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Facts
The Revenue challenged the deletion of cash aggregating to Rs. 5,65,23,941/- deposited in bank accounts during demonetization. The Assessing Officer (AO) treated these as unexplained cash credits, considering the cash sales to be non-genuine.
Held
The Tribunal held that the assessee had provided sufficient documentary evidence to support the cash sales. The AO failed to disprove the genuineness of the sales or reject the books of account. The addition made by the AO was not justified.
Key Issues
Whether the cash sales declared by the assessee were genuine and could be accepted as the source of cash deposits, or if they were fabricated to explain unexplained income.
Sections Cited
68, 115BBE, 143(2), 145(3), 69A
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Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
Before: SHRI CHALLA NAGENDRA PRASAD & SHRI AVDHESH KUMAR MISHRA
ORDER
PER AVDHESH KUMAR MISHRA, AM
1. The appeal of the Revenue for Assessment Year (‘AY’) 2017-18 is directed against the order dated 27.03.2024 of the Commissioner of Income Tax (Appeals)-26, New Delhi [‘CIT(A)’].
2. The Revenue, vide sole ground, has challenged the deletion of cash aggregating to Rs.5,65,23,941/- deposited in the bank accounts during the demonetization period by the assessee treated as unexplained.
3. The relevant facts giving rise to this appeal are that the assessee, manufacturer of TMT Bars, S S Rounds, Coils, wire, rods, billets, etc., filed its /Del/2024 Rathi Steel & Power Ltd. Income Tax Return (‘ITR’) on 29.10.2017 declaring loss of (-) Rs.40,16,64,923/-. The case was picked up for scrutiny and consequential assessment loss of (-) Rs.34,51,40,922/- by making addition of Rs.5,65,23,941/- as unexplained cash credits under section 68 r.w.s 115BBE of the Income Tax Act, 1961 (‘Act’). The assessee had disclosed the sum of Rs.5,65,23,941/- as cash sales. However, the Ld. Assessing Officer (‘AO’) held the said cash sales deposited in the bank during the course of demonetization period as non-genuine and taxed it. Aggrieved, the assessee preferred appeal before the Ld. CIT(A) and succeeded there. The Revenue challenged the impugned order of Ld. CIT(A).
4. The Ld. Sr. Departmental Representative (‘Sr. DR’) vehemently argued the case emphasizing the details mentioned in the assessment order wherein the cash sales had been held non-genuine. He, placing emphasis on following part of the assessment order, prayed for setting aside the impugned order to restore the assessment order:
“6.1. The assessee has claimed that the material sent on consignment basis before 01.04.2016 was defective due quality complaints and consignment agents were not able to sell that material and was lying on their site and the said material was sold in cash during the year under assessment at a discounted price. However, from the examination of the final accounts and audit report filed by the assessee it is found that no stock as on 31.03.2016 is shown with the consignment agents. As the value of such stock is quite substantial, the same is required to be disclosed separately in final accounts or notes to accounts. However, no such details are mentioned in Audit Report of final accounts. This fact was /Del/2024 Rathi Steel & Power Ltd. also confronted to the assessee vide show cause dated 27.12.2019. However, no explanation was furnished by the assessee. In view of above the claim of the assessee that defective goods were lying with consignment agents is not believable. 6.2. The assessee submitted bill wise details of defective material sold during the period under assessment. Copies of bills numbering 01 to 050 issued for cash sales were also submitted. It is observed that the bills numbered 001 to 050 were issued from single sale book. From the bill wise details of cash sales of defective material. It is also observed that total bills numbered from 01 to 326 has been issued from single sale bill book. The cash sale bills issued are serially numbered from 01 to 326 without any other sale other than cash sales. It is also observed that though the sale bills are claimed to have been issued over a period of seven months, however, the bills are in same hand writing and flow and it can easily be made out that the bills are made at single point of time at one go and not over the period of time as claimed by the assessee. 6.3. The assessee has submitted copies of consignment bills issued to consignment agents with different locations. However, the cash sales bills are issued from single cash sale books and in hand writing of a single person. It is not believable that the goods are lying at different locations with different consignment agents and the sale bills are issued from same sale bill book. 6.4. The report of Inspector conclusively established that the claim of the assessee regarding sale of goods in cash lying with consignment agents is false. 6.5. It is also observed that the cash was deposited into the bank accounts of the assessee from 11.11.2016 to 08.12.2016 on several occassions. Once bank notes of denominations of Rs. 1,000/- and Rs. 500 were declared illegal tenders, normally a person would deposit all the cash available with him in SBNs to bank account in one go.
