9911796707
TMI Blog2025 (3) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... re November 2016, and those invoices also did not contain PAN details; however, Revenue did not dispute those sales at the same time. We note that the DR has not controverted the claim of the learned AR. In our considered opinion, consistency should be maintained, and the Revenue cannot be allowed to take different positions on similar transactions conducted on different dates in the same financial year. Regarding the absence of customer addresses on invoices, which is required under Rule 29 of the Karnataka VAT Act, we note that the statutory requirements should generally be followed. However, the circumstances under which the requirement was not met must be considered before drawing an adverse inference against the assessee. As noted that after the announcement of demonetization on the evening of November 8, 2016, effective from November 9, 2016, the people rushed to general stores, jewellery shops, fuel stations, etc., to spend their cash before it became invalid for general transactions. Furthermore, it is important to note that the requirement to record the buyer's address is a VAT regulation and not under the Income Tax Act. VAT Department accepted the invoices raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) erred in deleting the above mentioned addition as the assessee was not able to produce the confirmation of sales from third party either before the assessing officer or before the Ld. CIT(A). 4. On the facts and circumstances of the case, the learned CIT(A) erred in deleting the above mentioned addition as section 68 of IT Act, 1961 states that in failure of satisfactory explanation of the nature and source of cash credits in the bank account, the assessing officer can invoke section 68 of the IT Act, 1961. In this case, the assessee failed to discharge the onus of proving the nature and source of cash credits made during the month of 'Nov. 16 and thereby unexplained cash credits were added as Income by the assessing officer by invoking the section 68 of the IT Act, 1961. Hence. Ld. CIT(A) ought not to have deleted the addition made under section 68 of the IT Act, 1961." 3. The interconnected issue raised by the revenue is that the Learned CIT-A erred in deleting the addition of Rs. 6,61,00,000/- made by the Assessing Officer (AO) under Section 68 of the Act. 4. The relevant facts are that the assessee, a partnership firm, is engaged in the retail trading of jewellery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h sales amounted to ₹ 6.85 crores, including ₹ 6.72 crores on a single day (November 8, 2016). The AO considered this volume abnormally high and commercially unfeasible. 2. Lack of Credible Evidence: The invoices issued for cash sales did not contain the proper names and addresses of customers, which was against the statutory requirements under the Karnataka State Value Added Tax Rules, 2005. The AO also noted that the failure to furnish customer details amounts to non-compliance with the onus for the provisions under section 68 of the Income Tax Act. Additionally, the assessee did not provide confirmation from all creditors, and the purchase bills submitted lacked itemized details. 8. Based on the above observations, the AO concluded that out of the total cash sales of ₹ 7.23 crores recorded in November 2016, only ₹ 61.64 lakh (the average monthly cash sales) could be considered genuine. Consequently, the AO treated the excess cash sales of ₹ 6.61 crores (₹ 7.23 crores - ₹ 0.61 crores) as unexplained cash credit under Section 68 of the Act and added the same to the total income of the assessee. 9. The aggrieved assessee preferred an ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that, after the demonetization announcement, a large number of customers rushed to purchase jewellery in exchange for their cash and were unwilling to disclose their addresses. Given these circumstances, the assessee argued that it was practically impossible to obtain customer details and, therefore, it should not be penalized for a situation beyond its control. 16. The Ld. CIT-A, after considering the facts in totality deleted the addition made by the AO by observing as under: "6.3 The assessee is into retail trade business of purchase and sale of jewellery. During the assessment proceeding, the AO has observed that the assessee has declared gross receipts of Rs. 21.99 Crores. During the assessment proceedings, the Assessee was specifically required to submit the sources of cash deposits made in his bank account. It is also noticed that the assessee has made total sales of Rs. 21.99 crores during the year out of which cash sales have been made to the extent of Rs. 11.64 Crores. Further, out of the total cash sales, the assessee has shown cash sales of Rs. 6.85 Crore, only during the period 01.11.2016 to 08.11.2016 which works out to around 58.84% of total cash sales of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs. All the tax invoices are supported by barcode. The existence of barcode in the tax invoice raised by the Appellant would mean that there was sufficient inventory for making huge sales on 08.11.2016. 6.6 The Assessing Officer has stated in the assessment order that the provisions of Karnataka VAT rules, 2005 clearly illustrate that a person doing business needs to maintain bills/invoices containing of the person to whom sales are being made. In the instant case, in respect of sales, the assessee failed to furnish the name and address of the persons to whom sales have been made in respect of sales exceeding Rs. 100. However the details of the persons to whom sales have been made have not been provided in this case. In this regard, the appellant has stated that the Appellant except mentioning the address of the buyer as required under Rule 29(1)(d) has complied with all the requirements of the aforesaid Rule. The Appellant could not mention the address of the buyer for the reason that, the buyers who rushed to Jewellery shop to exchange their cash for money, hesitated to disclose their address and identity. Such being a case, it was highly impossible for the Appellant to gettt a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... untant under section 44AB of the Act. All the sales, purchases and stocks were recorded in the books of account which had not been doubted by the AO. The sales shown by the appellant had been accepted by Sales Tax/VAT Department. 