2024 (5) TMI 782 - AT - Income Tax

Addition u/s 69A - cash was deposited out of cash sales accounted in books - cash sales during the de- monetization period - HELD THAT - As during the assessment proceedings, all the vouchers of cash sales were produced before the AO. AO has not pointed out any lacuna or shortcoming in those vouchers nor any doubt has been raised regarding genuineness of any cash sales on such vouchers. AO has also accepted the corresponding entries in sale book and cash book. The stock register, sales and purchase registers etc. have also been accepted by the AO without bringing any discrepancy therein. Complete set of audited books of account and auditor s report were also accepted without pointing out any shortcoming. Therefore, we are of the view that once the complete set of books of account have been produced before the AO and no question has been raised regarding genuineness of the entries therein by the AO there is no point in making disallowance of cash deposit based on the same set of books of account. CIT(A) has also not brought anything on record to question the correctness or genuineness of vouchers, ledgers, sales book, purchase book, stock register etc. of the Assessee, therefore, his action of giving partial relief to the Assessee is purely on estimate basis. We have also considered various case laws brought on record by Assessee. As considered the case law in the case of Mehta Parikh and Company 1956 (5) TMI 4 - SUPREME COURT . In both these orders, higher authorities have clearly and categorically brought out a case that any cash deposit or cash sales cannot be doubted unless short comings are pointed out in the books of account and unless all accounts, as such are rejected. Herein this case, we find that not only all the vouchers of cash sales, cash register and other ledgers and registers in the complete set of books of account have been accepted by both the AO and CIT(A), authorities below have failed to bring any discrepancy whatsoever in the balance of cash as on 8.11.2016 and cash sales during the de- monetization period. Once, everything has been accepted by the AO and the CIT(A), there is no reason to make addition on estimate basis by the AO and its partial confirmation by the CIT(A). Appeal of the Assessee is allowed.

Summary

Issues Involved:
1. Treatment of cash sales as unexplained income u/s 69A r.w. section 115BBE of the Income Tax Act.
2. Rejection of audited books of accounts for treating cash sales as unexplained income.
3. Ignoring lack of discrepancy in books of accounts for treating cash sales as unexplained income.
4. Treating cash sales as higher without proper justification.
5. Request for amendment of grounds of appeal.

Summary:
The appeal was filed against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, regarding the treatment of cash sales as unexplained income. The Assessee, a partnership firm dealing in jewellery, had deposited cash in its bank account during the assessment year 2017-18. The Assessing Officer raised concerns about the cash deposits and made additions u/s 69A of the Income Tax Act. The ld. CIT(A) partially allowed relief to the Assessee based on estimation of sales during a specific period.

During the appeal, the Assessee presented various arguments, including the maintenance of complete books of accounts, non-rejection of books of accounts, explanation for cash deposits post-demonetization, availability of sufficient stock, and compliance with VAT returns. The Assessee emphasized the interlinking of purchases, sales, and stock, highlighting that the Assessing Officer accepted certain aspects while doubting cash sales without valid reasons.

The Assessee also cited relevant case laws supporting the principle that income cannot be estimated without rejecting books of accounts. The Tribunal considered the evidence presented, noting that all vouchers of cash sales were produced, and no discrepancies were found in the books of accounts accepted by the authorities. The Tribunal referred to previous judgments emphasizing the importance of pointing out shortcomings in books of accounts before doubting cash sales.

Ultimately, the Tribunal allowed the appeal of the Assessee, concluding that the additions made by the Assessing Officer were unjustified as the books of accounts were not rejected, and no discrepancies were identified in the records. The Tribunal highlighted the necessity of concrete evidence before treating cash sales as unexplained income, thereby ruling in favor of the Assessee.

(Order pronounced on 07.05.2024.)