7. From the above facts and findings it is clear that the cash sales claimed to have been made by the assessee are bogus and the bills relating to cash sales were fabricated to explain the source of cash deposited into the bank accounts of the assessee which was actually unaccounted cash of the /Del/2024 Rathi Steel & Power Ltd. assessee.
8. As the explanation given by assessee for the nature and source of cash credits amounting to Rs.5,65,23,941/-shown as cash sales receipt against sale of defective material is not found satisfactory, the provisions of Section 68 of I T Act, 1961 are clearly attracted to said cash deposits.”
5. On the other hand, the Ld. Counsel, placing reliance on the factual finding of the Ld. CIT(A), prayed for dismissal of appeal. He contended that the Ld. CIT(A)’s order being self-explanatory, supported the assessee. He contended that the Ld. AO held cash deposits of Rs.5,65,23,941/- as unexplained under section 68 of the Act solely on the reasoning that the cash sales were non-genuine. He contended that the assessee had filed detailed submission along with corroboratory evidence before the Ld. CIT(A), who remanded the matter back to the AO. In remand report; the AO, reiterating the finding in the assessment order, justified the addition of Rs.5,65,23,941/- . He drew our attention to the finding of the Ld. CIT(A) wherein he had held that the inference drawn by the AO was not justified. The relevant part of the impugned order reads as under: “8.1 The appellant has submitted that the impugned addition of Rs. 5,65,23,941/- has been made by the Ld. AO on account of cash deposited by the assessee company in its bank accounts out of cash sales, by treating the same as unexplained cash credits u/s 68 r.w.s 115BBE of the Act. During the course of assessment proceedings, the assessee company furnished the details of cash deposited during the demonetization period as well as explanations for its source and documentary evidences in case of cash sales. In response to the notices issued by the AO, the assessee vide replies dated 09.11.2019, 29.11.2019, 16.12.2019 and 25.12.2019 from time to time submitted the following details/explanations:
/Del/2024 Rathi Steel & Power Ltd.
Explanations towards cash deposited out of cash sales of certain defective goods sent earlier on consignment basis Details of cash deposited during the preceding financial year, i.e. FY 2015-16 (Refer Pg 573 of PB) Comparative details of cash sales made in FY 2015-16, along with sample cash sale invoices (Refer Pg 713-714 of PB) Details of cash deposited during 01.04.2016 to 07.11.2016 (Refer Pg. 574-576 of PD) Details of cash deposited during 08.11.2016 to 31.12.2016 (Refer Pg. 577-578 of PB) Details of sales invoices in respect of defective materials sold through consignors (Refer Pg 638-646 of PB) Copies of sample cash sale invoices for the year under consideration (Refer Pg 647-696 of PB) Details and invoices-cum-challans in respect of materials dispatched to various consignment agents (Refer Pg 586-637, 697-709 of PB) Excise and service tax returns (Refer Pg 277-452, 453-503 of PB) Ledger account of consignment commission and freight outwards (Refer Pg 504-519, 520-560 of PB)
Disregarding the plethora of explanations and documentary evidences submitted by the assessee, and without bringing any cogent material on record, the Ld. AO made the impugned addition of Rs. 5,65,23,941/- treating the cash deposits made by the assessee company out of cash sales of certain defective goods sold through consignment agents as unexplained income u/s 68 of the Act.
8.1.1 The appellant further submitted that while making the said addition, the Ld. AO has alleged that the assessee has made cash sales without having corresponding stock available in financials and non-availability of details of outward freight/carriage. The Ld. AO has failed to take cognizance of the fact that cash sales as well as corresponding purchases have already been disclosed in the audited financial statements of the assessee company. The addition has been made by the Ld. AO by ignoring the documentary evidences and submissions with regard to explanation of cash deposits furnished by the assessee company during the course of /Del/2024 Rathi Steel & Power Ltd. assessment proceedings and by ignoring the fact that provisions of section 68 of the Act are not applicable in the case of assessee.
