2023 (7) TMI 1429 - AT - Income Tax

Addition u/s 69 - addition made on account of specified currency notes deposited during demonetization period by assessee/jeweller - HELD THAT - AO has neither disproved the genuineness of purchase/availability of stock of jewellery corresponding to the sales nor the claim of the assessee that source of cash deposit was made out of the cash sale effected during the year under consideration. AO has not brought on record any clinching evidences to prove that cash sale made by the assessee was not genuine as the same was supported with corresponding purchases relevant bills and invoices and stock position as discussed supra in this order. We also find that ld. CIT (A) has rightly held that Sec. 69 provides that in case the assessee is found to be owner of any money, bullion, jewellery or any other valuable article and same is not recorded in the books of account, it may be considered to be deemed income of the assessee in case he is not able to provide explanation or his explanation is not satisfactory in the opinion of the assessing officer. The same cannot be applied to the case of the assessee since the assessee has himself declared the amount of cash deposited in the return of income after duly entering the same in the books of account. Applicability of the provision of section 69A - We find the AO has failed to justify in applying section 69A to the case of the assessee when the assessee itself declared the cash sales in its return of income duly recorded in the audited books of accounts maintained by the assessee. Therefore, the CIT (A) has correctly held that provision of Sec. 69A of the Act cannot be applied in respect of cash deposited which have been duly recorded in the books of account and had already been declared income in the return of income filed by the assessee. Therefore, the grounds of appeal of the revenue is dismissed.

Issues Involved:
1. Justification of the CIT (A)'s decision to delete the addition made on account of specified currency notes deposited during the demonetization period.
2. Applicability of Section 69A of the Income Tax Act, 1961 to the cash deposits made by the assessee.
3. Validity of the assessee's explanation regarding the source of cash deposits.
4. Relevance of previous judicial pronouncements to the current case.

Issue-wise Detailed Analysis:

1. Justification of the CIT (A)'s Decision:
The Revenue argued that the CIT (A) was not justified in deleting the addition made on account of specified currency notes deposited during the demonetization period. The assessee, engaged in the business of jewellery making and selling, had deposited substantial cash in its bank account during the demonetization period. The Assessing Officer (AO) treated the cash deposit of Rs. 6,92,00,000/- as undisclosed income under Section 69 of the Act, as the assessee failed to provide sufficient details of the cash sales.

2. Applicability of Section 69A:
The CIT (A) held that Section 69A of the Income Tax Act, 1961, which deals with unexplained money, cannot be applied in this case. The assessee had recorded the cash sales in its books of account and declared the same in the return of income. The CIT (A) emphasized that the cash deposits were duly recorded and taxes were paid on the said amount. The AO did not provide any evidence to prove that the cash deposits were not part of the sale consideration.

3. Validity of Assessee's Explanation:
The assessee explained that the cash deposits were out of sales made to various parties, with detailed records maintained for transactions exceeding Rs. 2,00,000/-. The CIT (A) accepted the explanation, noting that the assessee had provided the necessary details and maintained proper books of account, which were duly audited. The CIT (A) also highlighted that the percentage of cash sales during the year under consideration was not abnormally high compared to the previous year.

4. Relevance of Previous Judicial Pronouncements:
The CIT (A) and the Tribunal relied on various judicial pronouncements to support the assessee's case. Notable cases included ACIT Vs. Hirapanna Jewellers, where it was held that cash deposits explained as sales of jewellery should not be added as unexplained income. Similarly, in Agson Global Pvt. Ltd. Vs. Pr.CIT, it was held that cash deposits corresponding with cash sales should not be added as unexplained income. These precedents supported the CIT (A)'s decision to delete the addition made by the AO.

Conclusion:
The Tribunal upheld the CIT (A)'s decision, concluding that the AO had not disproved the genuineness of the purchases, stock positions, or the cash sales made by the assessee. The Tribunal found that the assessee had maintained proper books of account and provided sufficient evidence to substantiate the source of cash deposits. Consequently, the appeal of the Revenue was dismissed, and the CIT (A)'s order was affirmed.

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