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TMI Blog2023 (9) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... n Form 61A giving all the details with respect to cash sales. Nowhere, the ld. AO has pointed out that assessee did not have sufficient stocks in its possession or otherwise found any defect in the stock register. If that finding has not been given and no discrepancy has been pointed out, then how the corresponding sales of same stock and quantity can be treated as undisclosed income of the assessee. Once, AO has accepted the sales and there is direct nexus with the closing stock and the sales along with movement of stock linked to purchases then such credit on account of sales cannot be added u/s. 68. Addition u/s. 68 on account of cash deposits cannot be made simply on the reason that during the demonetization period, cash deposits vis-a-vis cash sales ratio is higher. Here in this case the parties to whom notices u/s. 133(6) were issued have confirmed the purchases but also filed the purchase bills. AO cannot disbelieve the purchases made from the assessee simply on the ground that those parties could not submit the source of their funds which is not the requirement of the assessee to prove specifically when assessee is a retail seller of jewellery and even law does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case and in law, the Ld. CIT(A) ought not to have deleted the addition made u/s 68 of the Act inspite of the assessee's failure to prove the genuineness of transactions of sales and receipt of cash against these sales immediately before the demonetization period. 5. The Appellant craves leave to add, amend and/or vary the grounds of Appeal before or during the course of hearing. 3. In cross objection assessee has raised following ground:- 1. The Learned Commissioner Appeals failed to appreciate the AO erred in imposing tax @60% u/s. 115BBE instead of 30% as the cash deposits had taken place prior to Taxation Laws (Second Amendment) Act, 2016 coming into force. 4. The brief facts are that Assessee Company is engaged in jewellery business, selling jewellery items to its retail customers. The return of income filed was on 01/11/2017 declaring total income of Rs. 80,12,140/-. The case was selected for scrutiny for cash deposits in bank and accordingly, AO required the assessee to justify the deposits of cash in the bank accounts with Dena Bank, HDFC Bank and Thane Bharat Sahakari Bank during the period of demonetization. The ld. AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next 8 more days, there is further speedy increase in cash sales and the balance goes upto Rs. 3.36 crore at the end of November 8, 2016. 3. Again after deposit of the cash, the balance cash in hand is reduced substantially to the pre-September level. From 20th November onwards, again it hovers around Rs. 15 lakhs to Rs. 40 lakhs in the similar fashion as happened from April to Sept, 2016. 6. He also analysed the replies from the persons to whom notices u/s. 133(6) were issued which have been received and his office which was as under:- Sr. No. Name of Person PAN No. Amount Received Remark 1 Mayank Trivedi AAAPT8235A 4,10,000 Reply Received 2 Mrs. Hegde ABIPH8227M 3,00,000 Reply Received 3 Krishnaben Bhanushali No PAN 1,78,000 Reply Received 4 Sheron Eliza No PAN 1,55,200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber, 2016 itself. For the balance 11 months the average monthly deposit works out to Rs. 36,23,636/-. Considering the above facts, and also that it was a festive season, the admissible cash deposit for the month of November, 2016 is taken at Rs. 45,00,000/-. Accordingly, the assessee is given benefit of Rs 49,92,300/- (45,00,000 + 4,92,300) (on the basis of Average cash sales / cash sales to identifiable person without PAN). Thus balance cash sales of Rs. 2,57,59,680/- (1,05,20,302 + 2,02,31,678 49,92,300) is considered as not explained Therefore, the sum of Rs. 2,57,59,680/- is added to the total income of the assessee u/s 68 of the IT Act under the head income from Other Sources. The total income assessed is taxed u/s 115BEE of the Act at the rate 60%. Penalty proceedings are separately initiated u/s 271AAC of the Act in respect of unexplained income. 8. The ld. CIT(A) deleted the addition by making the following observations:- 7.5 The appellant has maintained regular books of accounts which are duly audited a Chartered Account and the said books of accounts are not rejected by the AO, which imply that though the AO has accepted the sales to such retail customers as gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7.7 The AO 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 appellant. Suspicion however strong it may be, it should not be decided against the appellant without disproving the sales with tangible evidence. The additions cannot be made in the demonetization cases by the assessing authorities on the basis of deviation/variance in cash deposits and cash sales ratio of the demonetization period with that of the earlier periods since the appellant has established the authenticity and genuineness of the cash sales. There can't be a fixed sales pattern in any business. In-fact appellant has explained the reasons for such high sales being Diwali period, marriage season etc. which reasons are not rebutted by the Assessing Officer The Hon'ble Delhi Tribunal in the case of AGSONS GLOBAL P LTD v. Asstt. CIT [2020] 115 taxmann.com 342 (Delhi - Trib.) has held that the addition being made on the sole ground of deviation in ratio of cash sales and cash deposits during the demonetization period with that of earlier period, is not proper and lawful. 7.8 .. 7.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubted the 'source' of 'source of amount credited in the books of accounts, which is not permissible under the provisions of the Act. 9. Thereafter, the ld. CIT(A) held that in the present case already entire sales have been offered for taxation and same cannot be taxed again. Finally, he concluded as under:- 7.19 As regards the addition of Rs. 2,57,59,680/- u/s 68 invoking the provisions of Section 115BBE is concerned, the order of the AO and the detailed submissions of the appellant has been thoroughly considered. The contention of the appellant had been that, it is not a case of unexplained deposits having been deposited in the bank account of the appellant and it is the sale of gold ornaments/jewellery which have deposited in the bank account and such entries have duly been recorded in the audited books of accounts. I have also considered the submissions of the appellant about the sales declared in the VAT returns and the remand of VAT through banking channel and the assessment for the year under consideration by the VAT Department. Whatever turnover has been disclosed by the appellant in the audited books of accounts are found to be in order. Hence, cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to notice u/s. 133(6) could not substantiate the source of funds. Therefore, the cash sales made during the demonetization period cannot be accepted and ld. AO has rightly taxed the cash deposits u/s. 68. 11. On the other hand, ld. Counsel for the assessee submitted that, firstly, nowhere the ld. AO has rejected the sales or the quantity of purchase stock and the quantity of sales. Once the purchase and sales are verifiable, then such cash sales deposited in the bank account cannot be treated as undisclosed income. He thus, completely relied upon the order of the ld. CIT (A). 12. We find that the only reason given by the ld. AO for treating the entire cash deposited in the bank account is that, there was abnormal growth on the cash sales in the month of November 2016 and corresponding cash deposits from the month of November to December, which alone cannot be the ground when deposits are directly linked with sale duly disclosed in the books. Another point raised by him was that, some of the cash sales made to different parties cannot be identified and the parties who responded were unable to explain the source of their funds. From the perusal of the material placed on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sales in that particular month cannot be the reason for treating it as undisclosed income from undisclosed sources. Here in this case the parties to whom notices u/s. 133(6) were issued have confirmed the purchases but also filed the purchase bills. The ld. AO cannot disbelieve the purchases made from the assessee simply on the ground that those parties could not submit the source of their funds which is not the requirement of the assessee to prove specifically when assessee is a retail seller of jewellery and even law does not prohibit any cash sales or there is any requirement to seek any further detail. For this compliance assessee has also filed Form 61A before the ld. AO. Once, it has been established that sales representing outflow of stocks is duly accounted in the books of accounts and there are no abnormal profits during the year, then there is no justification why AO should treat the deposits made in the bank account out of cash sales to be income from undisclosed sources. Thus, aforesaid finding recorded by the ld. CIT(A) which is based on correct appreciation of facts on record and there is no adverse finding by the ld. AO with regard to the availability of stock and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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