9911796707
TMI Blog2024 (8) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... the advances have been converted into sales, appears to be bona fide and reasonable. We find force in the arguments of the assessee for simple reason that as per the details furnished by the assessee like bank statements, cash book, it is undoubtedly clear that assessee was having sufficient withdrawals from very same bank accounts before the date of demonetization which was recorded in the books of accounts of the assessee. The cash balance maintained by the assessee as per books of accounts as on 08.11.2016 was much higher than the amount of cash deposited to bank account during demonetization period. Therefore, when the assessee is able to file necessary evidences to prove that there was sufficient cash withdrawal from very same bank account which is further backed by bank statements, where it has been clearly evident that there are sufficient cash withdrawals, in our considered view, there is no reason for the AO to reject explanation of the assessee that cash deposit is out of cash withdrawals from very same bank account. Respectfully following the decision of M/s. Sahana Jewellery Exports Pvt Ltd [ 2024 (1) TMI 112 - ITAT CHENNAI] we are of the considered view that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer, we are of the considered view that said reasons come under reasonable cause for not filing the appeal and thus, in the interest of advancement of substantial justice, the delay in filing of appeal by the Assessing Officer is condoned. 6. The brief facts of the case are that, the appellant M/s. DAR Paradise Pvt Ltd., is engaged in the business of trading in gold jewellery and bullion. The assessee has filed its return of income for the assessment year 2017-18 on 04.11.2017, declaring a total income of Rs. 31,74,020/-, under normal provisions of Income-tax Act, 1961 and Rs. 17,32,330/- under provisions of section 115JB of the Income-tax Act, 1961 (hereinafter referred to as the Act ). The case was selected for complete scrutiny under CASS to verify large cash deposits during demonetization period and other issues. During the course of assessment proceedings, the Assessing Officer called upon the assessee to furnish certain details including audited financial statements for the relevant assessment year, details of bank account, tax audit report etc. In response, the assessee has filed books of accounts, bank account details, tax audit report etc. Further, during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also not paid advance to the assessee. Further, one or two persons came and deposed before the Assessing Officer and admitted to have subscribed to gold scheme and payment of advances. The Assessing Officer, on the basis of enquiries conducted during the course of assessment proceedings, opined that the assessee could not able to furnish any evidences to prove receipt of trade advances from various persons for gold scheme and thus, issued show cause notice dated 23.12.2019 and called upon the assessee to explain as to why cash deposits made during demonetization period amounting to Rs. 90,85,62,000/- should not be treated as unexplained cash credits u/s. 68 of the Act. In response, the assessee vide letter dated 25.12.2019, submitted that source for total cash deposits of Rs. 90,80,86,500/- is explained out of opening cash in hand of Rs. 90,75,10,005/-. The assessee further submitted that, the cash balance as per books of accounts as on 08.11.2016 is out of cash drawn from bank before the date of demonetization at Rs. 39,33,30,165/-, direct cash sales without any advances at Rs. 15,58,58,464/- and balance amount of Rs. 32,43,85,989/- is out of advances received from customers f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s before the ld. CIT(A). During the appellate proceedings, the ld. CIT(A) furnished additional evidences filed by the assessee to the Assessing Officer for his comments and remand report. The Assessing Officer has submitted his remand report dated 03.06.2022 and rejected additional evidences filed by the assessee including list of customers, copies of board resolution dated 08.02.2016 and 17.02.2017 along with image of pamphlet advertising the purported gold scheme as additional evidences, on the ground that various evidences gathered during the course of assessment proceedings clearly proves the fact that, there is no gold scheme as claimed by the assessee and further, the claim of receipt of advance from various customers is not genuine. The assessee has filed its rejoinder to the remand report of the Assessing Officer and reiterated its arguments that, it has floated the gold scheme and was widely advertised by way of pamphlets and through newspapers circulated to the people. The scheme was also approved in a board meeting and various customers have responded to the scheme and also paid advances. The advances paid by the customers has been subsequently converted into sales and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of accounts maintained by the assessee with regard to purchase and sales declared for the relevant period. The Assessing Officer failed to make out any irregular movement of stock in trade or deficit stock in trade when the assessee has declared sales for the relevant period. In fact, there is no iota