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2023 (6) TMI 477 - AT - Income TaxAddition u/s 68 - cash deposits during the demonetization period in SBNs - Proof of the source being the cash sales with necessary corroborative evidences - after demonetization, the demonetized notes could not have been accepted as valid tender - CIT(A) deleted the additions - HELD THAT - CIT(A) has considered the details of sales, the stock register and the turnover is consistently maintained. Assessee has submitted the details of cash sales/receipts and party wise details of sales above Rs. 2 lakhs and when a query was raised to Ld.AR on submissions of details were the cash sales are below Rs. 2 Lakhs. The Ld.AR mentioned that the assessee has submitted details of sales below Rs. 2 lakhs and highlighted rule 114B of the I T Rules r.w.s 139(a)(5)(c) of the Act and there was no KYC required. AR demonstrated the sample Tax Invoice below Rs. 2 lakhs in the demonetization period and the invoice contains, name and address etc. Further there is no significant increase in the cash sales out of total sales, whereas for F.Y. 2016-17 it is @ 31.27% and in comparison to F.Y. 2015-16 @ 31.44%, the Ld.AR referred to the cash flow statement, cash book and demonstrated the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs. 68.07 crs for the F.Y 2015-16 and for F.Y 2016-17 it was maintained at Rs. 65.38crs and the cash sales are part of the stocks maintained which is not disputed. Further the addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the cash sales proceeds/receipts received from the customers are reflected in the Audited Profit Loss account as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. The AO has not pointed out any specific adversity but made a generalize addition without considering the factual aspects and primary evidences. The A.O has failed to make further enquiries on the information filed and the assessee has discharged the initial burden placed by submitting the information and details. We find the CIT(A) has dealt on the facts, provisions of law, notes and judicial decisions. Decided against revenue.
Issues Involved:
1. Deletion of addition on account of cash deposits during the demonetization period. 2. Consideration of the ratio of total cash sales vis-a-vis the total turnover. 3. Requirement of KYC for sales below Rs. 2 lakhs. 4. Charging of interest under sections 234B and 234C. Summary: Issue 1: Deletion of Addition on Account of Cash Deposits The revenue challenged the deletion of Rs. 13,29,50,000/- made on account of cash deposits during the demonetization period. The Assessing Officer (AO) argued that the assessee could not substantiate the source of cash sales with necessary corroborative evidence and treated the cash deposits as unexplained cash credits under section 68 of the Income Tax Act. The CIT(A) found that the assessee had provided detailed explanations, including the impact of a jewellers' strike, Diwali sales, and the demonetization announcement. The CIT(A) observed that the assessee maintained consistent stock levels and submitted all necessary documents, including VAT returns and cash books, which showed no discrepancies. The CIT(A) relied on various judicial precedents to conclude that the cash deposits were adequately explained and directed the AO to delete the addition. Issue 2: Ratio of Total Cash Sales Vis-a-Vis Total Turnover The revenue contended that the CIT(A) erred in considering the ratio of total cash sales to total turnover without appreciating the abnormal increase in cash sales during the demonetization period. The CIT(A) noted that the percentage of cash sales to total sales remained consistent at around 31% for both FY 2015-16 and FY 2016-17. The CIT(A) also considered the impact of promotional schemes and the festive season on sales. The CIT(A) found that the cash sales were in line with historical trends and that the AO did not point out any specific discrepancies in the stock or cash position. Issue 3: Requirement of KYC for Sales Below Rs. 2 Lakhs The revenue argued that the CIT(A) erred in accepting the assessee's submission that no KYC is required for sales below Rs. 2 lakhs. The CIT(A) referred to Rule 114B read with section 139A(5)(c) of the Income Tax Act, which stipulates that no KYC is required for transactions below Rs. 2 lakhs. The CIT(A) found that the assessee had complied with the relevant rules and had provided sufficient documentation to substantiate the cash sales. Issue 4: Charging of Interest Under Sections 234B and 234C The CIT(A) dismissed the ground related to the charging of interest under sections 234B and 234C as consequential in nature. The CIT(A) directed that the interest be recalculated based on the revised total income after deleting the addition of Rs. 13,29,50,000/-. Conclusion: The CIT(A) allowed the appeal of the assessee, deleted the addition of Rs. 13,29,50,000/-, and dismissed the grounds related to the charging of interest as consequential. The Tribunal upheld the order of the CIT(A), finding no infirmity in the decision and dismissing the revenue's appeal.
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