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TMI Blog2023 (6) TMI 1432X X X X Extracts X X X X X X X X Extracts X X X X ..... monetisation treated as bogus sales - When the assessee has sufficient opening cash balance at the time of pronouncement of demonetization which was not disputed by the department, if the same is being deposited by the assessee in its bank accounts, the same cannot be treated as unexplained or bogus unless any contrary observations borne from available records or otherwise brought on by the revenue against the assessee. CIT(A) has appreciated the facts of the case, considered all the aspects correctly and has appropriately allowed the appeal of the assessee. The case of the Vaishnavi Bullion [ 2022 (12) TMI 1309 - ITAT HYDERABAD] since has distinguishing facts and circumstances not comparable with the present case, the same cannot be applied to rescue the contention of the revenue. The department was unable to brought before us anything which inspires us to agree with the contentions of the department to substantiate their claim that the deposits made by the assessee out of its cash sales were not explained or are bogus, we therefore having no distinguished view then the view taken by ld. CIT(A), upheld the finding of the ld. CIT(A) and therefore, decided this issue against the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot;Whether on points of law and on facts & circumstances of the case, the Id. CIT(A) erred in ignoring that not a single cash sale was made during the period 01/04/2016 to 04/11/2016 and the sales multiplied exponentially during the period prior to 08/11/2016. 7. "The Ld. CIT(A) has not gone into the merits of the case and just dismissed the order by relying on the orders of jurisdictional ITAT/High Court though there is no nexus between the conclusion of fact and primary fact upon which conclusion is based. 8. The order of the Id. CIT(A) is erroneous both in law and on facts. 9. Any other ground that may be adduced at the time of hearing." 2. Brief facts of the case culled out of the material on records are that, this case was selected for scrutiny under CASS for the assessment year 2017-18. Accordingly notice under section 143(2) was issued on 08/08/2018 online and was duly served upon the assessee online and by post also. The case was received in transfer from ITO-1(3), Bhilai on 30/08/2018. A fresh notice u/s 143(2) was issued on 27/09/2018 by ITO2(2), Bhilai. With the change of incumbency, a fresh notice under section 129 was issued on 01/11/2019. Notice under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oretrue for the de-notification period when evey person was legally bound to deposit the currency. The jurisdictional ITAT has deleted addition made by AO in similar case of Amit Kumar Bansal Prop. M/s Shri Krishna Minerals vs ITO -1 Raigarh ITA No. 130/Rpr/2013. The relevant paras are as under- 3. He observed that all the three loan creditos had made cash deposit in their ban kaccount prior to issue of cheques of the same amount to the assessee as loan. Therefore, he held that the unsecured loan shown by the assessee is not genuine and the loan creditors did not have the capacity to advance laon to the assessee. 10. We find that the argument of Ld AR of the assessee is that the loan from all the loan creditors has been received by cheque through banking channel. All the three loan creditors are income tax assessee. They have filed their income tax returns, profit and loss account and balance sheet before the assessing officer. The assessing officer has dobuted the creditworthiness of the loan creditors on the ground that they have deposited cash prior to issue of cheque to the assessee. ………The assessing officer as well as CIT(A) has drawn adverse infe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not doubted the purchases. When puirchase s have accepted, the respective sales cannot be doubtful. Addition u/s 68 cannot be made in respect of amount which were found tobe cash receipts from the customers against which delivery of goods were made to them. The credit on account of sales are not unexplained when sales details are available. [ Smt Harshila Chordia vs ITO 298 ITR 349 Raj]. The ITAT in this case held that addition u/s 68 cannot be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them. Where all the records relating to purchase and sales including quantitative details are maintained there no addition u/s 68 in call for treating the sale proceeds as cash credits [ACIT vs Dewas Soya Ltd ITA 336/IND/2012]. In the judgment dt. 31/10/2012, wherein so many other decisions were relied upon and referred and it has been held where all the records relating to purchases and sales including quantitative details are maintained, then no addition u/s 68 is called for treating the sale proceeds as cash credits. In present case all the details like purchase and sales statement including quantita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition based on surmises and presumption which were also entirely against the facts on the records, thus, the allegation of AO were absolutely baseless. In this respect, the ld. AR of the assessee relied upon the judgment the case of CIT VS. ORISSA CORPORATION PVT LTD. 159 ITR 78 (SC), in the case of ROHINI BUILDERS' CASE, GUJ HC [ 256 ITR 360 wherein it has been held that no additions u/s 68 can be made if the primary owns is discharged by the assessee by providing confirmations, ITRs and bank statement of the loan creditors. Ld AR also relied upon the case of Pawan Kumar Agarwal vs. ITO, Ward 2(2), Bilaspur (Hon'ble Jurisdictional High Court of Chhattisgarh, Bilaspur in Tax case No. 24 of 2011), wherein it has been held as under:- "6. Section 68 of the Act provides a process by which the Assessing Authority has to reach at transactions of those persons with whom the Assessee had entered into transactions in which the particular assessee is involved, to conclude the assessment on the basis of the transactions referable to those persons. Such concluded assessments will have a bearing on the acceptability or otherwise the plea set up by the Assessee In the course of proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in the same year and remaining creditors have also repaid their loans in subsequent years. Therefore, the transactions are of the genuine loans and repayment, the same cannot be considered as bogus on which the provisions of section 68 of the Act could be invoked. 