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TMI Blog2022 (10) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... itors and survey officials. During the course of assessment proceedings, the AO also did not find any fault or defect in the books of accounts or stock register maintained by the assessee. The impugned deposits have been made by the assessee from the cash balance available in the books of accounts, which were duly generated on sale of goods out of stock available with the assessee. It is not the case of the AO that the purchases of stock made by the assessee and entered in the stock register were not genuine. As observed by the Visakhapatnam bench of ITAT, there is no case of making abnormal profits from the cash sales recorded by the assessee. The observations of the AO with regard to non-response by the customers to the notices issued by him and non-filing of returns by the customers are not relevant to the facts of the present case. Thus we hold that the assessee has duly explained the sources for making cash deposits into its bank account. Since the sources of cash have been generated out of business activities of the assessee, the same cannot also be assessed u/s 69A of the Act as unexplained asset - Decided against revenue. - I.T.A. No. 1408/Mum/2021 - - - Dated:- 11-10- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee also submitted that the survey team has also verified the physical stock and compared the same with the book stock at the time of survey operations. They have also not found any discrepancy in the stock register and further they did not doubt sales recorded in the books of account. The assessee also submitted that the income tax provisions require collection of PAN number, when the value of bill exceeds Rs. 2.00 lakhs and it has duly collected the PAN numbers. The assessee also furnished details of customer names along with the PAN numbers given by them. Accordingly, it was submitted that the sources of cash deposits were the cash balance available with the assessee in the books of accounts, which was accumulated out of cash sales. 4. The Assessing Officer, however, did not accept the explanations given by the assessee. He noticed that the assessee has not carried out any cash sales prior to 2nd November 2016 and there have been sudden increase in cash sales from 2nd November 2016. The Assessing Officer also observed that the concerned cash sale bills have not been signed by the customers. Further the assessee has not given any reason as to why it kept cash of Rs. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, 2016. Accordingly, the Ld D.R submitted that the claim of cash sales was rightly rejected by the AO. In support of this proposition, the D.R placed his reliance on the decision rendered by High Court of Himachal Pradesh in the case of J.M.J. Essential Oil Co. Vs. CIT (2018) 100 taxmann.com 181. 7. The Learned AR, on the contrary, submitted that the assessee has been maintaining stock register for purchase and sale of gold and diamond ornaments. The said stock register has been verified both by the auditors at the time of audit and also by the survey officials at the time of survey. The assessee has made cash sales out of the stock available with it and the sale of stock have been duly recorded in the stock register and in cash book. He submitted that the survey officials have compared the physical stock with the stock register and did not find any difference. The assessee has also duly disclosed the sales in its books of account. Hence, there is no reason to suspect the cash sales disclosed by the assessee which was the source for making cash deposits into the bank account of the assessee. 8. The Learned AR further submitted that an identical issue has been considered by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s unexplained, mainly on the reasoning that the AO was not satisfied with the explanations given by the assessee. However, in the instant case, sale of jewellery in cash is explained and it is not an unusual activity. Further the said sales are duly supported by the stock register. The books of accounts and stock registers were verified by the survey officials and they did not find any deficiency therein. The auditors, who audited the accounts also did not find any fault therein. Hence, it is not a case of rejection of explanations furnished by the assessee on valid reasons. On the contrary, the AO did not accept the explanations only on suspicious and surmises, that too, without bringing any material on record to disprove the books of accounts and stock register of the assessee. Accordingly, the learned AR submitted that the above said decision will not apply to the facts of the present case. 10. He further submitted that the provisions of sec.68 can be invoked only in cases of receipts shown as cash credits, without offering the same as income. Under sec.68 of the Act, a legal fiction is created in order to assess certain receipts shown as cash credits and not as income, i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les are of only Rs. 4.85 cr. Which is a small portion of overall sales. Therefore, it is not the case that the assessee could not have made the cash sales in the instant case. I also agree with the contention of the assessee that as on 08/11/2016, a lot of sales were made by the jewellers, late in the night and there were huge crowd outside the shop of the jewellers on the said date, as per the media reports. The reason is simple that there was panic in the public on account of declaration of demonetization and they had only four hours time to do whatever they could do with the banned currency notes. So, the cash sales have been made by the assessee in unusual time and in unusual circumstances and if viewed from that perspective, it does not look unusual. 9.5 is father seen that the assesee has already disclosed these sales, in their sales tax returns/VAT returns and it appears that these returns were filed much before the search and seizure action carried out in the group of the assessee. It is also seen that there is no revision of sales/VAT returns of the assessee. .. 