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TMI Blog2023 (10) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... ted in books should be accepted. There is no matter to show there was any discrepancy in the cash balances, withdrawals, cash expenditures. Merely on assumptions Ld. AO could not have considered that deposits in demonetization period to be out of books or tempered books. The ground thus raised by the Revenue has no substance. SBNs received from the undisclosed sources - HELD THAT:- Assessee should not be expected to establish the cash flow from cash sales with mathematical precisions and what is essential is to establish that on preponderance of probability the business of assessee was able to generate surplus cash to be deposited in the bank. Only because the period under examination is of demonetisation that does not change the basic principle with regard to discharge of burden of proof for purpose of Section 68 of the Act. The nature of business of the assessee was one which would have been directly affected by market forces, where whole sale dealers and customers would have used SBNs for cash purchases. To allege without any evidence that there can be possibility that the appellant might have booked these sales in books by 08.11.2016 to deposit the SBNs, but actually ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness practice to receive cash and all the cash deposited is out of cash in hand. 2.1 The Ld. AO has not accepted the aforesaid explanation on the ground, primarily, based on the comparison from the previous year 2015-16 and 2016- 17, he considered the deposits to be abnormal. Then he found the cash retention was on the higher side. Ld. AO considered the comparative sales in month of October, 2016, and from 1st to 8th November, 2016 as suspicious and abnormal. He observed that the increase in sales in this period has been shown because Vat returns having been filed for October and thus, concluded in para 5 as follows ; 1455 2006/Del/2021 5. Thus, in view of the above facts and from the figures of cash in hand submitted by the assessee for the last year it is seen that the assessee was having opening cash in hand from Rs. 80 lakhs to Rs. 1 crore on monthly basis and also as the assessee was maintaining cash in hand of about cash sales of 4-5 days thus, cash deposit of Rs. 1 Crore at max. can be attributed as the cash in hand and the remaining amount of Rs. 3.04 Crores is treated as unaccounted cash deposited by the assessee and accordingly added in the income of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to satisfy the AO about the true nature and source of cash deposit. iii. (a) The ld. CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, amend any/ all the grounds of appeal before or during the course of the hearing of the appeal. 4. Heard and perused the record. 5. On behalf of assessee it was submitted by the Ld. AR that Ld. CIT(A) has recorded factual findings at pages 48-64 of the appeal order by recording inter alia as under: 1. That Ld. AO had used figures of some other case and Ld. AO has based his analysis on partly wrong data. 2. That the assessee was not required under the statute to file VAT returns of October, 2016 and November, 2016 till 08.11.2016. 3. The cash sales in the year under appeal is at same percentage as that of AY 2015-16. 4. The cash sales for FY 2016-17 was Rs. 22.24 crores as compared to slightly higher cash sales of AY 2016-17 at Rs. 23 crores. 5. Total sales, cash sales for AYs 2017-18 and 2016-17 are in trend. 6. The VAT returns up to the period September, 2016 were filed in time and were never revised and thus there could be no possibility of manipulation in amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash and all the cash deposited is out of cash in hand. The Ld. AO however disbelieved the explanation and comparing the sales and cash sales of 2015-16 and 2016-17 had made the addition. As before Ld. CIT(A) in appeal he asked assessee to submit data on various accounts in the desired formats. He had sought data of following facts; 1. Comparable details of sales made by the appellant during the F.Y. 2015-16 and 2016-17, 2. Month wise cash sales from 01.04.2016 to 31.03.2017, 3. Month wise cash sales and cash deposits from 01.04.2016 to 31.03.2017, 4. Month wise cash sales and cash deposits from 01.04.2015, 31.03.2016, 5. Cash deposits in bank between 09.11.2016 to 30.11.2016, 6. Total deposits in the bank including SBNS, 7. Daily cash sales and cash in hand details from 01.06.2016 to 30.06.2016, 8. Daily cash sales and cash in hand details from 01.09.2016 to 30.09.2016, 9. Daily cash sales and cash in hand details from 01.10.2016 to 31.10.2016, 10. Daily cash summary from 8th November 2016 to 30th November, 2016, 11. Month wise creditors, purchase and finish good details of 01.04.2016 to 31.03.2017, 12. Month wise creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant had cash sales of Rs. 3.53 crore in the month of September, 2016 and had cash sales of more than Rs. 2.5 crores in the months of May June, 2016. The appellant has not revised any of the VAT returns filed by it. The appellant cannot manipulate the sales data of retruns filed before demonetization up to the month of September, 2016. In these facts, the cash sales made by the appellant in October, 2016 is found to be in line with the increase in cash sales of earlier year and the trend of earlier months in the current year. (v) The appellant had shown cash in hand of Rs. 98,69,664/- as on 31.10.2016. The appellant was asked to give the data of cash in hand of more than Rs. 1 crore. This data had been collated at Table 16 above. It is observed that the appellant had cash in hand of more than Rs. 1 crore on 29 occasions upto 30.10.2016, with maximum cash in hand of Rs. 1,79,02,854/- as on 23.10.2016. The appellant had cash in hand of more than Rs. 1 crore on 8 occasions during the year in the months up to September, 2016. Therefore, the cash in hand of Rs. 98,69,664/- shown by the appellant is not an outlier and is in line with the cash in hand held in earlier months ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.2016. 