9911796707
TMI Blog2025 (2) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... ve named assessee challenges the order of National Faceless Appeal Centre, Delhi [for short 'CIT(A)/NFAC'] dated 06/10/2023 for assessment year 2017-18. The said order of the ld. CIT(A) arose because the assessee challenged the order of assessment passed u/s. 143(3) of the Income Tax Act [for short Act] by ITO, Ward 2(1), Jaipur [for short AO] before him. 2. At the outset of hearing, the Bench observed that there is delay of 210 days in filing the appeal by the assessee for which the ld. AR of the assessee filed an affidavit stating the reasons for delay and prayed for condonation of delay, the content of the affidavit reads as under :- "I, JITENDRA KUMAR TAHILRAMANI, aged 51 years, residing at 24, Khatipura Road, Vaishali Nagar, Jaipur, 302021 do hereby declare on oath as under: - 1. That I am aged 52 years, engaged in jewellery business in Jaipur. 2. That I have given my email address on the portal of the Income Tax Department. However, being not conversant with technology, I normally do not check my emails. All my correspondences are through my mobile phone or in physical manner only. I seldom use my email ID. 3. That during the course of first appellate proceedings, ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the merits of the dispute, the assessee has raised following grounds: - "1. In the facts and circumstances the case and in law, Id. CIT(A)/National Faceless Appeal Centre (NFAC) has erred in confirming the action of Id. AO in making additions of Rs. 37,95,560/- as unexplained cash deposits u/s 68. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the additions of Rs.37,95,560/- made u/s 68 of the Income Tax Act, 1961. 2. In the facts and circumstances of the case and in law, Id. CIT(A)NFAC has erred in confirming the action of the Id. AO, in invoking provisions of Section 115BBE of the Income Tax Act, 1961. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the invocation of Section 115BBE, as being not in accordance with the relevant law. 3. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing." 7. Succinctly, the facts as culled out from the records are that the assessee is engaged in the business of trading of manufacturing and trading o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le holding so, he noted that before depositing of Rs. 50,00,000/- in his bank account in SBN on 13.11.2016, the opening cash balance with the assessee as on 01.10.2016 was Rs. 4,04,200/- only. The source of the cash is claimed to have been generated as per cash book was out of the alleged cash sale proceeds which was shown to have risen drastically from the month of October, 2016 till 8th November, 2016 in comparison to corresponding months of the FY 2015-16 as well as earlier month of FY 2016-17. Ld. AO extracted figures of cash in hand and cash deposited out of it on various dates during October and November, 2016, as listed herein below : Date Cash in hand (in Rs.) Cash deposited (in Rs.) 12.10.2016 11,38,953/- 2,00,000/- 17/10/2016 9,48,173/- 65,000/- 19/10/2016 9,75,353 1,27,000/- 31/10/2016 14,43,326/- 2/11/2016 20,99,220/- 1,35,000/- 3/11/2016 25,72,205/- 1,50,000/- 5/11/2016 29,76,815/- 5,90,000/- 7/11/2016 26,71,165/- 1,10,000/- 8/11/2016 53,10,622/- - 13/11/2016 53,10,622/- 50,00,000/- Ld. AO from the above chart observed that despite having a considerable amount of cash in hand on different dates, assessee had deposited a meager a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the month of October and November 2016 over corresponding period of last FY 2015-16 was not considered as acceptable reasons. Ld. AO observed that the source of cash deposits in bank account during demonetization period cannot be held to be entirely from alleged cash sale. Ld. AO noted that assessee claimed having cash in hand as on 12.10.2016 Rs. 11.38 Lac which kept on rising till 8th Nov, 2016 but the assessee never deposited the same in the bank account or deposited a nominal amount which was not in consonance with the cash balance he used to maintain in hand during FY 2015-16 and earlier months of FY 2016-17. Considering that enormous factors as discussed by AO, he had considered sales as unverifiable alleged sale, the trading results declared by the assessee was not considered for verification and thereby he invoked the provision of section 145(3) of the Act and rejected the book results. As regards the contention of the assessee for verification of the sales by invoking the provision of section 133(6) [calling for any information from any person or any officer] , section 131 [Summons enforcing attendance of any person or any officer and examine him on oath] and Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5000000/- during the period of demonetization in his bank account. Based on these information AO has sought explanation along with documentary evidence to justify the source of cash deposited in his bank account during the assessment proceedings. The AO has analysed the information and explanations given by the appellant during the assessment proceedings in details in his assessment order. AO has