9:8 Further, there was no discrepancy found between physical stock and stock in books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, may trigger further enquiries in the hands of the respective customers. So far a trader is concerned, the transaction of sales is complete when the stock is delivered to the customer and consideration for the same is obtained from the customer. The decision rendered by Hon'ble Bombay High Court in the case of R.B.Jessaram Fatehchand (Sugar Dept) Vs. CIT (supra) would clarify this legal position. The relevant observations made by the Hon ble jurisdictional High Court are extracted below:- 2. Now, the Income-tax Officer in not accepting the book results of the assessee proceeded mainly on the ground that in respect of the cash sales entered in the books of account of the assessee the assessee was unable to supply the addresses of the customers to whom sugar was sold. The assessee had supplied an explanation for his inability to do so, but the said explanation was not accepted by the Income-tax Officer. There was no other reason for the Income-tax Officer to discard the book results. He, no doubt, pointed out that it appeared that other wholesale traders in the market had shown a higher gross profit of their turnover but it appears that no explanation had been called ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Sugar Market Reports produced by the assessee, which show that the demand for sugar was slack and the rates, in the market were declining. According to the Tribunal, although the entries in the account books of the assessee appeared to be all right ostensibly, the assessee could not merely rely on the said entries but had further to show that the transactions as entered in these accounts were true and genuine. Since, in the present case, by reason of its failure to give the addresses of the customers, it had failed to establish adequately the genuineness of the transactions, the Income-tax Officer was right in taking the view that the book results shown by the assessee were not acceptable. 4. In our opinion, the assessee's account books are to be accepted, unless, on verification, they disclosed any faults or defects, which cannot be reasonably and satisfactorily explained by the assessee. All the other transactions, except the cash transaction, which were verifiable, have been verified and scrutinised by the Income-tax Officer and there is nothing wrong whatsoever found with them. As to the cash transactions also, the quantity of sugar sold has not been disputed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh sales effected by the assessee is beyond the scope of human probabilities. Accordingly, in our view, both the above said decisions would not apply in the facts of the present case. 16. We notice that the decision in the case of J M J Essential Oils (supra) has been rendered by Hon ble Himachal Pradesh High Court under peculiar facts of that case. As rightly pointed out by Ld A.R, it is not clear as to whether the assessee could prove the sales with stock register. In any case, a perusal of the above said decision would show that the Hon ble Himachal Pradesh High Court has confirmed the addition of cash sales by invoking provisions of sec.68 of the Act on the ground that the assessee did not give proper reasons for cash sales effected in a particular month. Further, the assessee was also claiming deduction u/s 80IC of the Act. Hence, we agree with the Ld A.R that the said decision will not apply to the facts of the present case. 17. In our view, there is merit in the contentions of Ld A.R that the provisions of sec.68 can be invoked only in cases of cash credits, which were not offered as income, i.e., a legal fiction has been created in sec.68 of the Act to assess certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P L account in page No. 7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts and trading account, P L account and the financial statements and failed to disprove the condition of the assessee. Suspicion however strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence. 7.1 In the case of CIT v. Associated Transport (P.) Ltd. [1996] 84 Taxman 146/[1995] 212 ITR 417 (Cal.) the Tribunal found that the assessee had sufficie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained. Hon'ble Delhi High court considered the issue of taxing the opening stocks in the case of CIT v. Akshit Kumar [2021] 124 taxmann.com 123/277 Taxman 423 (Delhi), and upheld the order of the ITAT in deleting the addition related to sales. The Hon'ble High Court has extracted the relevant part of the order of the ITAT which reads as under: 17. Thus, in our opinion the sale made by the assessee out of his opening stock cannot be treated as unexplained income to be taxed as 'income from other sources'; firstly, the stock was available with the assessee in his books of account and trading in such stock including purchase, sale, opening and closing stock (quantity wise and value wise) has been accepted by the department year after year and in some years under scrutiny proceedings, therefore, non existence of stock or business cannot be upheld; secondly, the sale of stock in the earlier years and the sale of balance left out stock in subsequent years has been accepted or has not been disturbed, then to hold that no stock was sold in this year and remained with the assessee will be difficult proposition; thirdly, inquiry and inspection by the AO done much aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R relied on the decision of P. MohanaKala (supra), Devi Prasad Vishwanath Prasad (supra) both the cases refer to the sums found credited in the books of account but not offered as income, whereas in the instant case the assessee admitted the same as sales and offered for taxation, hence, the case laws has no application in the assessee's case. The Ld.DR also relied on the decision in Naresh Kumar Tulshan (supra), the decision was related to the addition u/s 69A representing huge deposit of cash in bank for which the initial source was declared as past profits and subsequently explained as withdrawal from partnership firm without relevant matching entries in the banks, therefore, the coordinate bench of ITAT held that withdrawal of such huge amount in high denomination was not practicable. The Ld.DR also relied on the decision of J.M.J. Essential Oil Company (supra) in the cited case, the assessee effected large sales in one month of each year continuously for two years and the assessee is eligible for deduction u/s 80IC and the AO observed that the assessee was inflating the sales and claiming the huge deductions. No such cash inflow is involved due to demonetization. Whereas i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o respectfully, following aforesaid referred to orders by the various Hon ble High Courts and the coordinate benches of ITAT, we are of the view that the impugned addition made by the AO and sustained by the Ld CIT(A) was not justified, accordingly the same is deleted. 20. The facts of the present case are identical with the facts prevailed in the cases of Hirapanna Jewellers and M/s Kalaneedhi Jewellers LLP. The cash sales declared by the assessee were duly supported by the stock register. The books of accounts and stock register have been found to be correct by the auditors and survey officials. During the course of assessment proceedings, the AO also did not find any fault or defect in the books of accounts or stock register maintained by the assessee. The impugned deposits have been made by the assessee from the cash balance available in the books of accounts, which were duly generated on sale of goods out of stock available with the assessee. It is not the case of the AO that the purchases of stock made by the assessee and entered in the stock register were not genuine. As observed by the Visakhapatnam bench of ITAT, there is no case of making abnormal profits from the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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