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TMI Blog2023 (4) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO in respect of estimating the sales is merely on assumption or presumption or surmises or conjectures . AO has made addition in the hands of the assessee by reducing the actual sales for the month of October, November 2016. The basis of rejection of books was not acceptable here. AO has made such addition without discharging the burden of prove the correctness of addition. It is a settled law that once the adequate evidence/material has been provided which prima facie discharge the burden of the assessee in that case, the burden shifts on the revenue and the revenue has not discharged its onus in these circumstances. Amount deposited in the bank account was out of sale of various items as held by the assessee as stock in trade and since the deposits in the bank account were out of sale of stock therefore the stock of the assessee has depleted and the cash has come in respect of stock, such sales had been disclosed in the trading account against the purchase which had not been doubted, neither the opening and closing stock had been doubted. Nothing could have been doubted when the source of cash was well explained and was shown in the bank account. Addition was made only on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that no specific defect in the books of account was pointed out by the AO which is not even part of the assessment order. 6. That the CIT(A) NFAC erred in confirming the action of the AO based upon surmises and conjecture without there being any evidence contrary to the contention of the assessee which is duly supported by documents. 7. That the CIT(A) NFAC has erred in confirming the addition of Rs. 28217200/- being cash deposited in bank accounts without appreciating that the said cash was part of the cash account submitted with the submissions made and was sourced from sales duly accepted by VAT department, out of cash withdrawals, etc. 8. That the CIT(A) NFAC has erred in ignoring the past history of the appellant since, the cash deposit was not against the past history of the appellant. 9. That the CIT(A) NFAC has erred in confirming the order of the AO ignoring the position of law that provisions of section 68 cannot be applied in respect of income from a source which has already been taxed which would amount to double taxation. 10. That the CIT(A) NFAS has erred in confirming the order of the AO ignoring the position of law that no addition u/s 68 can be made wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge cash deposit during demonetization. Pursuant to the same, the appellant was issued various notices u/s 142(1) requiring the appellant to provide necessary information and documents in respect of source of such cash deposit amounting to Rs 4,09,50,000/- during demonetization. The appellant during the course of assessment proceedings explained that he was in the business of sale / purchase of sugar, refined oil and other allied items and the said cash was deposited out of sale proceeds, cash withdrawal and out amount realized from debtors during the year consideration. 3.2. In argument the ld. Counsel placed that the appellant was also asked to submit the month wise total sales and purchases and corresponding cash sales made in every month for the year under consideration and for the last year. It was also explained that the total cash deposit during FY 2015-16 is to the tune of Rs 4,31,25,914 against the cash deposit in FY 2016-17 of Rs 5,98,60,500/-. The assessee vide reply dated 20.11.2019 submitted the desired information and the copy of the same is enclosed at page no 45& 61 of APB. Furthermore the Ld. AO also requested to segregate the cash deposit between the period 01.04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod 01.04.2016 to 31.03.2017submitted before AO vide reply in response to notice u/s 142(1) dated 27.12.2019 and the copy of same is placed at page no 157 of APB. g) Complete Postal address of debtors and creditors to/from whom sale/purchases submitted before AO vide reply in response to notice 142(1) dated 11.11.2019 and the copy of same is placed at page no 64-68 of APB. h) Copy of month wise stock statement submitted to the AO vide reply in response to notice 142(1) dated 11.11.2019 and the copy of same is placed at page no 63 of APB. i) Copy of account of debtors and creditors exceeding Rs 5 lakhs vide reply in response to notice u/s 142(1) dated 25.12.2019 and the copy of same is placed at page no 75-154 of APB. 3.4. The ld. Counsel placed that during assessment proceedings it was also brought to the knowledge of the assessing officer that the case for assessment year 12-13 has been opened under section 148 for cash deposit of Rs 3,02,06,000/- in HDFC Ltd. That the department has completed the assessment under section 147 at returned income. Furthermore, the department had accepted that the assessee was regularly depositing cash out of sales proceeds. It is pertinent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of ground No 2, 3 and 7 a) There has been no dispute in respect of assessments of the earlier years and the assessee's book result have been