TMI Blog2023 (4) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... ises 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout appreciating that no specific defect in the books of account was pointed out by the AO which is not even part of the assessment order. 6. That the CIT(A) NFAC erred in confirming the action of the AO based upon surmises and conjecture without there being any evidence contrary to the contention of the assessee which is duly supported by documents. 7. That the CIT(A) NFAC has erred in confirming the addition of Rs. 28217200/- being cash deposited in bank accounts without appreciating that the said cash was part of the cash account submitted with the submissions made and was sourced from sales duly accepted by VAT department, out of cash withdrawals, etc. 8. That the CIT(A) NFAC has erred in ignoring the past history of the appellant since, the cash deposit was not against the past history of the appellant. 9. That the CIT(A) NFAC has erred in confirming the order of the AO ignoring the position of law that provisions of section 68 cannot be applied in respect of income from a source which has already been taxed which would amount to double taxation. 10. That the CIT(A) NFAS has erred in confirming the order of the AO ignoring the position of law that n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s selected for scrutiny for the primary reason of large cash deposit during demonetization. Pursuant to the same, the appellant was issued various notices u/s 142(1) requiring the appellant to provide necessary information and documents in respect of source of such cash deposit amounting to Rs 4,09,50,000/- during demonetization. The appellant during the course of assessment proceedings explained that he was in the business of sale / purchase of sugar, refined oil and other allied items and the said cash was deposited out of sale proceeds, cash withdrawal and out amount realized from debtors during the year consideration. 3.2. In argument the ld. Counsel placed that the appellant was also asked to submit the month wise total sales and purchases and corresponding cash sales made in every month for the year under consideration and for the last year. It was also explained that the total cash deposit during FY 2015-16 is to the tune of Rs 4,31,25,914 against the cash deposit in FY 2016-17 of Rs 5,98,60,500/-. The assessee vide reply dated 20.11.2019 submitted the desired information and the copy of the same is enclosed at page no 45 61 of APB . Furthermore the Ld. AO also reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted before the AO in the reply dated 25.12.2019relevant page no. 79 of APB e) Complete books of accounts along with sale purchase register for the period 01.04.2016 to 31.03.2017 was submitted before AO vide reply in response to notice u/s 142(1) dated 27.12.2019 and the copy of same is placed at page no 157 of APB . f) Copy of cash book for the period 01.04.2016 to 31.03.2017 submitted before AO vide reply in response to notice u/s 142(1) dated 27.12.2019 and the copy of same is placed at page no 157 of APB. g) Complete Postal address of debtors and creditors to/from whom sale/purchases submitted before AO vide reply in response to notice 142(1) dated 11.11.2019 and the copy of same is placed at page no 64-68 of APB . h) Copy of month wise stock statement submitted to the AO vide reply in response to notice 142(1) dated 11.11.2019 and the copy of same is placed at page no 63 of APB. i) Copy of account of debtors and creditors exceeding Rs 5 lakhs vide reply in response to notice u/s 142(1) dated 25.12.2019 and the copy of same is placed at page no 75-154 of APB. 3.4. The ld. Counsel placed that during assessment proceedings it was also brough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re NFAC on 11.08.2022 on the online portal is enclosed at page no 48 of APB reply dated 22.02.2023. 4. The ld. Counsel for assessee has made ground wise submission which is reproduced as below:- Ground No- 2,3 7. The ld. Counsel for assessee invited our attention in written submission duly filed before the bench. The relevant paragraphs are reproduce as below: - 12. Submissions in respect of ground No 2, 3 and 7 a) There has been no dispute in respect of assessments of the earlier years and the assessee s book result have been accepted year after year on the basis of stock tally of different items of and said stock register have been maintained right from the date of start of business. During the earlier years, there has been no dispute of any nature, whatsoever, and the book results of the assessee have been accepted by the department. b) For the year under consideration, the return of income was filed an income of Rs. 9,67,203/- and the assessment have been framed by the Assessing Officer by making the addition of Rs. 2,74,00,000/- which have been challenged by us and the income have been assessed by the Assessing Officer at Rs. 28217200/- vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts of the Assessee