also made comparative analysis of the sale proceeds and cash deposit month wise in his assessment order. Considering that appellant is a businessman engaged in jewellery business where cash/ cheque sales are norms of the business, has given his detailed analysis of the sale proceeds corresponding to cash deposit in his bank account. The AO has noted that since the appellant is engaged in regular business of jewellery and hence cash deposited during the demonization period, being a peculiar period must be inclusive of his genuine sales proceeds. Accordingly in order to ascertain the cash earned on account of genuine cash sale, the AO has taken into account cash sale shown during October and till 8th November 2015, at this period of year 2015 and 2016 covered most of big festivals/ auspici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of section 68 is not valid. In support of his contention he has cited several case laws and judicial pronouncement passed by ITAT/High Courts. 5.4 I have duly examined and evaluated the findings of the AO and reply/explanation of the appellant filed during appellate proceedings. There is no doubt that cash of Rs. 5000000/- has been deposited by the appellant in his bank account on 9th November 2016. The explanation of the appellant with regards to source of cash deposit has been properly examined by the AO. It is seen that a proper scientific method has been employed by the AO for proper evolution of the cash deposits and business proceeds by the appellant. The AO has given due benefit to the appellant for genuine cash sale during the period. On the proper examination of the present case in the light of findings of the AO contained in his assessment order and explanation submitted by the appellant, I am inclined to concur with the findings of AO with regard to addition u/s 68 amounting to Rs. 3795560/- as unexplained income of the appellant for the assessment year 2017- 18. Hence I hereby confirmed the addition of Rs. 3795560/-. Therefore this ground of appeal is dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essments under Section 143(3) for preceding years were accepted without any such additions. The assessee has consistently deposited cash generated from sales into the bank account. In this regard, it is submitted during the year under consideration the assessee has deposited Rs.1.30 crores cash, in total, out of cash sales, whereas, for the immediately preceding year the assessee had deposited Rs. 1.26 crores. The fact is undisputed and noted by the ld. AO at Page 5 of his order. Accordingly, it is not that the assessee only on account of demonetization deposited the amount. 2.4. During the course of proceedings before the lower authorities, assessee submitted all requisite details and supporting documents pertaining to the cash sales made during the relevant previous year. These submissions included complete address of the buyers involved in the cash transactions, as recorded in the sales bills. Despite the submission of these comprehensive details and supporting evidence, the lower authorities failed to point out any specific discrepancy or irregularity in the information provided by the assessee. 2.5. Ld. AO erred in stating that identity of persons from whom cash payment ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctual matrix of the cash on hand in our considered view the addition made cannot sustain and therefore, we vacate the addition of Rs. 80,00,000/- made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO. * ACIT Central Circle-1 vs. Shri Mahendra Kumar Agarwal ITA No. 172/JP/2022 We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact, the AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account Similar observations were made by ITAT, Jaipur Bench, in the case of Raj Kumar Nowal, ITA No. 165/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hereunder: "It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer. The assessee has maintained the complete stock tally in its accounting software. Such books of accounts are audited, quantitative records produced before the tax auditor, such quantitative records are certified by tax audit and no questions have been raised by the assessing officer. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details." The said decision has also been upheld by Hon'ble Delhi High Court in Agson Global (P.) Ltd [2022] 134 taxmann.com 256 (Delhi). 