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TMI Blog2024 (11) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... sh sales during demonetization period and also observed that SBN was banned from 08.11.2016 and technically rejected the sales from 09.11.2016 with the observation that the assessee should not have accepted the SBN after 08.11.2016. The abovesaid observation of the Assessing Officer is not proper considering the fact that as per the Ordinance No.10/2016 dated 30.12.2016 the prohibition of holding SBN was after 31.12.2016 as per Section 5 of the Ordinance not 08.11.2016. This is supported by RBI Circular on demonetization 2016. Therefore, we are inclined to dismiss ground no.1 raised by the Revenue. Salary expenditure claimed by the assessee paid to brother of the Director/Satya Prakash Sharma - HELD THAT:- Satya Prakash Sharma is a regular employee and key employee of the assessee and whatever salary received by him is properly disclosed in its return of income not only during this year but also in the past which was accepted by the Revenue. Therefore, the disallowance made by the Assessing Officer in the name of Satya Prakash Sharma is not justified and we are inclined to accept the findings of ld. CIT (A) by considering the fact that it is a family owned business. Coming to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6, for 31.12.2016 and 01.12.2016 to 31.12.2016. In response, assessee submitted detailed submissions during assessment proceedings. For the sake of clarity, the same is reproduced below :- Table-1 Amount in Crore Month Cash sale in FY 2017-18 CASH DEPOSITED IN BANK in FY 2017- 18 Cash sale in FY 2016-17 CASH DEPOSITED IN BANK in FY 2016- 17 Cash sale in FY 2015-16 CASH DEPOSITED IN BANK in FY 2015- 16 April 14.94 15.22 18.60 18.10 10.90 9.89 May 20.73 21.02 23.76 16.80 11.22 10.47 June 27.39 26.65 25.64 23.02 22.34 23.70 July 2.08' 3.60 15.10 24.05 14.91 14.10 August 9.74 9.55 21.60 23.49 9.93 9.90 September 7.97 7.80 11.74 12.30 12.63 11.94 October 7.15 6.95 13.88 11.65 9.94 11.16 1/11 to 8/11 2.32 2.30 8.02 3.75 6.97 5.30 9/11 to 30/11 5.88 5.75 6.56 11.35 13.98 15.25 1/12 to 31/12. 8.99 8.17 5.39 5.96 17.82 17.76 Jan 12.02 11.82 12.42 13.08 12.43 12.78 Feb 8.50 9.45 7.39 6.50 19.89 18.55 March 8.42 7.85 11.23 10.64 34.61 35.13 Total 136.12 136.13 181.33 180.69 197.56 195.93 Table-2 Month Cash sale % to total cash sale Cash deposit % to total cash sale Cash sale % to total cash sale Cash deposit % to total cash sale Cash sale % to total cash sale Cash deposit % to total cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cash sale of the products. It had violated the direction/notification of the Government of India to accept the Specified Bank Notes in the business transactions as stated before the undersigned. 5. Further, Assessing Officer observed that assessee has claimed salary expenses for payment to the related parties which includes Director s brother - Satya Prakash Sharma, sister-in-law Sunita Sharma and Director s Wife Anita Sharam. The assessee was asked to justify the abovesaid transactions and salary paid to the abovesaid related parties also to furnish evidences of services rendered by them and how it is utilised for the business. The Assessing Officer observed that the assessee failed to submit how the services were rendered by the abovesaid related parties and how the services were actually benefited the business of the assessee. In absence of documentary evidences and nexus to the business of the assessee, the same was disallowed to the extent of Rs. 1,06,80,000/-. 6. Aggrieved with the above order, assessee preferred an appeal before NFAC, Delhi and filed a detailed submissions before him which is reproduced by the ld. CIT(A) in his order. After considering the detailed submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ast year. Hence it is practically half of last year and comparable to subsequent year. (e) As regards high cash sales during demonetization period it can be seen that:- A.Y. Total cash sales (including VAT) during the year Cash sales during 09.11 to 30.12 2016-17 197,56,44,419 31,79,25,467 2017-18 181,32,61,874 11,20,81,344 2018-19 136,12,49,147 14,86,45,083 Thus the AO failed to appreciate that during demonetization period the cash sale is 11.20 Cr as against during the same period, in AY 2016-17 it is 31.79 Cr. and in AY 18-19 it is 14.86 Cr. The cash sale during demonetization