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TMI Blog2023 (3) TMI 1148X X X X Extracts X X X X X X X X Extracts X X X X ..... e granted by deleting the entire addition made by the ld. AO and confirmed by ld. CIT(A). 2. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the act of the ld. AO, in invoking provisions of Section 115BBE of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief and please be granted by quashing the invocation of Section 115BBE, as being not in accordance with the relevant law. 3. The assessee craves his right to add, amend or alter any of the grounds on or before the date of hearing." 3. The fact as culled out from the records is that the assessee is engaged in the business of wholesale and retrial business of gold and silver ornaments. He has filed return of income declaring total income at Rs. 45,83,340/- on 02.11.2017. The said income tax return was processed u/s 143(1) of the I.T. Act. Subsequently, the case was selected for complete scrutiny under computer assisted selection for scrutiny (CASS) to examine the issue of abnormal increase in cash deposits during demonetization period from 09.11.2016 to 30.12.2016 as compared to average rate of cash deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above two issue the assessee submitted written reply of the show cause notice on ITBA on 26.11.2019 which is reproduced as under: "1. As it has been brought to our notice that assessee has deposited cash of Rs. 82,50,000/- which is huge in comparison to the amount of cash deposited during the same period in the previous year. Your honor we would like to bring to your notice that starting from 19th of October 2016 Diwali Festival season was started and Marriage season also started form 11th of November 2016 due to which there was significant increase in retail sales during the period under consideration. Most part of sales was retail cash sales due to festive and wedding season which resulted in huge cash in hand with the assessee. As demonetization started from 08.11.2016, assessee deposited the previous year in the month of May assessee has deposited Rs. 42,00,000/- which was also a wedding season, which helps to indicate that during peak business season sales increases substantially which generate cash in hand. 2. Copy of sales bills issued from 22.10.2016 to 15.11.2016 along with the details required as per specified format is enclosed. 3.3 The assessee filed a detailed s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osited Rs. 1.5 lacs and 1 lac respectively in the bank account. After duly considering the circumstances of the case, I agree with the observations of the Assessing Officer that cash amounting to Rs.80,00,000/- deposited on 15.11.2016 is unlikely to be the sale proceeds from 08.11.2016 to 14.11.2016. As the addition has a sound basis, I find no need to interfere with the action of the Assessing Officer. 10. In the result, the appeal is dismissed." 5. As the assessee did not find any favour from the order of the ld. CIT(A), he has preferred an appeal before this tribunal on the grounds so raised and reproduced here in above in para 2. In support of the grounds so raised by the assessee the ld. AR of the assessee, filed the following written submission. "I. Assessee, an individual, is engaged in the wholesale and retail business of gold and silver ornaments through his proprietorship concern M/s KV Jewellers. Assessee, for the year under consideration, filed his return of income on 02.11.2017, at a total income of Rs. 45,83,340. Subsequently, case of the assessee was selected for scrutiny and order, dated 03.12.2019, was passed under Section 143(3), at a total income of Rs. 1,25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1961. In the Audit, there were no adverse remarks of the Auditor and the Auditor found the underlying evidences, substantiating the transactions recorded in the books of accounts, to be adequate and reasonable. 4.3. Cash sales in the jewellery trade is a normal practice. Assessee has been selling jewellery in cash in past also. Breakup of the cash sales vis a vie total sales made by the assessee, during the year under consideration and in the preceding year is as under: - (Amt. in Rs.) Particulars AY 2016-17 AY 2017-18 Total Sales 1,48,81,725 7,60,31,534 Cash Sales 78,47,769 1,86,45,067 % of Cash Sales to Total Sales 53% 25% 4.4. Ld. AO disbelieved the cash sales for the sole reason that details of the buyers, including their name, PAN, addresses etc, were not available with the assessee, therefore, the same were not verifiable. 4.5. It is submitted that law nowhere prohibits cash sales. Assessee by selling the goods in cash did not violate any of the provisions of the Income Tax Act, 1961. It is submitted that ld. AO has not mentioned any provisions of the Act/ Rules having been violated by the assessee while undertaking such cash sales. Mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition to Rs. 73.13 crores. Hon'ble Bench deleted the addition. The relevant para 126 (vii) is reproduced hereunder: "It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer. The assessee has maintained the complete stock tally in its accounting software. Such books of accounts are audited, quantitative records produced before the tax auditor, such quantitative records are certified by tax audit and no questions have been raised by the assessing officer. