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TMI Blog2024 (9) TMI 1435X X X X Extracts X X X X X X X X Extracts X X X X ..... well as cash balance during the period prior to demonetization period. The Bench noticed that provisions of Section 115BBE are applicable only on the income taxable u/s 68,69,69A,69B or 69D of the Act. Since in this case, the source of cash deposit in bank is income from business and thus Section 115BBE is not applicable. CIT(A) failed to take into consideration various papers and documents including the under mentioned papers and documents produced/furnished during assessment proceedings before the AO - Assessee has duly discharged the initial burden of proof which lay upon him by explaining that source of SBN s deposited at Rs. 26.00 lacs during demonetization period is out of cash sales made by him and duly credited the sales in the regular books of account of the assessee. It is also noted that the assessee has given necessary evidence on the basis of its books of accounts, sale/purchase invoice, cash book, journal, ledger bank statements and other relevant records that the cash deposited by him in bank accounts upto 31.12.2016 were out of sale proceeds in cash and the cash in hand as per books of accounts as on 01.04.2016 and cash withdrawals made from the banks before 08.11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of assessee and consequentially adding the same i.e. Rs. 20,00,000/-u/s. 69A r.w.s. 115BBE in the total taxable income of the assessee. 3. That the learned CIT(A) failed to take into consideration various papers and documents including the under mentioned papers and documents produced/furnished during assessment proceedings before the AO:- a. Details, in the format provided by the AO, of cash sales and cash deposit in bank during F.Y. 2015-16 (relevant to A.Y. 2016-17) and F.Y. 2016-17 (relevant to A.Y. 2017-18) b. Producing computer generated books of accounts including Cash Book, Journal Bank Book, Sale Bill, Purchase Bill, Vouchers of expenses, Bank Statement, sale book before the AO c. Copy of VAT assessment order for the period 01/04/2016 to 31/03/20017 passed by Commercial Taxes Officer, Circle N, Region Jaipur III Govt. of Rajasthan d. Audited Final Accounts i.e. Trading A/c P L A/c, Balance sheet with all schedules and Annexure, Books of A/c e. Furnishing various details, information, supporting papers and documents in compliance to summon u/s. 131 of the Act during assessment proceedings. 2.1 During the course of hearing, the Bench noted that there is delay of 34 days in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus in view of the affidavit of the assessee, the delay in filing the appeal by the assessee is condoned. 3.1 Brief facts of the case are that he assessee, an individual, carries on sole proprietary business under the name and style of M/s. Shubh Laxmi Trading Company. The said concern deals in tobacco and its products, paan masala etc. The return of income for the assessment year 2017-18 was filed on 7-11-2017 declaring total income of Rs. 7,23,460/-. The case of the assessee was selected for scrutiny through CASS. Notice u/s. 143(2) was issued. Subsequently notices u/s. 142(1) along with questionnaires were issued from time it time and in compliance to these notices assessee e-Filed/uploaded requisite information and details. The A.O. assessed the total income of the assessee at Rs. 27,73,460/- against the declared income of Rs. 7,23,460/-, by making addition u/s. 69A r.w.s 115BBE at Rs. 20,00,000/- and addition for non-verifiable expenses at Rs. 50,000/- i.e. total addition of Rs. 20,50,000/-. 3.2 Aggrieved by the order of the AO, the assessee preferred an appeal before the ld. CIT(A) who dismissed the appeal of the assessee. 3.3 Now aggrieved by the order of the ld. CIT(A), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash book, ledger, journal, bank statement and invoices manually given to the AO in response to summon u/s. 131 of the I.T. Act issued to the assessee by the AO during assessment proceedings. j. Copy of delivery challans furnished by the assessee. k. Explanation of source of SBN s of Rs. 26,00,000/- deposited in bank during the period 08.11.2016 to 31.12.2016 l. G.P. Chart confirming the fact that G.P. rate in the year under appeal i.e. A.Y. 2017- 18 is higher as compared to G.P. rate of preceding assessment years. 2. That, both the lower authorities also erred in not taking into consideration following facts and circumstances of the case:- a. All the books of accounts are duly audited by a Chartered Accountant and there is no adverse observation/comment of the auditors at any stage. b. There is no change in the method of accounting nor in the method of valuation of closing stock. c. That each and every entry in the books of accounts is supported by bills vouchers. d. That the assessee has regularly kept and maintained books of accounts consisting of Cash Book, ledger, journal, bills and vouchers, purchase and sales registers, bank statements and other relevant records. 