2024 (2) TMI 1478 - AT - Income Tax

Addition u/s 69A - cash deposited during demonetization period - Assessee said cash was duly recorded in the books of accounts. The books were subjected to Tax Audit u/s 44AB - HELD THAT - There is no fact base finding as to how the sales were not genuine. Merely because the sales were high in this month could not lead to formation of such a conclusion especially when the sales turnover was found duly reflected in assessee s books of accounts. The sales were duly supported by monthly sales register. It is trite law no addition could be made on mere suspicion conjectures or surmises. It could also be seen that cash has been generated out of sales turnover. The cash generated by the assessee arise out of same set of sale transaction a part of which has been accepted by AO. AO has segregated SBN and non-SBN cash deposits and made disallowance of cash deposits in SBN. In other words the cash generated in non-SBN has been accepted to be genuine sales whereas cash generated in SBN has been accepted to non-genuine sales. This conclusion is clearly fallacious since a particular customer may pay in combination of SBN as well as non-SBN. Therefore accepting a part of the transaction and rejecting the other part could not be held to be justified in any manner. When the assessee had furnished all the documentary evidences in support of its financial transactions then in such a case in our considered opinion the burden was on revenue to controvert the stand of the assessee. In the absence of such an exercise the impugned additions have no legs to stand. Appeal of assessee allowed.

Summary

Issues:
- Validity of the order of the learned First Appellate Authority
- Consideration of submissions by the appellant
- Rejection of book results
- Intention behind omission to file VAT returns
- Addition made under section 69A of the IT Act

Analysis:

Validity of the Order of the Learned First Appellate Authority:
The appeal by the assessee for Assessment Year 2017-18 challenged the order passed by the Commissioner of Income Tax (Appeals). The grounds of appeal included contentions regarding the legality and correctness of the said order. The appellant raised concerns about the failure to consider submissions and material facts, such as the non-rejection of book results and the unintentional omission to file VAT returns. Additionally, the appellant disputed the addition made under section 69A of the IT Act, emphasizing the necessity for the amount to be unrecorded in the books of accounts.

Assessment Proceedings:
During the assessment proceedings, the assessee was scrutinized for cash deposits made during the demonetization period. The assessing officer directed the assessee to substantiate cash deposits totaling Rs. 202.01 Lacs across multiple bank accounts. The assessee explained that the cash deposits were from legitimate sales transactions in the wholesale footwear business, supported by the engagement of individuals to collect cash from customers. However, the assessing officer raised suspicions regarding the abnormally high sales in October 2016, suggesting potential fictitious sales to accommodate unaccounted cash deposits during demonetization.

Appellate Proceedings:
The appellant contested the application of section 69A for the cash deposits, arguing that the amounts were duly recorded in the books of accounts and supported by financial statements. Despite the appellant's submissions, the Commissioner of Income Tax (Appeals) upheld the additions under section 69A, citing the inability of the assessee to establish the source of the cash deposits and linking them to genuine sales receipts. The Commissioner highlighted discrepancies in the sales data, lack of third-party evidence, and abnormal cash sales percentages, indicating potential fictitious sales.

Findings and Adjudication:
Upon review, the Appellate Tribunal found that the appellant's wholesale footwear trading business generated cash through legitimate sales transactions, supported by audited books of accounts and financial statements. The Tribunal criticized the assessing officer's conclusion of non-genuine sales based on high October 2016 sales, emphasizing the lack of factual basis and the acceptance of sales turnover in the books. The Tribunal deemed the additions under section 69A unjustified, as the revenue failed to rebut the appellant's documented financial transactions adequately. Consequently, the Tribunal allowed the appeal, emphasizing the burden on the revenue to disprove the appellant's submissions.

In conclusion, the Appellate Tribunal overturned the Commissioner's decision, ruling in favor of the appellant and emphasizing the importance of substantiated evidence in tax assessments.