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details." The said decision has also been upheld by Hon'ble Delhi High Court in Agson Global (P.) Ltd [2022] 134 taxmann.com 256 (Delhi). [CLC Page 280-309] 4.8. Attention is also invited towards the decision of the Hon'ble Bombay High Court in the case of R.B. Jessaram Fatehchand v. CIT (1970) 75 ITR 33, wherein the Hon'ble High Court at Para 2 of the order held as under: "In these circumstances, the reason given by the Income-tax Officer for rejecting the book results shown by the assessee's accounts or for not accepting the cash transactions as genuine cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers. The question of sustaining the addition of Rs. 6,98,000 would not arise." "We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them." 4.10. Ld. AO invoked provision of Section 68 in respect of sales. Section 68 deems non-income to be income. In the instant case, the credits by way of sales were already offered for tax. Hence, Section 68 per se cannot be invoked. Provisions of Section 68 can only be invoked in cases where an assessee is unable to explain the source of a particular receipt to the satisfaction of the Assessing Officer. These provisions have no application in case where an amount already disclosed by the assessee as his income, while filing the Return of Income on which no further addition has been made by the ld. AO, during the course of assessment proceedings. 4.11. Sections 68 creates deeming fictions, whereby certain amounts which are not considered as income by the assessee, are deemed to be income of the assessee. A deeming fiction of income cannot apply to an item which is already treated as income by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting stock available with the assessee and was well explained, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. - Decided in favour of assessee. 4.14.ii ITAT, Jaipur Bench, in the case of Motisons Jewellers Ltd., ITA Nos. 161 and 178/JP/2022 [CLC - Page 1- 93], vide order dated 29.09.2022, dismissed the appeal of the Department. Hon'ble ITAT relied upon the decision of Hon'ble Rajasthan High Court in the case of Smt. Harshil Chordia Vs. ITO reported at MANU/RH/0851/2006 : 298 ITR 349 (Rajasthan-HC) and held as under:- "...Thus, the fact of the case on hand is similar to the jurisdictional high court decision cited by the Ld. AR of the assessee. The Ld. AR of the assessee also relied upon the coordinate Jaipur ITAT decision also on the issue and the revenue not prove the sale made by the assessee which is executed after giving the goods to the customer, duly reflected in the invoice issued, assessee having sufficient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT. Therefore, the contention of the revenue based on the facts and circumstance of the case is not accepted and we see no reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered VAT dealer and all such sales had been reflected in the VAT returns of the assessee. 4.17. It is worthwhile to note that ld. AO has accepted the opening stock, purchase, as well as the closing stock at the year-end to be genuine and correct. It is also worthwhile to mention that the ld. AO has not rejected the books of accounts of the assessee by invoking the provisions of Section 145(3). Ld. AO has not brought any material on record to establish that the sale bills were bogus or any evidences indicating that sales were bogus. Ld. AO is wrong in not accepting the declared cash sales as not verifiable which are recorded in books of accounts which were found to be correct and complete. 4.18. It is submitted that the assessee during the year under consideration had undertaken cash sales of Rs. 1,86,45,067. Out of the total cash sales, cash sales amounting to Rs. 80,00,000 has been found to be non-genuine. Explanation offered to substantiate the cash sales has been arbitrarily rejected by the ld. AO (although for part cash sales, same explanation accepted). The ill reasoned and arbitrary rejections of explanation, in terms of requirements of Section 68, have been held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to explain its possession of these currency notes; and (ii) that the explanation given by the assessee that the notes formed part of the cash balance of Rs. 34,000 and odd was fairly satisfactory and was not found by the Tribunal to be false; the statement of sales was hardly relevant to the question; the Department, in relying on the entries relating to the bills of each day, committed an error and no inference should have been drawn from them; that any one single transaction did not exceed Rs. 399 did not preclude the possibility of payment in high denomination notes for such transaction ; therefore, the Tribunal rejected the explanation of the assessee on surmises, and there was no material for the Tribunal to hold that the sum of Rs. 25,000 represented suppressed income of the assessee from undisclosed sources." 