itself during the demonetization period. In other words, it is only a case, wherein the existing stock in hand as available with the Assessee is sold for cash. Hence, it is a case, wherein the stock is out and in return is cash is in, which stands deposited in the bank account and the same is disclosed in the books of accounts of the Assessee. The books of accounts of the Assessee are further duly audited by a Chartered Accountant. Thus, there is no scope of any default on the part of the Assessee. It is pertinent to mention here that the appellant had made purchase to the tune of Rs. 3,09,69,406/-in October 2016 on which the assessee has duly paid the VAT [please refer page 63 of the PB] . The Ld. AO has not doubted the purchases, opening stock and quantitative tally. It is a matter of record The purchase sale have duly been reflected in the VAT return filed before the Punjab VAT Authorities. g) As regard AO s objection regarding increase in sales in the month of October 2016 and November 2016. In this regard it is very humbly submitted that the appellant is engaged in whole sale/ retail trading of sugar, refined oil, ghee and other allied karyana i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also submitted that the assessee deposited cash amounting to Rs.4,09,50,000/- during the demonetization period out of cash sale proceeds, cash withdrawals to the tune of Rs. 46,05,000/- and cash received from debtors and the same stands reconciled from the cash books, PVAT Returns filed with the Trade Taxes Department along with the P L Account for the relevant assessment year. The copy of vat 20 is enclosed at page no 85-91 of the paper book. 5. The ld. Counsel for the assessee further respectfully relied on the orders of the Hon ble Courts ITAT which are extracted as below: i. Smt. Charu Aggarwal Vs. Deputy Commissioner of Income-tax [2022] 140 taxmann.com 588 (Chandigarh - Trib.). I. Section 68, read with section 153A, of the Income-tax Act, 1961 - Cash credit (Unexplained cash deposits) -Assessment year 2017-18 - Certain cash was deposited during post-demonetization in account of assessee, engaged in resale of jewellery, diamond etc. -Assessing Officer observed that there were two sets of books of account, i.e., one in computer of accountant and another in pen drive of accountant with different sales figures for October 2016 and assessee having failed to fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as trading results declared by assessee were much variable, by applying provisions of section 145(3), Assessing Officer rejected books of account and by applying GP rate of 8.5 per cent on enhanced sale, made an addition - Commissioner (Appeals) as well as Tribunal deleted additions - Whether since Commissioner (Appeals) as well as Tribunal had gone into detail in discussing evidence and recording conclusion after appreciating same, and on basis of evidence, they concluded that no discrepancy could be found in maintenance of accounts and even Assessing Officer who was present before Commissioner (Appeals) could not point out any such discrepancy, conclusion reached by Commissioner (Appeals) and Tribunal was correct . iv. Principal Commissioner of Income-tax v. Agson Global (P.) Ltd. [2022] 134 taxmann.com 256 (Delhi). IV. Section 68 of the Income-tax Act, 1961 - Cash credit (Bank deposits) - Assessment year 2017-18 -Assessee-company was engaged in business of selling dry fruits - post-demonetization, assessee deposited cash amounting to Rs. 180.53 crore in its bank accounts - Assessing Officer held that cash deposits made by assessee represented unaccounted income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt deposited by assessee-jeweller in its bank account post demonetization, since assessee had explained source of said cash deposits as sales of jewellery, produced sale bills and admitted same as revenue receipt as well as offered it to tax and assessee also represented outgo of stocks which was matching with sales, impugned addition was to be deleted. [ Emphasis supplied] 6. The ld. counsel for the assessee further placed argument in ground no. 5 and filed a submission which is extracted as below: - Reason for rejection Explanation (i) Cash sales for October 2016 [Rs. 15806536] and November 2016 [Rs. 15363687] are abnormally high as compared to cash sales in October 2015 [Rs. 527717] and November 2015 [Rs. 520020]. [Para No 4.1 of the order enclosed at page no 4-5 of the paper book] 1.It is pertinent to mention here that the appellant has given detailed explanation for increase in sales due to festival season and addition in product line. The same has duly been submitted before the AO in reply enclosed at page no 80. That the applicant is regulating depositing cash in accounts which is evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale register which contains party name, bill number, item name, quantity, price, taxable amount, sale tax and grand total, therefore, the observations of the AO that the sale bills were not uploaded seems to be incorrect. 