9911796707
TMI Blog2024 (12) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... er in the stock registers submitted or quarterly reports submission before the GST authorities. The results declared by the assessee is within the range of book results. The lower authorities has not made any adverse comments nor found any deviations in the book results. Stock movement and excess sales , we observed that the assessee has submitted relevant stock reconciliation and auditors report of stock movements and there is no negative stock movement which will indicate that the assessee has booked excess sales without there being proper purchases. There are chances that during the demonetization period the regular customers may have chose to buy the spare parts and bearing by making payment by cash so that their excess SBN is transferred. We noticed that the credit sales has come down during this period and the sales of the assessee is more or less maintained during this period. Therefore, it shows that the changes in the patterns recorded in the sales are not abnormal. Whether the recording of cash sales which is already declared in the books of account will attract the deeming provisions of sec.68 or 69A of Act.? - As per provisions of the section, it is necessary that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort the Act ) along with questionnaire were served on the assessee. After issue of several notices u/s 142(1) of the Act, assessee filed the relevant information along with confirmation of unsecured loan, ledger copy of expenses and reconciliation of sale/turnover shown in ITR and VAT return. With regard to cash deposits during demonetization period, assessee submitted that out of cash of Rs. 2,01,53,000/-, cash of Rs. 29,00,000/- was deposited in new currency. He further submitted that entire cash deposited during the year was out of cash in hand appearing in cash book as on 08.11.2016. The Assessing Officer observed that no cash book was submitted by the assessee. 4. Further, directions under section 144A of the act were sought from the Addl.CIT, Range 22, New Delhi. The Addl.CIT sought further information from the assessee by issue of show-cause notice dated 11.12.2019 to the assessee to explain the abnormal higher cash sales for October and November, 2016 and consequently, deposit of Rs. 2,01,53,000/- during the demonetization period shall be treated as unexplained and other issues relating to cash deposits. In response, the assessee submitted detailed submissions and bank stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documentary evidences such as VAT returns, quantitative details of purchase and sales etc. to substantiate the sales made during the year out of which cash were deposited in bank accounts. 4. Because the CIT(A) NFAC has erred in alleging that no cash book was submitted without considering the fact that the appellant had requested the Ld. AO vide reply dated 17.12.2019 to produce cash book during physical hearing because of being vary voluminous, however, the Ld.- AO proceeded to pass the order on 20.12.2019 without providing any opportunity to present the same which shows that the Ld. AO has passed the order without providing reasonable opportunity of being heard and made the addition u/s 68 of the Act based on his whims and fancies. 5. Because the CIT(A) NFAC has erred in doubting the cash sales made as the books of account of the appellant is duly audited by Independent Chartered Accountant and quantitative details were also given in audited report. 6. Because the Ld. AO has erred in making addition on account of cash deposited in bank account without rejecting the books of account. Moreover ~ on one hand the Ld. AO has accepted cash deposited in new currency of Rs. 29,00,000/- o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee duly recorded in the audited books. 8. Further, it was submitted that proceedings U/S 144A of the Act was initiated by the learned JCIT, Range 22, Delhi vide issue of notice dated 11-12-2019 wherein it was proposed to reject the books of accounts of the assessee u/s 145 of the Act for difference in turnover reported in the audited accounts and turnover submitted based upon the replies made during assessment proceedings. In reply during assessment dated 17.12.2019, wherein the assessee submitted the reconciliation of turnover and no discrepancies were found by the AO and the trading results of the assessee as per the audited accounts was accepted and the books of accounts were not rejected by the AO U/S 145(3) of the Act. The original and revised VAT returns were also accepted by the AO. The purchases, sales, opening stock, closing stock and financials of the assessee company was accepted as such and no discrepancy was reported by the AO. w.r.t the allegation of the AO that cash book requisitioned during assessment was not submitted, please note that the assessee vide reply dated 17.12.2019 requested the learned AO to give an opportunity of personal hearing to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sales and a percentage of such unexplained amount is offered as profits. In a nut shell neither are the Purchases duly substantiated nor were the Sales substantiated with Sale Bills/Cash Receipts or names and addresses of the customers. In the background the Books of the appellant are not found to be reliable and do not reflect the correct