of evidence in the order passed by the Assessing Officer with regard to discrepancy in books of accounts and stock details maintained by the assessee. In fact, the assessee has declared purchase and sales to GST authorities and the same has been accepted without any deviation. In absence of any findings with respect to incorrectness in books of accounts maintained by the assessee, the Assessing Officer cannot simply bring trade advance received by the assessee as cash credits which falls under the mischief of Sec. 68 of the Act, more particularly, when the assessee has declared said advances as sales and also offered to tax. The Ld. CIT(A) had also negated observation of the Assessing Officer with regard to certain judicial precedents, including the decision of the Hon ble Supreme Court in the case of Sumati Dayal v. CIT(Supra) and CIT v. Durga Prasad More reported in 82 ITR 540 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme whiCT were subsequently converted into gold sales but also the cash sales made before the demonetisation and also the net withdrawals of the cash from the Bank and brought the entire cash deposits of Rs. 90,80,86,500/- as addition u/s 68 of the Act. The entire cash deposit has been taxed as unexplained cash credit even the same has been supported by the cash bills, stock, purchase, sales register and VAT return. 6.6 As regards various adverse comments in the assessment order, the appellant has submitted point by point rebuttal of the A.O.s comments. The A.O observed that the customers remained unverifiable and the onus lies with the assessee to prove the genuineness of the transactions, the appellant has submitted before the A.O, that due to absence of law in this regard, the assessee could not insist upon the proof of identification and/or address from the customers and recorded whatever names and addresses were declared by them. Further, the AO has not disputed the fact that the cash sales were duly accounted for and were part of the credit side of the trading account and tax was duly paid therein. The increase in Cash Sales as compared to the earlier period seems normal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o income. Though certain suspicious features were noticed by the AO but he did not find any defect in the books of accounts and financial statement. Assessee had sufficient stock in hand. AO has not questioned the same. AO could not find any discrepancy in the stock when the goods were delivered against the amounts received from customers. When the sale volumes have not been suspected, the raising of suspicion on the basis of receipt of cash and deposit of same immediately after 8.11.2016 is not valid. 6.8 The assessee maintains regular books of account, which are audited by auditor. The cash sales and the corresponding cash deposits in banks are duly reflected in books of the assessee in the respective years. The audited financial statements form part of the regular returns filed by the assessee. The trend of cash sales and cash deposits existed in the past years as well as in the months subsequent to the demonetization period. The entries pertaining to cash sales and corresponding cash deposits in banks were duly reflected in the books of account of the assessee. The audited books of account and the tax audit report for the F. Y. 2016- 17 were also filed before the AO in course o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 99.16 Percentage Total sales/Cash 51. 71% 43.58% 6.11 The increase in the total turnover in the assessment year 2017-18 over the assessment year 2016-17 was due to advance scheme promulgated to avail interest free sale advance for utilization in the business. As a whole the cash sale is reduced compared to previous year and cheque/RTGS sale has increased. The GP ratios are the past year, current year and future assessment year are also comparable and are as under: S. A.Y. Sales GP G ratio 1 2016-17 783877063 12171232 1.5 2 2017-18 2275331698 39913515 1.75 3 2018-19 781703649 24007233 3.07 6.12 Further, the assessee has submitted that there was rise in the turnover and that there is natural tendency of people to utilize their cash holdings in purchasing gold due to such unusual and sudden phenomenon like demonetization leading to sudden surge in sales, total cash sales reported in the instant year cannot be said be unreasonable. In the year 2016, October was the festive season since Navratri was on I to 9'h of October, Dhanteras was on 28th October and Diwali was on 30' October. Thus the peak time within the whole year foe sale of jewellery being this festise season which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s /or an opportunity to the assessee explain the nature and source of the fund. Once it is explained, it is incumbent on the Assessing Officer to consider the same and form an opinion whether the explanation is satisfactory or not The expression used in the section clearly lays the burden on the assessee to explain the nature and source of the fund. Unless an explanation is offered, the Assessing Officer is free to treat the fund as income of the assessee from undisclosed sources chargeable to tax. Once an explanation is offered by the assessee, the assessing Officer is bound to consider the same such consideration is guided by sound principles of Jaw. The opinion