3. That, abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le transactions in cash cannot be taxed u/s. 69A of the Act because the sales against cash and deposit of such cash in assessee s bank account cannot be called unexplained money. Cash memos were immediately issued to the buyer and delivery was made then and there against SBN s/cash and thus sales are recorded properly in the books of accounts. Just because the amounts were received from the buyers in cash (i.e. SBN),the appellant cannot be penalized because there is no restriction under the Act to accept cash against sale upto Rs. Two lakh at one point of time. It is reiterated that in appellant s case none of the individual cash sale transaction exceeded the limit of Rs. Two lakh and it is quite evident from the books of accounts particularly cash book of the assessee which stand filed before the AO. 3. Further the SBN s were received against sale of tobacco products, Pan Masala etc. dealt by the assessee in his regular course of business activities. 4. That by making cash sales, withdrawing money from the bank and having opening cash balance and deposit of these sale proceeds etc. in bank as per details filed during assessment proceedings the assessee has not made infringement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant) and rather it is beyond his control. 9. That the appellant craves leave to submit that during the immediately preceding previous year i.e. 2015-16 relevant to AY 2016-17 the assessee s cash sales were of Rs. 6,09,73,170/- and during the previous year relevant to year under appeal i.e. A.Y. 2017-18 the cash sales are to the tune of Rs. 8,27,27,576/- which are slightly higher as compared to immediately preceding assessment year i.e. AY 2016-17 and hence the apprehension of the learned AO is unfounded, baseless and based on surmises and conjectures and it cannot become a basis for treating the deposit of SBN s of Rs. 20,00,000/- as unexplained cash deposit. 10. Legal consensus in this regard is that the additions based on suspicion should not be sustained. 11. That there is not an iota of evidence with the lower authorities to prove that the sales are unverifiable and accordingly additions of Rs. 20,00,000/- on adhoc basis is without any lawful justification. 12. That the learned A.O. has accepted the purchases shown by the assessee in his books of accounts. It is respectfully submitted that once the purchases have been accepted then the corresponding sales cannot be distur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income tax is not on gross receipts but it is on profits and gains properly so called. GROUND OF APPEAL NO. 3 1. That the lower authorities failed to note that the appellant has duly discharged the initial burden of proof which lay upon him by explaining that source of SBN s deposited at Rs. 26,00,000/- during demonetization period is out of cash sales made by him and duly credited such cash sales in his regular books of accounts. In its support he has duly filed and furnished entire cash book for F.Y. 01/04/2016 to 31/03/2017. 2. That after discharging of initial burden by the appellant, the next burden of proof is shifted to the AO. The learned AO failed to discharge this burden of proof which squarely lay upon him. Moreover he failed to mention a single supporting evidence in describing the genuine cash sales and SBN s of Rs. 20,00,000/- (out of total SBN s deposited in bank at Rs. 26,00,000/- during the period 01/04/2016 to 08/11/2016) as an afterthought act of the assessee to introduce his unaccounted money. 3. That the burden of proof of not accepting the apparent as real lies on the AO but he has failed to discharge this burden of proof. So much so the AO has not given a si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estimation of income by applying NP Rate and accordingly the lower authorities are directed to delete the addition of Rs. 47,72,297/- sustained by learned CIT(Appeal). 2 2021 (5) TMI 447 ITAT Visakhapatnam Asst. Commissioner of Income Tax, Central Circle-1 Visakhapatnam Versus M/S Hirapanna Jewellers(Vice-Versa)) The hon ble ITAT observed that assessee had deposited the sum in high denominations of specified bank notes (SBNs) post demonetization - CIT-A deleted the addition - HELD THAT:- The assessee produced the newspaper clippings of The Hindu, The Tribune and demonstrated that there was huge rush of buying the jewellery in the cities consequent to declaration of demonetization of ₹ 1000 and ₹ 500 notes on 08.11.2016. As cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor. 9 (1956) 30 ITR 228 (Nag.) Lajwanti Sial vs. CIT The finding that cash credits or high denomination notes encased upon demonetization represent undisclosed income, would be rejected by the court if there is no evidence to support it. 10 (i) 26 ITR 775, (ii) 37 ITR 151 and (iii) 37 ITR 288 all the three are Supreme Court Judgment (a) Dharkeshwari Cotton Mills Ltd vs. CIT (b) Omar Salay Mohammed vs. CIT and (c) Lal Chand Bhagat Ambica Ram vs. CIT Respectively In these cases Hon ble Supreme Court has set aside the assessment on the ground that it was based on bare suspicion conjectures and surmises. 