10. We have considered the rival contentions and perused the orders of the authorities below along with the relevant documents placed on record and also analysed to the case laws relied upon by the ld. AR of the assessee in support of the assessee contentions. On perusal of judgment in the case of CIT VS. ORISSA CORPORATION PVT LTD. 159 ITR 78 (SC) wherein the Hon'ble Supreme Court of India has held that "the assessee has given the name and address of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income tax assessee's. Their index number were in filed of the revenue. The revenue apart from issuing notices u/s 131 at the instance of the assessee, did not pursue the matter, further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance alleged loan. There was no effort made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO has observed that the assessee was confronted on the issue and was asked to furnish cash book for the previous year and current year. The assessee was also asked to furnish his stock position for verification of assessee cash sales. It is observed that the assessee has not made any cash sales during the period 1st April 2016 to 4th November, 2016. The cash sale was made on 5.11.2016 for an amount of Rs. 31,92,901/- with opening balance of cash of Rs. 31,42,146/-. The assessee has made sale of Rs. 2,61,80,430/- till 08.11.2016. Thereafter, the assessee deposited old high denomination currency to the tune of Rs. 2.90 Crs. Thus, it was the observations of the ld. AO that the modus operandi adopted by assessee was for adjusting old demonetized notes of various customers by way of booking of substantial sales. It is further stated by the ld. AO that the assessee was not having enough and sufficient gold stock as on 1st April, 2016 which stood at 1468.981 gram, therefore, stock of gold was generated artificially as an afterthought, so as to cater the need of booking sales during the demonetisation period. With these observations, the ld. AO has treated the deposit of Rs. 2.90 crs as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een legal and illegal incomes; Also holds that demonetised currency was received by the Assessee and was wrongfully deposited with the bank, thus, upholds the assessment order by concluding that the Assessee mischievously and unscrupulously brought the demonetised currency into the network; Discards Assessee's claim that money was received from the customers and upholds Revenue's stand that no legal sale of gold could be made with use of prohibited currency; ITAT takes a stern view on Assessee's conduct, observes, "...The persons like assessee have given a setback to well-intended and well-thought policy of Government of India and they have used this as an opportunity to convert their or others' ill-gotten money into bullions....The above said act of the assessee is not only against the law but also against the interests of the nation.": :ITAT HYD" The ld. CIT-DR thus has vehemently supported the order by the ld. Assessing Officer and has made the submissions to restore the same. 14. In defence, the ld. AR of the assessee has placed before us the written submissions which reads as under:- "GROUND NO. 2 [Addition of Rs. 2.90 crore, u/s 68, treating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it appears that the whole purpose of the department is to single out the cash deposits in the bank during demonetization period as arising out of unexplained source and to tax it u/s 68 so as to attract the provision of section 115BBE for levy of higher rate of tax. It is not the intention of the Legislature while introducing section 115BBE in the Finance Act, 2012. Kindly refer Explanatory Memorandum to Finance Bill, 2012 in which the reason and purpose of the provision of section 115BBE has been explained. Refer page no.152 of PB for Memorandum to Finance Bill, 2012. k. It is "unexplained credits, money, investment etc." and NOT "duly explained credits" in consonance with the fact of the case, for which section 115BBE has been inserted in the I. T. Act, 1961. Judicial pronouncement 1. SMT. HARSHIL CHORDIA VS. ITO [298 ITR 0349 (RAJSTHAN HC)] [Page 153-160 of PB] "Addition u/s 68 cannot be made in respect of the amount which was found to cash receipts from customers against which delivery of goods was made to them." 2. ACIT VS. DEWAS SOYA LTD [ITA NO 336/INDORE/2012, INDORE BENCH OF ITAT] "Where all records relating to purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titative stock details, cash book and all such documents were fully furnished before the AO. According to the ld. AO has rejected the explanation given by the assessee that the cash deposits are out of the opening cash balance and cash sales. The assessee has explained the nature and source of credit, but AO has rejected it on presumption and his on assumption without bringing any material available on record. The allegations of the AO that the assessee has not sufficient called stock as on 1st April, 2016 was without any basis since the assessee has not only sold its opening stock but also has made purchase during the year and all such purchases were duly accepted by the department. 