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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 ..... we vacate the addition 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. Appeal of the assessee is allowed. - ITA. No. 149/JP/2022 - - - Dated:- 23-3-2023 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Sh. Rajeev Sogani (C.A.) And Sh. Rohan Sogani (CA) For the Revenue : Smt Runi Pal (Addl. CIT) ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 13/04/2022 [here in after referred (NFAC/ ld. CIT(A) ] for assessment year 2017-18, which in turn arise from the order passed by the ACIT/DCIT, Circle-5, Jaipur [ here in after referred as ld. AO ] dated 03.12.2019. 2. The assessee has marched this appeal on the following grounds:- 1. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the action of the ld. AO in making addition of Rs. 80,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 2017-18 and month wise deposited of cash during the AY 2016-17 and 2017-18. The assessee was also required to furnish the comparative month wise stock for AY 2016-17 and 2017-18. The assessee submitted reply on different dates on ITBA portal which was examined and verified. After scrutiny of the details submitted by the assessee the ld. AO found certain discrepancies and therefore ld. AO issued show cause notice on 21.11.2019 on the ITBA portal which is reproduced as under: a) On the perusal of the month wise details of cash deposited during A. Y. 2016-17and A. Y. 2017-18 it is noticed that in the month of November 2016 you have deposited abnormal and very high cash of Rs. 82,50,000/- in your bank account against the cash deposited of Rs. 1,25,000/- in the month of November, 2015. Please furnish the reason of a huge cash deposited in the month of November, 2016 when there was cash crunch in the market. b) The assessee is required to furnish the copy of the sale bills issued from 22.10.2016 to 15.11.2016 along with complete details of the purchases in the following format: Bill no. Date Amount of cash sale Name and complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in fact income of the assessee from undisclosed sources and not from the actual sale made. He also stated verification of bills shows that they are below Rs. 2 lac and name, address and mobile number of purchasers are not mentioned on the sale bills except a few. The assessee expressed his inability to provide these details of the parties. In view of these reasons and based on the decisions in the case of Roshan D Hatti Vs. CIT 107 ITR 938 and P. Mohan Kala 291 ITR 278 hold genuineness of the sales bills could not be verified and stated that all the bills are fabricated and self-made issued just before the deposition of the undisclosed cash of the assessee of Rs. 80,00,000/- on 15.11.2016 and the explanation offered by the assessee in this regard not found satisfactory and hence cash deposited for an amount of Rs. 80,00,000/- added u/s. 68 of the Act. 4. Being aggrieved from the order of the assessing officer the assessee carried the matter in appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee and the relevant finding of the ld. CIT(A) on the issue raised before him is reiterated here in below : 9. I have carefully considered the action o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Assessee, along with his family members, has been in the jewellery business since the year 1998. 1.2. Assessee during demonetization period, on 15.11.2016, deposited a sum of Rs 80,00,000 in his Bank Account. The cash so deposited by the assessee was received against cash sales during the period 1.10.2016 to 8.11.2016. 2. ASSESSING OFFICER 2.1. Ld. AO, for the sole reason of assessee not having complete details of cash sales, disbelieved the said cash sales. Ld. AO invoked the provisions of Section 68 and disbelieved the cash sales, amounting to Rs. 80,00,000, made by the assessee and added the same under the provisions of Section 68. Ld. AO also invoked the provisions of section 115BBE for taxing the said addition under Section 68. 3. NATIONAL FACELESS APPEAL CENTRE 3.1. Before NFAC, elaborated submission, were made by the assessee which have also been reproduced from Page 9 to 43 of the order. 3.2. Ld. CIT(A), without any cogent basis, in just one para, dismissed the appeal of the assessee by simply mentioning that ld. CIT(A) agreed with the observations of the ld. AO [CIT(A) Order Page 44]. 4. SUBMISSIONS 4.1. Elaborate submissions made by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and made addition of Rs. 4.72 crores u/s 68 r.w.s. 115BBE. Hon ble Bench held that where assessee has admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. The relevant para 9 is reproduced hereunder: In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. 4.7. Attention is drawn towards Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchaser. The Hon ble High Court at Para 4 of the order finally held as under: Since, having regard to the nature of the transaction and the manner in which they had been effected, there was no necessity whatsoever for the assessee to have maintained the addresses of cash customers, the failure to maintain the same or to supply them as and when called for cannot be regarded as a circumstance giving rise to a suspicion with regard to the genuineness of the transactions. The Tribunal, therefore, was not right, in our opinion, in setting aside the order of the Appellate Assistant Commissioner and restoring that of the Income-tax Officer. There are no circumstances disclosed in the case nor is there any evidence or material on record which would justify the rejection of the book results. 