MAYANK GUPTA,DELHI vs. ACIT ,CIRCLE-35(1), DELHI

The only effective issue to be decided in the appeal is as to whether the ld NFAC was justified in confirming the addition of ₹7,99,88,030/- on account of cash sales under section 68 read with Section 115BBE of the Act in the facts and circumstances of the instant case.

We have heard the rival submissions and perused the material available on record. The assessee is an individual engaged in the business of manufacturing of fabric, trading of yarn and selling of yarn on commission basis under the name and style of M/s. Ganesh Textile. The return of income for assessment year 2017-18 was filed by the assessee on 19.10.2017 declaring total income of ₹22,48,363/-. The case of the assessee was selected for scrutiny. The assessee during the course of assessment proceedings filed replies dated 11.02.2019 and 20.09.2019 had furnished the following details: – A. name and complete address of the business premises of the assessee. b. Nature of business of the assessee c. Bank statement maintained by the assessee with Karur Vysya Bank (3 accounts) and Yes Bank (1 account) d. Monthly GST return in the form of GSTR– 3B of the assessee e. comparative chart showing month-wise cash sales, credit sales, total sales, purchases and cash deposits in the FYs 2015–16 to 2017–18, evidencing the constant trend in the business of the assessee. F. comparative chart showing quarter-wise cash sales, credit sales, total sales, purchases and cash deposits for AYs 2015-16 to 2017-18, evidencing the constant trend in the business of the assessee. G. comparative chart showing ratio of cash sales to total sales for AYs 2015-16, 2016-17 and 2017-18.

Thereafter, the assessee further filed reply dated 13.09.2019, 07.12.2019 and 18.12.2019 furnishing month-wise details of sales for AY 2017-18, among others. Month-wise cash movement was also furnished by the assessee before the ld AO in tabular form. From the details furnished by the assessee, the ld AO noted that there has been manifold increase in cash sales during the month of October and November 2016. Further, the assessee was asked to furnish week-wise sales during the demonetization period, which was also duly submitted by the assessee and which is tabulated in page 5 of the assessment order. Owing to substantial increase in cash sales in the month of October and November, the ld AO treated the cash sales of ₹7,49,88,030/- as unexplained income u/s 68 of the Act. This action of the ld AO stood confirmed by the ld NFAC.

The only dispute is whether the cash sales made by the assessee in the month of October 2016 and 01.11.2016 to 08.11.2016 could be construed as bogus sales. It is pertinent to note that the cash sales together with credit sales had been recorded in the books of account of the assessee and reflected as part of total turnover of ₹34,08,47,220/-. The registers maintained by the assessee as reflected in Form 3CD are Bank book, Cash book, journal, ledger, purchase register, sales register, Stock register in a computerized format. Quantitative details for the business carried out by the assessee duly reflected in Form 3CD Clause 35 and the ratio of gross profit and net profit are furnished in Clause 40 in Form 3CD. The assessee furnished the complete details of cash sales together with the cash deposited in the bank account up to date of announcement of demonetization and corresponding details of immediately preceding year as under:-

Week-wise, month-wise details of cash sales and cash deposits for the year under consideration with comparative chart of earlier years are tabulated as under:-

First of all, we find that the assessee had duly disclosed the entire cash sales including the cash sales in October 2016 and November 2016, which is considered by the revenue to be abnormal. The total cash sales is part of total turnover disclosed by the assessee in the profit and loss account in the sum of ₹34.08 crores. The books of account of the assessee and book results are not rejected by the revenue. Hence, the cash sales which stood already credited as part of the total sales, if the same is added as bogus u/s 68 of the Act separately, it would only result in double addition. Hence, the addition made by the ld AO deserves to be deleted on this count itself. Further, the assessee had furnished all the relevant documents and complete details. It is not the case of the revenue that assessee did not have sufficient stocks to effect the cash sales. To the extent of sales made, the stocks had been duly reduced. Hence, the cash sales could not be treated as bogus in the facts and circumstances of the instant case. Further both cash sales as well as credit sales were subjected to VAT/GST and GSTR were also placed on record by the assessee. Hence, we have no hesitation to delete the addition u/s 68 of the Act on account of alleged bogus sales which stands unproved by the revenue. Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed.