2024 (11) TMI 1249 - AT - Income Tax

Addition u/s 68 - Cash deposited during demonetization period - AO was of the opinion that the sum was not deposited in the bank in one go, rather it was deposited in piece-meals in the months of November and December 2016 - HELD THAT - A careful perusal of the chart furnished by assessee clearly shows that the facts of the case in hand are identical to the facts of the case in M/S. FINE GUJARANWALA JEWELLERS 2023 (3) TMI 1196 - ITAT DELHI . AO was of the view that cash deposit in every transaction was below Rs. 2 lakhs which was done to avoid application of provisions of section 258BA r.w.r. 114E of the Act, which has no legs to stand as there is nothing on record to prove the same. AO has not pointed out any flaw, fallacy or deficiency in the regular books of account maintained during the normal course of his business. It is a settled principle of law that once the Assessing Officer accepts the books of account and the entries in the books of account are matched, there is no case for making the addition as unexplained. Submission of assessee that income of the assessee has to be computed by the AO on the basis of available material on record and it is very important to have direct evidence to make an addition rather than circumstantial evidence. AO as well as the ld. CIT(A) have based their findings on surmises and conjectures. Moreover, the AO has not examined any party to whom the goods were sold by the assessee and has come to the conclusion that the sales are not genuine, without rejecting the books of account, which is bad in law. We are of the considered opinion that the AO disbelieved the explanation of the assessee on the basis of presumptions and assumptions and has acted arbitrarily. Appeal of assessee allowed.

Summary

Issues:
Addition under section 68 of the Income-tax Act, 1961.

Analysis:
The judgment by the Appellate Tribunal ITAT Delhi involved an appeal by the assessee against the order of the NFAC, Delhi pertaining to the assessment year 2017-18. The main issue in this case was the addition of Rs. 35,40,660/- made by the Assessing Officer under section 68 of the Income-tax Act, 1961. The assessee, a partnership firm engaged in the business of manufacturing and retail trading of gold, gems, and diamond jewelry, had filed a return of income which was selected for scrutiny assessment. The Assessing Officer added Rs. 35,40,660/- under section 68 of the Act, considering cash deposits during the demonetization period. The assessee contended that the sales were higher during the festival season and decreased due to demonetization and subsequent cash unavailability. The assessee provided explanations and submitted details of sales and cash on hand to justify the transactions.

The Assessing Officer, not satisfied with the explanations, assessed the income of the assessee at Rs. 49,61,390/-. The assessee then appealed to the CIT(A) who granted relief of Rs. 10,69,340/- on account of cash sales to identifiable persons with PAN. Still dissatisfied, the assessee appealed to the Appellate Tribunal. During the appeal hearing, the counsel for the assessee presented a chart distinguishing the case from a previous decision and argued in favor of the assessee. The Tribunal observed that the facts of the case were similar to the previous case cited by the assessee. It was noted that the Assessing Officer did not point out any flaws in the regular books of account maintained by the assessee. The Tribunal emphasized that once the books of account are accepted and entries are matched, there is no basis for additions as unexplained.

The Tribunal further highlighted that the Assessing Officer and the CIT(A) based their findings on surmises and conjectures without direct evidence. It was noted that the Assessing Officer did not examine the parties to whom goods were sold by the assessee and concluded that sales were not genuine without rejecting the books of account, which was deemed improper. The Tribunal concluded that the Assessing Officer had disbelieved the assessee's explanation based on presumptions and acted arbitrarily. Consequently, the Tribunal allowed the grounds of appeal raised by the assessee and allowed the appeal.