TMI Blog2023 (3) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... to act fairly as reasonable person and not arbitrarily capriciously. The assessment should have been made based on the adequate material and it should stand on its own leg. AO without examining any parties to whom the goods are sold by the assessee, came to conclusion that the sales are not genuine, without even rejecting the books of account which is in our opinion is erroneous - Decided in favour of assessee. - I.T.A. No. 1540/DEL/2022 SA No. 244/Del/2022 (In I.T.A. No. 1540/DEL/2022 - - - Dated:- 27-3-2023 - SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER For the Assessee : Shri K. Sampath, Advocate; Shri V. Raj Kumar, Adv.; Shri Pardeep Jain, C. A.; For the Department : Shri Avikal Manu, Sr. D. R.; ORDER PER YOGESH KUMAR U.S., JM This appeal is filed by the assessee against the order dated 21.06.2022 of the ld. Commissioner of Income Tax (Appeals) (hereinafter referred to CIT (Appeals)/National Faceless Appeal Centre (NFAC) Delhi, for assessment year 2017-18. 2. The assessee has raised the following substantive ground of appeal :- On the facts and in the circumstances of the case and in law the NFAC, CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash from undisclosed sources was deposited in bank accounts of assessee, additions made under section 68 was justified. 2. The Hon ble Delhi High Court in the case of Ravinder Kumar Vs ITO in [2020] 118 taxmann.com 166 (Delhi)/[2020] 273 Taxman 369 (Delhi) wherein it has been held that where assessee had failed to produce any material to authenticate his contention that cash deposits in his account were on account of sales being made by him from Kirana business, tax authorities were justified in making addition of unexplained cash entries in bank account in hands of assessee. 3. The Hon ble Delhi High Court in the case of Rajiv Jain Vs ITO in [2019] 101 taxmann.com 92 (Delhi)/[2019j 410 ITR 179 (Delhi) wherein it has been held that where assessee challenged addition made to its income under section 68 in respect of amount deposited in bank contending that said amount came from sale of wearing apparel and traditional silver utensils, since there was no evidence and material to establish sale or inheritance, etc., impugned addition made by authorities below was to be confirmed. The appellant failed to discharge its onus of providing itemwise sale for each invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017-18 b. Copy of Audited Balance Sheet and Profit and Loss Account for the year ended 2016-17 c. Copy of Bank Statement of Bank of India from 01-06-2016 to 31- 03-2017 d. Copy of Bank Statement of HDFC Bank from 01-01-2017 to 31- 03-2017 e. Copy of Bank Account in Books of Accounts f. Copy of GST Registration Certificate g. Details of Cash for the Period 01-04-2016 to 31-03-2017 h. Copy of Tax Audit Report under section 44AB of the Act for A.Y 2017-18 i. Copy of VAT Registration and VAT Returns for the relevant previous year. wherein all the eligible sales have been disclosed and the VAT liability on the same has been discharged by the assessee. 10. In reply to one more notice dated 04.09.2019, the assessee furnished details and documents on 16.09.2019, 04.10.2019 and 01.11.2019 by producing following documents:- a. Copy of Stock Register for the period 01-04-2016 to 31-03-2017 b. Copy of Bills of Labour Charges for the period 01-04-2016 to 31- 03-2017 c. Copy of Labour Charges Ledger for the period 01-04-3016 to 31 03-2017 d. Details of Month wise Sales and Purchase e. Detail of Month wise Cash Sales and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act with a list of requirement to the assessee. In response to the said notice the assessee had furnished the details and documents on 02.12.2019, 10- 12-2019, 11-12-2019, 17-12-2019 and 20-12-2019 as under: a. Month wise Detail of Stock b. Detail of Sales Reconciliation for F.Y 2016-17 c. Copy of All Sale invoices for F.Y 2016-17 d. Detail of Cash Sale and Credit Sale e. Summary of Sales for F.Y. 2015-16, F.Y. 2016-17 and F.Y. 2017-18 f. Copy of Cash ledger for the period 01-04-2016 to 31-03-2017 g. Confirmations of Loan Balances 13. On perusal of the above documents the Assessing Officer issued a show cause notice on 18.12.2019 asking the assessee to show cause as to why the amount of Rs. 1,61,93,000/- deposited in the bank account of the assessee during the demonetization should not be added to the income treating the same from undisclosed source u/s 68 of the Act and tax to be charged u/s 115 BBE of the Act. The assessee in response to the show cause notice, vide submission dated 16.12.2019 submitted as under:- a. That these sale of 86 invoices were during the day starting from 10 am in the morning till late in the evening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement with item-wise quantities sold each month was provided for the relevant previous year and thus, the cash in hand position remained unexplained by the Assessee. Thus, it is clear that the appellant brought in unaccounted cash in the books of account by inflating the sales abnormally at astronomically very high and unusual levels. 