3. Furthermore, the appellant had also furnished the copy of VAT returnswhich duly substantiate the sales made during the year under consideration. The copy of VAT return is enclosed at page no 85-91 of the paper book. (iv) Assessee does not have too much space to stock a huge quantity of stock [Para No 5.1 of the order enclosed at page no 164-165 of the paper book] 1. As regard the allegation in respect of space to accommodate huge quantity of stock, it is pertinent to bring to your kind attention that during the year under consideration the appellant had takena godown [located on tarn Taran Road, Kochhar rice Mill near Shani Dev Mandir] on rent. The rent expenses incurred during the year are duly reflecting in the audited profit and loss account enclosed at page no 26-27 of the paper book. This clearly shows that the AO has made the addition on the basis of surmises and conjectu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown in 26AS) - Assessment year 2013-14 - Case of assessee-contractor was selected for scrutiny through CASS due to difference in turnover between Form 26AS and books of account - Assessing Officer completed assessment in case of assessee company by making various additions based on difference between declared amount and that in terms of Form 26AS - Commissioner (Appeals) confirmed findings of Assessing Officer - However, Assessing Officer had not found a single defect in assessee's books of account and enquiry made bv him under section 133(6), had been properly explained by assessee - Assessing Officer's contention that other party had booked expenses could not be reason to make additions since contract receipt was reflected in subsequent year in terms of assessee's regular method of accounting - An addition based on amount in Form 26AS and that shown in books indicated that additions were made by following a pick and choose method - Further, information as per data base of revenue could not, by itself, be a legally sustainable basis for making addition to assessee's income -Grievance of revenue that assessee had not offered correct income was fully explained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfied with assessee's explanation regarding decline in GPR and, therefore, he rejected its books of account and applied GPR at 27per cent which resulted in certain addition - On appeal, Commissioner (Appeals) deleted addition holding that Assessing Officer made addition without pointing out any specific defect in books of account - Tribunal upheld finding of Commissioner (Appeals) - Whether there was any perversity in order of Tribunal - Held, no . 7. The ld. counsel further argued in respect of ground no. 6 and placed the broad submission which are extracted as below:- Submissions in respect of Ground No. 6 Ground No 6 6. That the CIT(A) NFAC erred in confirming the action of the AO based upon surmises and conjecture without there being any evidence contrary to the contention of the assessee which is duly supported by documents. a) As already stated, that the Ld. AO has not referred to any documentary evidence to prove anything contrary to the submissions of the appellant. In such a case where there is no corroborative material. Addition made is mere suspicion and no reasonable belief can be formed and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer on account of difference in receipts shown in financial statements of assessee and credit entries appearing in bank account of assessee - Further, revenue had not placed any material on record to contradict aforesaid concurrent finding of facts returned by Tribunal and Commissioner (Appeals) - Whether therefore, said concurrent findings could not be interfered with - Held, yes [Paras 3, 4 and 5] [In favour of assessee] Hon ble Bench in the case of ACIT vs Joginder paul in ITA No. 734/Chd/2014/ reported at 38 ITR 0486. The discretion of not depositing the said cash in hand anytime earlier than these had been actually deposited in bank was with the appellant and mere suspicion on this account could not obliterate the fact of assessee having such cash in hand as on 31.03.2009. In the circumstances, there is no reason to hold that the said cash deposits were from some other accounted income of the appellant and not from available cash in hand. The addition made is merely on suspicion ignoring all factual evidence in this regard and is therefore directed to be deleted. The Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led upon the ITAT to decide the case in favour of the Assessee was the history of the case. The ITAT went by the trading account in the earlier years viz. opening stock, purchase and sales, closing stock, gross profits and assessment made by the Department in AY 2007-08 when assessment was framed under section 143(3)/147. The ITAT observed that since the entire books of account had been scrutinized and the Assessee's income had been accepted, it also means that the entire opening stock, sales and closing stock made during the year stood accepted. Additionally, in respect of AY 2012-13 also, Assessee's trading activities were subjected to detailed scrutiny under section 143(3). In the said year, the AO had rejected the trading result and even enhanced the GP rate and made an addition in the trading account. The ITAT thus held that in respect of AY 2012-13 the opening and closing stock and trading accounts including sales has not been disturbed. In these circumstances, the ITAT observed that in the impugned AY 2014-15, the audited balance-sheet reflected an opening stock of Rs. 19,53,29,660/- which stood accepted by the Department either under the scrutiny proceedings or by n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. Appeal of assessee is allowed. 