so formed must be reasonable and based on materials and shall not be perverse, The extent of the power of the Assessing Office, while considering the materials produced by the Assessee is very wide. It is a question of examining as to whether the apparent is real. The Assessing Officer is empowered to lift the corporate veil and examine the real nature of the transaction. In the process, he may exercise his power of examining the materials. He may require the assessee to produce further materials if so required. He may se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant's claim as per books of accounts and other documentary evidences that the advances from Gold deposit scheme were not converted into sales. In fact, one of the director's statement on 30.03.2017 narrated the Gold deposit scheme floated by the appellant and the enquires u/s 131(1A) could not disprove this claim by bringing out any discrepancies in the purchases, sales and closing Stock as on the dates of enquiries 6.17 Further, the cash deposited in the demonetized currency added as income of the assessee by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in statement of profit loss, therefore there is no occasion to again consider the same as income of the assessee by applying the provisions of section 68 of the Act. It is further relevant to mention here that if the intention of the legislature would be to apply the provisions of section 68 of tile Act on the sale transactions also, then in such case as per law it would be mandatory to have the identity, genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly recorded in the books of accounts and stock register. The AO did not consider such submission and documents in right perspective and by brushing aside all the submission and settled principal of law. This fact is apparent from the assessment order which was framed without considering the submission as well as facts of assessee in right perspective. The amount deposited in demonetized currency out of cash balance as on 08.11.2016 is entirely added as income of the assessee presuming that as on this date the assessee did not holding any single legitimate SBN (Specified Bank Note) at the end of 08.11.2016. SBN (Specified Bank Note) was deposit out of the funds realized during the period from 03.11.2016 to 08.11.2016 against cash sales, realization from sundry debtors and advance from customers and the same was entirely added as income of the assessee by presuming that during these days the showroom of the assessee was not functioning and there was no regular cash sales of single penny on these days. 6.20 The AO has treated the cash deposited in the banks during the demonetization period in demonetized currency as unexplained cash credits u/s 68 of the Act although the nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. 6.22 In the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC), the Hon'ble Apex Court decided the matter in favour of assessee of the ground that it was clear on the record that the assessee maintained the books of accounts according to the mercantile system and there was sufficient cash balance in its cash books and the books of account of the assessee were not challenged by the Assessing officer. If the entries in the books of accounts are genuine and the balance in cash is matching with the books, it can be said that the assessee has explained the nature and source of such deposit. In the case of Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.) Hon'ble Patna High court held as under: It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetized and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons bank notes (SBNs) post demonetisation bank notes (SBNs) post demonetization. The assessee has explained the sources of cash deposits as cash sales received on 08.11.2016 against the sales. In support of its explanation, the assessee also produced the sale bills and books of accounts before the AO. There was a survey u/s 133A by investigation wing where also the assessee explained its purchase sales and stock. These explanation were given before the AO also. However, the AO was not satisfied with the assessee's explanation of sales citing the reason that the assessee could not furnish proper KYC documents of the buyers during the course of survey, the average sales of the firm was not matching with peak and non-peak season. In the present case there was no survey or any other development. AO had do document except the suspicion that assessee must have manipulated the sales as the quantum of sales is extraordinary. