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TMI Blog2023 (6) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 2015-16 @ 31.44%, the Ld.AR referred to the cash flow statement, cash book and demonstrated the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs. 68.07 crs for the F.Y 2015-16 and for F.Y 2016-17 it was maintained at Rs. 65.38crs and the cash sales are part of the stocks maintained which is not disputed. Further the addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the cash sales proceeds/receipts received from the customers are reflected in the Audited Profit Loss account as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. The AO has not pointed out any specific adversity but made a generalize addition without considering the factual aspects and primary evidences. The A.O has failed to make further enquiries on the information filed and the assessee has discharged the initial burden placed by submitting the information and details. We find the CIT(A) has dealt on the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected for scrutiny under CASS and notice u/s 143(2) and 142(1) of the Act along with questionnaire was issued. In compliance to the notice, the assessee has furnished information online from time to time and explained the nature of business and income. On perusal of the financial statements, the Assessing Officer (AO) found that during the demonetization period there are cash deposits in the bank accounts and therefore in order to verify these facts the AO has issued notice u/s 142(1) of the Act to explain the sources. Whereas the assessee has filed the submissions along with the bank statements and reconciliation of cash deposits made during the demonetization period. 3. The AO on perusal of the information found that the assessee has made cash deposits in the bank accounts held with Saraswt Coop Bank Ldt., Canara Bank, State Bank of India and Bank of Maharashtra all aggregating to Rs. 13,29,50,000/-. The assessee was called to explain the nexus of cash sales and cash deposits by notice dated 09.11.2019. The assessee has filed the detailed submissions on 18.12.2019 and also submitted the details of month wise cash sales and cash deposits. Whereas the AO observed that, the month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmission was uploaded on 18.11.2021. Later, before conclusion of these appeal proceedings, another written submission dated 28.01.2022 was uploaded. The second submission was exactly the same as was the earlier one. The same is being reproduced as under, for ready reference: Ground of Appeal 1 1. On the facts and under the circumstances of the case and in law the learned AO erred in making addition of Rs, 13,29,50,000/- u/s 68 by treating it as Cash credits which is bad in law. 2. On the facts and under the circumstances of the case and in law the learned AO erred in making addition of Rs. 13,29,50,000/- u/s 68 without appreciating the fact that the appellant had submitted all the documentary evidences such as sale register, cash sale memos, Stock statement, audited cashbook and bank statement Indicating the source of Cash Deposited. Hence all the condition relating to section 68 was satisfied. 3. On the facts and under the circumstances of the case and in law the learned AO erred in making addition of Rs. 13,29,50,000/- u/s 68 without appreciating the fact that the appellant had offered the said deposit as its business income, thereby such addition u/s 68 resu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Month wise details of purchases, Cash and credit sales and other relevant details as called by the AO. In addition to above the sales being subject to Value Added Tax has also been offered to Tax and shown in the VAT returns of the year under consideration and also the Sales and Labour Charges have been credited to Profit Loss Account and correspondingly expenses have been claimed. Hence appellant had offered the said deposit as its business income. Assessment order u/s 143(3) was passed against the appellant dated 23.12.2019 wherein addition was made of Rs. 13,29,50,000/- u/s 68 of the IT Act read with section 115BBE of the Income Tax Act, 1961. The AO just made two observation while passing the order: 1. Assessee has neither furnished the details of the parties, name and address 2. Assessee has not carried out any cash sales and the assessee was in possession of unexplained cash credits and since the demonetisation of notes were brought in, assessee has deposited the same in bank account. Assessing officer just compared the cash deposit of October and November 2016 with the previous year and completed the assessment. We wish to explain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total Turnover Cash sales % of total sales Cash deposited in bank 2015-16 59 Cr 18.55 31.44 17.35 2016-17 82 Cr 25.64 31.27 23.73 The above statistics clearly prove that in this country, the majority of the people prefer to purchase jewellery in cash. It is not the case that the appellant has the unaccounted cash which is deposited. The appellant has submitted all the details of cash receipt and party wise details of purchases above Rs. 2,00,000/-. The income Tax Rules per se requires details party wise only above Rs. 2,00,000/-, Hence for sales below Rs. 2,00,000/-, income tax rules also does not require the party wise details to be maintained. As per section 139(A)(5)(c) road with rule 1148 of Income Tax Rules no KYC is required for gold sales upto Rs. 2,00,000/-. Requirement for KYC for purchases above Rs 10 lakh are part of India's commitments to the Financial Action Task Force (FATF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als) had returned a finding that the stock and cash found at the time of search had been examined by the Assessing