2023 (4) TMI 529 - AT - Income Tax

Unexplained deposits in bank account - appellant had inflated the sales to cover unaccounted money - AO has rejected the books of accounts u/s 145(3) on the ground that the assessee has not furnished the sales bills - addition made u/s 68 on account of unexplained cash deposit and the same is taxed u/s 115BBE at the rate of 60% - HELD THAT:- It is pertinent to mention here that the assessee has duly submitted books of accounts, sale & purchase register, confirmations, bank statements, expenses, parties from whom the purchase and to whom sales were made.

AO has computed the sales for the month of October & November 2016 at Rs. 28,06,536/- and Rs. 9,63,687/- respectively. AO while doing such exercise has ignored the fact as to why a prudent businessman will make purchases to the tune of Rs. 3,09,69,406/- in the month of October, 2016 much before the date of demonetization in order to execute such meagre sale as computed by the AO.

Assumption drawn by the AO in respect of estimating the sales is merely on assumption or presumption or surmises or conjectures. AO has made addition in the hands of the assessee by reducing the actual sales for the month of October, & November 2016. The basis of rejection of books was not acceptable here.

AO has made such addition without discharging the burden of prove the correctness of addition. It is a settled law that once the adequate evidence/material has been provided which prima facie discharge the burden of the assessee in that case, the burden shifts on the revenue and the revenue has not discharged its onus in these circumstances.

Amount deposited in the bank account was out of sale of various items as held by the assessee as stock in trade and since the deposits in the bank account were out of sale of stock therefore the stock of the assessee has depleted and the cash has come in respect of stock, such sales had been disclosed in the trading account against the purchase which had not been doubted, neither the opening and closing stock had been doubted. Nothing could have been doubted when the source of cash was well explained and was shown in the bank account. Addition was made only on the basis of surmises without establishing any motive on the part of the assessee and without disturbing the closing stock as on 31/03/2017 which had been arrived at after reducing the sale in quantity of stock in trade.

AO has no right to calculate sales on hypothetical basis ignoring the evidence submitted during the course of assessment proceedings in the form of VAT return, purchase bills and quantitative details. Once the amount is declared as turn over cannot be called concealed income and be taxed doubly on same amount. We further relied on order of Jet Freight Logistics Ltd. [2022 (9) TMI 1183 - ITAT MUMBAI] - addition U/s 68 is beyond jurisdiction of the ld. AO as the turnover is already reflected in the books of the assessee. Decided in favour of assessee.