On going through the provisions of Section 68 of the Act, it is discernible that the provisions of section 68 are applicable where any sum is found credited in the books of an assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer. However, in the present case under consideration, the assessee has duly given detailed explanations along with documentary evidences to support its contention which has been rejected by the Ld. AO without pointing out any firm defects in the documents/explanations submitted. Further, your Honors, if the Ld. AO was not satisfied with the explanation furnished by the assessee, then the onus was on the Ld. AO to substantiate his view by either pointing out any defect in the documents/explanations furnished before him or by bringing any material which could validate his allegations.
8.1.2 The appellant further submits that, during the course of assessment proceedings, it was duly submitted by the assessee company that cash deposits in the bank accounts have been made out of cash sales of certain consignment goods. Some of the goods sent on consignment basis before 01.04.2016 were defective and the respective consignment agents were not able to sell that material. Accordingly, the assessee decided to sell the material at discounted price on ex-godown basis. To substantiate the above said reply, the assessee company had duly submitted complete details of sale of such defective materials (Refer Pg 638-646 of PB), from which it is evident that an aggregate of 326 items had been sold through the consignment agents.
Further, the Ld. AO did not issue a valid show-cause notice as the time allowed was even less than 2 days and the allegations raised in the final assessment order did not find place in such show cause notices. Accordingly, the assessee could not submit any further document at the time of assessment proceedings to further substantiate its claim. Hence, the supporting documents are being submitted before your Honors as additional evidences under Rule 46A of the Income Tax Rules in order to prove the genuineness of the sales made by the assessee during the year /Del/2024 Rathi Steel & Power Ltd. under consideration and consequently the cash deposited out of such sale proceeds.
On perusal of the details submitted, it can be safely concluded that the assessee had sufficient stock the making cash sales and all the sales made through consignment agents are backed by necessary supporting documents substantiating their genuineness. Your Honors, during the course of assessment proceedings, the Ld. AO has neither doubted on the total sales nor the total purchases disclosed by the assessee in its audited financial statements. This is further substantiated by the fact that the business income of the assessee has been duly accepted by the Ed. AO which is evident from the fact that the addition has been made to the returned income of the assessee.
On going through the above documentary evidences furnished by the assessee company, your Honors will acknowledge that there is no dispute as to availability of stock, cash balance and cash deposited in the bank account out of the cash available in hand. Further, when there is no discrepancy in the goods sent on consignment and availability of the same for sale then it cannot be presumed that the cash available with the assessee has not been generated out of cash sales and assume that the cash deposited by the assessee in the bank account represents unexplained cash credits of the assessee.
8.1.3 The appellant submits that in the present case under consideration, it is not the case of the Ld. AO that cash sales declared by the assessee company have not been reported in the ITR or not offered to tax in the computation of income. Thus, when it is a fact on record that cash sales have taken place and also reported by the assessee, the contentions raised by the 1.4. AO appear fruitless and do not suggest as to how such sales represent undisclosed income of the assessee.
The Ld. AO has neither been able to prove his view point with any material on record nor is he able to disprove the facts laid down on record by providing some documentary evidences, and therefore, making an addition merely on the basis of suspicions is not justified on part of the Ld. AO since it is settled position in law that mere suspicion, however strong, /Del/2024 Rathi Steel & Power Ltd. cannot take the place of proof. In this regard reliance has been placed on the following catena of cases: Honourable Supreme Court in the case of Umacharan Shaw and Bros. v. CIT …….. Honourable Supreme Court in the case of Krishnand v. State of Madhya Pradesh: AIR 1977 SC 796: ……… Honourable Supreme Court in the case of Jayadayal Poddar vs. Mst. Bibi Hazra: AIR 1974 SC 171: …….. Honourable Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC): …….. Honourable Supreme Court in the cae of Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC): …… Honourable Kerala High Court in the case of CIT vs. K Mahim Udma [2001] 158 CTR (Ker.) 100: [2000] 242 ITR 133 (Ler.): …….. In view of the above judicial pronouncements, it can be said that it is a settled position in law that Income Tax Act does not entitle department to base the assessment on pure guess, without reference to any evidence or material Le. an assessment could not be made only on bare suspicion, since suspicions cannot partake the character of evidence. Accordingly, in order to prove that the apparent is not real, i.e. the cash sale receipts are not genuine sales of the assessee but its unexplained money then it is obligatory for the Ld. AD to bring on record material evidences to prove the same, since mere suspicions will not fulfil the requirement of Indian Evidence Act as well as Income Tax Act.