Officer and was compared with the stock and cash position as per books. The stock and cash position as per the books had been arrived at after the effect of the aforesaid cash sales. The stock position as well as the cash position as per the said books had been accepted by the Assessing Officer, The Commissioner of Income-tax (Appeals) also noted that the appellant had furnished the complete set of books of accounts and the cash books and no discrepancy had been pointed out. The Assessing Officer had doubled the aforesaid sales as bogus and had made the aforesaid addition. However, the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal returned findings of fact to the contrary. The Tribunal also noted that the departmental representative could not challenge the factual finding recorded by the Commissioner of Income-tax (Appeals). Nor could he advance any substantive argument in support of his appeal. The Tribunal also observed that it is not in dispute that the sum of Rs 24,58,400/- was credited in the sale account and had been duly inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. On appeal before CIT(A) it was demonstrated that even if the said sale was treated as undisclosed income there can't be any addition in undisclosed income, since the said amount has already been included in sales and hence in total Income. The honorable Delhi High Court accepted the contention if assessee. 4.Salem Sreeramavilas Chit Company (P.) Ltd. v. Deputy Commissioner of Income Tax, Circle 1(1) HIGH COURT OF MADRAS [2020] 114 taxmann.com 492 (Madras) Section 69A, read with section 153, of the Income-tax Act, 1961 Unexplained moneys (Demonitization Cash deposits) - Assessment year 2017-18- Government of India demonetized Rs. 500 and Rs. 1000 notes on 8-11-2016 Between 1-11-2016 and 8-11-2016, assessee had collected a sum of Rs. 57.86 lakhs from its chit fund business - Deputy Commissioner concluded that amount collected by assessee during said period was huge and remained unexplained and therefore, treated same as unaccounted money in hands of assessee under section 69A However, amount did not appear to be unusual as compared to collection made during previous year 2015 and amount deposited out of total collection was also not in variance with cash deposits mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed source of said amount in question as sales, produced sale bills and admitted same as revenue receipt as well as offered it to There was no defect in purchases and sales and same were matching with Inflow and outflow of stock - Audit report under section 44AB and financial statements clearly showed reduction of stock position matching with sales which clearly showed that cash generated represented sales Assessing officer accepted sales and stocks He had not disturbed closing stock which had direct nexus with sales Both Assessing Officer and DDIT (Inv.) did not find any defects in books of account, trading account, P L account and financial statements of assessee Whether, on facts, Impugned addition made under section 68 was to be deleted-Held, yes [Paras 7, 7.2 and 9] [In favour of assessee). Ground of Appeal 2 On the facts and under the circumstances of the case and in law the learned AO erred in concluding that cash sales has increased drastically upto 10 times as compared to the previous year without appreciating the facts: 1. The total sales has increased during the year on the account that appellant company had celebrated 78 years of establishment and on the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emonetization. The percentage of cash sales to total sales is 31.27% in FY 2016-17 when there was demonetization. Considering the above facts and figures we also submit the following reasons for increase in turnover of Cash sales and Cash deposited during the F.Y: 2016-17 (A.Y: 2017-18) as compared to P.Y 2015-16 (AY 2016-17). 1. Turnover of sales during F.Y. 2016-17 of the first 3 month was decreased due to strike by Jewellers association to protest against levy of excise duty on Jewellery therefore the customers could not buy Jewellery and they had bought Jewellery during Navratri to Diwali festival (October 2016) and therefore there was sufficient reason for increase in Sales during that period. 2. The company had also celebrated its 78 years of establishment and on this occasion the company had given free gifts on purchase of all kind of Jewellery, Silver Bar, Loose Diamond the scheme was only for the period from the period 12/10/2016 to 14/11/2016 at all three outlets. Customers have purchased the jewellery during festival period and availed the benefit of the said scheme. This was also one of the reason for increase in sales during that period. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition and allowed the appeal for statistical purposes. Aggrieved by the CIT(A)order, the revenue has filed the appeal with the Hon ble Tribunal. 5. At the time of hearing, the Ld. DR submitted that the CIT(A) erred in deleting the addition overlooking various facts, evidences and findings of the AO, where the assessee could not explained completely the cash deposits during the demonetization period and were not substantiated and the assessee has not maintained the proper books of accounts books and The Ld.DR prayed for allowing the revenue appeal. 6. Contra, the Ld. AR submitted that the assessee has filed the summary of cash book, invoices, stock register and also the comparison of the sales from earlier years and names, PAN of the customers in the assessment proceedings and were overlooked. Whereas, the CIT(A) has considered the primary and secondary evidences filed and relied on the judicial decisions and granted the relief. The Ld.AR substantiated the submissions relying on the order of the CIT(A), factual paper book, charts and judicial decisions. 7. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on 20-12-2019 23-12-2019 placed at page 436 to 444 of the paper book. The Ld.AR emphasized that substantial details were filed on record and the AO has not considered these facts and made unilateral addition overlooking these material evidences. At this juncture, we considered it appropriate to refer to the observations of the CIT(A) in granting the relief dealt at Para 5 of the order, read as under: 5.0 Decision on Grounds of appeal and reasons thereof:- In this appeal, as many as 5 Grounds were raised. Ground no. 5, being residual ground and in the entire appeal proceedings no ground having been amended or added during hearing is worth dismissal and therefore, Ground no. 5 is dismissed. Ground no. 4 challenges the levy of interest u/s 234B/234C of the Act. This being consequential in nature, Ground no. 4 is worth dismissal, and is dismissed. Ground no. 1,2 3 are related to one another and challenge the one single addition of Rs. 13,29,50,000 on account of unexplained cash credit u/s 68 of the Act. 5.1 Ground no. 1,2 3 challenge the addition of Rs. 13,29,50,000 u/s 68 of the Act. These grounds are now adjudicated as under: - 5.1.1 The Ld. AO discussed the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason of sales for all kinds of jewellery. 4. The Hon. Prime Minister of India announced on 8th November 2016 at 8:00PM that the currency having denomination of Rs. 500 and Rs. 1000 would cease to be legal tender after 12:00 PM due to which the customers have turned out in large. 5.6 The assessee's submission is carefully perused but the same is not found tenable. During demonetization period the assessee has deposited amount of Rs. 13,29,50,000 in SBNs. In order to justify the cash deposits in SBNs assessee has afterthought taken the plea of cash sales during the month of October November 2016. Further, perusal of the details reveals that there are (sic is) multifold increase in cash sales. Further, the assessee had neither furnished the details of the parties/customers with respect to names, address, party wise cash sales etc. In view of the above, this clearly evident that the assessee has not carried out any cash sales and the assessee was in possession of unexplained cash credits and that since the demonetization of notes were brought in the assessee had deposited all its unexplained cash credits into its bank account. In view of the above, amount of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or all kinds of jewellery. 4. That, it was further submitted that due to declaration of demonetization by Hon. Prime Minister of India announced on 8th November 2016 at 8:00 PM, customers turned out in large number to jewellery shops for purchasing jewellery items and other related items. The shop of the appellant company was also no exception to this general rule. It was furthermore submitted that this was one of the reasons for increase in sales in the corresponding period i.e. October November, 2016. 5.1.3 All the facts and circumstances of relation addition of 13,29,50,000 are duly considered. Also, the arguments of Ld. A/R and facts in the Written Submission submitted/uploaded on 18.11.2021 on ITBA and the facts and to why circumstances as to why the Ld. AO had to make the addition, as discussed in the impugned assessment order dated 23.12.2019 have been given a thoughtful consideration. As a result, following points are found/noted: - i. That, the appellant company had submitted all the details of cash receipts and party wise details of sales above Rs. 2,00,000 each. ii. That, for sales below Rs. 2,00,000 each, Rule 114B of I.T. Rules, 1962 r.w.s . 139 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s offered it to - There was no defect in purchases and sakes and same were matching with inflow and outflow of stock - Audit report under section 44AB and financial statements clearly showed reduction of stock position matching with sakes which clearly showed that cash generated represented sakes - Assessee officer accepted sakes and stocks - He had not disturbed closing stock which had direct nexus with sales - Both Assessing Officer and DDIT(Inv.) did not find any defects in books of account, trading account, P L account and financial statements of assessee - Whether, on facts, impugned addition made under section 68 was to be deleted - Held, yes . 5.1.6 In pursuance to the above discussion, the appellant gets the relief for which it is entitled to. The Ld. AO is directed to delete the impugned addition of Rs. 13, 29, 50,000. Ground no.1, 2 3 are, therefore, allowed. 6.0 As a result, this appeal is allowed for the statistical purposes. 9. We found that the CIT(A) has relied on the information, evidences and findings of the AO and the judicial decisions. Further in the course of hearing, the Ld. DR has filed the information received from the AO by letter dated 23-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36,67,57,558 45,32,14,237 81,99,71,796 F.Y 2015-16 (A.Y 2016-17) Sales below2L Sales more than / Equalto 2L Total 01.04.2015 to 08.11.2015 12,97,99,252 22,00,69,894 34,98,69,146 09.11.2015 to 31.12.2015 4,98,70,422 4,51,46,540 9,50,16,962 01.01.2016 to 31.03.2016 4,10,04,143 10,36,74,751 14,46,78,894 Sub total 22,06,73,817 36,88,91,184 58,95,65,001 10. The Ld. AR relied on the following judicial decisions i. Pr. CIT Vs Akshit Kumar, [2021] 124 taxmann.com 123 (Del) held as under: Section 56, read with sections 68 and 133, of the Income-tax Act, 1961 - Income from other sources (Sale of opening stock) - Assessment year 2014-15 Assessee was engaged in business of textiles - All sales undertaken by assessee were in cash o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer who disbelieved the version of the