4.19. It is not compulsory or mandatory under the Income Tax Act, 1961 to collect the information related to full name, address or/and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. It is voluntary to the customer to provide their personal information to the assessee while goods being sold. 4.20. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pages 144 to 182] 4.21. Ld. AO at Page 4 of his order has stated that the opening balance of cash amount with the assessee was Rs. 11,03,263 on 21.10.2016. Thereafter, 112 cash sale bills were issued by the assessee for sale of Rs. 70,80,378. 4.21.i It is submitted that such period, from mid of October 2016 till the time when demonetization was announced, the assessee had peak season of sales. 4.21.ii Diwali was on 30.10.2016 and thereafter, marriage season had started from November 2016. As a result, there was certain rise in sales. 4.21.iii Moreover, in business, it is difficult to maintain the same consistency of sales. There may be occasion where there may be huge sales and demand, and there may be occasion where there may be muted sales and demand. 4.21.iv Moreso, where the assessee was operating from the walled city of Jaipur, which is considered to be the hub of jewellery trade in not only Jaipur, but also the state of Rajasthan. 4.22. The lower authorities have observed that the assessee deposited cash of Rs. 1,50,000 on 03.11.2016 and Rs. 1,00,000 on 07.11.2016. Further, it has been observed that if the assessee had cash generated through cash sales, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive amendment for any indirect transfer of Indian assets if the transaction was undertaken before 28th May, 2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President). It is further proposed to provide that the demand raised for indirect transfer of Indian assets made before 28th May, 2012 shall be nullified." 4.28. Thus, the law, applied by the ld. AO did not see the light of the day, when the transactions of cash sales took place. The said law for the first time was introduced on 28.11.2016. 4.29. On comparison of the amended provision with the earlier provision, it is clear that the above-stated clause (a) of subsection (1) of section 115BBE retains the essential features of the earlier provision with the difference that the rate of tax is ENHANCED from 30% to 60%. Simultaneously, Section 2(9) of Chapter II of the Finance Act, 2016 was amended by inserting the Seventh proviso to provide for a levy of surcharge at the rate of twenty five per cent of tax u/s.115BBE. Thus, the rate of tax after the amendment to Section 115BBE was 77.25% [60% + 25% Surcharge + 3% Cess], as against 30%. 4.30. Withdrawal or modification of provision with retrosp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on incomes accruing after the law having received assent of the President. 4.33. In the case of Govind Das (1976) 1 SCC 906 (SC), following observation was made by the Hon'ble Supreme Court while holding Section 171(6) of the Income Tax Act to be prospective and inapplicable for any assessment year prior to 1-4-1962, the date on which the Income Tax Act came into force:- "...11. Now it is a well-settled Rule of interpretation hallowed by time and sanctified by judicial decisions that, unless the terms of a statute expressly so provide or necessarily require it, retrospective operation should not be given to a statute so as to take away or impair an existing right or create a new obligation or impose a new liability otherwise than as regards matters of procedure. The general Rule as stated by Halsbury in Vol. 36 of the Laws of England (3rd Edn.) and reiterated in several decisions of this Court as well as English courts is that 'all statutes other than those which are merely declaratory or which relate only to matters of procedure or of evidence are prima facie prospective and retrospective operation should not be given to a statute so as to affect, alter or destroy an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreted and the legislature seeks to overcome it by declaring that the law in question was never meant to have the import given to it by the Court? The general position of the courts in this regard is where the purpose of a special interpretive statute is to correct a judicial interpretation of a prior law, which the legislature considers inaccurate, the effect is prospective. Any other result would make the legislature a court of last resort. United States v. Gilmore 8 Wall [(75US ) 33019LEd396 ( 1869 )] Peony Park v. O'Malley [ 223F2d668 ( 8th Cir 1955)] It does not mean that the legislature does not have the power to override judicial decisions which in its opinion it deems as incorrect, however to respect the separation of legal powers and to avoid making a legislature a court of last resort, the amendments can be made prospective only[ Ref County of Sacramento v State (134 Cal App 3d 428) and In re Marriage of Davies (105 III App 3d 66)]..." 