8.2 The AO in the assessment order has noted that the explanation furnished by the assessee about the nature and source of cash amounting to Rs. 5,65,23,541/-as cash received against sale of defective material is not found satisfactory since M/s Shiv Enterprises to which cash sales of Rs. 4,25,32,257/- is shown to be made by the appellant has not been found at the given address and all the cash sales bills were serially numbered from 1 to 326 and bills were made in same handwriting and /Del/2024 Rathi Steel & Power Ltd. possibly made at a single point of time, however, it is not possible that goods are lying at different locations with different consignment agents and the sale bills were issued from same sale bill book.
8.3 From the submission of the appellant and the assessment order, it has b that the show- cause notice issued by the AO wherein only 2 days' time was given and the appellant the allegations raised in the final assessment order did not find place in show cause notices issued and accordingly, the assessee could not submit any further document at the time of assessment proceedings to further substantiate its claim, Howe, the supporting documents has been submitted by the appellant as additional evidences under Rule 46A of the Income Tax Rules in order to prove the genuineness of the sales. Considering the same a remand report was called from the AO.
8.3.1 In the remand report the AO has just reiterated the findings and observations made in the original assessment order. In the rejoinder filed by the appellant, it is submitted that the appellant is registered under Excise and Service Tax laws and has filed the return on timely basis. It is also worthwhile to mention that all the sales made are duly disclosed in the Excise and Service Tax return which was filed much before the date of demonetization. Le 08.11.2016 (in which there was no prediction of demonetization). Hence, no adverse inference can be made regarding the sales made which have been already disclosed in Excise and service tax return filed before the demonetization period. The challan register for the following months during which the goods were sent on consignment and has been subsequently sold as defective material is enclosed as Annexure- 1. The reconciliation of the challan registers with excise returns which has already been filed earlier is also enclosed along with the same.
The copy of the VAT return filed for the quarter ended 30th June 2016, 30th September 2016 and 31 December 2016 is enclosed as Annexure-2. It would not out of place to mention that the registration is showing cancelled online despite being restored and as such the returns were filed physically. The relevant documents/ communications are enclosed as Annexure-3.
/Del/2024 Rathi Steel & Power Ltd. Therefore, the remand report submitted by the Ld. AO is devoid of any merits and as such, the additional evidence being adduced by the appellant deserves to being admitted in light of the complacent attitude of the Ld. AO and not providing adequate time to submit response w.r.t the queries raised.
8.4 I have gone through the assessment order, submissions of the appellant, remand report and its rejoinder filed by the appellant. Before getting into the merits of the case, it is imperative to re-visit the facts on record. The appellant is engaged in the business of manufacturing and trading of iron and steel products which in-turn is a major source of its revenue/income. The year under consideration is financial year 2016-17 the appellant had duly tiled its quarterly returns before the excise and service tax authorities before the respective due dates, Specifically, the returns for the months of April 2016 to October 2016 were filed before the date of demonetization i.e., 08.11.2016 when bank notes of denominations of Rs. 1000 and Rs. 500 were declared as illegal tenders. The Appellant filed its return of income on 29th October 2017. The case of the appellant was selected for scrutiny under CASS and notice under section 143(2) was issued on 09.08.2018. The AO asked a specific query about the cash deposits made during the period between 8th November 2016 to 31st December 2016. He further asked the cash deposit details for the preceding as well as the subsequent previous years. The specific query relating to the details sought was the source of cash deposits of Rs. 5,07,96,000/- which were made between 8th November 2016 and 31st December 2016.
In response, the appellant submitted that the source of such deposits was cash sales of Rs. 5,65,23,941/- to various customers. To substantiate its claim, the appellant filed the following details during the assessment proceedings and by way of additional evidence: I. Copy of excise return II. Copy of service tax return II. Copy of ledger account of consignment commission IV. Copy of ledger account of freight outward V. Copy of details of opening and closing stock VI. Copy of details and invoices of material dispatched of to all the customers /Del/2024 Rathi Steel & Power Ltd.
