed by the revenue authorities may be upheld. 3.7 The Bench has heard both the parties and perused the materials available on record and the case laws. The Ground No. 1 raised by the assesee relating challenging the order of revenue authorities in rejecting the books of account and application of Section 145(3) of the Act by the AO. In this regard, the ld. AR , 18 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR apart from relying upon the written submission has submitted that lower authorities have erred in ignoring various papers, documents, details and information including under mentioned papers, documents, details information etc. e-Filed by the appellant and complete books of accounts including cash book, bank book, purchase/sales bills and vouchers, journal, ledger, bank statements produced before the AO in the course of assessment proceedings and the same was not considered by the AO. It was further argued by the ld. AR of the assessee that the rejection of books of account and applying the provisions of Section 145(3) of the Act is against the provisions of law. 3.8 After analyzing the documents placed on record and after appreciating the facts of the present case and after hearing both the parties at length, the Bench noticed from the records that the assessee has produced various papers during the course of assessment proceedings whose details are as under”- a. Tax Audit Report and Audited final accounts with Annexure and schedules for the year under appeal. b. Month wise details of sales and purchases. c. Details of month wise cash sale and cash deposit in bank. d. Periodical details of cash sales, cash deposited in bank and cash balance. e. Comparative details of cash deposit in banks and cash sales during different periods of financial years 2015-16 and 2016-17 relevant to assessment years 2016-17 and 2017-18 respectively. f. Copy of VAT Returns filed with VAT Department of Govt. of State of Rajasthan for the period 01/04/2016 to 31/03/2017 relevant to year under appeal and VAT assessment order for F.Y. 01/04/2016 to 31/03/2017 relevant to A.Y. 2017-18. g. Ledger accounts of purchases for the period 01/04/2016 to 08/11/2016 accompanied with purchase invoices. h. Copy of ledger accounts of dealers to whom payment made after 08/11/2016. i. Copy of cash book, ledger, journal, bank statement and invoices manually given to the AO in response to summon u/s. 131 of the I.T. Act issued to the assessee by the AO during assessment proceedings.
19 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR j. Copy of delivery challans furnished by the assessee. k. Explanation of source of SBN’s of Rs. 26,00,000/- deposited in bank during the period 08.11.2016 to 31.12.2016 l. G.P. Chart confirming the fact that G.P. rate in the year under appeal i.e. A.Y. 2017- 18 is higher as compared to G.P. rate of preceding assessment years.
That, both the lower authorities also erred in not taking into consideration following facts and circumstances of the case:- a. All the books of accounts are duly audited by a Chartered Accountant and there is no adverse observation/comment of the auditors at any stage. b. There is no change in the method of accounting nor in the method of valuation of closing stock. c. That each and every entry in the books of accounts is supported by bills & vouchers. d. That the assessee has regularly kept and maintained books of accounts consisting of Cash Book, ledger, journal, bills and vouchers, purchase and sales registers, bank statements and other relevant records.
