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2023 (12) TMI 1426 - AT - Income TaxAddition u/s 68 - cash sales during the demonetization period - CIT(A) deleted addition - HELD THAT - As the cash sales is always more than Rs. 20 lakhs per day which went as high as Rs. 45.55 lakhs. The total sales from 28.08.2016 to 03.09.2016 is Rs. 1, 30, 42, 002/- which means that cash sales of 8 days are more than cash sales from 01.011.2016 to 08.11.2016. Therefore it can be safely concluded that there is nothing unusual in the cash sales during 01.11.2016 and 08.11.2016. Nowhere in the assessment order the AO has mentioned that after inflating the alleged cash sales the assessee has frequently revised its VAT returns. It is not the case of the AO that the assessee has shown alleged cash sales without having sufficient stock in hand during that period. Not a single instance of defect is pointed out in the audited books of account. The entire assessment is based on assumptions/presumptions surmises and conjectures de hors of the facts on record. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment was whether the addition of Rs. 1,59,26,716/- to the assessee's income by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, on account of unexplained cash sales during the demonetization period, was justified. The Tribunal also evaluated whether the CIT(A) was correct in deleting this addition. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The primary legal provision involved is Section 68 of the Income Tax Act, which deals with unexplained cash credits. The legal framework requires the AO to substantiate claims of unaccounted income with evidence and not merely rely on assumptions. Court's Interpretation and Reasoning The Tribunal examined the AO's reliance on mathematical calculations and assumptions rather than concrete evidence. The AO had concluded that the cash deposited during the demonetization period represented unaccounted income, based on a comparison of cash sales across financial years and a presumption of inflated sales figures. Key Evidence and Findings The Tribunal noted that the AO's assessment was based on presumptions and lacked factual backing. The AO had not identified any discrepancies in the assessee's VAT returns or stock records, nor had any defects been pointed out in the audited books of account. The Tribunal emphasized that the cash sales pattern from 01.04.2016 to 31.10.2016 did not indicate any unusual activity, as daily sales figures consistently exceeded Rs. 20 lakhs, reaching as high as Rs. 45.55 lakhs. Application of Law to Facts The Tribunal applied the legal principles under Section 68, emphasizing that additions to income must be based on tangible evidence rather than assumptions. The Tribunal found that the AO's decision lacked substantive evidence of unaccounted income and was primarily based on speculative calculations. Treatment of Competing Arguments The Tribunal considered the arguments presented by both the Revenue and the assessee. The Revenue argued for the addition based on perceived discrepancies in cash sales, while the assessee maintained that the sales figures were consistent with past records and were duly accounted for in the books. The Tribunal found the assessee's arguments more persuasive, given the lack of evidence from the AO. Conclusions The Tribunal concluded that the AO's addition of Rs. 1,59,26,716/- was unjustified, as it was based on assumptions without corroborative evidence. The Tribunal upheld the CIT(A)'s decision to delete the addition, finding no reason to interfere with the findings. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The Tribunal remarked, "The entire assessment is based on assumptions/presumptions, surmises and conjectures de hors of the facts on record." Core Principles Established The judgment reinforced the principle that tax assessments must be based on factual evidence rather than speculative calculations. The Tribunal emphasized the importance of verifying the accuracy of financial records before making additions under Section 68. Final Determinations on Each Issue The Tribunal determined that the AO's addition of Rs. 1,59,26,716/- was not supported by evidence and upheld the CIT(A)'s order to delete the addition. Consequently, the Revenue's appeal was dismissed.
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