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TMI Blog2025 (1) TMI 1054X X X X Extracts X X X X X X X X Extracts X X X X ..... source of impugned deposits is sufficiently explained by assessee. Also once the AO has rejected books of assessee u/s 145, the addition u/s 68 cannot be made. Their Lordship in Dulla Ram [ 2013 (12) TMI 253 - PUNJAB HARYANA HIGH COURT] have approved this proposition as held as books of accounts were rejected in their entirety, the Assessing Officer could not rely upon any entry in the books of accounts for making an addition Addition made by AO in present case is neither tenable on merit nor on legal provisions of section 68. Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances the books of accounts of the assessee cannot be said to be true and correct and hence liable to be rejected u/s 145 of the Income tax Act. Hence not being satisfied about the correctness of the books of account, I reject them by invoking the provisions of section 145(3). Considering the earlier years trend of average cash balance and facts of the case, only the cash of Rs 9,85,000/- deposited on the first instance i.e. 10.11.2016 (which is also almost equal to average cash balance normally seen) is treated as genuine and remaining amount i.e. Rs 32,67,500/- is treated as unexplained cash credit u/s 68 and is being taxed at special rate u/s 115BBE. Further penalty u/s 271AAC are being initiated separately in view of the additions being made u/s 68 read with 15BBE." 4. Thereafter, Ld. AR made detailed oral pleadings which are already submitted in the Written-Synopsis filed by him. For a ready reference, we re-produce below the Written-Synopsis: "Ground No. 1 to 4 The said Grounds relates to the affirmation of the addition of Rs. 32.67 Lakhs by the Ld. CIT(A) as made by the Ld. AO as unexplained cash credits. ASSESSMENT ORDER - COVERED IN PARA 4.3 & 5 AT PAGE 6-7 CIT APP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs which was in matching with the available cash balance on the same date. Kindly refer page no. 204 of the PB). 1.5. The Ld. AO & Ld. CIT(A) disapproved the above said contentions of the appellant without bringing on record any contrary evidence. And wrongly interpreted that the appellant has introduced unaccounted cash in the guise of cash sales and proceeds from debtors' realization. (Kindly refer Para-5, page-7 of the AO order, first four lines.) No observation whatsoever was made in the order to controvert the cash withdrawals made during the pre- demonetization period which was the main source for cash deposit and all the supporting documents were on record. The cash sales and debtor's realization were very miniscule part of the cash balance forming part on 08.11.2016. 1.6. The Ld. AO in its order has repetitively observed that the quantum of cash deposit is high in comparison to the earlier assessment year. But the appellant during the assessment proceedings clarified that the event of demonetization was of exceptional nature and where the currency notes of 500/1000 became useless and had to be deposited in bank account. 1.7. In case there was no demonetiza ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(3), the provisions of Section 68 were not applicable. In this context, we place reliance on the judgments submitted at 29-53 of the case law paper book. Therefore, in view of above-mentioned facts, circumstances and judicial pronouncements, we humbly Pray to the Hon'ble Bench to delete the impugned addition of Rs. 32,67,500/- u/s 68 r.w.s 115BBE of the Act, 1961." 5. Thus, precisely Ld. AR raised following contentions: (i) The assessee filed a detailed reply dated 16.05.2019 to AO (Paper-Book Page 41 to 44) explaining the deposits made in bank and sources thereof. Vide Para 11 of reply, the assessee submitted "Cash-flow Summaries" in three parts (i) for pre-demonetisation period from 01.04.2016 to 08.11.2016, (ii) for demonetization period from 09.11.2016 to 31.12.2016, and (iii) for post-demonetisation period from 01.01.2017 to 31.03.2017. These Cash-flow Summaries which are made up from audited accounts of assessee, themselves show that there was an Opening Balance of Rs. 44.33 lakhs on 09.11.2016 at the start of demonetization and the sources of such Opening Balance were a miniscule receipt of just Rs. 1.21 lakhs from debtors and the balance cash of Rs. 43.13 lakhs cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Purchase Register filed to AO (Paper-Book Page 203) before Diwali which is in line with trend of assessee's business as can been seen from corresponding figures of preceding financial year given in the same Purchase Register. Thus, there was much higher purchase and sales during pre-demonetisation period because of Diwali festival. (iv) That, the AO has wrongly rejected audited books of account of assessee for two reasons. The first reason assigned by AO is factually wrong that the assessee did not file Cash-Book on 04.07.2019 as required by notice dated 26.06.2019, the correct position is that the assessee filed Cash-Book alongwith reply dated 03.07.2019. The second reason assigned by AO is the non-compliance of summon u/s 131 by Sati Polyveave Ltd. (debtor of assessee). So far this second reason is concerned, Ld. AR submitted that there is no fault of assessee since the assessee has filed all documentary evidences in the shape of Ledger A/c and Sales Bills of concerned debtor as part of reply dated 19.06.2019 (Page 164-166 of Paper-Book). The Sales Bills clearly include Bill Nos., Name of debtor, VAT Registration No. of debtor, VAT charged @ 5%, Truck No. in which goods wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting that the assessee did not produce books is thus not correct. Be that as it may, the audited Cash-Book of assessee shows opening balance of Rs. 44.33 lakhs as on 09.11.2016 and also contains the entries of deposits made subsequently in bank a/cs. The assessee has also filed Bank Statements to AO showing entries of cash withdrawals made by assessee which has built up opening cash balance of Rs. 44.33 lakhs on 09.11.2016. The collection from debtors, forming part of opening balance, is miniscule. Even for collection from one debtor M/s Sati Polyweave Ltd., the assessee has filed Ledger A/c and Sale Bills issued under VAT laws. The non-compliance of summon u/s 131 by the said debtor is not a fault of assessee and the assessee cannot be penalized for that. The higher amount of cash balance held by assessee as opening balance is also substantiated from the fact that there was high scale of business during August, 2016 to October, 2016 on account of Diwali festival. Thus, we find that the source of impugned deposits is sufficiently explained by assessee. 9. Even on legal side, we find merit in the submission made by Ld. AR that once the AO has rejected books of assessee u/s 145, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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