picture of the affairs of the business. Hence, the books of accounts are rejected u/s 145 (3) of the Act by exercise of powers of the Commissioner of Income Tax (Appeals) which are co-terminus with the powers of the Assessing Officer. In the background of the rejection of the books of accounts, the addition made U/S 68 of the IT Act is found to be inconsistent with the facts. In the present case the finding is that the appellant was found to be in possession of unexplained cash of Rs 1,62,46,533/- which was deposited in the bank accounts. hence, since, the possession of cash precedes its credit in books as sales, it would be more appropriate to tax the money of Rs 1,62,46,533/- for which the appellant failed to give satisfactory explanation, U/S 69A of the Income Tax Act. 10. Further, Ld. AR for the assessee submitted oral submissions and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he terms of a notice issued under subsection (2) of Section 143, the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment: Provided that such opportunity shall be given by the Assessing Officer by serving a notice calling upon the assessee to show cause, on a date and time to be specified in the notice, why the assessment should not be completed to the best of his judgment: Provided further that it shall not be necessary to give such opportunity in a case where a notice under sub-section (1) of Section 142 has been issued prior to the making of an assessment under this section. A plain reading of the aforementioned provisions would indicate that the AO or CIT(A) wields an authority to make additions on the basis of estimation of income upon fulfillment of the conditions mentioned in Section 145(3) of the Act. Once the AO/CIT(A) is satisfied about the existence of irregularities in the books of account as per Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144A of the Act was initiated on the assessee by the JCIT vide letter dated 11-12-2019, refer page 53-55 of the paper book, and a proposal was made to reject the books of accounts of the assessee on account of difference in turnover reported in ITR and turnover reported in the VAT return. The JCIT also questioned about the revised VAT returns filed by the assessee in the said letter. 6. In reply to the said letter, refer page 106-109a, the assessee satisfactorily explained the reconciliation of turnover. At page 107 of the paper book, the assessee has clearly reconciled the quarter wise turnover as per the VAT return and audited accounts. W.r.t the query that the VAT return has been revised for the first three quarters starting from April, 2016 to December,2016, it was submitted that there is no change in value of turnover as filed in the original VAT returns and Revised VAT returns. These returns were required to be revised for incorporating change in TIN number of some dealers. The assessee also submitted a tabular chart showing that there was no change in the value of turnover as reported in the original return and revised return. Both original return and revised return were sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge on turnover for the current year was reported at 0.32% and for the immediately preceding year, the same was reported at 0.4%. Details of GP and NP ratio of the last 3 years is tabulated below: AY GP Ratio NP Ratio 2015-16 7.10% 0.35% 2016-17 7.14% 0.40% 2017-18 7.27% 0.31% Thus, there is no deviation in the financial results of the current year as compared to the immediately two preceding years. Same accounting policies is followed by the assessee consistently year after year. The appellant is a private limited company and is required to maintain its books of account as per Companies Act 2013 and the same was audited by an Independent Chartered Accountant u/s 44AB of the Income Tax Act, 1961. Nothing adverse was pointed out by the auditor of the company w.r.t correctness or completeness of the accounts. Furthermore, as a normal practice followed every year the assessee takes physical stock of all the machinery items at the year end and item wise quantity of stock at the yearend is duly reported in the Tax Audit Report and the value of such closing stock is duly recorded in the audited accounts. This practice has been followed in the preceding and succeeding years also. 9. Here, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections 30 to 43C, as meaning actually paid or incurred according to the method of accounting upon the basis of which profits or gains are computed under section 28/29. That is why, in deciding the question, as to whether the word 'expenditure' in section 37(1) includes the word 'loss', one has to read section 37(1) with sections 28, 29 and 145(1). Accounts regularly maintained in the course of business are to be taken as correct, unless there are strong and sufficient reasons to indicate that they are unreliable. Under section 28(i), one needs to decide the profits and gains of any business which is carried on by the assessee during the previous year. Therefore, one has to take into account stock-in-trade for determination of profits. The Act makes no provision with regard to valuation of stock. But the ordinary principle of commercial accounting requires that in the profit and loss account, the value of the stock-in-trade at the beginning and at the end of the year should be entered at cost or market