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2024 (9) TMI 1435 - AT - Income TaxAddition u/s. 69A r.w.s. 115BBE - Deposits by the assessee in his bank account during Demonetization period unexplained - HELD THAT - Section 69A of the Act is not applicable in this case because there are proper entries in the books of accounts of the assessee in relation to cash sale, cash balance and deposit (SBN s) Bank. It is noted that the sale transaction in cash cannot e taxed u/s 69A of the Act because the sales against cash and deposit of such cash in assessee s bank account cannot be called unexplained money. It is also noted that cash memos were immediately issued to the buyer and delivery was made immediately against cash SBN s/ cash and thus sales are recorded properly in the books of accounts. Lower authorities did not find any defects in the books of accounts and trading. It is also noted that there is no adverse observations in the AO s order particularly in para 3.5 of assessment order that there has been abnormal increase in cash sales as well as cash balance during the period prior to demonetization period. The Bench noticed that provisions of Section 115BBE are applicable only on the income taxable u/s 68,69,69A,69B or 69D of the Act. Since in this case, the source of cash deposit in bank is income from business and thus Section 115BBE is not applicable. CIT(A) failed to take into consideration various papers and documents including the under mentioned papers and documents produced/furnished during assessment proceedings before the AO - Assessee has duly discharged the initial burden of proof which lay upon him by explaining that source of SBN s deposited at Rs. 26.00 lacs during demonetization period is out of cash sales made by him and duly credited the sales in the regular books of account of the assessee. It is also noted that the assessee has given necessary evidence on the basis of its books of accounts, sale/purchase invoice, cash book, journal, ledger bank statements and other relevant records that the cash deposited by him in bank accounts upto 31.12.2016 were out of sale proceeds in cash and the cash in hand as per books of accounts as on 01.04.2016 and cash withdrawals made from the banks before 08.11.2016 and as such the assessee should be deemed to have discharged the primary onus which lay upon him and there after onus is shifted on the department to prove that cash amount deposited in bank represent assessee s undisclosed income. AO has fully failed to discharge the burden of proof which squarely lay upon him. Reliance is placed on the judgment of Apex Court in the leading case of CIT vs. Orissa Corporation Pvt. Ltd. 1986 (3) TMI 3 - SUPREME COURT . Hence taking into consideration the above deliberation, the Bench does not concur with the findings of the ld. CIT(A) and the Ground No. 3 of the assessee is allowed.
Issues Involved:
1. Rejection of books of accounts and application of Section 145(3). 2. Addition of Rs. 20,00,000/- as undisclosed income under Section 69A read with Section 115BBE. 3. Failure of the Revenue to discharge the burden of proof. Comprehensive Issue-Wise Analysis: 1. Rejection of Books of Accounts and Application of Section 145(3): - Arguments by Assessee: - The assessee argued that both lower authorities erred in ignoring various papers, documents, details, and information, including the complete books of accounts, which were produced during the assessment proceedings. - The books of accounts were duly audited by a Chartered Accountant without any adverse observations. - There was no change in the method of accounting or valuation of closing stock, and every entry was supported by bills and vouchers. - The assessee maintained regular books of accounts, including cash book, ledger, journal, bank statements, and other relevant records. - The AO made additions based on a "choose and pickup method" without any tangible material or supporting evidence. - Judicial consensus is that merely because of differences in the ratio of cash sales between periods, an AO cannot resort to provisions of Section 145 and Section 68/69A/115BBE for making additions. - Bench's Findings: - The Bench noted that the assessee produced various documents during the assessment proceedings, including the Tax Audit Report, month-wise details of sales and purchases, VAT returns, and other relevant records. - The Revenue authorities failed to appreciate that the books of accounts were duly audited and there were no inherent defects pointed out. - The AO made additions without any tangible material and supporting evidence, and the CIT(A) upheld such additions without any justifiable basis. - The Bench concluded that the rejection of books of accounts and application of Section 145(3) by the AO was not justified and allowed the ground raised by the assessee. 2. Addition of Rs. 20,00,000/- as Undisclosed Income Under Section 69A read with Section 115BBE: - Arguments by Assessee: - Section 69A is not applicable as there were proper entries in the books of accounts regarding cash sales, cash balance, and cash deposits (SBNs). - Cash sales and deposits in the bank cannot be called unexplained money as cash memos were issued immediately, and sales were recorded properly in the books. - The lower authorities did not find any defects in the books of accounts or trading account. - The provisions of Section 115BBE are applicable only on income taxable under Sections 68, 69, 69A, 69B, or 69D. Since the source of cash deposits was income from business, Section 115BBE was not applicable. - Bench's Findings: - The Bench noted that the sale transactions in cash cannot be taxed under Section 69A as the sales against cash and deposits in the bank were properly recorded. - The lower authorities did not find any defects in the books of accounts or trading account. - The Bench concluded that Section 69A was not applicable, and the addition of Rs. 20,00,000/- as undisclosed income was not justified. The ground raised by the assessee was allowed. 3. Failure of the Revenue to Discharge the Burden of Proof: - Arguments by Assessee: - The assessee argued that he had discharged the initial burden of proof by explaining the source of SBNs deposited during the demonetization period as cash sales and duly credited the sales in the regular books of accounts. - The AO failed to discharge the burden of proof, which lay upon him, and did not provide any evidence to disprove the assessee's claims. - The assessee provided necessary evidence, including books of accounts, sale/purchase invoices, cash book, journal, ledger, bank statements, and other relevant records. - Bench's Findings: - The Bench noted that the assessee had duly discharged the initial burden of proof and provided necessary evidence to support his claims. - The AO failed to discharge the burden of proof and did not provide any evidence to disprove the assessee's claims. - The Bench relied on the judgment of the Apex Court in the case of CIT vs. Orissa Corporation Pvt. Ltd. (159 ITR 78) and concluded that the ground raised by the assessee was allowed. Conclusion: The appeal filed by the assessee was allowed, and the grounds raised by the assessee were upheld. The rejection of books of accounts and application of Section 145(3) by the AO, the addition of Rs. 20,00,000/- as undisclosed income under Section 69A read with Section 115BBE, and the failure of the Revenue to discharge the burden of proof were all found to be unjustified. The order was pronounced in the open court on 25/04/2024.
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