VII. Copy of cash book VIII. Copy of cash sale account IX. Copy of goods receipt note (GRN) in respect of goods sold to the cash sale customers X . Copy of freight details wherever, applicable XI. Copy of stock register as filed before excise authorities 8.4.1 After considering these pieces of evidence, the AO made the addition of Rs. 5,65,23,941/- being unexplained cash sales / credits under section 68 of the Act observing that the closing stock reported in the balance sheet did not show the stock lying with the consignment agent, cash sale bills were issued from a single book and in the same handwriting, details of outward freight of such cash sales were not furnished and M/s Shiv Enterprises one of the consignment agents was not found at the given address. From the assessment order, it is clear that the AO has concluded that the appellant had fabricated casks sales to explain the source of cash deposited during the demonetization period.
8.4.2 From the facts on record and the submissions made before me, the following emerges:
First and foremost, the most crucial fact is that the appellant had filed the excise returns for the period from April 2016 to October 2016 before the date of announcement of demonetisation was made. From the paper book filed by the Appellant, it is seen that the monthly filings for these months had been in the following manner: …………………………..
From the above, it is quite clear that all the filings had been made for the said months before the announcement of demonetisation on the evening of 08.11.2016. Needless to say, these returns require the assessee to submit all the details of the opening balance, manufacturing, clearing and closing stock of all goods. Hence, it cannot be said that the appellant had indulged into any fabrication of sales when these goods had already boon sold and cleared before the announcement of demonetisation. These sales can certainly not be said to be an /Del/2024 Rathi Steel & Power Ltd. afterthought to explain the cash deposits made by the Appellant Thus, sales turnover was duly declared to the VAT department and VAT department has accepted the sales turnover declared by the assessee for the assessment year under consideration.
On perusal of the stock register, it is seen that the closing balance of stock disclosed in the balance sheet is as per the VAT returns filed by the appellant. The assessee has been reporting stock on aggregate basis in earlier years also and the same was never doubted. Further, there is no legal requirement under the statute that provides that the assessee is required to provide the location wise details of stock. In Form 3CD the bifurcated details of stock is provided considering the nature of stocks. There is no evidence on record which shows that the stock with the consignment agents was not part of the total stock declared in the audit report. This means that though there may be lapse in disclosure, the existence of such stock cannot be denied altogether. Further, the proof of delivery of such stock from the appellant to the consignment agent establishes that the stock was transferred to the agent.
On existence of a single cash sales book and the same handwriting on it, other than the observation the AO has not brought on record any discrepancy in such book vis a vis the cash book or stock register or sale register. The appellant submits that the argument of consignment agents being at different locations is also very thin as all the agents are from Delhi itself. Further, I find force in the argument of the appellant that the bills were generated from a single location as all the agents were in close proximity to the appellant and that the company had decided, considering the huge quantity of defective material, to maintain a separate bill book so as to keep the record of sale of defective goods separately.
The AO had asked for proof of outward freight on such cash sales. In response the appellant submitted that such sales were made on ex-godown basis and therefore no freight or carrier /Del/2024 Rathi Steel & Power Ltd.
charges were paid by the appellant. However, the appellant did bear carrier charges on transfer of goods to the consignment agent and the proof of s deliveries have been furnished. In my view, generally, in case of cash sales, the customer reaches out to the vendor and claims the goods on his own. Clearly, the appellant is not in a position to furnish outward freight details for the goods which were sold so godown basis by the consignment agents to the customers. Thus, the appellant has discharged its onus by providing the proof of delivery of the goods sent to the consignment agents.
The AO has doubted the existence of one consignment agent, M/s Shiv Enterprises relying on the inspector's report that there was no physical presence of such party at the given address on 27th December 2019. The appellant has submitted that goods have been delivered to the consignment agent cannot be denied as the appellant has submitted all the original sale bills, ledger account of consignment expenses evidencing commission paid to consignment agent for sale of material during the relevant A.Y. and copy of ledger accounts and bills of transporters evidencing that the payments made for transport of goods, the GRN evidencing the acknowledgement of goods and proof of vehicle. Further, regarding the existence of M/s Shiv Enterprises wherein the AO had noted that the address provided is a residential house, it is stated that the area referred is a commercial area and not the residential area. Pahari Dhiraj is a very old area in which one side is commercial and the other side is residential area which is evident from the photograph enclosed. Thus, it cannot be conclusively said that the address provided was a residential area. The AO has not done any further enquiry to find out the current address of such party while all the evidence produced by the appellant establish the existence of such party when the impugned transactions were undertaken.