4.35. Section 92B of the ITA setting out the meaning of International Transaction was introduced by Finance Act, 2001 w.e.f. 01.04.2002. Subsequently, an explanation was added to section 92B, increasing the scope of "International T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court, the substantial question of law for decision was whether law relating to clubbing of minor son's share of income under Section 64(1)(iii) which was introduced by Taxation Law (Amendment) Act, 1975, w.e.f 1.04.1976 would be applicable for previous years coming to an end on 10.08.1975 and on 31.12.1975 4.40.iii Those were the years where there was no law prescribing uniform previous year. In the case before the Hon'ble High Court, the issue was related to Assessment Year 1976-77. The precise issue was whether newly introduced law, although applicable for the relevant assessment year, could be made applicable on the previous years relevant to the same assessment year, but ending well before the introduction of law. 4.40.iv Hon'ble High Court was pleased to decide at Para 17 of the order:- "...Under the new provision, i.e. Section 64(1)(iii) a new liability has been prescribed and not the rate for ascertaining the liability. Such new liability under the Income Tax Act, 1961 cannot be given a retrospective effect..." 4.40.v Hon'ble High Court held that tax rate existing as on the point of time of accrual of income would be relevant for charging the tax on such accrued inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubted about the availability of the stock with the assessee to support the sales so made. The sales were ranging below Rs. 2 lac the assessee cannot be obligated to maintained the detailed name, address and mobile number of the customer. Even the ld. CIT(A) has not given separate finding on the written submission so made by the assessee and ld. CIT(A) has merely confirmed the view of the ld. AO without considering the detailed submission filed in the proceeding before him. The ld. AR further argued that cash deposited is duly recorded in the books of account, the source of these cash is on account of receipt of sales proceeds, amount deposited is part of sales proceeds, the sales is supported the payment of the indirect taxes so paid by the assessee, the sale is already part of the sales tax records of the assessee. To support all these contentions before us the ld. AR of the assessee filed the following records: S. No. Particulars Page No. 1 Copy of Audited Financial Statements of the assessee, for the year under consideration. 1-5 2 Written submissions filed by the assessee, before the ld. AO, during the course of assessment proceedings. 6-9 3 List of Bank Accounts ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office letter No. 564 dated 01.02.2023 and subsequent reminder issued vide No. 610 dated 01.03.2023 on the above subject. The comments of this office on the points as desired in your letter are given as under: 2. The case of assessee was selected for scrutiny through CASS and one of the reason of selection was "Large cash deposits during demonetization period". The assessee had made cash deposit of Rs. 80,00,000/- in SBN on 15.11.2016 in his account with Yes Bank. As per the cash book the assessee was having cash in hand of Rs. 3,74,213/- only on 30.09.2016 which had increased to Rs. 48,96,227/- as on 31.10.2016 and to Rs. 83,76,531/- as on 15.11.2016. This was made possible by showing cash sales of Rs.83,23,912/- during the months of October and November, 2016 which is quite abnormal considering the volume of cash sales in the past e.g. cash sales of Rs. 1,25,000/- only were made in the same two months in the year 2015. The inconsistency in the cash book of the year 2016-17 vis-à-vis that of 2015-16, is shown as under: Description Amount in Rs. Cash sales during the months of October & November, 2016 83,23,912/- Cash sales during the months of October & November, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash sales shown during the months of October, 2016 and November, 2016 are not genuine and did not consider such cash available for deposit in bank a/c. As such the books of accounts stands rejected by the AO as regards the source of cash deposits of Rs. 80,00,000/- made in bank account on 15.11.2016. The mention of section 145(3) of the Act is not relevant here as the declared trading results have not been disturbed. In view of such facts, the decisions relied upon by the assessee/appellant are not relevant. Point 4(B) As mentioned in preceding para, the AO has not accepted the abnormal cash sales shown in the months of October and November, 2016 and hence the cash sales to the extent of Rs. 80,00,000/- have also not been accepted. Point 4(C) During the year under consideration the assessee has declared gross profits @ 11.71% on Turnover as against the GP rate of 14.04% declared in just preceding year. The declared cash sales to the extent of Rs. 80,00,000/- have not been considered genuine by the AO. The AO has already rejected the version of assessee regarding the source of the impugned cash deposit of Rs. 80,00,000/-. It has been held that the source of such cash depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has disputed only a sum of Rs. 80,00,000/-. The said sum is picked as unexplained as the