9. The ld. counsel further argued in respect of ground no. 9 and placed the submission which is extracted as below: 6. Submissions in respect of Ground No. 9 Ground No 9 9. That the CIT(A) NFAC has erred in confirming the order of the AO ignoring the position of law that provisions of section 68 cannot be applied in respect of income from a source which has already been taxed which would amount to double taxation. a) To begin with, your Honor s kind attention is drawn towards section 68 f the income tax act 1961 which is reproduced hereunder: - Cash credits. 47 68. 48Where any sum is found credited in the books49of an assessee maintained for any previous year, and the assessee offers no explanation49 about the nature and source thereof or the explanation offered by him is not, in the opinion of the 50[Assessing] Officer, satisfactory, the sum so credited may49 be charged to income-tax as the income of the assessee of that previous year : 51[51a[Provided that] where the assessee is a company (not being a company in which the public are substantia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer treated high denomination notes worth Rs. 81,000 as unexplained money, disbelieving assessee's explanation as to how he came into possession of same and added same in income of assessee and also imposed penalty - Tribunal found that assessee had sufficient cash in hand and in books of account of assessee cash balance was usually more than Rs. 81,000 - It, deleted addition and cancelled penalty - Whether finding of Tribunal being on basis of appreciation of facts against which no question of perversity had been raised, Tribunal was right in deleting addition and consequent penalty - Held, yes 10. The ld. counsel further argued in respect of ground no. 10 and placed the submission which is extracted as below: 7. Submissions in respect of Ground No. 10 Ground No 10 10. That the CIT(A) NFAS has erred in confirming the order of the AO ignoring the position of law that no addition u/s 68 can be made where books of account had been rejected by the AO u/s 145(3) and again relying upon the same books of accounts for the purpose of section 68. a) Alternatively, it is humbly submitted that whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee by considering the maximum sale shown of June, 2016 i.e Rs.23,28,355/- and also after considering gross profit shown @ 4.84% by the assessee in his trading account on these inflated cash sales, benefit of Rs.28,06,536/- is allowed for Oct, 2016 and balance Rs.1,30,00,000/- is treated as unexplained cash deposited in the bank and is assessed u/s 68 of the Income Tax, Act,1961. On the same analogy, out of cash sale of Rs.1,53,63,687/- shown for 8 days of Nov, 2016, benefit of Rs.9,63,687/- as allowed on account of sale and G.P, balance of Rs.1,44,00,000/- has been treated as unexplained cash deposit in the bank and assessed u/s 68 of the I.T. Act, 1961. Hence total addition on account of unexplained cash deposit is made amounting to Rs. 2,74,00,000/- u/s 68 of the Income Tax Act, 1961 and the same is taxed u/s 115BBE of the Act at the rate of 60%. Further, penalty proceedings u/s 271AAC(1) of the Income Tax Act, 1961 are also initiated on this issue. 11.1 The ld. CIT DR further relied on the order of the ld. CIT(A) s para nos. 4 to 4.1are extracted as below: 4. Decision:- The AO in its order u/s 143(3) of the Act has noted that the assessee has made large ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember 2016. The basis of rejection of books was not acceptable here. We respectfully relied on the order of jurisdictional High Court in the case of Ludhiana Steel Rolling Mills Ltd , supra. The Ld. 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. Here, no addition can be called for. In this regard, the respectfully reliance is placed on the following case laws: K.P. Varghese vs ITO (1981) 7 Taxman 13 (SC) A.S. Sivan Pillai vs. CIT (1958) 34 ITR 328 (Madras) Roshan Di Hatti vs CIT 107 ITR 938 (SC), CIT, Faridabad v. Laul Transport Corporation, [2009] 180 Taxman 185 (Punjab Haryana) 12.1 We also considered that the amount deposited in the bank account was out of sale of various items which had been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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