It is noted that the Revenue authorities failed to appreciate that the books of account are duly audited by the Chartered Accountant and there is no adverse observation / comment of the auditors at any stage. Further, there is no change in the method of accounting nor in the method of valuation of closing stock and each and every entry in the books of account is supported by bills and vouchers. From the perusal of the details filed by the assesee, the Bench noticed that the assesse has regularly kept and maintained books of account consisting of cash book, ledger, journal, bills and vouchers, purchase and sales registers bank statement and other relevant records. It is noticed that even in spite of filing of all the documents before the AO who made the additions on the basis of ‘’choose and pickup method’ without any tangible material and supporting evidence in hand and also 20 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR the ld. CIT(A) upheld such addition without any justifiable basis and it is utter disregard of law and particularly against the instruction of CBDT NO. 03/2017 dated 21-02-2017 wherein it has been mentioned that the AO is required to take into consideration the record of the assessee, bank statements, VAT return etc. before arriving at a conclusion in relation to assessments involving issues of demonetization period. The Bench also noticed that both the lower authorities have not pointed out any inherent defects in the books of account and as against that the relevant assessment order has rather been framed by the AO by taking the figures of net profit on the basis of assessee’s books of accounts. On this aspect, the different judicial authorities have given respective findings and the consensus of the judicial decisions emerges out of identical circumstances are that merely because of difference in ratio of cash sales between two periods of the previous year and the year under assessment or difference in ratio of preceding assessment years as compared to the year under assessment an AO cannot resort to the provisions of Section 145 and section 68/69A/115BBE etc of the Act for making additions in the total income. In support of these submissions, the assessee has relied upon the decision of Coordinate Bench, Jaipur (supra) which has form part of judicial pronouncement. Even otherwise, there is no findings by the lower authorities that in issuring cash invoices, the assessee had disregarded the provisions of Income Tax Act including Section 269ST of the Act which inter alia 21 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR says that it will be infringement of law if an individual cash invoice exceeding Rs.2,00,000/- is issued at one point of time. Since, this is not a case of Revenue, therefore we are not in agreement with findings of the ld.CIT(A).Thus the Bench allows the ground No. 1 raised by the assessee. 4.1 The second ground raised by the assesse related to challenging the order of the ld. CIT(A) wherein the amount of Rs.20.00 lacs was treated by the Revenue as undisclosed income out of total SBN’s of Rs.26.00 lacs deposited by the assesee in his bank account during the demonetization period. 4.2 The ld. AR of the assessee relied upon the detailed written submission (supra) which is not required to repeat the same. 4.3 After hearing both the parties and perusing the materials available on record, the Bench noticed that Section 69A of the Act is not applicable in this case because there are proper entries in the books of accounts of the assessee in relation to cash sale, cash balance and deposit (SBN’s) Bank. It is noted that the sale transaction in cash cannot e taxed u/s 69A of the Act because the sales against cash and deposit of such cash in assessee’s bank account cannot be called unexplained money. It is also noted that cash memos were immediately issued to the buyer and delivery was made immediately against cash SBN’s/ cash and thus sales are recorded properly in the books of accounts. It is also noted that the lower authorities did not find any defects in the books of accounts and trading. It is also noted that there is no adverse 22 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR observations in the AO’s order particularly in para 3.5 of assessment order that there has been abnormal increase in cash sales as well as cash balance during the period prior to demonetization period. The Bench noticed that provisions of Section115BBE are applicable only on the income taxable u/s 68,69,69A,69B or 69D of the Act. Since in this case, the source of cash deposit in bank is income from business and thus Section 115BBE is not applicable. Hence, in this view of the matter, the Bench does not concur with the findings of the ld.CIT(A) and thus the Ground No. 2 of the assessee is allowed. 5.1 As regards the Ground No. 3 raised by the assessee (supra), the Bench after hearing both the parties and perusing the materials available on record noticed that the assessee has duly discharged the initial burden of proof which lay upon him by explaining that source of SBN’s deposited at Rs.26.00 lacs during demonetization period is out of cash sales made by him and duly credited the sales in the regular books of account of the assesee. It is also noted that the assessee has given necessary evidence on the basis of its books of accounts , sale/purchase invoice, cash book, journal, ledger bank statements and other relevant records that the cash deposited by him in bank accounts upto 31.12.2016 were out of sale proceeds in cash and the cash in hand as per books of accounts as on 01.04.2016 and cash withdrawals made from the banks before 08.11.2016 and as such the assessee should be deemed to have discharged the primary onus which lay upon him and 23 ITA NO. 211/JP/2024 SATISH CHAND GUPTA VS ITO, WARD 6(2), JAIPUR there after onus is shifted on the department to prove that cash amount deposited in bank represent assessee’s undisclosed income. From the above facts and circumstances of the case, it is noticed that AO has fully failed to discharge the burden of proof which squarely lay upon him. Reliance is placed on the judgment of Apex Court in the leading case of CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78.. Hence taking into consideration the above deliberation, the Bench does not concur with the findings of the ld. CIT(A) and the Ground No. 3 of the assessee is allowed. In the result, the appeal filed by the assessee is allowed 6.0 Order pronounced in the open court on 25 /04/2024.
Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 25/04/2024 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Satish Chand Gupta, Jaipur 2. izR;FkhZ@ The Respondent- The ITO, Ward 6 (2),Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 211/JP/2024) vkns'kkuqlkj@ By order,