4.9. Ld. AO, unnecessarily emphasising the need of complete identity of buyers in respect of cash sales, held the same to be non-genuine (contrary to the legal provisions) and further erred in invoking the provisions of Section 68 in respect of such cash sales. Attention is drawn towards the judgment of the Hon ble Jurisdictional High Court in the case of Smt. Harshila Chordia v. ITO (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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. 4.13. If the contention of the lower authorities is accepted that the same income would be taxed twice, once when being offered for tax by the assessee as part of cash sales and subsequently as addition under Section 68, which is impermissible in law. 4.14. Reliance is placed on the below mentioned judicial pronouncements, wherein, under identical set of facts, as in the present case, additions made under Section 68 on account of alleged bogus cash sales were deleted:- 4.14.i ITAT Chandigarh in the case of Smt. Charu Agarwal M/s. Kalanidhi Jewellers Vs. DCIT ITA No. 310 311/Chd/2021 order dated 25/03/2022 The findings of Hon'ble ITAT is in para 10 of the order. Hon'ble ITAT after considering the decision of the Hon'ble Delhi High Court in the case of Pr. CIT (Central)-3 V/s. M/s. Agson Global Pvt. Ltd. In ITA No. 68-73/2021 and various oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 500/- made by the AO by applying the provisions of Section 68 of the Act, it is noted that provisions of Section 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P L account. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act 4.14.iv ITAT, Chandigarh Bench in the case of Roop Square Pvt Ltd ITA No. 198 and 249/Chand/2021 [CLC Page 183 to 190] 4.14.v ITAT, Kolkata Bench in the case of Senco Alankar, ITA No. 10/Kol/2021 [CLC Page 191-197] 4.15. It is submitted that ld. AO without enquiring the matter further, just for lack of name and addresses, reached to an adverse conclusion. It is submitted that assessee maintained complete stock records. Each item of sale, including the alleged nongenuine cash sales, is identifiable in the stock records. Ld. AO has not found any defect in the said stock records. Complete set of the documents in respect of the entire alleged non-genuine cash sales were placed before the lower authorities. Following details were submitted in order to substantiate the sales mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d objectively with reference to the material available on record. Hence, application of mind is sine qua non for forming the opinion. 4.18.ii The Apex Court in Dalgobinda Paricha v. Nimai Charan Misra, AIR 1959 SC 914 defined opinion to mean something more than mere retailing of gossip or of hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question. 4.18.iii In S.R. Bommai v. Union of India AIR 1994 SC 1918 while construing the expression if the President is satisfied under Article 356(1) the Court at para 74 held that it is not the personal whim, wish, view or opinion or the ipse dixit of the President dehors the material but a legitimate inference drawn from the material placed before him which is relevant for the purpose. 4.18.ivThe Apex Court in the Lal Chand Bhagat Ambica Ram v. CIT (supra) approvingly noted the decision of the Hon ble Allahabad High Court in the case of Kanpur Steel Co. Ltd. vs CIT (1957) 32 ITR 56 and summarised the findings in the following words: (i) that the burden of proof lay upon the Department to prove that the sum of Rs. 32,000 represented suppressed income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... low to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods 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, evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as distinguished the case laws before the ld. CIT(A), which have been reproduced at page 42 and 43 of the ld. CIT(A) order. The same may please be considered. 4.24. The provisions of Section 115BBE were inserted in the ITA by Finance Act, 2012, with effect from 1.04.2013. Section 115BBE taxed the unexplained credits, money, investment, expenditure, etc., which were deemed as income under Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D, at the rate of 30% (plus surcharge and cess), without allowing any deduction for any expenditure or allowance. 4.25. Thereafter, the provisions of sub-section (1) of Section 115BBE were substituted by Taxation Laws (Second Amendment) Act, 2016, w.e.f 1.04.2017 i.e. AY 2017-18 ( Amendment -115BBE ). Although, Taxation Laws (Second Amendment) Act, 2016 received the assent of the President of India only on 15.12.2016. Search on the assessee was carried out on 21.07.2016. 4.26. Chronology of various events, as discussed hereinbefore, is as under :- Particulars Date 115BBE Introduced for the first time in the Income Tax Act. Rate of Tax 30% 01.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.31. The amendment, to Section 115BBE, cannot, in any way, be considered to be introduced to overcome any defects of the law, previously in place, nor it can be considered to be clarificatory in nature, explaining the intention of the law already in place. Per contra , such amendment has resulted into increase in tax burden on the assessees. 4.32. Hon ble Supreme Court in the case of Vatika Township (P) Ltd. [2014] 367 ITR 466 (SC) observed that of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities, which is based on the principle of law known as lex prospicit non respicit : law looks forward not backward. Thus, legislation which modify accrued rights, or which imposes obligation or impose new duties or attach a new disability have to be treated as prospective, unless the legislation is for purpose of supplying an obvious omission in a former legislation or to explain a former legislation. 