assessee, though the assessee was maintaining that it had actually made the sales. Moreover, the Assessing Officer did not deal with the issue from this angle at all and such a reasoning adopted by the Commissioner (Appeals) and Tribunal was based on surmises and imagination. [Para 4] In the result, order passed by the authorities below was to be set aside and ground raised by assessee was to be allowed. iii. Salem Sree Ramavilas Chit Company (P.) Ltd., Vs. DCIT, [2020] 114 taxmann.com 492 (Madras) After the returns were filed by the assessee-chit fund company, proceedings were taken up and notice for completing the assessment was issued under section 143(2) followed by notices under section 142(1) to which the assessee responded, pursuant to which the impugned assessment order was passed. The assessee submitted that in the impugned order, the respondent Deputy Commissioner had erroneously come to a conclusion that the assessee had not properly explained the deposit of cash amounting to Rs. 67.38 lakhs collected during the demonetization period into their account and that the assessee had claimed the source of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. The assessee submitted that he was maintaining all regular books of account and other books for commission income and the various expenses incurred and to substantiate his commission income, he furnished ledger accounts of commission income showing therein party-wise purchaser and seller with their available address and the amount of commission. However, the Assessing Officer noted that assessee failed to submit details regarding commission income and that assessee failed to prove with supporting evidences from whom the commission was received and concluded that assessee received commission income from unknown source and treated the same as cash credit under section 68. On appeal before the Commissioner (Appeals), the action of the Assessing Officer was upheld. On appeal: 11. The Hon ble Tribunal in the case of Anantpur Kalpana Vs. ITO, [2022] 138 taxmann.com 141 (Bangalore Trib), dated 13-12-2021 has observed at Para 6 of the order read as under: 6. I have heard the rival submissions. Learned Counsel for the assessee submitted that both the AO and CIT(A) accepted the fact. that the cash receipts are nothing but sale proceeds in the business of the assessee. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from undisclosed sources. It is not a fit case for treating the amount of Rs. 81,000/- as concealed income of the assessee and consequently imposition of penalty was also not justified in this case. Further reliance is placed on the decision of the Hon'ble Vishakapatnam Tribunal in the case of Asstt. Asstt. CIT v. Hirapanna Jewellers [2021] 128 taxmann.com 291/189 ITD 608 wherein, the Hon'ble Tribunal while considering the issue of implication of sec. 68 of the Act during demonetization held as under : 9. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me u/s 115BBE again. I am of the view that in the light of the facts and circumstances of the present case, the addition made is not sustainable and the same is directed to be deleted. 10. In the result, appeal of the assessee is allowed, 12. Similarly the Hon ble High Court of Delhi in the case of Pr.CIT Vs. Agson Global P Ltd., 134 taxmann.com 256 (Delhi) 19 January 2022 has observed as under: Section 68, read with section 69C, of the Income-tax Act, 1961 - Cash credits (Share capital money) years 2012-13 to 2017-18 - - Assessment Assessee-company received share capital and share premium money from several investors - Assessing Officer made addition in respect of same on account of unaccounted income under section 68 on basis of recorded statement of managing director of assessee-company Whether since placed sufficient documentary evidence to establish that money which assessee had paid to investors was routed back to it in form of share capital/share premium and identity, creditworthiness and genuiness of investors was proved, there was no justification to make addition under section 68 Held, yes [Paras 11.4, 11.5 and 14.4] [In favour of - assessee] II. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee's business and impugned addition was to be deleted - Held, yes [Paras 16.9 and 17.6] [In favour of assessee] 13. We find the coordinate bench of Hon ble Tribunal on the similar/identical issue in the case of M/s RS Diamond India Vs. ACIT, [2022] 145 taxmann.com 545 (Mum Trib) dated 26 July 2022 has observed and granted the relief at Para 4 of the order read as under: 4. I have heard the parties and perused the record. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les above Rs. 2 lakhs and when a query was raised to Ld.AR on submissions of details were the cash sales are below Rs. 2 Lakhs. The Ld.AR mentioned that the assessee has submitted details of sales below Rs. 2 lakhs and highlighted rule 114B of the I T Rules r.w.s 139(a)(5)(c) of the Act and there was no KYC required. Further the Ld.AR demonstrated the sample Tax Invoice below Rs. 2 lakhs in the demonetization period and the invoice contains, name and address etc. Further there is no significant increase in the cash sales out of total sales, whereas for F.Y. 2016-17 it is @ 31.27% and in comparison to F.Y. 2015-16 @ 31.44%, the Ld.AR referred to the cash flow statement, cash book and demonstrated the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs. 68.07 crs for the F.Y 2015-16 and for F.Y 2016-17 it was maintained at Rs. 65.38crs and the cash sales are part of the stocks maintained which is not disputed. Further the addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the cash sales proceeds/receipts received from the customers a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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