2022 (11) TMI 1334 - AT - Income Tax

Addition u/s 68 - cash sales of the assessee unexplained - assessee is an individual and deriving income from business of jewellery - CIT-A deleted the addition - HELD THAT - The assessee is engaged in the business of Jewellery and gold. The higher cash sales on festival season Karva Chouth, Dhanteras and Diwali is general feature in the trade of the assessee and such sales is also apparent from the cash book submitted during the course of assessment proceedings. It is not the case of the A.O. that the assessee did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. As regard to not providing the name, address and PAN of the customers to whom cash sales was made the assessee explained that the sales were below the prescribed limit so it is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. 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. In fact the AO neither found any concrete and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstance of the case is not accepteda - Appeal of the revenue is dismissed.

Issues Involved:

1. Deletion of addition made under Section 68 of the Income Tax Act.
2. Justification of cash deposits during the demonetization period.
3. Application of Section 115BBE.
4. Acceptance of sales and stock records by the Assessing Officer (AO).
5. Rejection of books of accounts and the necessity of maintaining customer details.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 68:

The primary issue is whether the deletion of the addition of Rs. 1,03,00,000/- made under Section 68 of the Income Tax Act by the Commissioner of Income Tax (Appeals) [CIT(A)] was justified. The AO had treated the cash deposits during the demonetization period as unexplained cash credits. However, the CIT(A) found that the cash deposits were from cash sales recorded in the books of accounts, which were audited and supported by relevant bills and stock registers. The VAT department had also accepted the sales declared by the assessee. Therefore, the CIT(A) concluded that the addition under Section 68 was not justified as the sales were genuine and duly recorded.

2. Justification of Cash Deposits During the Demonetization Period:

The AO questioned the genuineness of the cash sales during the demonetization period, noting an exceptional rise in sales compared to the previous year. However, the CIT(A) found that the sales were supported by stock records, sales invoices, and VAT returns. The CIT(A) noted that the increase in sales during the demonetization period was plausible due to the rush of customers purchasing jewelry with demonetized currency. The CIT(A) also observed that the AO did not find any concrete evidence of bogus sales or backdating of entries.

3. Application of Section 115BBE:

The AO applied Section 115BBE, which imposes a higher tax rate on unexplained income. However, since the CIT(A) deleted the addition made under Section 68, the application of Section 115BBE became irrelevant. The CIT(A) held that the sales were genuine and recorded in the books of accounts, and thus, there was no unexplained income to be taxed under Section 115BBE.

4. Acceptance of Sales and Stock Records by the AO:

The CIT(A) noted that the AO had accepted the books of accounts, which were audited and supported by stock registers and sales invoices. The AO did not reject the books of accounts under Section 145(3) of the Income Tax Act. The CIT(A) found that the AO did not bring any material evidence to prove that the sales were bogus. Therefore, the CIT(A) concluded that the sales were genuine and duly recorded.

5. Rejection of Books of Accounts and the Necessity of Maintaining Customer Details:

The AO raised concerns about the lack of customer details such as PAN and addresses for cash sales. However, the CIT(A) pointed out that it is not mandatory under the Income Tax Act to collect such details for sales below a prescribed limit. The CIT(A) also noted that the assessee followed the same practice in previous and subsequent years, and the AO did not find any defects in the stock register or sales invoices. Therefore, the CIT(A) rejected the AO's contention that the sales were non-genuine due to the absence of customer details.

Conclusion:

The CIT(A) deleted the addition made under Section 68, finding that the sales were genuine and supported by proper documentation. The AO's application of Section 115BBE was also deemed irrelevant as there was no unexplained income. The CIT(A) accepted the books of accounts and stock records, noting that the AO did not provide any concrete evidence of bogus sales. The CIT(A) also clarified that maintaining customer details for cash sales below a prescribed limit is not mandatory. Consequently, the appeal by the revenue was dismissed.

← Previous Next →