9911796707
TMI Blog2025 (4) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 2. Brief facts of the case are that the assessee is a company engaged in the business of tiles, hardware and sanitary items. The assessee filed its return of income for A.Y. 2017-18 on 09/10/2017 declaring taxable income of Rs. 3,27,900/ -. The case was selected for scrutiny. During the assessment, the Assessing Officer, on perusal of bank statements noted that during demonetization period, the assessee made cash deposit with HDFC Bank and bank of Baroda of Rs. 44,54,000/- and 6,50,000/- respectively. The assessee was asked to furnish the source of cash deposit in the bank accounts. The assessee in its reply submitted that the cash deposited during the period is out of cash sales. The assessee also furnished a list of parties alongwith their names and address from whom the cash was received against sales. The Assessing Officer in order to verify the transaction, issued notice under Section 133(6) of the Act to the parties. The Assessing Officer recorded that the notices sent to most of the parties were either returned unserved or not served. One of the purchaser Pankaj Rameshchandra Desai attended the office of Assessing Officer, his statement was recorded. In his statement, Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of other parties, fresh addresses were filed. For remaining parties which are shown at serial No. 5,7,13,15 and 16, the amount was received by cheque. Against the statement of Pankaj Bhai Desai, which was relied by Assessing Officer, the assessee asked for copy of statement and his cross examination. The assessee stated that the party has accepted the sale, which proved that sales is as per account and delivery challan bearing his signature, ought to have been accepted. The assessee explained that his cash book was verified by Assessing Officer and cash in hand on 30/09/2016 was of Rs. 36,03,228/ -. Out of total cash deposit of Rs. 50,50,000/-, a major cash deposit in the cash balance accumulated prior to 30/09/2016. Thus, balance amount of Rs. 14,46,772/- was out of collection in the month of October and first week of November, 2016 and no doubt, should be raised for old cash in hand till 30/09/2016. The sales of assessee is of Rs. 4,87,66,541/- (Rs. 4.88 crores approx.) and the deposits of cash is fully justified which is duly supported by sale bills and delivery challan. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer reiterated his conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h deposit in the bank account. 2 Balaji Construction N Machines & Spare Purchases Delivered but no reply - do - 3 Kohler India CorporationPvt. Ltd. Purchases Delivered but no reply - do - 4 Alpesh Bhai Modh Sales Return Unserved There are counter sales where most of the parties either pay in advance or pay in cash and delivery is made to the site of buyer. The genuineness of sales gets established on the base of delivery challan. 5 Avadh Infratech Sales Return Unserved - do - 6 Avanti Enterprise Sales Delivered but no reply There is no fault on the part of assessee if the party does not reply. 7 Ceramica Exclusive Sales Return Unserved There are counter sales where most of the parties either pay in advance or pay in cash and delivery is made to the site of buyer. The genuineness of sales gets established on the base of delivery challan. 8 Dhirubhai Sales Return Unserved - do - 9 Harishbhai Sales Delivered but no reply There is no fault on the part of assessee if the party does not reply. 10 Keshavbhai Kesal Sales P Return Unserved There are counter sales where most of the parties either pay in advance or pay in cash and delivery is made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee also relied on reconciliation of sales with VAT return. The assessee also filed detailed written submission against taxing the addition under Section 115BBE of the Act as the same is not applicable for the year under consideration as the amount in the bank deposits were out of sale proceeds i.e. business transaction. 5. The ld. CIT(A) on considering the submission of assessee in para 6.1 of his order recorded that the assessee failed to satisfy Assessing Officer regarding the source of cash deposit except opening cash balance of Rs. 6,38,555/-. The ld. CIT(A) also referred the observation of Assessing Officer that Pankajbhai Desai in his statement accepted only purchase of Rs. 30,000/- against sale of Rs. 1,30,569/ -. On the contention of assessee that they have furnished fresh address/latest address, the ld. CIT(A) noted that the Assessing Officer has given sufficient opportunity to the assessee to show the genuineness of cash transaction. The assessee failed to establish the genuineness of cash transaction. The notice sent to parties were returned back. In financial year (FY) 2015-16, the assessee was having maximum cash in hand of Rs. 20,68,141/- whereas in this year, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the Assessing Officer made addition by considering sales and of purchases of three parties as non-genuine. The addition is without any logic and basis. No cross examination of party was allowed by Assessing Officer, whose statement was recorded and relied by him. The ld. AR of the assessee reiterated that books of account was not rejected. The Assessing Officer in his show cause notice, proposed to estimate the gross profit, yet the sales were not considered as genuine. The assessee furnished cash flow statement from April to October, 2016 which was not rejected by Assessing Officer. The assessee also reconciled the sales bill, VAT return and nothing adverse was found. The Assessing Officer merely relied upon his observation about non-compliance of notice under Section 133(6) of the Act or on the statement of one of the purchaser whose cross examination was not allowed. Statement is not evidence unless it is tested by cross examination. In support of ground No.2, which relates to taxing the addition under Section 115BBE, the ld. AR of the assessee submits that the provisions of Section 115BBE of the Act is not applicable as the provisions of Section 68 or 69 are not applicable on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during demonetization period in two bank accounts i.e. in HDFC bank and in Bank of Baroda and that the assessee failed to substantiate the source of cash deposit. The Assessing Officer issued notice to various parties, which was either returned unserved or no response was made by such parties. The Assessing Officer made addition of Rs. 44,65,445/- by allowing credit of Rs. 6,38,555/- as cash available on 01/04/2016. We find that before the Assessing Officer as well as before the ld. CIT(A), the assessee explained about each and every purchaser or seller. For first three parties shown in the show cause notice is seller of goods to the assessee. From first three parties, the assessee has made purchases through cheques out of which confirmation of two parties were filed. Again the assessee claimed that the assessee has received entire sale consideration from parties mentioned at serial No. 5,7,13,15 and 16. The assessee also claimed that they have filed fresh addresses of nine parties mentioned at serial No. 4,5,8,10,12,14,17,18 and 19. No fresh verification either by from Verification Unit of department or by sending notices or summons was carried out by Assessing Officer. The Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted amount cash is only of around Rs. 50.00 lacs which is almost 11%. Considering the overall facts and circumstances of the case, in our view, the addition of entire cash deposit on the peculiar facts of the case was not justified, when there was extraordinary event of demonetization during the financial year. Even though, if it is assumed that the assessee has failed to reconcile one to one sale or purchase the addition of entire cash deposit is not justified, when books of assessee was not rejected. It is settled position under income tax proceedings that only profit from business is to be taxed and not the cash or credit entry in the Bank account. We find that in a series of decisions in similar cases where the business transaction of assessee is in cash, only profit element to avoid the revenue leakage is estimated. The ld. AR of the assessee strongly relied on the decision of Surat Bench in Amrita Gems Pvt. Ltd. Vs ITO (supra) wherein Surat Bench has estimated 10% of profit as reasonable profit to avoid the possibility of revenue leakage. Thus, considering the overall facts of the case, the Assessing Officer is directed to tax 10% of cash deposit during demonetization period ..... X X X X Extracts X X X X X X X X Extracts X X X X
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