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2025 (4) TMI 35 - AT - Income TaxUnexplained deposits in the bank accounts - onus to prove - HELD THAT - Considering the volume of business the assessee is required to maintain proper books of accounts as well as quantitative details of stock etc. which in fact has been done by the assessee. These books of accounts have duly been audited under law and the same were furnished to AO during the course of assessment proceedings. The books have not been rejected and no singled effect has been pointed out in the same. The assessee has duly furnished stock register as well as cash book which would show that corresponding entry of purchase and sales was made therein and the same were duly recorded in the books of accounts. The assessee had sufficient closing cash-in-hand as on 08-11-2016 to make impugned deposits in the bank accounts. The sales are supported by sales invoices and the payment for all the purchases was made through banking channels well before 08-11-2016. The salesmen of the assessee were examined by AO and no adverse finding was recorded in the assessment order. The sales made by the assessee were duly credited in the Profit Loss Account and sales were duly reflected in the VAT returns. A separate addition thereof would amount to double taxation which is impermissible. The assessee had duly discharged the initial onus of establishing the source of cash deposit and the onus was on revenue to controvert the same. However this onus in our considered opinion has remained to be discharged by the revenue by bringing on record adverse evidences to disprove the claim of the assessee. AO has merely applied a mathematical formula to arrive at alleged excess sales without there being any single evidence to show that any of the sales as made by the assessee was not genuine. The said estimation in our considered opinion is wholly erroneous and the same could not be sustained in the eyes of law. As decided in Anandha Metal Corp. 2004 (7) TMI 49 - MADRAS HIGH COURT has held that return accepted by commercial tax department is binding on Income Tax Authorities. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core legal issue in this appeal concerns the addition of cash deposits made during the demonetization period. Specifically, the question is whether the cash sales recorded by the assessee on the day of demonetization were genuine or fabricated to create a source for cash deposits. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The central legal framework involves Section 68 of the Income Tax Act, which deals with unexplained cash credits, and Section 115BBE, which specifies tax rates for such unexplained income. The Tribunal also considered precedents such as the decision in the case of ACIT vs. Hirapanna Jewelers and CIT vs. Anandha Metal Corp., which provide guidance on the treatment of sales and tax returns. Court's Interpretation and Reasoning The Tribunal examined whether the assessee's recorded cash sales on the day of demonetization were supported by sufficient evidence and whether the Assessing Officer's (AO) estimation of excess sales was justified. The Tribunal found that the assessee maintained complete and audited books of accounts, which were not rejected by the AO. The Tribunal emphasized that suspicion cannot replace evidence and that the AO's reliance on a statistical formula without supporting evidence was erroneous. Key Evidence and Findings The assessee provided extensive documentation, including audited financial statements, stock registers, sales invoices, and VAT returns, to support the legitimacy of the cash sales. The Tribunal noted that the assessee had sufficient stock to make the sales and that all transactions were recorded in the books of accounts. The AO's estimation of excess sales was based solely on a comparison with previous years' sales figures, without any direct evidence of fabrication. Application of Law to Facts The Tribunal applied the legal principles from the relevant precedents to the facts of the case. It concluded that the assessee had discharged its initial burden of proof by providing comprehensive documentation to substantiate the cash sales. The Tribunal found that the AO failed to provide any adverse evidence to counter the assessee's claims, and therefore, the addition made under Section 68 could not be sustained. Treatment of Competing Arguments The Tribunal considered the arguments from both the Revenue and the assessee. The Revenue argued that the sales were fabricated, while the assessee contended that the sales were genuine and supported by evidence. The Tribunal found the assessee's arguments more persuasive, given the lack of evidence from the Revenue to support its claims. Conclusions The Tribunal concluded that the AO's addition of Rs. 10.98 Crores as undisclosed income was not justified. The assessee's documentation and the circumstances surrounding the sales on the day of demonetization were sufficient to establish the genuineness of the transactions. The Tribunal upheld the decision of the CIT(A) to delete the addition. SIGNIFICANT HOLDINGS The Tribunal held that the AO's reliance on statistical estimation without evidence was erroneous. It emphasized the principle that suspicion cannot replace evidence in tax assessments. The Tribunal also reiterated that returns accepted by commercial tax authorities are binding on income tax authorities, as established in CIT vs. Anandha Metal Corp. The final determination was that the appeal by the Revenue was dismissed, and the decision of the CIT(A) was upheld, affirming the genuineness of the assessee's cash sales during the demonetization period.
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