9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (4) TMI 1615 - AT - Income TaxAddition u/s 69A - cash receipts as inflated to explain the cash deposits post-demonetization - HELD THAT - It is not in dispute that the AO has accepted the books of account filed by the assessee. The turnover of the assessee was Rs. 31 crores and during the demonetization period cash sales amounting to Rs. 2, 53, 99, 000/- were recorded. AO based on certain calculations concluded that there was inflation of sales to the extent of Rs. 1.40 crores and proceeded to make an addition on the assumption that cash deposits were made out of demonetized currency. There is no material on record to show that the sales were inflated or that the deposits were made out of unaccounted cash. It is noted that the assessee s cash book stock register and VAT records were duly produced and verified and no discrepancies were pointed out therein. It is also noted that the festive season of Diwali which generates higher sales coincided with the demonetization period unlike the preceding year when the timing differed. Therefore a mere comparison with previous years figures without considering the seasonal impact is not sufficient to draw an adverse inference. Further the cash on hand as per the books prior to the demonetization period was verifiable and matched with the records filed and no adverse findings have been recorded by the lower authorities on this aspect. In such circumstances when the turnover stock records and cash flow are duly explained and supported by evidence and no purchaser has been disbelieved the addition made on mere assumptions and conjectures is not sustainable. Decided in favour of assessee.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Justification for Addition under Section 69A on Account of Alleged Inflated Cash Receipts Relevant Legal Framework and Precedents: Section 69A of the Income Tax Act empowers the Assessing Officer to deem unexplained cash credits as income if the assessee fails to explain the nature and source of such credits. The burden of proof lies on the assessee to satisfactorily explain the source of cash deposits. Judicial precedents such as Chuharmul vs. CIT and Shashi Garg vs. PCIT reaffirm the principle that unexplained cash deposits can be added to income. Court's Interpretation and Reasoning: The Assessing Officer observed that cash deposits aggregating Rs. 2,53,99,000/- were made during the demonetization period, with Rs. 2,02,34,000/- in demonetized currency notes. The AO found that cash in hand as on 08.11.2016 was abnormally high compared to previous and subsequent years. Based on comparative analysis, the AO concluded that Rs. 1,40,05,602/- of the cash receipts were inflated and added this amount under Section 69A (alternatively Section 68). Key Evidence and Findings: The AO relied on cash book records, cash sales bills lacking buyer details, and comparative cash sales data from previous years. The absence of party-wise verifiable details and incomplete compliance with notices under Section 142(1) weighed against the assessee. Application of Law to Facts: The AO applied the principle that unexplained cash credits can be added to income and inferred inflation of sales to justify the addition. Treatment of Competing Arguments: The assessee contended that the cash receipts were genuine, arising from seasonal sales during Diwali, and supported by books of account and party-wise details. The AO rejected these submissions due to lack of verifiable evidence and incomplete disclosure. Conclusions: The AO and CIT(A) upheld the addition, holding the assessee failed to discharge the burden of proof. Issue 2: Whether the Comparative Analysis Ignored Seasonal Variations and Was Valid Relevant Legal Framework: Comparative analysis of cash sales is a common method to detect abnormalities; however, courts have held that seasonal fluctuations and business cycles must be considered before drawing adverse inferences. Court's Interpretation and Reasoning: The Tribunal noted that the Diwali festival, which naturally causes a surge in cash sales, coincided with the demonetization period in 2016, unlike the previous year. Hence, comparing cash sales figures without accounting for this seasonal impact was flawed. Key Evidence and Findings: The assessee's cash book, stock register, and VAT records were produced and verified without discrepancies. The Tribunal observed no adverse findings regarding cash on hand or turnover. Application of Law to Facts: The Tribunal held that mere numerical comparison with previous years' data, without considering legitimate business reasons for increased cash sales, cannot justify additions under the Act. Treatment of Competing Arguments: The AO's reliance on inflated cash sales based on comparative figures was rejected as lacking cogent basis. The assessee's explanation of seasonal business impact was accepted. Conclusions: The addition based on comparative analysis ignoring seasonal factors was found unsustainable. Issue 3: Effect of Acceptance of Books of Account on Addition under Section 68/69A Relevant Legal Framework: Acceptance of books of account by the Assessing Officer generally indicates that the accounts are reliable. Additions under Section 68 or 69A require that the cash credits be unexplained or not satisfactorily explained. Court's Interpretation and Reasoning: The Tribunal noted that the Assessing Officer accepted the books of account, cash book, stock register, and VAT returns. No discrepancies or adverse findings were recorded against these records. Key Evidence and Findings: The assessee's turnover exceeded Rs. 31 crores, and all cash deposits were reflected in the books. Party-wise details and payments were furnished. The cash deposits were utilized for vendor payments. Application of Law to Facts: Since the books of account were accepted and no evidence of unaccounted cash was found, the addition on the basis of assumptions and conjectures was not justified. Treatment of Competing Arguments: The AO and CIT(A) relied on assumptions of inflated sales despite acceptance of books. The Tribunal rejected this approach, emphasizing the need for concrete evidence. Conclusions: The acceptance of books precluded additions based solely on assumptions about cash deposits during demonetization. 3. SIGNIFICANT HOLDINGS The Tribunal held:
Core principles established include:
Final determinations were:
|