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case and considering the decisions in similar cases by various courts as discussed above, I have no hesitation to hold that the cash receipts represent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be defects in the stock registers/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stocks. h'e 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 peige 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 OO/T (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited supra suggest that once, the assessing officer accepts the books of accounts and the entries in the books of accounts are matched, there is no case for making the addition as unexplained. Hon'ble Delhi High court considered the issue of taxing the opening stocks in the case 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 !TAT 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and no unexplained cash credits were found, thus, the case law relied upon by the Ld.DR is also distinguishable on the facts of the case. The Ld.DR 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 Jaws 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 /TA T 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 80/C and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained cash credit which is against the principles of taxation. It is also on record that the assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. Hon'ble Kolkata Tribunal in the case of CIT Vs. Associated Transport Pvt. Ltd. reported in 84 Taxman 146 on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. The Hon'ble Vishakapatnam Tribunal in the case of ACIT Vs. Hirapanna Jewelers in /TA No. 253Niz/2020 on identical acts held that when cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not have been again added as income. I find the issue in the present case is also covered by the aforesaid two decisions relied on by the Learned A.R. of the assessee. In such circumstances and in absence of any contrary material brought on record by the Department, I am of the view that in the present case no addition is called for I, therefore, direct for deletion of the addition made by A. O. and upheld by the Ld. CIT(A). Thus. the ground raised by the assessee is allowed. 6.28 After considering the above discussion, I am of the view that appellant has furnished necessary documents in support of sales transaction before the assessing officer during the assessment proceeding. There was sufficient stock to effect the sales and no defect has been found in the stock as well as the sales and purchases. Therefore, I do not find c1ny reason to suspect the sales. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case and considering the decision on similar issue by various Courts. I have no hesitation to hold that the cash receipt represent the sales which the assessee has rightly offered for taxation. Since, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciate the fact that, the assessee initially stated that source for cash deposits is out of deposits received from various persons for gold scheme, but subsequently changed its stand and argued that it has huge cash withdrawals from very same bank account prior to demonetization period. The subsequent stand taken by the assessee was not taken before the Assessing Officer, but the Ld.CIT(A) without confronting those evidences, simply accepted the claim of the assessee and deleted additions made by the Assessing Officer. The Ld. DR further submitted that the Ld.CIT(A) failed to appreciate the fact that there is a substantial increase in cash sales during the impugned Financial Year when compared to earlier Financial Year. Although, the assessee claims that the percentage of cash sales to total sales is almost equal when compared to earlier years, but fact remains that when it comes to value, the assessee could not explain sudden spike in cash sales before the demonetization period. Although, the Assessing Officer has brought out clear facts to the effect that the so-called trade advances received from various parties is unexplained cash credits, which comes under the provisions of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les were made. In the present case, the assessee has discharged its onus and filed necessary details. 14. The Ld. Counsel for the assessee, further submitted that the Assessing Officer made additions towards cash receipts purely on suspicion and surmise without there being any findings as to how trade advances collected by the assessee comes under the purview of provisions of Sec. 68 of the Act. In fact, the Assessing Officer is not disputing the fact that cash in hand as on the date of demonetization was much higher than the amount of cash deposits. Further, the assessee has filed all evidences before the Ld.CIT(A) to prove that the source for cash deposits, is out of cash withdrawal from very same bank account prior to the date of demonetization. As per the details submitted by the assessee, the assessee has withdrawn about Rs. 39.33 Crores. from bank accounts. The assessee had also explained the reasons for cash withdrawal. The assessee has furnished cash book and as per cash book maintained by the assessee, sufficient cash in hand was available before date of demonetization. The assessee has furnished books of accounts, including purchase bills and sales bills and also stock re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and addresses and from the above, it is undisputedly clear that the assessee is not having the details of persons from whom advances was received. The Assessing Officer, further was of the opinion that the notices issued u/s. 133(6) of the Act to various persons were returned unserved with a remark no such address/address cannot be found or insufficient address . The summons issued u/s. 131(1) of the Act are also returned unserved. Further, in few cases, summons were served to the partied and they have responded and claimed that they did not aware any kind of gold scheme from the appellant company and also not paid any