11 ITA No. 613/2010 decided by the Hon ble Delhi High Court on 09/04/2017 CIT vs. KailashJewellery House The Hon ble Delhi High Court In the facts of this case cash sales of Rs. 24,58,400/- was deposited in bank account. The A.O. made the addition on the grounds that nexus of such deposit was not established with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the profit and loss account. The A.O. has verified the stock and cash position as per books and has accepted the assessee s record and no dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade under section 69A of the Act. In support of the assessee's contentions, the learned AR placed reliance on the decision of the ITAT - Mumbai Bench in the case of DCIT Vs. Karthik Construction Co. in ITA No.2292/Mum/2016 dated 23.02.2018, wherein the Bench at para 6 thereof has held that addition under section 69A of the Act cannot be made in respect of those assets / monies / entries which are recorded in the assessee's books of account. In ITA Nos.1383 and 1384/Bang/2019 my considered view, the aforesaid decision of the ITAT - Mumbai Bench (supra) is squarely applicable to the facts of the case on hand, where the entries are recorded in the assessee's books of account. In this view of the matter, I am of the opinion that the addition of Rs. 6,30,000/- made under section 69A of the Act is bad in law in the facts and circumstances of the case on hand and therefore delete the addition of Rs. 6,30,000/- made there under. The AO is accordingly directed. 15 74 ITR 279 (Mys. H.C.) Vijay Traders vs. CIT The Hon ble Mysore High court held that sanctity of regular books to be disturbed where it is impossible to compute profits there from 16 (1970) 75 ITR 33 R.B. Jessaram Fate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law arose. The High court was right in refusing to state a case. 3.6 On the other hand, the ld. DR relied upon the orders of the authorities below and strongly refuted the arguments raised by the assessee. It was also contended by the ld. DR that there are no merits in the arguments of the ld. AR and the orders passed by the revenue authorities may be upheld. 3.7 The Bench has heard both the parties and perused the materials available on record and the case laws. The Ground No. 1 raised by the assessee relating challenging the order of revenue authorities in rejecting the books of account and application of Section 145(3) of the Act by the AO. In this regard, the ld. AR, apart from relying upon the written submission has submitted that lower authorities have erred in ignoring various papers, documents, details and information including under mentioned papers, documents, details information etc. e-Filed by the appellant and complete books of accounts including cash book, bank book, purchase/sales bills and vouchers, journal, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closing stock. c. That each and every entry in the books of accounts is supported by bills vouchers. d. That the assessee has regularly kept and maintained books of accounts consisting of Cash Book, ledger, journal, bills and vouchers, purchase and sales registers, bank statements and other relevant records. It is noted that the Revenue authorities failed to appreciate that the books of account are duly audited by the Chartered Accountant and there is no adverse observation / comment of the auditors at any stage. Further, there is no change in the method of accounting nor in the method of valuation of closing stock and each and every entry in the books of account is supported by bills and vouchers. From the perusal of the details filed by the assessee, the Bench noticed that the assessee has regularly kept and maintained books of account consisting of cash book, ledger, journal, bills and vouchers, purchase and sales registers bank statement and other relevant records. It is noticed that even in spite of filing of all the documents before the AO who made the additions on the basis of choose and pickup method without any tangible material and supporting evidence in hand and also th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bench noticed that Section 69A of the Act is not applicable in this case because there are proper entries in the books of accounts of the assessee in relation to cash sale, cash balance and deposit (SBN s) Bank. It is noted that the sale transaction in cash cannot e taxed u/s 69A of the Act because the sales against cash and deposit of such cash in assessee s bank account cannot be called unexplained money. It is also noted that cash memos were immediately issued to the buyer and delivery was made immediately against cash SBN s/ cash and thus sales are recorded properly in the books of accounts. It is also noted that the lower authorities did not find any defects in the books of accounts and trading. It is also noted that there is no adverse observations in the AO s order particularly in para 3.5 of assessment order that there has been abnormal increase in cash sales as well as cash balance during the period prior to demonetization period. The Bench noticed that provisions of Section115BBE are applicable only on the income taxable u/s 68,69,69A,69B or 69D of the Act. Since in this case, the source of cash deposit in bank is income from business and thus Section 115BBE is not app ..... 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