VRV LUNGI COMPANY,CHENNAI vs. ACIT, CENTRAL CIRCLE 3(2), CHENNAI

आदेश / O R D E R

PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-18, (hereinafter in short ‘the Ld.CIT(A)’), Chennai, dated 24.01.2023 for the Assessment Year (hereinafter in short ‘AY’) 2019-20.

However, the AO was not satisfied with the reply of the assessee, even though, assessee pointed out that the cash sales of Rs.1,10,36,780/- has also shown in the GST returns and offered tax thereon. However, the AO was of the view that the assessee could not place any evidence for unaccounted cash sales in the form of notings or bills which could have been found during the course of search. Therefore, according to him, the cash found amounting to Rs.1,10,36,780/- was unexplained money and therefore, he taxed it u/s.69A of the Act and charging tax at the subject rate as per sec.115BBE of the Act. Aggrieved, the assessee preferred an appeal before the Ld.CIT(A), who was pleased to confirm the same.

Aggrieved, the assessee is before us.

when the search team asked the partners of the assessee, to explain the source of this cash, Shri V.V.Deenadayalan (partner of the assessee’s firm) in his sworn statement u/s.134 of the Act recorded during the course of search on 13.04.2019 admitted that the same were generated from the cash sales made outside the books of accounts and not accounted for and also submitted that the cash of Rs.1,10,36,780/- was being offered as additional sale receipts over and above the sales of Rs.41,05,34,061/- as per books of accounts for the year ending 31.03.2019 without claiming any additional purchases, expenses or any other expenses, while filing the ITR for AY 2019-20. Thereafter, search team didn’t make any further enquiries to the assessee regarding source of the cash of Rs.1,10,36,780/-. Thereafter, the assessee while filing the return of income for AY 2019-20 had shown the cash sales of Rs.1,10,36,780/- as additional sale receipts over and above the sales of Rs.41,05,34,061/- which was the turnover as per the books of accounts for the year ending 31.03.2019 without any additional purchase expenses or any other expenses while filing returns for the AY 2019-20 and the assessee also filed GST Returns showing the GST had been paid for the cash sales of Rs.1,10,36,780/-. In such a scenario, the assessee’s explanation about the source of the cash found during the course of search, should have been accepted unless, the Revenue could have confronted with some information or evidence which was in their (AY 2019-20) M/s.VRV Lungi Co. :: 5 :: possession to show the inherent weakness of the assessee’s explanation (about the source of the cash). The Hon’ble Supreme Court in the case of Smt. Srilekha Banerjee & Othrs. V. CIT reported in [1963] 49 ITR 112 (SC) held that before the Department reject the explanation of the assessee, it must either show an inherent weakness in the explanation or rebutted by putting to assessee, some information or evidence which it has in its possession. The Department cannot be merely rejecting unreasonably a good explanation, convert good proof into a no proof.

The only reason given by the AO to take an adverse view was that during search, no evidence could be unearthed to show that there was out of book cash sales of lungis. However, that cannot be the sole reason for rejecting explanation of the assessee, because, when assessee was searched and the partner was confronted with the cash of Rs.1,10,36,780/-, he accepted the source of cash sales which was unrecorded in the books. The search team didn’t ask further questions to find out ‘as to whether’ there was any other source of income for the assessee. The search team also didn’t find any other source of income for the assessee and it is not the case of the AO also that he has information regarding any other source of income for the assessee to generate cash of Rs.1,10,36,780/-. In such a scenario, the assessee’s explanation at the time of search and the assessee offering the entire amount as profit (without any additional purchase expenses or any other expenses for (AY 2019-20) M/s.VRV Lungi Co. :: 6 :: generating this amount) ought to have been accepted and we are inclined to accept it and direct the deletion of the action of the AO/Ld.CIT(A) who have made separate addition u/s.69A of the Act and charged it u/s.115BBE of the Act. Therefore, we direct deletion of the addition made u/s.69A of the Act to the tune of Rs.1,10,36,780/-. The AO to accept the return of income filed by the assessee returning income of Rs.3,89,57,470/-

Order pronounced on the 05th day of July, 2024, in Chennai.