advance. The Assessing Officer, on the basis of enquiry conducted during the course of assessment proceedings opined that the explanation offered by the assessee with regard to source for cash deposits is false and not genuine and thus, made additions u/s. 68 of the Act. 16. There is no dispute with regard to the amount of cash deposits into bank account during demonetization period. In fact the assessee has deposited a sum of Rs. 90,80,86,500/- into two bank accounts maintained with Oriental Bank of Commerce and Axis Bank. It is also not in dispute that, as per ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to cover up source for cash deposits into bank account during demonetization period, then there should have been a finding with regard to stock in trade maintained by the assessee. But, there is no finding with regard to stock deficit. If sales is accounted without there being any stock, then as per stock register there should be a negative stock. But, there is no such observation from the Assessing Officer. The sales declared by the assessee has been accepted by the GST authorities. From the above, it is undisputedly clear that the Assessing Officer made additions towards cash deposits purely on suspicion basis without there being any observation with regard to incorrectness in books of accounts maintained by the assessee and sales declared for the relevant period. No doubt, some customers might not have replied or responded to the summons issued u/s. 131(1) of the Act by the Assessing Officer or notices issued u/s. 133(6) of the Act, but, no response from the customers cannot be reason for the Assessing Officer to take adverse view against the appellant, when the appellant is able to furnish sufficient evidences to prove source for cash deposits. Further, there is a fundamenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash receipts recorded in the books of accounts before the date of demonetization. Further, cash receipts from various persons have been further substantiated with sales made to them before the date of demonetization. In fact, the assessee has filed various evidences, including sales bills to support its arguments. The Assessing Officer never disputed sales declared by the assessee nor pointed out any discrepancy in purchase or stock in trade held in the business of the assessee before the date of demonetization. In fact, the assessee has filed comparative sales for the month of April, 2016 to November, 2016 and corresponding April-15 to November, 2015 and we find that there is no abnormal deviation in sales declared for the month of November, 2016 when compared to earlier periods. It is not a case of the Assessing Officer that the assessee has declared sales without purchases. In fact, sale declared by the assessee is backed by corresponding purchases, and is supported by necessary purchase bills. The Assessing Officer could not point out any discrepancy in stock register maintained by the assessee nor made out a case that the assessee has declared sales without there being any sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank statements, where it has been clearly evident that there are sufficient cash withdrawals, in our considered view, there is no reason for the Assessing Officer to reject explanation of the assessee that cash deposit is out of cash withdrawals from very same bank account. 21. The assessee has relied upon the decision of ITAT, Chennai Benches in the case of ITO vs M/s. Sahana Jewellery Exports Pvt. Ltd., in ITA No. 999/Chny/2022 order dated 20.12.2023. The coordinate bench of ITAT, Chennai Benches has considered an identical issue of cash deposits during demonetization period and after considering relevant submissions has held that trade advances received from customers and subsequently converted as sales cannot be treated as unexplained cash credit u/s. 68 of the Act. The relevant findings of the Tribunal are as under: 11. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. We have also carefully considered relevant reasons given by the AO to make additions towards cash receipts amounting to Rs. 51,39,39,100/- u/s. 68 of the Act. The AO has made additions towards cash receipts pertains to sale of jewellery f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause as to why the credits should not be considered as unexplained cash credit u/s. 68 of the Act. In response, the assessee submitted that as per law, it is not required to collect complete address and PAN from the persons to whom it has sold jewellery. Further, as per Rules 114B of the Income Tax Rules 1962, if sale value of jewellery is in excess of Rs. 2 lakhs to a single person, then, it is required to collect PAN. Since, there is no requirement of collecting PAN, the assessee does not having details of PAN and correct postal address of the persons from whom it has received trade advances for sale of jewellery. Therefore, assessee submitted that the question of filing confirmation letter from the parties, from whom, it has collected advance for sale of jewellery does not arise, and consequently, cash receipts cannot be assessed u/s. 68 of the Act. The assessee had also explained the AO that it has sufficient cash balance as on 08.11.2016 as per books of accounts maintained for that assessment year and argued that the total cash deposits into bank