accepted year after year on the basis of 'stock tally' of different items of and said stock register have been maintained right from the date of start of business. During the earlier years, there has been no dispute of any nature, whatsoever, and the book results of the assessee have been accepted by the department. b) For the year under consideration, the return of income was filed an income of Rs. 9,67,203/- and the assessment have been framed by the Assessing Officer by making the addition of Rs. 2,74,00,000/- which have been challenged by us and the income have been assessed by the Assessing Officer at Rs. 28217200/- vide order, dated 31.12.2019 [Refer page no 158-167]. c) We have attached the statement of facts along with Form No. 35 before your goodself and while ground No. 1 is general in nature and ground No. 2,3,& 7 relate to the addition of _ 27400000/- on account of cash deposit during demonetization , presuming the same as 'inflated cash in hand' from 'inflated sales' and such addition is based on conjectures and surmise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artered Accountant. Thus, there is no scope of any default on the part of the Assessee.It is pertinent to mention here that the appellant had made purchase to the tune of Rs. 3,09,69,406/-in October 2016 on which the assessee has duly paid the VAT [please refer page 63 of the PB]. The Ld. AO has not doubted the purchases, opening stock and quantitative tally. It is a matter of record The purchase & sale have duly been reflected in the VAT return filed before the Punjab VAT Authorities. g) As regard AO's objection regarding increase in sales in the month of October 2016 and November 2016. In this regard it is very humbly submitted that the appellant is engaged in whole sale/ retail trading of sugar, refined oil, ghee and other allied karyana items. The major sales take place around Diwali as demand of Ghee/oil/ sugar increases near festive season. It is pertinent to mention here that the 'Diwali' festival in the year 2016 was on 30th October 2016 and increase in sales as stated by the assessee in comparison the earlier months was justified. Furthermore it was also brought to the knowledge of AO that the assessee has started dealing in new commodities i.e.sugar, cotton seed oil(loo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ib.). "I. Section 68, read with section 153A, of the Income-tax Act, 1961 - Cash credit (Unexplained cash deposits) -Assessment year 2017-18 - Certain cash was deposited during post-demonetization in account of assessee, engaged in resale of jewellery, diamond etc. -Assessing Officer observed that there were two sets of books of account, i.e., one in computer of accountant and another in pen drive of accountant with different sales figures for October 2016 and assessee having failed to furnish documentary evidence regarding source of cash deposits in its bank accounts, addition was made to income of assessee - However, it was found that assessee was maintaining complete stock tally, sales were recorded in regular books of account and amounts were deposited in bank account out of sale proceeds - Nothing was brought on record to substantiate that cash obtained by assessee from sales which reduced stock of assessee was utilized elsewhere - Cash sales made during month of October, 2016 were in line of cash sales in earlier years and equal to sales in month of July, 2016 - Opening stock, purchases and sales and closing stock, declared by assessee were not doubted-Cash deposited post-d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as correct". iv. Principal Commissioner of Income-tax v. Agson Global (P.) Ltd. [2022] 134 taxmann.com 256 (Delhi). "IV. Section 68 of the Income-tax Act, 1961 - Cash credit (Bank deposits) - Assessment year 2017-18 -Assessee-company was engaged in business of selling dry fruits - post-demonetization, assessee deposited cash amounting to Rs. 180.53 crore in its bank accounts - Assessing Officer held that cash deposits made by assessee represented unaccounted income and accordingly, made additions - Tribunal analysed data pertaining to cash sales and cash deposits made in relevant assessment year as against two earlier assessment years and noted that in year of demonetization percentage increase in sales was less than earlier year - He, thus, held that growth in sales compared to earlier two years showed similar trend, and it could not be said that assessee had booked non-existing sales in its books post-demonetization -Furthermore, revenue made no allegation that assessee had backdated its entries - Whether since assessee placed material on record that cash deposits made with banks more or less corresponded with cash sales, it could only be concluded that there was growth in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Para No 4.1 of the order enclosed at page no 4-5 of the paper book] 1.It is pertinent to mention here that the appellant has given detailed explanation for increase in sales due to festival season and addition in product line. The same has duly been submitted before the AO in reply enclosed at page no 80. That the applicant is regulating depositing cash in accounts which is evident from the fact that the case for A.Y. 12-13 has been selected based on cash deposit of Rs 3,02,06,000/- in HDFC limit. The same has been accepted by the department by accepting the returned income by passing order under section 147 on 14th December 2019. The copy of same is enclosed at page no 173 to 177. 