2022 (11) TMI 1333 - AT - Income Tax

Addition u/s 68 r.w.s. 115BBE - Unexplained cash deposited in demonetized currency as undisclosed income of Assessee - CIT-A deleted the addition - HELD THAT - We found that all the points or allegation mentioned by the AO are duly considered and discussed by the CIT(A) while dealing with the appeal of the assessee. The revenue did not pin point which of the findings of the CIT(A) is incorrect or against the facts placed on record by the assessee. As noticed that during the course of assessment proceedings, the AO examined the books of account and she has not rejected the books of account of the assessee and provisions of section 145(3) were not applied. During the year under consideration the assessee deposited in demonetized currency. The cash so deposited was accumulated cash which was received against/for sales made in the proprietorship concern of assessee M/s Mohan Lal Mahendra Kumar Jewellers. The assessee submitted the summary of cash book. We find the explanation of the assessee is genuine and the sales cannot be doubted merely on surmises and conjectures on the ground of nonfurnishing of address and PAN of the customer. The AO did not make any enquiry on the material submitted by the appellant. She merely proceeded on statistical analysis to make the addition on account of cash deposits. We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. AO did not even reject the books of accounts of the appellant under the provision of section 145(3) - Therefore, the contention of the revenue on the facts and circumstances of the case is not accepted and we see no reason to interfere in the order of the ld. CIT(A). Appeal of the revenue stands dismissed.

Summary

Issues Involved:

1. Deletion of addition of Rs. 1,41,32,000/- made by the Assessing Officer.
2. Genuineness of high cash sales during the demonetization period.
3. Applicability of Section 115BBE of the Income Tax Act, 1961.
4. Allegation of activity against public policy by the taxpayer.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 1,41,32,000/-:

The Assessing Officer (AO) added Rs. 1,41,32,000/- to the income of the assessee, treating it as undisclosed income. The AO argued that the cash deposited during the demonetization period was unusually high compared to the pre-demonetization period and questioned the genuineness of the cash sales. The AO also noted that the assessee failed to provide details like the name, address, and PAN of the buyers. The CIT(A) deleted the addition, stating that the assessee had maintained regular books of accounts, which were audited and supported by sales invoices, stock registers, and VAT returns. The CIT(A) emphasized that the sales were genuine and backed by sufficient stock, and the AO did not find any defect in the books of accounts. Therefore, the addition was deemed unjustified and deleted.

2. Genuineness of High Cash Sales During the Demonetization Period:

The AO questioned the genuineness of high cash sales during the demonetization period, arguing that it defied logic for a person with a regular bank account to hold such huge cash. The CIT(A) found that the assessee had provided sufficient documentary evidence to substantiate the cash sales, including cash books, sales registers, and VAT assessment orders. The CIT(A) noted that the sales were part of the regular business operations and were supported by stock availability. The CIT(A) also highlighted that the AO did not reject the books of accounts or find any evidence of bogus sales. Therefore, the high cash sales were considered genuine.

3. Applicability of Section 115BBE of the Income Tax Act, 1961:

The AO applied Section 115BBE, which imposes a higher tax rate on unexplained income, to the addition made under Section 68. The CIT(A) held that the provisions of Section 68 were not applicable to the sales transactions recorded in the books of accounts, as these transactions were already part of the income credited in the Profit & Loss Account. The CIT(A) cited various judicial precedents, including the Supreme Court's ruling in CIT vs. Devi Prasad Vishwnath Prasad, to support the view that the same income cannot be taxed twice. Consequently, the application of Section 115BBE was deemed inappropriate.

4. Allegation of Activity Against Public Policy by the Taxpayer:

The AO alleged that the taxpayer was involved in an activity against public policy by depositing demonetized currency. The CIT(A) dismissed this allegation, stating that the sales were genuine and supported by documentary evidence. The CIT(A) noted that the sales were recorded in the regular books of accounts, which were audited and accepted by the VAT department. The CIT(A) also pointed out that the AO did not find any evidence of undisclosed income or bogus sales during the survey conducted at the assessee's business premises. Therefore, the allegation of activity against public policy was not substantiated.

Conclusion:

The CIT(A) concluded that the addition of Rs. 1,41,32,000/- was unjustified and deleted it, as the sales were genuine and supported by sufficient documentary evidence. The application of Section 115BBE was also deemed inappropriate, as the income from sales was already credited in the Profit & Loss Account. The allegation of activity against public policy was dismissed due to a lack of evidence. The appeal of the revenue was dismissed, and the order of the CIT(A) was sustained.