account is explained out of cash in hand. The assessee has also made an alternative submission that it has sufficient cash withd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and sales has been accounted in the books of accounts of the assessee. Therefore, in our considered view, the AO has committed a fundamental mistake in examining the cash receipts claimed to have been received by the assessee towards sale of jewellery in light of provisions of Sec. 68 of the Act. 14. Be that as it may. The fact remains that, the assessee has furnished name and address of the customers from whom it has received cash for sale of jewellery. The assessee need not obtain confirmation and submit to the AO, because, the law does not mandate colleting PAN details of the persons, if sale value of jewellery does not exceed Rs. 2 lakhs as per Rule 114B of Income Tax Rules, 1962. In so far as compliance of KYC norms, it is mandatory under Prevention of Money Laundering Act, 2002, w.e.f. 04.05.2023 onwards and not applicable for the impugned assessment year. Therefore, in our considered view, when the assessee has furnished name and address of the persons from whom it has received trade advances for sale of jewellery, the assessee has satisfactorily discharged onus cast upon to furnish name and address of the persons. Therefore, the observation of the AO in light of provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed cash from various customers towards sale of jewellery and subsequently the advances have been converted into sales, appears to be bona fide and reasonable. 16. Coming back to second observation of the AO in rejecting explanation of the assessee with regard to source for cash deposits. Initially, assessee claims that source for cash deposits is out of trade advances received in cash from various persons. However, during the course of assessment proceedings itself, the assessee claimed that it was an error in making a submission that it has received trade advances from various persons before the date of demonetization, but fact remains that authorized representative who appeared and made submissions before the AO made an inadvertent error of copying submission made in another group case which is also pending for assessment. Further, immediately after noticing the above inadvertent error, the assessee has submitted details of cash book along with bank statements and explained that it has sufficient cash withdrawal aggregating to Rs. 150 Crs. from very same bank account on various dates before the date of demonetization and after utilization of the cash for the purpose, for which, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account in the form of share capital. Based on this, the Tribunal concluded that there was 'no confession' made by the managing director that unaccounted income had been introduced by the assessee in the form of share capital. Therefore, according to the Tribunal, the statement made under section 132(4) did not constitute incriminating material. [Para 10.4] The Tribunal, has correctly analyzed the statement of the managing director. The statement does not allude to the fact that the assessee had introduced 'unaccounted money' in the form of share capital/share premium through investor entities. The retraction letter, as noted by the Tribunal, also did not advert to the introduction of investment of money in the assessee in the form of share capital/share premium. [Para 11.1] The trail of the money received from various entities in the form of share capital/share application money, concluded that the assessee had been able to place before the Assessing Officer sufficient documentary evidence which established that the money which the assessee had paid to the investor entities was routed back to it in the form of share capital/share premium. [Para 11.4] That be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed then necessarily the sales shown in the assessee's regular books of account would also have to be excluded which would result in the assessee's income falling below the returned/declared income. [Para 15.1] Furthermore, the Assessing Officer had not placed on record any material to justify the disallowance of 25 per cent of the purchases on the ground that they were bogus without carrying out any inquiry or investigation. In particular, the Tribunal also flagged the issue that the purported shortage of stock was based on a reference made qua that aspect in the appraisal report of Investigation Wing which, as noted above, did not find mention in the remand report, as during the search it was found that the stock worth the aforementioned value was lying at the assessee's warehouse, something which was completely ignored. This position, was fortified by the fact that no addition in respect of any excess or shortage of stock had been made in the assessment orders of any of the years. In effect, according to the Tribunal, the stock found in the books reconciled with the stock which was found physically. [Para 15.3] It appears, that the Commissioner (Appeals) did not cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner (Appeals), based on the mere statement of the managing director of the assessee. Besides this, as noted by the Tribunal, the Commissioner (Appeals) had attempted to quantify the profit by resorting to a