assessee has deposited a sum of Rs. 84,00,000/- being the demonetized currency in the bank account considering the sales shown by the assessee as not genuine. Out of total sales of Rs. 1,86,45,067/- made in the year under consideration only a sum of Rs. 80,00,000 not considered as genuine. The only reasons that was advanced that the details of the buyers showing complete name, address and phone were not verifiable. The sales shown by the assessee is supported by the following documents which were not doubted by the ld. AO: a) Bill wise detail in respect of cash sales during the period from 03.11.2016 to 08.11.2016, along with the Sales Bills. [AO Order Page 3] b) Copy of the Monthly summary of Stock Register. [PB : 94] c) Copy of Sales Register from the books of accounts of assessee for the relevant previous year. [PB : 92] d) Copy of cash book for the relevant previous year [PB : 34-91]. e) Copies of VAT Return filed by the assessee, for the year under consideration. [PB : 30-33] f) Tax Audit Report Audited Financial Statements [PB : 1-5] None of these records were disputed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Hon'ble Delhi High Court in the case of Keshav Social and Charitable Foundation 278 ITR 152 wherein the court considered a situation where the assessee, a charitable trust, had disclosed donations received by it as its income, and claimed exemption u/s. 11. The Assessing Officer, on finding that the assessee was unable to satisfactorily explain the donations and the donors were fictitious persons, held that the assessee had tried to introduce unaccounted money in its books by way of donations and, therefore, the amount was to be treated as cash credit u/s. 68. The Delhi High Court held that section 68 did not apply, as the assessee had disclosed such donations as its income. 9.5 The bench has also noted that the ld. AO accepted the opening stock, purchase, as well as the closing stock at the yearend to be genuine and correct. It is also worthwhile to mention that the ld. AO has not rejected the books of accounts of the assessee by invoking the provisions of Section 145(3) and even there is no whisper in the order about any defects in the books of account. The ld. AO has not brought any material on record to establish that the sale bills were bogus or any evidences indicating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee and such practice was accepted by the AO. We find the explanation of the assessee is genuine and the sales cannot be doubted merely on surmises and conjectures on the ground of non-furnishing of address and PAN of the customer. The AO did not make any enquiry on the material submitted by the appellant. She merely proceeded on statistical analysis to make the addition on account of cash deposits. We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact the AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. The AO did not even reject the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts, bill, vouchers and day to day stock register having complete quantitative details have been maintained by the assessee. The said books of accounts are audited. A copy of audited statement of account alongwith complete quantitative details have been submitted alongwith the return of income. The assessee maintained manual itemwise stock register. The said stock register was bulky and so could not be produced in e-proceedings but was produced before the AO in course of hearing as is evident from submission dated 27-09-2019. The fact of maintenance of stock register manually is stated in Tax Audit Report also. Thus the cash sales transaction is recorded in regular books of accounts, sales are made out of stock-in-trade. The assessee also filed copies of sales invoice No. 82 to 158 of Bangaluru and 110 to 216 of Koklata outlets before AO which were of 28-10-2016 and these were earlier produced before Investigation Wingh in F.Y. 2016-17 i.e. after the sales were made and same were verified by the Investigation Wing also. This view of the ld. CIT(A) indicates hat the assessee has maintained regular books of accounts, bills, vouchers and day to day stock register having complete q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act. In view of the above deliberations and case laws relied upon by both the parties, we find that the AO was not justified in making an addition of Rs.2,90,93,500/- u/s 68 of the Act which has rightly been deleted the ld. CIT(A) and we concur with his findings. Thus the appeal of the Revenue is dismissed. 9.8 Respectfully following the consistent view and after considering the factual matrix of the cash on hand in our considered view the addition made cannot sustain and therefore, we vacate the addition of Rs. 80,00,000/- made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO. In terms of these observations ground no. 1 raised by the assessee is allowed. 10. Since, we have decided the ground no. 1 in favour of the assessee the second ground for levy of additional tax u/s. 115BBE become educative in nature. In the result, appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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