The AO in the remand report has not disproved any evidence filed by the Appellant and rather chose to rely on the assessment order itself. In this case, the material evidence /Del/2024 Rathi Steel & Power Ltd.
furnished by the Appellant cannot be ignored as it proved the physical delivery of goods and in turn establishes the genuineness of the transactions.
The averment made by the AO that the appellant has fabricated its cash sales to prove or explain its cash deposits made during the demonetization period is disproved from the facts of the case itself. In other words, the appellant had already filed its excise returns for the period between April 2016 to October 2016 while the announcement of demonetization was made on 8th November 2016. Hence, there was no scope of any manipulation or fabrication in any records for that period.
8.5 It is also important to examine the legal position on the issue ie. treatment of cash deposited after demonetization. Hon'ble ITAT in the case of Agons Global (P.) Ltd. vs ACIT [Appeal No 3741 to 3746/Del/2019] has held that mere addition made on this ground that there is deviation in ratio is not proper. When the assessee had regular cash sale and deposit of cash in bank accounts and if nothing incriminating is found contrary then addition u/s 68 of such cash sale would tantamount to double taxation. In several recent judgements such as in the cases of DCIT vs M/s. Bhanu Infrabuild Pvt. Ltd. 2023 TAXSCAN (ITAT-Del) 2159; DCIT vs M/s. Atulah Contractors and Construction Pvt. Ltd 2023 TAXSCAN (ITAT-Del) 2152; Sheo Chand Yadav vs Income Tax Officer 2023 TAXSCAN (ITAT-Del) 2101; Income Tax Officer vs M/s Zee Bangles Pvt. Ltd 2023 TAXSCAN (ITAT- Bom) 1886, it has been held that the provisions of Section 69A of the Income Tax Act cannot be applied to the cash deposits which have been duly recorded in the books of account and the books of account is not rejected.
8.6 In view of the above, it has been found that the appellant has submitted all the supporting documents such as sales bills pertaining to sales made in cash, audited balance sheet, stock statement, transport challans and VAT returns. On perusal of these documents, it is observed that the appellant has shown the cash sales in its regular books of account which Jas been considered in the VAT returns filed by it and duly reflected these sales in the stock statements. During the assessment proceedings, /Del/2024 Rathi Steel & Power Ltd. the AO has not recorded any contrary evidence or findings wherein it was found that the audited books of account of the appellant is fabricated. Further, it is also important to note that the Act does not prescribe the seller to maintain the identity and details of the purchaser who wants to make purchases in cash. In normal business transactions when the goods are sold on immediate cash basis and not on credit, no deﻟﺘﺲ from the customers are generally asked. It is also pertinent to highlight that in the present case the impugned transaction is with respect to sale and not of any loan or share application money which require long term association between the two parties and require assessee to be certain about the background and conduct of other parties.
8.7 Thus, from the above, it has been deduced that the AO has neither found any defect in stock statements nor the VAT paid on sales made. The AO has also not reported any contrary findings about the opening stock, closing stock and audited books of accounts maintained by the appellant. If the AO had taken the view that the sales are bogus then the AO should have also rejected the books of accounts by invoking the provisions of the section 145(3) of the Act. But the same has not been done in this case by the AO. When the purchases made by the appellant have been found to be genuine and were accepted during assessment proceedings then there should be either corresponding sales or same should reflect in closing stock. Further, no discrepancy has been found in VAT returns filed, wherein opening and closing stock, production of manufactured items and sales turnover are declared by the appellant Hence, the cash deposited by the appellant was out of the cash sales made during the year under consideration and the same was duly recorded in the books of account and in the VAT returns. Merely because sales have been made in cash cannot be the sole reason for making additions.
In view of the above stated facts and considering the judicial views, I am of the view that the assessing officer was not justified in making the addition on account of cash deposited by the appellant as the same has been done out of the cash sales made by the appellant which are duly recorded in the books and the AO has failed to make any adverse finding in this regard and has not rejected the books of the appellant assessee. Therefore, the addition made by the assessing officer is directed to be deleted and the grounds taken by the appellant are hereby allowed.”