2. That the Ld. AO while drawing the allegation has failed to appreciate that the appellant has made purchased to the tune of Rs. 3,09,69,406/- in the month of October, 2016. The said purchases were made much before demonetization period and the assessee has duly paid VAT on such purchase. Therefore, the sale made by the appellant in the month of October &November 2016 duly stands justified. (i.i) Despite having huge cash in hand, the assessee deposited small parts of cash before and after demonetiza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count enclosed at page no 26-27 of the paper book. This clearly shows that the AO has made the addition on the basis of surmises and conjectures even without going through the Audit Report. 2. Besides the above, we are also enclosing herewith the ledger account of electricity expenses from which your goodself will find that the electricity expenses for the godown are duly debited in the profit and loss account. Refer Page no 50 of reply dated 22.02.2023. 3. It is pertinent to mention here that the same godown address has been mentioned in the copy of account duly submitted before the AO along with the copy of account of creditors. Refer Page No 68 to 72 of the PB. 4. Furthermore, we are also enclosing herewith the ledger account of rent paid of godown from which your goodself will find that the part of the payment of godown was made from banking channels and which proves that the Ld. AO has failed to go through the bank statement. (v) Assessee was maintaining bank overdraft facility and was also paying a large amount of interest to the bank [Para No 5.2 of the order enclosed at page no 165 of the paper book] The said allegation of the AO does not find any force as the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer - Whether therefore, Assessing Officer as well as Commissioner (Appeals) had erred in law in confirming disallowance. ii. Paramount Impex v. AC IT, Circle-J, Ludhiana [2020] 117 taxmann.com 802 (Chandigarh Trib.) Section 145 of the Income-Tax Act, 1961 - Method of accounting - Rejection of Account (Non-maintenance of stock register) - Assessment year 2013-14 - Whether where assessee was dealing in a large number of small items and it was consistently following method of determining stock at end of year by physically verifying same, in view of fact that all purchase and sale vouchers and other records had been found to be in order, mere fact of non-maintenance of stock resister could not be basis for rejection of books of account if Revenue had found no other defect in books of assessee and there was no hindrance in determining true and correct profits earned by assessee. iii. PCIT-3v. Swananda Properties (P.) Ltd. [2019] 111 taxmann.com 94 High Court of Bombay "Section 145 of the Income-tax Act, 1961 - Method of accounting (Rejection of accounts) - Assessment year 2005-06 -Whether where revenue was not able to show an defect in assessee's records or in books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Brief Hon'ble Supreme Court of India in the case of Omar Salay Mohamed Sait vs. Commissioner of Income-tax reported at [1959] 37 ITR 151 (SC)[05-03-1959] "Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Order of - Assessment year 1948-49 - Whether Tribunal should not base its findings on suspicions, conjectures, or surmises nor should it act on evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of that sort, its findings, even though on questions of fact, will be liable to be set aside by Supreme Court - Held, yes" [2022] 145 taxmann.com 549 (Delhi) HIGH COURT OF DELHI Principal Commissioner of Income-tax v. ConwoodMedipharma (P.) Ltd. Section 145 of the Income-tax Act, 1961 - Method of accounting -Rejection of accounts (Concurrent findings of fact) - Assessee, engaged in business of equity trading, derivatives trading and real estate investment, filed Income-tax Returns ('ITR') declaring an income of Rs. 42.43 crores - On scrutiny, assessment order was passed making an addition of Rs. 10.21 crores on ground that there was differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing judgments:- i. Commissioner of Income Tax Vs. Ram Narain 224 ITR 180 (P&H) ii. JCIT Vs. Gramophone Company of India Ltd. 265 ITR (Kol-Trib) 46 (AT) iii. DCIT Vs. D.N. Kamani (HUF) 70 ITD (Patna-Trib) 77 iv. Elite Developers Vs.. Dy. Commissioner of Income Tax 73 ITD (Nagpur-Trib) 379 v. Monga Metals Pvt. Ltd. Vs. ACIT 67 TTJ (All) 247 vi. Daulat Ram Rawatmull 87 ITR 349 (SC)" 8. The ld. counsel further argued in respect of ground no. 8and placed the submission which is extracted as below: " Submissions in respect of Ground No. 8 Ground No 8 That the CIT(A) NFAC has erred in ignoring the past history of the appellant since, the cash deposit was not against the past history of the appellant. It is pertinent to mention here that the case of the appellant for Assessment Year 2012-13 was reopened by the