price, whichever is lower. This is how business profits arising during the year need to be computed. This is one more reason for reading section 37(1) with section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble High Court of Delhi in the case of Pr. CIT v. Swananda Properties (P.) Ltd. [2019] 111 taxmann.com 94/267 Taxman 429/2019 SCC, the Hon ble HC held that, 19. A plain reading of the aforementioned provisions would indicate that the AO wields an authority to make additions on the basis of estimation of income upon fulfillment of the conditions mentioned in Section 145(3) of the Act. Once the AO is satisfied about the existence of irregularities in the books of account as per Section 145(3) of the Act, it shall proceed in the manner provided under section 144 of the Act. At this juncture, what needs consideration is the question whether such an addition must be made only after the rejection of the books of account by the AO. 20. The Division Bench of the High Court of Bombay in the case of Pr. CIT v. Swananda Properties (P.) Ltd. [2019] 111 taxmann.com 94/267 Taxman 429/2019 SCC OnLine Bom 13359, had an occasion to consider the said question and the same was accordingly answered as under:- 11. We note that the books of account of the respondent were rejected by the Commissioner of Income-tax (Appeals) under section 145(3) of the Act. However, the Tribunal found in the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case it is noticed that neither the Assessing Officer nor the Commissioner of Income-tax (Appeals) have rejected the books of account maintained by the assessee in the course of the business. As such the Tribunal has rightly rejected or set aside the partial addition made by the Assessing Officer for arriving at gross profit and sustained by the Commissioner of Income-tax (Appeals) and rightly held that the entire addition made by the Assessing Officer was liable to be deleted. The said finding is based on sound appreciation of facts and it does not give rise for framing substantial question of law. [Emphasis supplied] 22. In another case of Pr. CIT v. Marg Ltd. [2017] 84 taxmann.com 52/249 Taxman 521/396 ITR 580 (Mad.)/2017 SCC OnLine Mad 37852, the Division Bench of the High Court of Madras has held that the rejection of books of account is sine qua non before the AO proceeds to make his own assessment. Paragraph 4(c) of the said decision is reproduced as under:- 4(c). Therefore, it is sine qua non that the Assessing Officer to come to a conclusion that the books of account maintained by the assessee are incorrect, incomplete or unreliable and reject the books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the system which commends to the ITO, is better. In the instant case, the assessee had been following a consistent system of accounting and regularly employing the same system of accounting for declaring its income from year to year. It was also not in dispute that this system of accounting was not found to be defective by the ITO in the past years. There was no material to indicate why the ITO considered the system of accounting regularly followed by the assessee as defective, or such that correct profits could not be deduced there from. It was not open to the ITO to intervene and substitute a different system of accounting than the one which was followed by the assessee, on the ground that the system which commended to the ITO was better. The ITO was, therefore, not justified in rejecting the assessee's method and substituting his own method for it. 10. In the present case, the learned CIT(A) rejected the books of accounts of the assessee u/s 145 of the Act on the pretext that, i) the stock register is not maintained by the assessee and ii) the purchases/sales is not substantiated with sale bills/cash receipts or names and address of the customers/confirmation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleteness of accounts in terms of section 145(3) of the Act. But the case would be different where the above-mentioned mistakes are coupled with other findings. [Para 18.8] In the given case, the Assessing Officer has rejected the book results of the assessee based on the finding that there was less production of tiles in comparison to the companies available in the public domain and non-maintenance of production registers properly. In the light of the above facts, the Assessing Officer invoked the provisions of section 145(3) of the Act and thereby he has made certain upward additions on account of suppressed production which was sold outside the books. [Para 18.9] The books of account cannot be rejected if the assessee does not maintain the stock registers until and unless it is coupled with other defects such as sales/ purchase outside the books of account. But in the instant case, there was no such conclusive finding by the Assessing Officer. [Para 18.12] In view of the above, we opined that the Assessing Officer cannot reject the books of account for the reasons as discussed above in a situation where the assessee does not maintain the stock register. Accordingly, the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affected the determination of true and correct profits of the assessee in the circumstance. The Revenue has found no other defect in the books of the assessee. All purchase and sale vouchers and other records have been found to be in order. The Revenue has not demonstrated before us as to how the non-maintenance of stock register has been a hindrance in determining the true and correct profits earned by the assessee and also what was the infirmity in the method adopted by the assessee of physically verifying its stock at the end of the year. Therefore in our opinion the mere fact of non-maintenance of stock register cannot be the basis for rejection of books of account. 