2023 (8) TMI 1484 - AT - Income Tax

Unexplained cash credit u/s 68 r.w.s. 115BBE - cash deposits made during demonetization period by assessee/ jeweller - assessee replied that the cash deposits were sourced out of cash sale collection, advance received from customers and available cash in hand and pursuant to the demonetization announced by the Government of India, it seized the business opportunity to make huge cash sales in the night of 8th November 2016 but did not provide details of customers or their PAN by stating that the personal details of retail customers are to be collected only when the cash sale invoice exceeded the specified threshold and that all the cash sales were made on 8th Nov 2016 below the threshold limit. HELD THAT - No discrepancies whatsoever were found by the AO in the cash book, stock registers, sales book etc except entertaining suspicion in his mind with a pre-conceived notion in order to reach a pre-determined destination - assessee had made a categorical submission that it had not entertained receipt of cash in specified bank notes from 9th November 2016 onwards from any customers due to the ban announced by the Government. This fact has not been controverted by the revenue. Effectively, the assessee had only recorded huge cash sales and cash advance received from customers on 8th November 2016 in demonetized currency (as the said currency was valid upto 12 AM of 8th November 2016) and had merely deposited the same thereafter. For the cash sales made by the assessee on 8th November 2016, the assessee had sufficient stocks of gold and diamond with it and had duly reduced the stocks in the stock register to the extent of sales made. There is nothing wrong on the business behaviour of the assessee trying to seize the business opportunity of making huge cash sales on 8th November 2016. What is required and relevant is that assessee should have sufficient stocks in its kitty to effectuate the sales - As long as existence of stocks with the assessee is not doubted by the ld. AO and cash sales made by the assessee is accepted by the ld. AO, in our considered opinion, the entire cash deposits made during the period 09.11.2016 to 31.12.2016 in the sum of Rs 3,43,50,000/- stands duly explained and there is no case for making any addition u/s 68 read with section 115BBE of the Act. Similar issue decided in CIT vs Kailash Jewellery House 2010 (4) TMI 1070 - DELHI HIGH COURT wherein it was held that the cash deposited out of sales cannot be treated as income u/s 68 of the Act once the sales are not disputed by the revenue. Similarly in the context of cash deposits made during demonetization period, the co-ordinate bench of Vizag Tribunal in the case of Hirapanna Jewellers 2021 (5) TMI 447 - ITAT VISAKHAPATNAM decided the issue in favour of the assessee. Appeal of revenue dismissed.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Deletion of addition made by AO on account of unexplained cash credit u/s 68 r.w.s. 115BBE.
3. Analysis of month-wise sales during FY 2015-16 and FY 2016-17.
4. Purchases of old gold adjusted against sales.
5. Acceptance of genuineness of purchases of old gold.

Detailed Analysis:

1. Delay in Filing the Appeal:
The appeal by the revenue was filed with a delay of 2 days. Considering the smallness of the delay, the tribunal condoned the delay and admitted the appeal for adjudication.

2. Deletion of Addition Made by AO on Account of Unexplained Cash Credit u/s 68 r.w.s. 115BBE:
The revenue contested the deletion of an addition of Rs. 3,43,50,000/- made by the AO on account of unexplained cash credit. The AO had observed that the assessee made significant cash deposits during the demonetization period, which were claimed to be sourced from cash sales. The AO disbelieved the explanation, citing improbability of making sales to 211 customers within a short span and the lack of customer details. However, the CIT(A) granted relief to the assessee, noting that the assessee had provided detailed stock records and sales data, which were not disputed by the AO. The tribunal upheld the CIT(A)’s decision, emphasizing that the cash sales and stock records were accepted by the AO, and the cash deposits were adequately explained.

3. Analysis of Month-wise Sales During FY 2015-16 and FY 2016-17:
The AO noted a steep increase in cash sales in November 2016 compared to November 2015, which appeared unexplained. The assessee attributed the increase to the demonetization announcement, which led to a surge in sales on 8th November 2016. The tribunal found that the assessee had sufficient stock to support the sales and had recorded the transactions in the stock register. The tribunal concluded that the increase in sales was adequately explained and aligned with the business behavior during the demonetization period.

4. Purchases of Old Gold Adjusted Against Sales:
The AO questioned the purchases of old gold, noting the absence of names and addresses of parties from whom old gold was purchased. The CIT(A) accepted the assessee’s explanation that the purchases were adjusted against sales made to the same persons. The tribunal found that the assessee had provided sufficient details of stock and sales, and the AO had not found any discrepancies in the inventory records. Therefore, the tribunal upheld the CIT(A)’s decision.

5. Acceptance of Genuineness of Purchases of Old Gold:
The AO doubted the genuineness of old gold purchases due to the lack of identity proof of the sellers and stock records. The assessee clarified that the AO had selected entries from the ledger without raising questions about the mode of payment. The CIT(A) found that the actual cash payments exceeding Rs. 20,000/- were minimal and supported by details. The tribunal noted that the AO had accepted the cash book and stock registers, and there was no evidence to disprove the genuineness of the purchases. Hence, the tribunal upheld the CIT(A)’s decision.

Conclusion:
The tribunal dismissed the revenue’s appeal, affirming the CIT(A)’s decision to delete the addition of Rs. 3,43,50,000/- and accept the genuineness of the transactions. The tribunal emphasized that the assessee had provided detailed records and explanations, which were not effectively disputed by the AO. The tribunal also referenced judicial precedents supporting the assessee’s position.