Department u/s 147 on the basis of cash deposits to the tune of Rs. 3,02,06,000/- in HDFC Limit Account. The said case was assessed as returned income and it was held that the cash was deposited out of sale proceeds. The copy of reasons recorded along with the closure order is enclosed at page 173 to 177 of the PB. This proves that the assessee was regularly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire material placed on record including the report of the AO. The ITAT has applied the rule of consistency and rejected the enqjiry made by the AO in the relevant assessment year. No doubt principles of res judicata are not applicable to the Income-Tax proceedings however, it is equally well settled law that rule of consistency is a well- established and recognised principle applicable to the Income-Tax proceedings. Pertinently, the Assessee had closed his business in July, 2015 after selling all the stocks and the survey carried out at a later stage would not have strong evidentiary value. Besides, all these aspects are completely factual in nature and we are unable to find any perversity in the impugned order. The factual findings recorded by the Income-Tax authorities, have been examined by the last fact-finding authority i.e. the IT AT. In absence of any perversity in the impugned order, court is not inclined to entertain the present appeal, which urges questions of law that are entirely resting on findings of fact. Therefore no question of law, much less substantial question of law, arises for consideration. Accordingly, the appeal stands dismissed." 2. NEENA P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.] b) On perusal of the text of section 68, it is evident that section 68 can only be invoked if the assessee is unable to explain the source of any sum found credited in the books of accounts. However, in the present case, the appellant had duly explained that the cash was deposited out of business receipts which were part of the audited results for the AY 2017-18. It is further pertinent to mention h ere that since the cash forms part of revenue receipts, as such, the appellant has duly paid tax on the same and any addition made in respect of such cash deposited would amount to double taxation which is against the principles of law. In this regard we are relying upon the following case laws: - Sr. No Citation Brief 1. [2022] 138 taxmann.com 141 (Bangalore - Trib) Anantpur Kalpana vs ITO INCOME TAX : Where Assessing Officer made addition under section 68 on account of cash deposited by assessee in its two bank account post demonetization, since said cash deposit was towards assessee's sale proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following case laws: Sr. No Citation Brief 1. [2016] 73 taxmann.com 100 (Karnataka) CIT, Belgaum v. Bahubali NeminathMuttin Section 69B, read with section 145, of the Income-tax Act, 1961 - Undisclosed investments (Stocks) - Whether where books of account of assessee had been rejected by assessing authority, same books of account could not be relied upon in an addition on account of trade creditors and also for arriving at closing stock - Held, yes [Para 15] [In favour of assessee] 2. [2014] 42 taxmann. com 349 (Punjab & Haryana) CIT, Patiala v. Dulla Ram, Labour Contractor, Kotkapura Section 68 of the Income-tax Act, 1961 - Cash credits [Rejection of books of account, effect of] - Whether where books of account are rejected in their entirety, Assessing Officer cannot rely upon any entry in those books of account for making an addition to assessee's taxable income under section 68 - Held, yes [In favor of assessee] 11. The ld. CIT DR vehemently argued and relied on the order of the ld. AO. Copy of the said order of para 6.1 is extracted as below: "6.1 The above discussion clearly shows that the assessee had shown inflated cash sales to cover his unaccounted mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available in the record. That the ld. A.O. had not disputed, the purchases, quantitative stock and sales for the entire period except October & November. It is pertinent to mention here that the assessee has duly submitted books of accounts, sale & purchase register, confirmations, bank statements, expenses, parties from whom the purchase and to whom sales were made. However, the Ld. AO has alleged that the appellant has inflated sales for the month of October &November, 2016. The total sales declared by the assessee was to be tune of Rs. 1,58,06,636/- and Rs. 1,53,63,687/- respectively. However, the ld. Assessing Officer has computed the sales for the month of October &November 2016 at Rs. 28,06,536/- and Rs. 9,63,687/- respectively. The Ld. AO while doing such exercise has ignored the fact as to why a prudent businessman will make purchases to the tune of Rs. 3,09,69,406/- in the month of October, 2016 much before the date of demonetization in order to execute such meagre sale as computed by the AO. The assumption drawn by the AO in respect of estimating the sales is merely on assumption or presumption or surmises or conjectures. Therefore, the Ld. AO has made addition of Rs. 2,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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