4.32.i Hon ble Apex Court, in the said cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mphasis Supplied] 4.34. Hon ble Delhi High Court in the case of New Skies Satellite BV [TS-64-HC -DEL (2016)] held that amendments though originally notified as clarificatory may turn out to be substantive in fact and such a substantive amendment is incapable of being given retrospective effect. Relevant extracts of the said order is reproduced hereunder for the sake of ready reference:- Undoubtedly, the legislature is competent to amend a provision that operates retrospectively or prospectively. Nonetheless, when disputes as to their applicability arise in court, it is the actual substance of the amendment that determines its ultimate operation and not the bare language in which such amendment is couched. A clarificatory amendment presumes the existence of a provision the language of which is obscure, ambiguous, may havemade an obvious omission, or is capable of more than one meaning. In such case, a subsequent provision dealing with the same subject may throw light upon it. Yet, it is not every time that the legislature characterizes an amendment as retrospective that the Court will give such effect to it. This is not in derogation of the express words of the law in ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sabh Diamonds (2016) 158 ITD 0564 (Mumbai) 4.35.ii Hiraco Jewellery (India) Pvt. Ltd., I.T.A. No.7297/Mum/2014 (Mumbai) 4.35.iii Gitanjali Exports Corporation Limited (2016) 178 TTJ 529 (Mumbai) 4.35.iv Siro Clinpharm Private Limited (2016) 177 TTJ 609 (Mumbai) 4.36. Hon ble ITAT, Jaipur Bench, in the case of KGK Enterprises [2017] 88 taxmann.com 264 (Jaipur - Trib.) accepted the above proposition and held that Explanation to section 92B enhancing its scope to be applicable from A.Y. 2013-14 onwards. 4.37. It is submitted that when the assessee made cash sales, the amended provisions of section 115BBE were not in existence. 4.38. Where an amendment, as under 92B, although was introduced having a retrospective effect, was held, by the courts, to have a prospective effect, by the same analogy, an amendment to Section 115BBE, putting additional burden on the assessee, introduced on 15.12.2016, w.e.f 01.04.2017 (A.Y 2017-18), should not be made applicable on any act committed between 01.04.2016 to 14.12.2016. 4.39. The amendment to Section 115BBE is penal in nature, which aims to penalize the assessee, if additions referred to in Section 68 to 69A are made. Penal s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, the amended provisions of Section 115BBE, should not be made applicable on the assessee for the following reason:- 4.42.i At the time of cash sales by the assessee Company, the amended provisions were not in place. 4.42.ii The amendment to section 115BBE, being onerous on the assessee, should not be given a retrospective effect. 4.42.iii Where any non-income is converted by AO to income, as per Section 68 to 69B then only Section 115BBE can be made applicable. In the present case, assessee himself offered amount for taxation. In view of the above, application of Section 68, read with Section 115BBE, by the ld. AO, to the amount of Rs. 80,00,000 accounted for sales by the assessee, is illegal and deserves to be quashed. 6. The ld. AR of the assessee in addition to the written submission submitted that the addition made by the ld. AO is against the law as the sales is duly recorded in the books of account and without rejecting or finding any defects in the books of account no addition can be made. Thus, addition of Rs. 80,00,000 made u/s. 68 is nothing but adding the same income twice. The demonetization was announced on the night on 08.11.2016 and cash has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. 10-25 4 Written submissions filed by the assessee, before the ld. AO during the course of assessment proceedings. 26-29 5 Copy of VAT return of the assessee for the year under consideration. 30-33 6 Copy of Cash book forming part of the books of accounts of the assessee for the year under consideration 34-91 7 Copy of sales register of the assessee for the year under consideration. 92 8 Copy of purchase register of the assessee for the year under consideration. 93 9 Copy of stock summary of the assessee for the year under consideration. 94 7. Thus, the provision of section 68 cannot be applied to the income which is already recorded in the books of account and the source of receipt is explained out of the stock already available with the assessee. To support these contentions the ld. AR of the assessee has relied upon the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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- -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, 2015 13,20,118/- Cash deposits made in Bank a/c during the months of October November, 2016 82,50,000/- Cash deposits made in Bank a/c during the months of October November, 2015 1,25,000/- Cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble 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 deposit as shown in books of accounts is not genuine and hence the same has been held unexplained u/s 68 of the IT Act and cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25% 9.1 The ld. AR of the assessee further submitted that out of total sales of Rs. 1,86,45,067/- made in cash the ld. AO 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and purchases are not supported by the quantity details. 9.4 As regards the applicability of section 68 in this case we have persuaded the decision 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted from the order of the ld. CIT(A) at para 4.1 wherein the ld. CIT(A) has described para 1.4 of assessee written submission that complete regular books of accounts, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P L account. Hence, there 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 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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