methodology, which was incomprehensible. [Para 15.9] The average cash deposited by the assessee with its bankers before demonetization was, approximately, Rs. 42.35 crores, whereas the actual sum deposited during the demonetization period was Rs. 180.53 crores. The assessee's explanation was, broadly, that deposits were made out of cash sales and, during Diwali, cash sales increase; especially in the business in which the assessee is i.e.. dry fruits. [Para 16.2] The assessee. in support of its plea that cash deposits were made by the assessee in respect of sales which were duly accounted for, reliance was placed on the following material:- audited books of account; bank-wise summary of cash deposits; copies of bank statements; and details of monthly cash sales and cash deposits made in earlier financial years. [Para 16.2] In this context, the Tribunal analyzed the data pertaining to cash sales and cash deposits made in the financial year in issue. The analysis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year; From the perusal of section 68, the sum found credited in the books of accounts for which the assessee offers no explanation, the said sum is deemed to be income of the assessee. In the instant case the assessee had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock registers. Both the DDIT (Inv.) and the AO have conducted the surveys on different dates, independently and no difference was found in the stock register or the stocks of the assessee. Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/ stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 441 ITR 550 (Delhi). The Hon ble Delhi High Court under identical set of facts, has deleted the additions made by the AO towards cash deposits during demonetization u/s. 68 of the Act. The relevant findings of the Hon ble Delhi High Court are as under: A careful perusal of the extract of the statement made by managing director of the assessee (as recorded in the assessment orders in-issue) would show that all that he had stated was that it was the assessee's own money, given in the form of loan and/or bogus sales or purchases, that had been routed back to the assessee in the form of share capital/share premium, albeit, through banking channels. [Para 10.3] The Tribunal, in this context, records a finding of fact that no unaccounted income of the assessee had been introduced in its books of account in the form of share capital. Based on this, the Tribunal concluded that there was 'no confession' made by the managing director that unaccounted income had been introduced by the assessee in the form of share capital. Therefore, according to the Tribunal, the statement made under section 132(4) did not constitute incriminating material. [Para 10.4] The Tribunal, has correctly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso found that in respect of assessment years 2012-13, 2013-14 and 2014-15, sale and purchase transactions were verified and assessment orders were framed under section 143(3). The books of account were duly audited, both, under the Companies Act, 2013 and the Income-tax Act; no defects concerning books were found either by the Assessing Officer or the Commissioner (Appeals). Thus, according to it, no incriminating evidence was found. [Para 15.1] Insofar as the abated assessment years were concerned i.e., assessment years 2015-16, 2016-17 and 2017-18, it was, apparent that the assessee had purchased goods, which were in value less than the sum for which they were sold. Therefore, as held by the Assessing Officer, in the deviation report, if the purported bogus purchases were to be disallowed then necessarily the sales shown in the assessee's regular books of account would also have to be excluded which would result in the assessee's income falling below the returned/declared income. [Para 15.1] Furthermore, the Assessing Officer had not placed on record any material to justify the disallowance of 25 per cent of the purchases on the ground that they were bogus without carryi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer, while preparing the deviation report and framing the assessment order with regard to purported bogus purchases is an aspect, which cannot be ignored and has been correctly highlighted by the Tribunal. [Para 15.8] If the revenue chooses to disallow bogus purchases, it would necessarily have to ignore the corresponding sales recorded against the very same parties. As pointed out by the Tribunal, the Commissioner (Appeals) could have rejected the books of account only, after it had examined and come to the conclusion that he was not satisfied as regards their correctness or completeness. The finding of fact returned by the Tribunal is that books of account were not examined by the Commissioner (Appeals). If that be so. then, section 145(3) could not have been triggered by the Commissioner (Appeals), based on the mere statement of the managing director of the assessee. Besides this, as noted by the Tribunal, the Commissioner (Appeals) had attempted to quantify the profit by resorting to a methodology, which was incomprehensible. [Para 15.9] The average cash deposited by the assessee with its bankers before demonetization was, approximately, Rs. 42.35 crores, whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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