SHIVANSH DAIRY PRODUCTS PRIVATE LIMITED,NEW DELHI vs. INCOME TAX OFFICER, DELHI

This appeal preferred by the assessees is directed against the order of the ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [for short ‘the ld. CIT (A)] dated 11.01.2024 for AY 2017-18.

Brief facts of the case are, assessee filed its return of income on 21.11.2017 declaring total income of Rs.6,16,930/-. The case was selected for complete scrutiny through CASS for the following reason :- “abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period.”

Notices under section 143(2) and 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee through ITBA portal. After final show- cause notice issued on 07.11.2019, assessee submitted relevant information through ITBA portal. The assessee submitted that cash of Rs.48,48,186/- was deposited in old currency in Canara Bank, Tagore Garden, Delhi Branch from 09.11.2016 to 31.12.2016. To justify the claim of cash deposits, assessee submitted the cash sales made prior to demonetization period and also submitted reconciling the month-wise sales and purchase chart. For the sake of brevity, the same is reproduced below :-

The Assessing Officer observed that from the information submitted by the assessee, the stock maintained by the assessee is indicative in the month of December / March i.e. after the demonetization period, therefore, the assessee had shown sales without having corresponding purchases which clearly establish from the chart wherein the assessee had not given data, such as, PAN, address, etc. in respect of certain parties from where purchases were made. The Assessing Officer reproduced the details of cash deposit made by the assessee prior to demonetization period which is listed in the assessment order. He also observed that assessee has filed vouchers to justify the cash sales which are without name and address even the cash sales exceeding Rs.25,000/-. Accordingly, he proceeded to make the addition u/s 68 of the Act.

Aggrieved with the above order, assessee preferred an appeal before NFAC, Delhi and filed grounds of appeal and detailed submissions along with copy of VAT returns. It was submitted that sales were made out of opening stock which were disclosed in the previous year income-tax return and out of regular purchases. It was submitted that the statement made by the Assessing Officer is not correct because while calculating the negative figure of stock, the Assessing Officer has not taken into consideration the gross profit earned from the sale of products and direct expenses debiting in the trading account. Accordingly, a fresh chart was submitted before the ld. CIT (A) which is reproduced at page 5 of the appellate order for the sake of brevity, the same is reproduced below :-

Aggrieved assessee is in appeal before us raising following grounds of appeal :-

At the time of hearing, ld. AR of the assessee reiterated the submissions made before the ld. CIT (A) and submitted that assessee has filed Form D-VAT 56 for all the four quarters disclosing purchases and sales and all the informations are submitted before the lower authorities that considering the opening stock and purchases matches with the sales after considering the GP earned by the assessee. He relied on the detailed submissions made before the ld. CIT (A).

Considered the rival submissions and material placed on record. We observe that the Assessing Officer proceeded to make the total cash deposit made by the assessee during demonetization period since assessee could not submit the relevant information of cash deposit made by the assessee during the impugned year. Assessing Officer also observed that when the assessee is depositing minor cash in its bank account then why he retained such huge cash in hand which it later on deposited during demonetization and the assessee after demonetization not deposited the whole cash in hand with it in one go. Assessing Officer also observed that the vouchers which were filed by the assessee to justify cash sales are without name and address even the cash sales are exceeding Rs.20,000/- . In our view, there is no requirement to maintain details for sales less than Rs.2 lakhs as per guidelines. In appeal, assessee made detailed submissions and filed copies of audited balance sheet, bank statement, VAT returns, sales bills, purchase bills etc. and before ld. CIT (A), he submitted that the Assessing Officer relied on the chart reproduced in assessment order and ld. CIT (A)’s order, which is reproduced above at page 2 & 3 of our above order, which is not correct because while calculating negative figure of stock, Assessing Officer has not taken into consideration the gross profit earned from the sale of the products and direct expenses debited in the trading account. He submitted that had the Assessing Officer considered the gross profit then all the figures of trading account will tally. In this regard, assessee submitted a calculation chart considering gross profit before the ld. CIT(A), which is reproduced by us at page 4 above, and submitted that this reflects the calculation of closing stock in a correct way on accounting basis and this chart proves that the assessee has enough stock in hand so the sales transacted during the year under consideration are genuine. He submitted that the assessee has furnished the entire information which proves the genuineness of the sales and the source of cash deposit and contention of the Assessing Officer/CIT(A) is based on assumptions, conjectures and surmises only and not on any authenticated evidences. We observe that the ld. CIT (A) also proceeded to sustain the above addition without considering the actual facts on record.

Based on the information available on record, we observe that the method adopted by the Assessing Officer to determine closing stock is not proper. The chart submitted by the assessee is proper. The trading results include the direct expenses and gross profit. Therefore, we are inclined to conclude that the assessee had enough stock to make the cash sales during the demonetization period. Therefore, we are inclined to allow the grounds raised