17. It was the submission of Ld AR that, The AO has accepted the cash sales by the assessee was demonetized and his blowing hot and cold in the same breath according to his convenience. The assessee has offered all the reasonable explanations. The cash sale were according to his trade practices and therefore, without bringing anything contrary, the AO was unjustified in making the addition u/s 68 of the Act. The ld. AR of the assessee has placed before us the following case laws in support of the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra),Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld." • Rahul Cold Storage vs .ITO in ITA No. 123/RPR/2022 dated 29.11.2022 is as under:- "12. Having given a thoughtful consideration to the issue in hand, I find certain peculiar facts attending to the case of the present assessee before me. As observed hereinabove, it was the claim of the assessee that the cash deposits of Rs.46.55 lacs (supra) made in its bank accounts during the demonetization period were sourced out of its business receipts, i.e., cold storage rentals that were duly recorded in its books of account. On the contrary, the A.O for the aforesaid reasons had rejected the claim of the assessee and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the fact that the bank accounts in question in which the cash deposits were made by the assessee during the demonetization period formed part of its books of account can safely be gathered from a perusal of the assessee's balance sheet, Page 20 to 22 of APB. Considering the aforesaid facts, I am of a strong conviction that now when the bank accounts in question, viz.(i) A/c. No.910020017065122 with Axis Bank Ltd.; and (ii) A/c. No.13460200011173 with the Bank of Baroda had both duly been accounted for by the assessee in its books of account for the year under consideration, therefore, the A.O by not rejecting the said books of account had clearly accepted that the cash deposited by the assessee firm during the year under consideration in the said bank accounts was out of its disclosed sources. 13. Considering the aforesaid facts, I am of the view that as the treating of the cash deposit of Rs.46.55 lac (supra) as an unexplained cash credit u/s.68 of the Act by the A.O in itself militates against the acceptance of the book results of the assessee by him, therefore, there can be no justification in upholding the addition so made by him. I, thus, on the basis of my aforesaid obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice for stamping the same as the assessee's unexplained money u/s.69A of the Act. I, thus, not being able to concur with the view taken by the lower authorities who had failed to come forth with any cogent reason for treating the amount in question as the assessee's unexplained money u/s.69A of the Act, thus, set-aside the order of the CIT(Appeals) and vacate the addition of Rs.6.86 lacs made by the A.O. Thus, the Ground of appeal No. (s) 1 & 2 raised by the assessee is allowed in terms of the aforesaid observations." • ACIT vs. Sh. Chandra Surana in ITA No. 166/JP/2022 dated 15.12.2022 is as under:- "2.6 We have heard both the parties and perused the materials available on record. From the assessment records, it is noted that the AO made an addition of Rs.2,90,93,500/- in declared income by holding that said amount of cash deposited by the assessee in his bank account during the demonetization period is nothing but the undisclosed income of assessee which was shown under the garb of cash sales and thus it is liable to be added u/s 68 of the Act and taxable @ 60% under the provision of Section 115BE of the Act. It is also noted from the order of the ld. CIT(A) at para 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee did not have sufficient stock for making the sales. Hence, it cannot be said that the figures of sales and purchases are not supported by the quantitative details and the AO did not make any enquiry on the material supplied by the assessee. Thus the AO neither brought any material on record to establish that the sale bills are bogus nor provided any evidence that such sales are bogus. It is also an open fact that the demonetization of Rs.500/- and Rs.1000/-note was declared by the Hon'ble Prime Minister at 8 PM on 8- 11-2016 and after this announcement the persons reached the jewellery shop to buy jewellery in exchange of notes. Thus, all such scenario indicates that the assessee had duly substantiated its claim from the documentary evidences and also with the facts. It is also observed from the assessment order that the AO had not rejected the books of account of the assessee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition of Rs.2,90,93,500/- made by the AO by applying the provisions of Section 68 of the Act, it is noted that provisions of Section 68 are not applicable on the sale transactions recorded i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was pronounced, and this fact is not disputed by the department. The ld. AO has observed that there was no cash sales between 1st April, 2016 to 4th November, 2016. However, the assessee is in a trade wherein cash sales is a regular feature which is demonstrated by placing necessary evidence before us. Like, the abstract of cash sales of previous year and for the current year. It was also the fact that total turnover of the assessment year under consideration was Rs. 105.18 crs out of which Rs. 18.21 crs was in cash and it was the observations of the ld. CIT(A) that the same cannot be considered as unusual which is further substantiated by the figures of the sale in the previous year wherein the total turnover of the assessee was 200.53 cr and cash sales was Rs. 92.62 crs. It is also admitted fact that books of accounts of the assessee were accepted by the revenue, thereby they have accepted the purchase sales, stock, bank accounts etc. of the assessee. The ld. AO on one hand has accepted the books of accounts of the assessee on the other hand treated the sale of the assessee has bogus, shows that ld. AO is blowing hot and cold at the same time which is unacceptable. The ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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