TMI Blog2023 (5) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of mutually intrinsically contradictory observations made in the assessment order, which observations are not at all sustainable in the eye of law. CIT(A) too has not considered the controversy in its proper perspective in the light of the afore-discussed facts and circumstances. The contradiction in the assessment order is also clear from the fact that whereas on the one hand, the AO observed that the Assessee had no money in hand to make the deposits in its bank accounts and deposits were made out of the advances received from the customers, to the contrary, he states that the entire amount of advances received by the Assessee from its customers were unexplained cash credits. Even the amounts confirmed to have been paid as advances, were not considered as genuine advance receipt of goods. Not even an attempt has been made to establish the source of the money to make the deposits, in the absence of succeeding to refute the receipts of the amounts as trade advances. The Department, thus, has miserably failed to prove that the apparent is not the real, as required by CIT Vs. Daulat Ram Rawatmull [ 1972 (9) TMI 9 - SUPREME COURT] The order under appeal is a result o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank accounts to justify any alternative source of cash. The AO further mentioned that from the copy of the accounts, it appeared that a number of creditors had been squared off during the financial year itself and in such accounts, the Assessee had shown cash receipts, each of Rs. 20,000/- or below several times during the year till December 2011, and after December 2011, the Assessee had shown repayment of the same, again, through cash payments and below Rs. 20,000/- each. It was further observed that the Assessee had also shown sales relating to the Rice Bran (R.B. Doc) Tax free of these parties sometime in February 2012 and the Assessee had, in some of the creditors, left very small credit balances at the end of the year. The AO held that the sale of R.B. Doc Tax free had been booked to provide a veneer of legitimacy of the transactions and the entire gamut of transactions did not appear to be in consonance with regular trade practice, or of common sense, especially since the Assessee had failed to produce sale bills, copies of receipts and any other supporting documents for the sales and also did not give any reasons for failure to produce these sale bills. The AO again asked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or less, against these parties, as advanced from April 2011 to December 2011 and that thereafter, money had been returned, again, in cash tranches of Rs. 20,000/- and less, which was unlikely to have happened in the case of trade advances; that the Assessee had taken the stand that the deposits were on account of cash advances for supply of goods and that most of the creditors were direct consumers; that there is no legal requirement that while purchasing goods from the dealers or shopkeepers, a purchaser has to produce proof of his identity and capacity to purchase the goods; that the AO could have verified the sale from selected parties, which was not done; and that some confirmations were finished and ledger containing accounts of all the persons or parties who had advanced the money and copies of the some accounts of the requisite depositors had been submitted. 7. The ld. CIT(A) refused to agree with the stand taken by the Assessee. It was observed that there was an internal inconsistency therein, with reference to normal common sense business practices; that the Assessee had admittedly made huge deposits of Rs. 73,15,000/- in its bank accounts; that the Assessee had duly su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash deposits in accounts with Axis Bank and IOB had been made out of cash available in the cashbook from day to day conduct of business; that such receipt of cash entries stood reflected in the cash book and the ledger for the whole of the F.Y. 2011-12, which were produced before the authorities below; that the receipt of cash was during the normal and regular course of day to day conduct of the business of the Assessee; that the deposits were on account of advances of cash by the Assessee s customers for the supply of goods to them; that most of the creditors of the Assessee were direct consumers of the goods and only a few of them were dealers; that the accounts of the persons / parties who advanced the money to the Assessee for supply of goods were appearing in the ledger which was duly produced; that no law requires that while purchasing goods from the dealer or shop keeper, the purchaser has to produce proof of his identity and capacity to purchase the goods; that the accounts of the customers in the ledger were opened to record the facts regarding the advances given by the customers, adjustment of advances against goods supplied and to find out any outstanding from such cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of bills and vouchers and no defect therein stood pointed out; that even the AO himself stated to have checked the books of account, bills and vouchers on a test-check basis; that the genuine advances received by the Assessee have wrongly been tainted by the authorities below as cash deposits obtained by the Assessee for its personal needs, or due to paucity of funds, whereas the customers deposited the money with the Assessee as advance to ensure the supply of the goods at the prevailing rate; that the factum of the goods having been supplied to the customers, against which, the advance were received, stands admitted by the AO himself, and there was only a small amount of the advances which remained outstanding and unadjusted at the close of the year; that the fact remains that in the assessment order the AO has himself stated that the Assessee had supplied the goods, adjusted accounts and returned the money in a few cases, whereas a few advances remained with it for supply of goods or repayment as on 31.3.2012; that this itself clearly shows the regular conduct of business by the Assessee on a day to day basis, as accepted by the AO; that therefore, the addition was wrongl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wers to ask for verification of the transactions, etc., from parties. This, however, was not done, even though the Assessee has specifically stated that the deposits were on account of advances of cash by the customers, who were direct customers, and only a few of them were dealers, for the supply of goods to them. Too, as rightly contended, there is no legal requirement for producing of proof of identity and capacity of purchasers, at the time of purchase of goods from the dealers or shopkeepers. Also, this, despite the fact that the AO has himself admitted in the assessment order that the identity of the some persons had been provided by the Assessee. Remarkably, qua these persons also, no weightage was given by the AO. 11. The above apart, the taxing authorities have failed to establish any paucity of funds or money with the Assessee which would have led to the alleged collection of deposits by the Assessee from the various persons in the garb of advances from customers. It has also not been disputed that the goods dealt in by the Assessee were of fluctuating rates. This being so, it would be a normal business practice for the customers to book the goods in advance, so as to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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