11. W.r.t the allegation of the learned CIT(A) that neither the purchases is substantiated nor sales is substantiated with sale bills/cash receipts or names and address of the customers, it is submitted that purchases and sales made by the assessee during the year was not disturbed by the learned CIT(A) in his order which suggest that the same was accepted by him. W.r.t the names and address of the customers, it is submitted that the daily cash sales bill register was duly placed before him, refer page 68-104 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... keep a record of the addresses of the cash customers. It could not, therefore, be said that the failure on his part to maintain the addresses was a suspicious circumstance giving rise to a doubt about the genuineness of the transactions entered into by the assessee. Since, having regard to the nature of the transactions and the manner in which they had been effected, there was no necessity whatsoever for the assessee to have maintained the addresses of cash customers, the failure to maintain the same or to supply them as and when called for could not be regarded as a circumstance giving rise to a suspicion with regard to the genuineness of the transactions. The Tribunal, therefore, was not right, in setting aside the order of the AAC and restoring that of the ITO. There were no circumstances disclosed in the case nor was there any evidence or material on record which would justify the rejection of the book results. 12. Here, it is interesting to note that in this scenario of rejecting the books of accounts, the learned CIT(A) ought to have rejected the cash sales corresponding to the cash deposits added u/s 69A of the Act. However, the cash sales or the trading results as per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded in the books of such company also offers an explanation about the nature and source of such sum so credited ; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory : Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. A bare reading of Section 68 of the Income-tax Act, 1961, suggests that for a sum so credited to be charged to income-tax as the income of the assessee of that previous year by the A.O. the following have to be present: (i) there has to be credit of amounts in the books maintained by the assessee ; (ii) such credit has to be a sum of money during the previous year ; and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. In the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act makes it clear that the prime condition for addition u/s 69A of the Act is that the assessee is found to be in possession of money, bullion jewellery, etc., not recorded in its books of account. In the present case, the cash deposits in the Bank A/c of the assessee was on account of retail cash sales made by the assessee and the same was duly recorded in the audited accounts and was also reported in the VAT returns. The assessee maintains regular books of account which were audited by an independent Auditor as per the requirement of Companies Act and also audited u/s 44AB of the Act. The cash sales and the corresponding cash deposits in banks are duly reflected in books of the Assessee. Thus, section 69A of the Act could not have been invoked in the present case since cash deposits and its source, being cash sales, was duly recorded in the audited accounts and one of the mandatory requirement of section 69A of the Act is that such money etc is not recorded in the books of accounts for any source of income. 15. Moving further, it is further submitted that the assessee was never informed about any outside material adverse for the present case which was used by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ularly having no bearing on the transaction with the assessee does not create any material evidence against the assessee. This is because section 142(2) mandates any such material adverse to the facts of assessee collected by AO u/s 142(1) has to be necessarily put to the assessee u/s 142(3) before utilizing the same for assessment so as to constitute as reliable material evidence through the process of assessment u/s 143(3) of the Act. Further reliance is placed on the recent judgment of the Hon ble ITAT Delhi in the case of ACIT vs M/s Sur Buildcon Pvt Ltd (I.T.A No.6174/Del/2013) pronounced on 15-07-2021 wherein relying on the above judgment of the Hon ble Kolkata ITAT in the case of SPML Infra (supra) it was held that, 7.11 Applying the law to the case at hand, it is evident that the Inspector Reports, that had been relied upon by the A.O., have been reproduced in length for the first time in the Assessment Orders only. The A.O.,by failing to confront the assessees with the evidence he had gathered u/s 142(2) Act, has, therefore, erroneously skipped the mandatory intermediary step prescribed u/s 142(3) of the Act. Thus, when the A.O. has directly gone on to pass the Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed in favour of the assessees. Thus, the order passed by the learned CIT(A) in the present case without affording an opportunity of being heard w.r.t his findings and observations during the course of appellate proceedings is not as per law and in violation of principles of natural justice 16. Having said that, at this juncture, your kind attention is invited to the audited accounts of the assessee, placed at page 1-27 of the paper book. On perusal of the Balance Sheet of the assessee, it may kindly be noted that the own funds of the assessee as on 31-03-2016 was Rs. 62,98,902/- and as on 31-03-2017 was Rs. 67,27,274/-. This means that the assessee is not a cash rich person and works with a very little capital. The assessee normally runs his business on trade credits and loans. To reduce the hardship on account of trade payables and loans, the assessee resorted to cash sales during the year. The trade payables of the assessee was Rs. 4,86,01,152/- in the immediately previous year which was reduced to Rs. 2,50,04,952/- in the current year. Thus, trade payables was reduced by Rs. 2,35,96,200/- during the year. Furthermore, the bank overdraft of the assessee was reduced to zero from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales as unexplained cash credits/unexplained money amounts to double taxation, which is not permissible as per the canons of Income Tax Law. In this regard, the assessee places reliance on the judgement of Jurisdictional Delhi ITAT in case of Harisons Dismonds Pvt. Ltd. vs ACIT(ITA No. 1426/Del/2021) reported in [2024] 161 taxmann.com 669 (Delhi - Trib.) wherein the Honorable Delhi ITAT has held that where cash sales have already been offered as income, same cannot be taxed in the garb of inflation sales to cover up demonetization currency . The relevant extract of the judgment is quoted below: There is no dispute that the assessee was maintaining proper books of account which were produced before the Assessing Officer during the assessment proceedings. Month-wise details of cash deposited out of cash sale submitted during the assessment proceedings. [Para 15] The entire quarrel revolves around the period 1-10-2016 to 8-11-2016 and cash sales during this period have been held to be unexplained credit under section 68. It is failed to understand how the cash sales for the period 1-10-2016 to 7-11-2016 be treated as inflated sales pursuant to demonetization, as not a single soul was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no merit in the impugned addition made by the Assessing Officer and also in the part relief given by the Commissioner (Appeals). Therefore, considering the totality of facts, the Assessing Officer is to be directed to delete the impugned addition. [Para 27]. Reliance is also placed on the judgment of the Hon ble jurisdictional ITAT, Delhi in the recent case of Vijay Kumar Jain vs ITO (ITA 1730/Del/2024) wherein on identical facts it was held that, 9. We have carefully considered the rival submissions and perused the assessment order and first appellate order. The material referred to and relied upon in the course of hearing was taken in to account as per Rule 18(6) of the Income Tax (Appellate Tribunal) Rules, 1963 together with case laws adverted to in the course of hearing. 9.1 It is the case of the assessee that the source of cash deposits in question bears direct nexus to cash sales made prior to such deposits. The cash sales are stated to be out of purchases made which are predominantly import goods. The cash sales, when seen in the context, is quite negligible hovering in the vicinity of about 4% of the total sales. The assessee is engaged in trading of fabric which are pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings on suspicion and conjectures and on improper rejection of tangible material. The assessee on the other hand has successfully demonstrated the propriety of cash sales by corresponding purchases, reduction in stock and declaration of profits on sales. 10.3 Having assessed a credit of revenue character as income, it is outside the remit of the AO to subject the same credit under different provision i.e. section 68 yet again, inflicting double whammy on the assessee. Besides, the books of accounts and book results have been not rejected per se. No defect has been pointed out on the declarations made towards purchases, the closing stock and the profits either. The additions made have resulted assessment of cash sales twice which is not permissible in law. 11. It is trite that suspicion, howsoever strong, cannot take the place of proof as held in Umacharan Shaw Bros. vs. CIT (1959) 37 ITR 271 (SC). The Hon ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd v. Commissioner of Income Tax (1954) 26 ITR 775 (SC) has observed that powers given to the Revenue authority, howsoever, wide, do not entitle him to make the assessment on pure guess without reference to any evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th that of earlier period, is not proper and lawful. The case was affirmed by the Hon ble Delhi High Court in 2022 134 taxmann.com 256 (Delhi). 