8.1 In continuity to the discussion made in Para 7.1(i) to 7.1(iii), it is observed as under: (i). The appellant had made cash sales between 1 to 7th November, 2016 in the range of 20-26 lakhs per day, whereas the sales on 08.11.2016 had been shown at Rs. 47.55 lakhs. The average cash sales between the period 1 to 7th November, 2016 is at Rs. 23.49 lakhs. The appellant had explained that the sales on 08.11.2016 actually represents the average sales of more than two days, due to following reasons: However; the cash sales on 08.11.2016 was quite higher because of the fact that after the announcement of demonetization the general public made a lot of purchases in cash due to the reason that such prohibited currency will be of no use from next day and there was panic and uncertainty of availability of new legal tender on the very next day and also the people were not certainty of availability of such new currency. Furthermore it is also again submitted that the assessee company is dealing in basic household products such as wheat, flour, Maida, breads and other such daily household need consumable items which are essential goods needed on daily basis . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove. In view of these facts, the amount of deposit made by the appellant in SBNs is considered at Rs. 2,08,87,500/- and not Rs. 2,16,87,500/-, as considered by the AO. It is further observed that the appellant had deposited all the SBNs between 10.11.2016 to 12.11.2016. 10. The appellant had built up cash in hand from Rs. 98.69 lakhs as on 31.10.2016 to Rs. 234.82 lacs as on 07.11.2016. The appellant had deposited only Rs. 4.5 lakhs between 01.11.2016 to 06.11.2016. The appellant has shown cash deposit of Rs. 59.62 lakhs on 07.11.2016 and cash in hand on 07.11.2016 was at Rs. 194.19 lacs. The appellant had shown sales of Rs. 47.55 lacs on 08.11.2016 had not deposited any cash on 08.11.2016, thereby having the cash in hand of Rs. 2.41 crores as on 08..11.2016 out of which Rs. 2.08 crores were in SBNs.The appellant had submitted the reasons for enhanced cash in hand between 01 to 08th Nov, 2016 compared to the cash in hand in other months, which is reproduced as under: With regards to the reason for accumulation of cash balance during the period 1st November to 8th November 2016 it is being submitted as under a) Appellant generally maintains sufficient cash bal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts such as wheat, flour, Maida, breads and other such dailyhousehold need consumable items which are essential goods needed on daily basis. 2. It has been observed that the details of cash sales for first seven days and the balance period given on page 6-7 Chart -2 under point no 3 - Detail of Cash sales during first 7 days as percentage of total Sales of our submission filed online which was prepared by our junior accountant have some clerical accounting errors may not be considered. 12. That the cash book for the period 01.11.2016 to 08.11.2016 has also been furnished in this regard it is also submitted that the assessee had deposited the entire available cash balance as on 08.11.2016 into their bank account subsequent to the demonetization of Indian currency being announced in the country. Therefore, the said cash balance as on 08.22.2016 includes the sale receipts and other cash in hand retained to meet out the daily expenses and specially for the purpose of procuring raw materials from the farmers. Thus, the entire cash deposited in the bank account of the assessee are completely explained. 11. As per the analysis of the data for the month of October, 2016 ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38.25 lakhs of SBNs held as cash in hand and subsequetly deposited in the bank account is held to be unexplained. 11.2 It appears the appellant had deposited the cash of SBNs received from the undisclosed sources and to cover it, it had shown equivalent sales on/before 08.11.2016 to create excessive cash in hand. There can be possibility that the appellant might have booked these sales in books by 08.11.2016 to deposit the SBNs, but actually made sales thereafter, to keep the stock as per books. 11.3 In view of the discussion made on analysis of data and facts in the above para, it is held that the appellant had not explained the source of Rs. 38.25 lakhs of SBNs held as cash in hand as on 08.11.2016-: and subsequently deposited in its bank account. Accordingly, the addition of Rs. 212 lakhs made by the AO u/s 68 r.w.s. 115BBE is restricted to Rs. 38.25 lakhs and this ground of appeal is partly allowed. 12. Now what can be concluded from aforesaid conclusions drawn by the Ld.CIT(A) in para 11.2 as reproduced above is that deposit of SBNs is not attributed to the any activity of assessee and SBNs received from the undisclosed sources is alleged to be the source a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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