2.15. Attention is also invited towards the decision of the Hon'ble Bombay High Court in the case of R.B. Jessaram Fatehchand v. CIT (1970) 75 ITR 33, wherein the Hon'ble High Court at Para 2 of the order held as under: "In these circumstances, the reason given by the Income-tax Officer for rejecting the book results shown by the assessee's accounts or for not accepting the cash transactions as genuine cannot be accepted as good and sufficient unless there was an obligation on the part of the assessee to keep a record of the addres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them." 2.17. Attention is invited towards the recent decision of the Hon'ble ITAT, Mumbai bench in the case of R.S. Diamonds India Private Limited vs ACIT, Mumbai, ITA No 2017/Mum/2021 wherein it was held as under: "The facts that the deposit made into the bank account is from out of the books of accounts and the said deposits have been duly recorded in the books of account are not disputed. It is the submission of the assessee that it had received advance money from walk in customers for sale of jewellery over the counter and the amount so received was duly recorded in the books of account. The said amount alongwith other cash balance available with the assessee was deposited into the bank account after announcement of demonetization by the Government of India. He also submitted that the assessee has raised sale bills against the said advances in the name of respective customers. Since the transaction was less than Rs.2.00 lakhs, it was stated that the assessee did not collect complete details of the customers. Thus, it is seen that the adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts noted by the ld. AO, which find mention in the order of the Hon'ble Supreme Court at page 7 of the order: "The Income-tax Officer found that the appellant's food grains licence at Nawgachia had been cancelled for the accounting year for its failure to keep proper stock accounts and that the appellant was prosecuted under the Defence of India Rules but had been acquitted having been given the benefit of doubt. The Income-tax Officer also had regard to the fact that the appellant was a speculator and that as a speculator the appellant could easily have earned amounts fair in excess of the value of the high denomination notes encashed. He considered that even in the disclosed volume of business in the year under consideration in the head office and in the branches, there was possibility of his earning a considerable sum as against which it showed a net loss of about Rs. 46,000. The Income- tax Officer also noticed that notwithstanding the fact that the period was very favourable to food grains dealers, the appellant had declared a loss for the assessment year 1944-45 up to 1946-47, though it had the benefit of a large capital on hand. The Income-tax Officer further took into cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explain the donations and the donors were fictitious persons, held that the assessee had tried to introduce unaccounted money in its books by way of donations and, therefore, the amount was to be treated as cash credit u/s. 68. The Delhi High Court held that section 68 did not apply, as the assessee had disclosed such donations as its income. 2.22. If the contention of the lower authorities is accepted that the same income would be taxed twice, once when being offered for tax by the assessee as part of cash sales and subsequently as addition under Section 68, which is impermissible in law. 2.23. Reliance is placed on the below mentioned judicial pronouncements, wherein, under identical set of facts, as in the present case, additions made under Section 68 on account of alleged bogus cash sales were deleted: - * ITAT Chandigarh in the case of Smt. Charu Agarwal & M/s. Kalanidhi Jewellers Vs. DCIT ITA No. 310 & 311/Chd/2021 order dated 25/03/2022 The findings of Hon'ble ITAT is in para 10 of the order. Hon'ble ITAT after considering the decision of the Hon'ble Delhi High Court in the case of Pr. CIT (Central)-3 V/s. M/s. Agson Global Pvt. Ltd. In ITA No. 68-73/2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applying the provisions of Section 68 of the Act, it is noted that provisions of Section 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P & L account. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act..." * ITAT, Chandigarh Bench in the case of Roop Square Pvt Ltd ITA No. 198 and 249/Chand/2021 * ITAT, Kolkata Bench in the case of Senco Alankar, ITA No. 10/Kol/2021 2.24. In view of the above, since Section 68 is not applicable in the instant case, the very invoking of the provisions of section 115BBE is illegal and deserves to be quashed. 2.25. Ld. AO has erroneously relied upon judicial pronouncements mentioned on Pages 7 and 8 of the order, which are not relevant to the facts of the present case. It is reiterated that the assessee had provided the complete addresses of the buyers who purchased jewellery from him, accordingly, the onus on the part of the assessee stood completely discharged. As far as the applicability of Section 68 is concerned, it has been submitted that the section is inappli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deposited cash during demonetization period and therefore, the sales made by the assessee are required to be seen from the angle and the purpose of demonetization. As further submitted the assessee deposited a huge sum of money into the bank account and ld. AO given the due benefit to the assessee and invoked the provision of section 145(3) of the Act. Even the ld. CIT(A) noted that the ld. AO has given the benefit of doubt to the assessee by scientific method and therefore, ld. DR relied upon the orders of the lower authorities. 