period is comparative lesser as compared to the year prior and the year subsequent to demonetization year. (f) The A.O. also failed to note and appreciate that although total cash sales in A.Y.17-18 is 181.32 Cr. out of which in demonetization period cash sale is only 11.94 Cr. against substantially lesser cash sales in A.Y.18-19 i.e. Rs. 136.12 Cr., however in A.Y.18-19, the cash sales during demonetization period is 14.86 Cr. i.e. much more than cash sales in demonetization period of relevant year i.e. A.Y.17-18. (g) All these factual analysis as given above prove that huge cash sales are regular feature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes irrelevant. (k) The A.O. has also doubted the cash in hand of Rs. 7,11,53,135/- as on 09.11.2016. Again the A.O. failed to appreciate that the cash in hand arises from the cash book in which no discrepancy has been noted or pointed out. Thus the cash available in hand being low or high, is not relevant. The A.O. has also observed that there was scarcity of cash flow in the market during demonetization period. It is a general observation of the A.O. but devoid of any evidence for making addition. As the sales of the assessee are mainly in cash and books of account has been accepted, there is no reason for A.O. to make addition based on this observation. The A.O. also failed to observe that lot of cash deposit by the assessee included non specified currency and newly introduces currency of Rs. 2000/- notes. (v) Based on the reasons detailed above, I hold that the assessing officer was wrong in making addition of Rs. 12,55,50,000/- under section 68 of the Act. Therefore the grounds of appeal No. 5 to 10 are allowed. 7. With regard to disallowance of salary expenses claimed by the assessee of Rs. 1,06,80,000/-, assessee submitted detailed submissions before the ld. CIT(A) and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and did not ask any remand report from the Assessing Officer. 9. At the time of hearing, ld. DR for the Revenue submitted that the assessee has deposited huge cash deposits during demonetization period and submitted that the assessee has not deposited the abovesaid cash sales immediately on such commencement of demonetization of currency. He submitted that assessee has first deposited on 17.11.2016 Rs. 3 crores, on 18.11.2016 Rs. 5 crores and 03.12.2016 Rs. 3 crores. He submitted that the cash book submitted by the assessee is totally fictitious and prepared only to justify the cash deposits. He supported the detailed findings of the Assessing Officer. 10. With regard to second issue of disallowance of salary expenses, ld. DR submitted that the related parties who are close relatives of the Director, Shri Satya Prakash Sharma and the assessee has not brought on record the relevant services rendered by them and also no documentary evidences were submitted before the authorities below and strongly objected to the relief granted by the ld. CIT (A) merely relying on the submissions made by the assessee before him. He submitted that ld. CIT(A) could have called for rema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during demonetization period and in support of the same, assessee has submitted detailed submissions before the Assessing Officer that the assessee has regular cash sales and deals only cash sales and regularly deposited the same in the bank and in support of the same, assessee has submitted month-wise cash sales and cash deposits in the bank. It also disclosed the cash sales during demonetization period and cash deposits. Assessee also submitted comparative chart of cash sales and cash deposits during the year in the form of chart before the Assessing Officer and demonstrated that all the cash deposits are only out of cash sales. The Assessing Officer rejected the same by making certain analysis in the assessment order and further observed that the SBN was banned from 09.11.2016 to use in general market except to meet out some basic necessities and proceeded to make the addition u/s 68 of the Act for total cash deposits made by the assessee during demonetization period. We observed that ld. CIT (A) considered the detailed submissions along with chart and all the issues raised by the Assessing Officer in his order and gave a detailed finding which is reproduced by us elsewhere in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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