6.9 The AO has neither disputed the books of accounts nor pointed out any discrepancy in the sales register and stock. The cash sales made by the assessee has been credited in the books of account and reduction in the stock has not been doubted by the AO. If the reduction of stock position is matching with the sales, it proves that the cash received/deposited represents the sales. The AO has not rejected the books of accounts. lt is also true that no businessmen can refuse to make sale to any customer when stock is available and if it is within the four corners of law, especially when price of the gold was high and there is demand for gold at that time of the day. If minimum details of the customers are taken on sale bills as required under a VAT Act, that cannot be doubted, particularly in the rush of the hour. If the AO alleges that the appellant has brought the unaccounted money generated, then the onus is on the AO to bring on record evidence to demo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation is satisfactory or not. The expression used in the section clearly lays the burden on the assessee to explain the nature anc source of the fund. Unless an explanation is offered, the Assessing Officer is free to treat the fund as income of the assessee from undisclosed sources chargeable to tax. Once an explanation is offered by the assessee, the assessing Officer is bound to consider the same. Such consideration is guided by sound principles of law. The opinion so formed must be reasonable and based on materials and shall not be perverse. The extent of the power of the Assessing Officer while considering the materials produced by the Assessee is very wide. It is a question of examining as to whether the apparent is real. The Assessing Officer is empoweredtoliftthecorporateveilandexaminetherealnatureofthetransaction. In the process, he may exercise his power of examining the materials. He may require the assessee to produce further materials if so required. He may seek information from the sources on the basis of material produced. In the process of enquiry, the assessee has no right of hearing, but the assessee has a right to challenge the conclusion arrived at on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in statement of profit & loss, therefore there is no occasion to again consider the same as income of the assessee by applying the provisions of section 68 of the Act. It is further relevant to mention here that if the intention of the legislature would be to apply the provisions of section 68 of the Act on the sale transactions also, then in such case as per law it would be mandatory to have the identity, genuineness and creditworthiness of each buyer. But the law is not so and in case of sale below to certain limit, the assessee was not required to prove all these ingredients of section 68 of the Act and even also in case of sale exceeding to certain limit the assessee is not required tc prove the creditworthiness of buyer. Thus, this also, strengthen the contention of the assessee that the provisions of section 68 are not applicable on the transaction which are already credited in the P&L and the same can only made applicable on the cash credit; such as loans, share appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of what was available in the cashbooks. The cash sales & receipts are duly supported by relevant bills, which were produced before the AO in course of the assessment proceedings, and nothing adverse in connection therewith was noted by the A.O. The fact that cash sales and corresponding cash deposits in banks have been regular feature of the assessee's business over the past several years has not been denied by the A.O. The provisions of sec.68 can be invoked only in cases of cash credits, which were not offered as income, i.e., a legal fiction has been created in sec.68 of the Act to assess certain cash credits, which were not otherwise shown as income. In the instant case, the assessee has declared the cash sales as its income in the profit and loss account. Hence it is not a case of cash credits, which were not shown as income, in order to attract the provisions of sec.68 of the Act. In the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC), the Hon'ble Apex Court decided the matter in favour of assessee of the ground that it was clear on the record that the assessee maintained the books of accounts according to the mercantile system and there was sufficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closure of business may not be persuasive for the past event especially in wake of facts as discussed above; and lastly, once neither any item in the trading account, nor gross profit has been rejected, then one part of credit side of the trading account, that is, sales cannot be discarded completely so as to hold that it unexplained money." 6.17 Identical issue was also decided by the Hon'ble Visakhapatnam bench of ITAT in the case of Hirapanna Jewellersin favour of the assessee. Vide I.T.A. No.253/Viz/2020 and C No.2/Viz/2021 dated 12.05.2021. The relevant part of the decision are as under: 7. We have heard both the parties and perused the material placed on record. In tl instant case, the assessee has admitted the receipts as sales and offered for taxation. T1 assessing officer made the addition u/s 68 as unexplained cash credit of the same amount which was accounted in the books as sales. In this regard, it is worthwhile to look in section 68 which reads as under.- 68. Where any sum is found credited in the books of an assessee maintained for a previous year, and the assessee offers no explanation about the nature and source there or the explanation offered by him is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient cash in hand in the books of account of the assessee, therefore, held that there was no reason to treat this amount as income from undisclosed sources and it was not a fit case for treating the said amount as concealed income of the assessee. The revenue moved to Calcutta High Court against the order of the tribunal and the Hon'ble High Court has confirmed the order of the Tribunal while deleting the penalty, Hon'ble Calcutta high court held as under: "8. The Tribunal was of the view that the assessee had sufficient cash in hand. In the books of account of the assessee, cash balance was usually more than Rs. 81,000. There is no reason to treat this amount as income from undisclosed sources. It is not a fit case for tr amount of Rs. 81,000 as concealed income of the assessee and consequently imposition of penalty was also not justified in this case. " In the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC), the Hon'ble Apex Court decided the matter in favour of assessee of the ground that it was clear on the record that the assessee maintained the books of accounts according to the mercantile system and there was sufficient cash balance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay not be persuasive for the past event of specially in wake of facts as discussed above; and lastly, once neither any item in the trading account, nor gross profit has been rejected, then one part of credit side of the trading account, that is, sales cannot be discarded completely so as to hold that it is unexplained money." 