16. Further, the Ld.CIT(A) held that the assessee failed to discharge its onus of providing item-wise sale for each invoice especially for the month of November, 2016 and the fact that average per day sale in these 39 days (01.10.2016 and the fact that average per day sale in these 39 days (01.10.2016 to 08.11.2016) was Rs.20.87 lakhs as compared to Rs.53,514/- only in FY 2017-18 points to the fact that claim of cash sales is an afterthought to justify huge cash deposits in Bank of India account during the demonetization period. 17. It is the specific case of the assessee is that the sale proceeds of jewellery were the source of cash deposited in the bank and of the entries are supported by books of accounts, purchase vouchers, sales invoice, stock register, VAT records, bank statement etc. at no point of time books of accounts of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P L account in page No. 7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexplained. In the assessee case of R S Diamond India Pvt. ltd. Vs. ACIT, I.T.A. No. 2017/Mum/2021 (A.Y. 2017-18) the Income Tax Tribunal Bench at Mumbai has held as under:- 4. I have heard the parties and perused the record. 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 advance amount collected from customers, the sales bill raised against them etc., have been duly recorded in the books of account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profits within the meaning of the law. Thus, considering the above ratio, when the Assessee s books of account were not rejected, the Lower authorities ought not to have made additions. 21. The ld DR also placed reliance on various decisions, the case laws cited by the ld DR insofar as Champalal Shah Vs. ITO (Mumbai) in ITA No. 1295/Mum/2014 dated 03.10.2017, in the said case, there was huge purchase mainly from one concern, such concern s capital was in the negative. Each invoices were exceeded Rs. 3 crores, identity of purchaser not disclosed, there was no proof of delivery of gold bars, assessee therein with petty capital. Those fact are not found in the present appeal and the facts and circumstances of the case cited above are contrary to the present case in hand. Further insofar as the case laws cited by the Revenue i.e. Ravinder Kumar Vs. ITO in ITA No. ITA.No.196/Del./2019 dated 02.09.2019, in the said case no material adduced to authenticate the contention that each of deposits were out of sales. But in the present case each of the deposit was made out of sales and books of account was maintained. In the case relied by the ld DR i.e. Rajiv Jain Vs. ITO (2013) 410 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer and the ld CIT(A) have concluded the findings on the basis of conjectures and surmises. The Assessing Officer has to establish the link between the evidence collected by him and the addition to be made. The entire case has to be dependent on the Rule of evidence, the assessee in this case explained the source of bank deposits are from cash sales. The Assessing Officer proceeded to disbelieve the explanation of the assessee on the presumption basis without bringing the corroborative material on record. The Assessing Officer is required to act fairly as reasonable person and not arbitrarily capriciously. The assessment should have been made based on the adequate material and it should stand on its own leg. The Assessing Officer without examining any parties to whom the goods are sold by the assessee, came to conclusion that the sales are not genuine, without even rejecting the books of account which is in our opinion is erroneous. 23. In view of the above discussion we are of the considered opinion that the ld CIT(A) has committed error in upholding the addition made by the AO u/s 68 of the Act. Accordingly, we allow the grounds of appeal of the assessee. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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