21. Further, the appellant begs to submit that the Ld. AO had made the addition u/s 68 of the Act accepting the books of accounts. On the contrary, the Ld. CIT(A) affirmed the said addition by invoking section 69A of the Act and rejecting the books of accounts of the assessee. As per the Income Tax hierarchical structure, the order of CIT(A) supersede the order passed by the Ld. AO. Thus, the section 69A invoked by the CIT(A) will prevail and the assessee has duly explained as to how the provisions of section 69A could not be invoked in the present case. 22. Having said as above, it is further submitted that the Ld. AO has made the impugned addition u/s 68 of the Act merely on the basis of surmises and conjectures without conducting any specific enquiry whatsoever in this regard to substantiate his findings and alleging that the money deposited into the bank account was out of bogus sale while making the impugned addition u/s 68 r.w.s 115BBE of the Act. The CIT(A) too confirmed the addition u/s 69A of the Act r.w.s 115BBE of the Act without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicion, conjectures or surmises and if it does anything of the sort, its findings even though on questions of fact, will be liable to be set aside by the Supreme Court. In the result, the order of the Tribunal was set aside and the matter was remanded back to the Tribunal to reconsider the same in accordance with law. Further reliance is placed on the judgment of the Hon ble Apex Court in the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) wherein relying upon the judgment of Hon'ble Apex Court rendered in the case of Omar Salay Mohamed Sait [1959] 37 ITR 151 (SC) it was held that: It is, therefore, clear that the Tribunal in arriving at the conclusion it did in the present case indulged in suspicions, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nov and Dec 2016. The reasons recorded by the AO to reject the reasons for such cash deposits are out of cash sales by observing that the cash is nothing but undisclosed funds of the assessee and it has manipulated the cash sales to make such cash deposits. From the records we observe that the AO neither rejected the book results or method of account adopted by the assessee. The AO or CIT(A) has not found any discrepancies in the method of accounting, margin declared by the assessee which are in consonance with the previous periods. Since the AO did not have any material against the assessee but made the addition merely on the basis his perception that the same is only out of assessee s undisclosed income. 14. On the other hand, Ld CIT(A) had also sustained the addition made by the AO by observing that the stock register is not maintained and purchase/sales are not substantiated with sales bills or names and address of the customers or not provided confirmations from the customers. Further, he has proceeded to sustain the addition u/s 69A against the additions made by the AO u/s 68 of the Act. Let us first address the findings of Ld CIT(A) that the assessee has not maintained the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be traced if at all the assessee has introduced such unaccounted money into the system, it will show from the financial results or parameters where it can be deducted with: a. Abnormal profit b. No stock movement c. Recording of excess sales From the information submitted before us, all the purchase and sales are properly recorded in the books and also substantiated by the information submitted before the GST officials and relevant quarterly reports. There is absolutely no discrepancies found by the lower authorities either in the stock registers submitted or quarterly reports submission before the GST authorities. 17. Let us analyze the financial results declared by the assessee in the last three years: AY GP Ratio NP Ratio 2015-16 7.10% 0.35% 2016-17 7.14% 0.40% 2017-18 7.27% 0.31% From the above, it is clear that the results declared by the assessee is within the range of book results. The lower authorities has not made any adverse comments nor found any deviations in the book results. 18. Coming to the issue of stock movement and excess sales, we observed that the assessee has submitted relevant stock reconciliation and auditors report of stock movements and there is no negativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 55.94 lakhs as on 8-11-2016, i.e., the date on which demonetization was announced, which sufficiently explains the source of deposit of Rs. 52.60 lakhs in specified bank notes. Apart from this, the assessee had duly furnished the month wise details of sales, month wise details of purchase, corresponding freight charges incurred month wise, month wise power and fuel expenses and month wise selling expenses in the form of rebate and discount. The assessee also furnished the quantitative details of goods month wise for rice, sugar, chana dal and wheat flour before the Assessing Officer. All these facts clearly go to prove the genuineness claim made by the assessee that cash deposits of Rs. 52.60 lakhs has been made out of cash balance available with the assessee and, hence, there is absolutely no case made out by the revenue for making addition under section 68. Further, in the case of Fine Gujaranwala Jewellers Vs.ITO (ITA No.1540/Del/2022 dated 27.03.2023, wherein it was held as under: . In the case in hand the reason for disbelieving the cash deposit is that the assessee has been deposited below Rs. 2 lakh in every transactions that lead to the conclusion of the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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