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TMI Blog2024 (8) TMI 566X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover from 1st January to 31st March in all these three years. AO has not visualized the circumstances during demonetization, where every amount available, is required to be routed through the Bank accounts. He has made analysis of average cash balance from January, 2016 to June, 2016 and December, 2016 to March, 2017. AO has tried to compare un-comparable without visualizing the effects of the true situation. The other expectation of the ld. Assessing Officer was that the assessee should have maintained details of old and specified currency, which were deposited in the Bank, but no such guidelines were issued to the assessee by the Income Tax Department. Addition restricted by CIT(A) on different analogy - CIT(Appeals) though reduced the quantum addition, but adopted a very different analogy. He calculated the availability of cash in the hands of the assessee in the same ratio in which turnover of the business increased in different years starting from F.Y. 2014-15. The ld. CIT(Appeals) ought to have analyzed the purchases also and whether such a profit has resulted to the assessee, which can give rise to unexplained cash to the assessee. In such a situation, why the books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Such submission reads as under:- 5.2. During appellate proceedings, the appellant has submitted his written submission dated 21.08.2023, relevant part of which is as under: The assessee was engaged in the retail trading in medicines. He was the proprietor of proprietorship concern M/S DI SHA and partner of the partnership firm M/S DI SHA w.e.f. 01.01.2017. As the assessee is engaged in retail trading in medicines, so all the sales comprise of cash sales only. Since medicine is an essential item, Government allowed sales in SBNs and therefore the shop remained open during the demonetization period and cash sales were made during the said period also. The assessee sold medicines during demonetization period in new currency. During the course of scrutiny assessment, the assessee produced audited Profit and Loss Account and audited Balance Sheet, copies of cash book, sales register, purchase ledger and bank statements before the Ld. A.O. Ld. A.O. has verified all such documents. During the demonetization period the business of the assessee was in full operation because medicines are essential items and during demonetization period, cash sales were made by the assessee. Turnover of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash deposits of Rs. 47,75,250 made with New Legal Notes are completely comprised of the receipts from cash sales during the demonetization period. The cash deposits of Rs. 54,57,500 made in Specified Bank Notes (SBNs) are comprised of receipts from cash sales and deposits from the cash balance as on 08.11.2016. [A Copy of the statement of segregation of bank notes employed for transactions during the demonetization period i.e. 09.11.2016 to 30.12.2016 as certified by the banks is being enclosed as Annexure F. Pgs: 1 to 2]. Assessee is engaged in line of retail trading in medicines, which is an essential item. Hence his medicine shop remained open during the demonetization period i.e. from 09.11.2016 to 31.12.2016. Cash sales were made during the demonetization period. During demonetization as per RBI guidelines, any Pharmacy, medical shop was one of the specified entities /persons permitted to accept special Bank Notes (SBNs) of Rs. 1000 and Rs. 500 towards Sales of Medicines. Practically, there was a rush and demand at the counter by people who wanted to procure medicines In exchange of their SBNs and that Sales were increased during demonetization period. The assessee was covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of for the Asst. Year 2017-18 in such a way that huge cash balance is comes out as on 08-11-2016 i.e. the day before the announcement of demonetization. The cash receipts cash sales shown in the month of October November 2016 is also abnormal in comparison to other period and it was also arranged in similar way to justify the huge cash deposit in banks. In view of the abovementioned fact circumstances, it is, therefore clear, that the assessee failed to substantiate the source of fund of cash deposit in its bank accounts with proper denomination of notes received subsequently deposited in its bank account. Considering the abovementioned opening cash balance for the month of January 2016 to June 2016 and December 2016 to March 2017, the average cash balance per month comes to Rs. 2,16,821/-. For the sake of natural justice, it may be considered that the cash balance as on 01-11-2016 was Rs. 2,16,821/-. Considering the total receipts and payments from 01-11-2016 to 08-11-2016, net cash balance on 08-11-2016, therefore, comes to Rs. 3,36,934/-. For the sake of natural justice, if it is considered that out of the above, Rs. 36,934/- was in other than SBNS, total SBNs on 08-11-2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pectively, bringing the yearly average to 32.5%. In the period 8th November to December in F.Y 2015-16 the cash deposits in bank are of Rs. 44,49,860/-. Hence applying the increase in average turnover ratio to this amount the cash deposits in FY 2016-17 during the same period should be around 132.5% of 44,49,860/- which comes to Rs. 58,96,064/-. Since the AO has already given credit of the opening cash balance as on 8.11.2016 which has been calculated by him by applying the averages, the addition made by the AO of 99,32,750/- is required to be reduced by an amount of Rs. 58,96,064/-. In view of the aforesaid discussion, the addition to the tune of Rs. 40,36,676/- on the issue of unexplained cash deposits in bank is upheld. The ground of appeal raised is partly allowed. 7. A perusal of both the impugned orders would suggest that none of the Officer was able to analysis the specific stand of the assessee and unnecessarily assumed availability of unexplained cash credit with the assessee. Let us first deal with the finding of the ld. Assessing Officer. The ld. Assessing Officer has observed that cash deposit trend of the assessee during demonetization period and in earlier few months ..... X X X X Extracts X X X X X X X X Extracts X X X X
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