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2024 (7) TMI 1127 - AT - Income TaxCash credit u/s 68 r.w.s. 115BBE - cash deposit during demonetization period - Assessee failure to maintain books of accounts u/s 44AD - HELD THAT - In case of Surinder Pal Anand 2010 (6) TMI 404 - PUNJAB AND HARYANA HIGH COURT as held that where under special provision of Section 44AD, exemption from maintaining of books of account has been provided and presumptive tax @ 8 per cent of the gross receipts itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts. Assessee holds the drug licence for wholesale and retail sale of veterinary medicines and has filed his return of income declaring gross receipts u/s 44AD of the Act. The return of income so filed by the assessee has been accepted by the AO meaning thereby that both the applicability of section 44AD and non-maintenance of books of accounts as well as particulars in the return of income so filed has been accepted which includes the gross receipts from sale of medicines. At the same time, only thing which has to be satisfied by the assessee is that cash so deposited in the bank account has the necessary nexus with the sales and gross receipts so disclosed by the assessee. We find that the assessee has shown cash sales in the month of October 2016 and cash sales of Rs 19,46,845/- in the month of November 2016 and cash of Rs 33,00,000/- has been deposited in the month of November 2016 and the fact that the source of cash so deposited is out of the sales made has been duly reported by the assessee to the Revenue authorities as mandated in terms of filings relating to acceptance of SBN Notes during the demonization period and thereafter, during the course of assessment proceedings, the assessee has also filed sales vouchers of cash sales along with copy of cash book for necessary verification of the AO. The fact that the cash receipts for the month of October have been deposited in the very next month in November cannot be a reason to dispute rather it supports the case of the assessee by satisfying the proximity test and the nexus which the assessee has established between the sales and the deposits, this coupled with the fact that there was epidemic regarding FMD disease and winter season resulting in increase sales in these two months has not been totally discarded by the AO and the ld CIT(A) and the fact that the sales have been duly reported and forms part of VAT filing and VAT assessment shows that sales cannot be disputed. The decision in case of J.M.J Essential Oil Company 2022 (7) TMI 1017 - HIMACHAL PRADESH HIGH COURT doesn t support the case of the Revenue as in that case, there were cash sales only in a particular month and there was sufficient material on record to show cash sales were fabricated unlike the present case, where the assessee is regularly undertaking cash sales and there are no material on record to establish the sales so reported are fabricated except suspicion due to high sales vis- -vis other months and which cannot be a ground to dispute the sales, rather, in the instant case, the assessee has produced the necessary sale vouchers and cash book. We therefore find that the assessee has made the necessary and timely disclosure regarding the source of cash deposited in the SBN notes during the demonetization period and the nexus has been duly established between the sales and cash deposits and in view of the same, we find that there is no justifiable basis to make addition of Rs 23 lacs which already stand disclosed and reported as part of gross receipts u/s 44AD and accepted by the AO resulting in double addition which clearly can t be sustained in the eyes of law. In the result, the addition so made is hereby directed to be deleted. Appeal of the assessee is allowed.
Issues Involved:
1. Addition of Rs. 23,00,000 as unexplained cash credit under Section 68. 2. Invocation of Section 115BBE for taxation. 3. Alleged failure to maintain books of accounts under Section 44AD. 4. Discrepancy in cash sales during the demonetization period. 5. Lack of a reasoned order by CIT(A). 6. Denial of opportunity to produce sales invoices. Detailed Analysis: 1. Addition of Rs. 23,00,000 as Unexplained Cash Credit under Section 68: The Assessee, a proprietor of M/s. Sansarwal Pharmaceuticals, filed a return declaring total income of Rs. 5,71,290 and agricultural income of Rs. 15,50,360. During scrutiny, the AO found cash deposits totaling Rs. 33,00,000 in the Assessee's bank accounts during the demonetization period. The Assessee claimed these deposits were from business sales and agricultural income. However, the AO found the sales figures unusually high during the demonetization period and treated Rs. 23,00,000 as unexplained cash credit under Section 68, after accepting Rs. 10,00,000 as genuine sales. 2. Invocation of Section 115BBE for Taxation: The AO invoked Section 115BBE to tax the unexplained cash credit at a higher rate. The CIT(A) upheld this decision but noted that the AO should have invoked Section 69A instead of Section 68, as the Assessee did not maintain regular books of accounts. 3. Alleged Failure to Maintain Books of Accounts under Section 44AD: The Assessee argued that under Section 44AD, he was not required to maintain books of accounts. The CIT(A) found that the Assessee's explanations and evidence for the cash deposits were insufficient and upheld the AO's decision, albeit under Section 69A. 4. Discrepancy in Cash Sales during the Demonetization Period: The AO noted a significant increase in cash sales during October and November 2016, which the Assessee attributed to an epidemic among cattle. However, the AO found this explanation unconvincing due to the lack of supporting evidence and the abnormal sales pattern. The CIT(A) agreed, stating that the Assessee's sales invoices appeared to be created retrospectively to justify the cash deposits. 5. Lack of a Reasoned Order by CIT(A): The Assessee contended that the CIT(A) did not pass a reasoned order, violating the principles established in Kranti Associates Pvt Ltd vs. Masood Ahmed Khan. The Tribunal did not find merit in this argument, as the CIT(A) had provided detailed reasoning for upholding the AO's decision. 6. Denial of Opportunity to Produce Sales Invoices: The Assessee argued that he was not given an opportunity to produce sales invoices, which were available and could be presented before the Tribunal. The Tribunal found that the Assessee had already submitted sales vouchers and other evidence during the assessment and appellate proceedings, which were duly considered. Tribunal's Conclusion: The Tribunal concluded that the Assessee had established a nexus between the cash deposits and business sales. It noted that the Assessee had filed returns under Section 44AD, declaring gross receipts of Rs. 72,01,093, which included the disputed cash sales. The Tribunal found that the AO and CIT(A) had not provided sufficient grounds to dispute the Assessee's sales figures, especially given the supporting evidence from VAT filings and certificates from relevant authorities. Consequently, the Tribunal directed the deletion of the Rs. 23,00,000 addition, resulting in the Assessee's appeal being allowed. Order Pronounced: The appeal of the Assessee was allowed, and the order was pronounced in the open Court on 03/07/2024.
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