7.2 In the instant case the assessee has established the sales with the bills and representing outgo of stocks. The sales were duly accounted for in the books of accounts and there were no abnormal profits. In spite of conducting the survey the AO did not find any defects in sales and the stock. Therefore we do not find any reason to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in the span of 4 hours, non availability of KYC documents for sales, non writing of tag of the jewellery to the sale bills, non-availability of CCTV footage for huge rush of public etc. The contention of the assessee that due to demonetization, the public became panic and the cash available with them in old denomination notes becomes illegal from 9-11-2016 and made the investment in jewellery, thereby thronged the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction or the exempt income and the profits we, also not abnormal. The assessee explained the reason for huge sales with evidence ar thus the case law relied up on by the DR is distinguishable. The Ld.DR relied on varioL case laws and all the case laws more or less are related to the additions made u/s 68 is unexplained cash credit and in none of the cases the assessee's have admitted the sarr as income. Therefore, we find that the case laws relied up on by the Ld.DR has r application in the instant case and the same are distinguishable. 9. In view of the foregoing discussion and taking into consideration of all the fact and the circumstances of the case, we have no hesitation to hold that the cash receipt represent the sales which the assessee has rightly offered for taxation. We have gone, through the trading account and find that there was sufficient stock to effect the sales are we do not find any defect in the stock as well as the sales. Since, the assessee he already admitted the sales as revenue receipt, there is no case for making the addition u, 68 or tax the same u/s 115BBE again. This view is also supported by the decision c Hon'ble Delhi High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected to be deleted." 6.19 Recently, the Hon'ble Delhi ITAT in ITA No 171/DEL/2022dt.26.04.2022 in the matter of Ramesh Kochar has decided identical issue in the favour of the assessee wherein it was held as under: I have heard the rival submissions made by both the parties and perused the material on record. The dispute before the Tribunal is with respect to addition at Rs. 34,99,500% made on account of cash deposits during the demonetization period. It is an admitted fact that assessee is engaged in the business of trading of electrical wires and trading in electrical equipments, products etc. find assessee has placed on record the details of cash sales made [a copy of which is placed in paper book] and it contains the details namely the date of sale, the voucher number, the name of the party, the amount of sales. It is also an undisputed fact that on the aforesaid sales, VAT as per the applicable rates has been paid by the assessee and the payment of VAT is also reflected in the VAT returns filed by the assessee with the Department of Trade and Tax, Government of Delhi. Before me, Revenue has not placed any material on record to demonstrate that the details of cash sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has rightly offered for taxation. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. Therefore, the action of the Assessing Officer is not justified. Hence, the addition u/s 68 cannot be upheld. Accordingly the Assessing Officer is directed to delete the addition of Rs. 6,61,00,000/-. The ground appeal no. 6 and 7 raised by the assessee are allowed. 17. Being Aggrieved by the order of the learned CIT(A), The revenue is in appeal before us. 18. The Ld. DR before us has filed the return submissions along with the citation addition of case laws and vehemently supported the findings contained in the assessment order contention of the 19. On the other hand, the Ld. AR before us filed two paper books running from pages 1 to 514 and 1 to 291 and detailed written submissions in support of the findings of the ld. CIT-A. 20. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the primary contention of the Revenue is that the cash sales reported during the demonetization period were abnor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Tax authorities or businesses can scan the barcode to verify transaction details, reducing the chances of tampering or post issuance alteration. While the presence of a barcode does not automatically validate every sale, it does enhance transparency and accuracy in accounting and tax records. However, the AO, without verifying this aspect or pointing out any specific defects, mechanically treated the sales as bogus and sham transactions which in our considered opinion is unjustified. 20.6 We further note that the AO, without considering the extraordinary event of demonetization, concluded that the cash sales on November 8, 2016, were bogus solely due to their unusually high volume compared to average monthly cash sales. In our considered opinion, applying a normal monthly cash sales average to an extraordinary event like demonetization is incorrect. The approach of the AO in treating cash sales exceeding the average as bogus is both flawed and unjustified. 20.7 We note that the Ahmedabad Tribunal, in the case of Hinima Atul Shah vs. ITO (164 Taxmann.com 439), dealt with identical facts and circumstances and deleted the addition. The relevant finding of the bench extracted as un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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