/Del/2024 Rathi Steel & Power Ltd.
[Emphasis supplied.] 6. The Ld. Counsel contended that the Ld. AO had not doubted any purchase, stock-in-trade, goods sent on consignment, book results, etc. It was further reiterated that the books of account had not been rejected by the AO; therefore, doubting cash sales were not justified at all. It was further submitted that the cash sales had taken place in January, 2017 onwards also. Therefore, the conclusion drawn that cash sales had not taken place after the demonetization period was factually incorrect. With the help of original VAT returns, the Ld. AR demonstrated that their VAT returns had been accepted by the concerned Department. The Ld. Counsel further argued that the Ld. AO had taxed the sales once as a regular sale shown in Profit & Loss Account and again the same under section 68 of the Act, which tantamount to double taxation being contrary to the law and accounting principles. He submitted that the Ld. AO had once treated cash sales shown in the Profit & Loss account as genuine and taxed the business income embedded in such sales and again taxing the entire amount of such sales as unexplained credits.
7. Before us, the Ld. Counsel submitted that the cash deposits were out of sales made by the respondent assessee. He further submitted that the details of the deposits in bank account along with sales register and Excise returns were also filed before the Ld. AO and the Ld. CIT(A). However, the Ld. AO brushing aside all these documents including sale vouchers/retail invoices /Del/2024 Rathi Steel & Power Ltd. containing all required details therein held that the cash sales were non- genuine. All these sales were shown in books of account and Excise returns also. The sales as per the sales registers tallied with the Excise returns. The Ld. Counsel submitted that the above highlighted portion of the order of Ld. CIT(A) being self-explanatory and well-reasoned, needed to be upheld.
We have heard both parties and have perused the material available on the record. We find force in arguments/contentions/submission of the Ld. Counsel that:
(i) The excise/VAT returns for the period from April 2016 to October 2016 before the date of announcement of demonetization; i.e. before 08.11.2016. In these returns, the assessee has disclosed the details of the opening balance, manufacturing, clearing and closing stock of all goods. Hence, it cannot be said that the assessee was indulged into fabrication of sales when these goods had already been sold and cleared before the announcement of demonetization. The sales duly declared in the VAT returns has been accepted by the VAT Department.
(ii). There is no dispute on the quantity of stock shown in the stock register. Only place of stock has been questioned. The assessee has been reporting stock on aggregate basis in earlier years also and the same has never been questioned/doubted. Further, there is no legal requirement under the statute that provides that the assessee is /Del/2024 Rathi Steel & Power Ltd. required to provide the location wise details of stock. At most, there may be lapse in disclosure but not the existence of such stock. Further, the proof of delivery of such stock from the assessee to the consignment agent establishes transfer of stock to the agent.
(iii). Single cash sales book in one handwriting had been maintained for all consignment agents as those were in same locality and in close proximity to the assessee in New Delhi to clear the huge quantity of defective material without any outward freight as sales were done on ex- godown basis. However, the appellant did bear carrier charges on transfer of goods to the consignment agent and the proof of deliveries had been furnished before the Authority below.
(iv). The AO in the remand report has not disproved any evidence filed by the assessee.
(v). The AO cannot tax the sale receipts and income embedded therein together at the same time.
It is an admitted fact that the respondent assessee has maintained sales vouchers and filed VAT return within the stipulated time period prior to 08.11.2016 and the VAT returns have not been revised later on. The turn over shown in the original VAT return remains unaltered. Before us, Revenue has not placed any material on the record to demonstrate that the details of cash /Del/2024 Rathi Steel & Power Ltd. sales shown by the respondent assessee are fictitious/bogus. Further, the Revenue has also failed to place any material on the record to demonstrate that the VAT returns of the relevant year have not been accepted by the VAT authority. Hence, following the reasoning given in the co-ordinate Benches decisions in the cases of Ramesh Kochar, dated 26.04.2022 and Appliances Forever in we hereby hold that this case is squarely covered by these decisions (supra). In view of the foregoing observations, we do not find any infirmity in the order of Ld. CIT(A). Hence, we decline to interfere with the impugned order as it is found well-reasoned.