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TMI Blog2024 (11) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... y sale bills. Although the AO made observation with regard to uniform cash sales, in our considered view, only on the basis of uniform pattern of sales, it cannot be held that the sales declared by the assessee is not genuine. Further in so far as the non-maintenance of phone number and PAN of the buyers, in our considered view, as per Rule 114B of IT Rules, 1962 there is no mandatory requirement of PAN of the buyers in case sales to single customer does not exceed Rs. 2 lakhs. Similarly, in respect of KYC compliances, the same is mandatory, in view of amendment to provisions of Money Laundering Act,2002 w.e.f. 04/05/2022 and the same is not applicable for the impugned assessment year. The observation of the AO on non-maintenance of phone and PAN number of the customer and adverse inference drawn against sales declared by the assessee is devoid of merit and cannot be accepted. Assessee has furnished all relevant details in respect of cash deposited during demonetization period into bank account when the DDIT(Investigation) Wing has carried out enquiries with regard to source for huge cash deposit into bank account. In fact, the appellant has submitted all relevant information inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yees etc. Therefore, the adverse inference drawn by the Assessing Officer considering human probability that no prudent person would carry huge cash in hand is only on suspicion and surmises. Therefore, in our considered view, the Assessing Officer is not justified in giving more weightage to unnecessary factors even though the evidence filed by the assessee clearly shows that the cash deposited in the bank account during demonetization period is out of opening cash in hand available as on 08/11/2016, which is supported by sales declared with supporting evidence. Merely for the reason of carrying excess cash balance during a particular period when compared to other periods, it cannot be held that the argument of the assessee is against the theory of human probability, more particularly, when evidences clearly suggest that the explanation of the assessee is genuine and supported by necessary evidences - Decided in favour of assessee. - Shri Manjunatha, G. Accountant Member And Shri K. Narasimha Chary, Judicial Member For the Assessee : Shri Shashank Dundu, AR For the Revenue : Shri Shiva Sewak, CIT, DR ORDER PER. MANJUNATHA G., A.M: This appeal filed by the Revenue is directed aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee could not explain the huge increase in cash balance during demonetization period when compared to period prior to demonetization period. The assessing Officer further observed that although cash in hand as on 08/11/2016 is supported by necessary sales, but on perusal of pattern of sales made prior to demonetization period, it is observed that all sales made to the individual parties is below Rs. 2,00,000/- and no proper details as to name of the customer, address, mobile number etc. have been maintained by the assessee. Further, the assessee has shown purchases from related parties on credit basis and made payments after 10/11/2016 through RTGS. Therefore, observed that the tendency to keep huge cash balance during demonetization period when compared to earlier period is against human probability and therefore, by following the decisions of Hon'ble Supreme Court in the case of CIT Vs. Durga Prasad More (1971) 82 ITR 540 (SC) and Sumati Dayal Vs. CIT (1995) 214 ITR 801(SC) held that the assessee could not explain the source for cash deposit into bank account during the demonetization period amounting to Rs. 16.24 crores and thus, by taking note of the fact that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts maintained for the relevant period. Learned CIT(A) further observed that from the details filed by the assessee to explain the cash deposit during the demonetization period, it appears that there is no abnormal deviation in cash sales during the demonetization period as compared to corresponding period in earlier financial year. The assessee has also explained the reasons for the sudden increase in sales during October and November every year. The Assessing Officer has not disputed the purchases, stock-in-trade nor there is any adverse inference as to sales also. The only ground on which the Assessing Officer disputed the sales executed by the assessee and cash in hand during 08/11/2016 is application of theory of human probability, although the theory of human probability cannot be universally applicable to all cases. Therefore, observed that the Assessing Officer without bringing on any evidence contrary to appellant s claim nor conducting any enquiry to disprove the explanation with regard to cash deposited into bank account treated as unexplained purely on the basis of human probability. Therefore, directed the AO to delete the additions made amounting to Rs. 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his regard, he relied upon the decision of Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT and CIT Vs. Durga Prasad More (supra). Learned DR also relied upon the decision of ITAT Hyderabad in the case of Vaishnavi Bullion Private Limited 2022(12) TMI 1309. 7. Learned Counsel for the assessee on the other hand supporting the order of the learned CIT(A) submitted that the sole basis for the Assessing Officer to disbelieve the sales declared by the assessee is on the basis of cash balance maintained by the assessee before the date of demonetization, during the demonetization and after demonetization period, but the fact remains that sales declared by the assessee cannot be doubted on the basis of cash in hand held by the assessee. Learned counsel for the assessee further submitted that the Assessing Officer conveniently ignored comparative analysis of total sales, cash sales, credit sales of last two years and subsequent one year to demonetization period and if we go by the reports submitted by the assessee, there is no abnormal variation in total sales, cash sales and credit sales. Further, the assessee also explained the reasons for the increase in cash sales during Oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s towards cash deposited into bank account during demonetization period u/s 68 of the Income Tax Act, 1961 needs to be examined in light of explanation of the assessee and the theory of human probability brought out by the Assessing Officer to disbelieve the sales declared by the assessee. 9. There is no dispute with regard to the fact that there is no abnormal variation in total sales, cash sales, credit sales and also cash deposited into bank account for the financial year 2016-17 when compared to financial year 2014-15 and 2015-16. Assessee has filed a comparative statement of purchase, sales, cash sales and cash deposited into bank account for four financial years including the financial year 2016-17 and from the details filed by the assessee, we find that there is uniform pattern of cash sales, credit sales and total sales. In fact, the cash sales during the financial year 2016-17 is less when compared to cash sales during the financial year 2014-15 and 2015-16. Therefore, going by the analysis of purchase and sales, there is no abnormality in sales declared by the assessee during the demonetization period. From the above, it is undisputedly clear that the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is not genuine. It is not the case of the Assessing Officer that the cash sales made prior to 08/11/2016 were not recorded in the books of accounts. It is also admitted fact that the assessee has filed VAT returns and declared sales to VAT authorities. Closing stock of the year is carried forward as opening stock of the next year and even in the subsequent year, scrutiny assessment was made by accepting the opening stock which shows that the sales made in the year under consideration and income earned thereon was never disputed. Although the Assessing Officer doubted purchases made from related parties, the fact remains that there is no evidence with the Assessing Officer to allege that said purchases are not genuine. Therefore, in our considered view, merely for the reason of purchase from a related party, genuineness of purchases cannot be doubted in case said purchases are supported by necessary evidence. Further, the assessee has made payment against purchases through proper banking channel. Therefore, in our considered view, the adverse inference drawn by the Assessing Officer is devoid of merit. 11. We note further that the Assessing Officer ignored all evidence fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves the genuineness of sales declared by the assessee and the cash balance held as on 08/11/2016. Therefore, merely for the reason of carrying excess cash balance during a particular period when compared to other periods, it cannot be held that the argument of the assessee is against the theory of human probability, more particularly, when evidences clearly suggest that the explanation of the assessee is genuine and supported by necessary evidences. Therefore, in our considered view, reliance placed upon by the learned Assessing Officer on the above cases is misplaced and cannot be accepted. The Assessing Officer had also relied upon the decision in the case of Rekha Kishnaraj Vs. CIT (250 Taxmann 333)(SC) to argue that even sales can be considered as unexplained cash credit. No doubt even unexplained credits on account of supply of goods also can be considered u/s 68 of the Act, if the assessee is unable to satisfy three conditions provided therein. Further, if the explanation of the assessee with regard to sale of goods and revenue generated there from is supported by relevant evidence, then the credits out of sales cannot be treated as unexplained cash credits. In the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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