13. We have heard the rival contentions and perused the material placed on record. In this appeal vide ground no. 1 assessee challenged finding of the National Faceless Appeal Centre (NFAC) while confirming the addition of Rs.37,95,560/- made by the ld. AO as unexplained cash deposits u/s 68. As the brief facts of the case have already been discussed herein the above paras and therefore, the same are not being repeated. The broad issue raised before this Tribunal is as to whether the cash sales recorded and supported by the sale invoice be considered as unexplained money and that too when the profit derived from those sales proceeds is already taxed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144. Thus, it is clear from the above provision of the Act that the ld. AO or ld. CIT(A) may proceed under Section 145(3) under any of the following circumstances : * * Where he is not satisfied about the correctness or completeness of the accounts; or * Where method of accounting cash or mercantile has not been regularly followed by the assessee; or * Accounting Standards as notified by the Central Government have not been regularly followed by the assessee. Based on the facts, as discussed above, it is not a case of the Revenue based on second and third reason, but based on the first reason as ld. AO was not satisfied about the correctness of completeness of the accounts. But the situation would not be same when the assessee has produced all the records that was required by the AO. The bench notes that before the ld. CIT(A), the assessee made a sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO following documents/publications to support the wastage declared by the assessee is reasonable and according to the standard practice adopted in the country as under:- 1. C.G.C.R.I., Khurja (PB No.13 to 1) 2. Publication of Articles in while wares (P.B. No.18) 3. Photocopy of Hand book of Ceramics-Volume 2 (Editor S. Kumar) showing typical composition of Bone china. 4. Photocopy of the Chapter 5 of stoneware in the books published by the Institute of Materials (P.B. No.21 to 22). In the report of CGCRI, Khurja, (refer P.B. No.17), the waste worked out to 28.31% to 38.7% interest he bone china crockery and in the case of stoneware crockery it worked out to 24% to 34.8% We agree with the arguments of the ld. AR that the main objection raised by the AO was that input/output ratio in various months has the inconsistency which has been duly explained by the assessee vide letter dated 26.03.2004 and the second objection by the AO was that the sister concern M/s. Bharat Potteries Ltd. has declared more yield and more gross profit, has also been explained by the assessee vide the same letter dated 26.03.2004. Therefore, the incons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next year, it will be open for AO or the Department to look into improvement of industries, machinery and assesss the same every year loss. 11. All the appeals are dismissed. Having held so that the books results cannot be rejected based on the surmises and conjectures. Now coming to the sales recorded in the books of account, the bench notes that the assessee furnished all the invoices with complete year cash book, names, addresses and telephone numbers of the person to whom the cash sales was made. On this information Ld. AO has not made any independent inquiry. He considered part of the sales as genuine and on the same set of records, part of the sales were not considered as genuine. This pick & chose approach was not correct on same set of evidence. Once ld. AO accepted part of the sales as genuine, why not the other part, on the same set of evidence placed on record. The bench notes that to drive home to this contention ld. AR of the assessee relied upon the decision of our own Jurisdictional Hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia Vs. ITO [298 ITR 349] wherein it has held that; So far as question No. 2 is concerned, apparently when the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der to the extent it sustains the addition of Rs. 40,13,000, we modify the directions of the Tribunal relating to addition Rs. 6,98,000 as part of the cash credit and hold that it should also be part of consideration by the Income-tax Officer in respect of other unexplained cash credits unembellished by any observation made in that regard. No costs. Thus, when the cash sales were duly recorded in the books of account and even part of the sales were already considered and part was not considered only due to the fact that the assessee had deposited cash of Rs. 50,00,000/- on demonetization on single day on 13.11.2016. In support of the sales the assessee had submitted all the details as required under law and the ld. AO based on the same details accepted the part of the sales on same set of records. Thus, we see no reason to sustain the addition of the amount recorded as sales i.e., for an amount of Rs. 37,95,560/- as "unexplained cash deposits" u/s 68 and thereby direct the ld. AO to delete the same. Based on these observations, ground no. 1 raised by the assessee is allowed. Since we have considered and decided ground no. 1 in favour of the assessee ground no. 2 becomes infruct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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