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TMI Blog2023 (9) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... g that much cash deposited during the said period was not proved to be received against regular sales" 2. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in not taking note of the fact that there was an extraordinary jump in regular sales immediately before demonetization period and assessee was unable to substantiate such jump in sales during this period. In such circumstances, the Ld. CIT(A) ought to have called for a remand report from AO for further verification of the reasons shown by the assessee with reference to documentary evidences. 3. "On the facts and circumstances of the case and in law, the Ld. CIT(A) ought not to have relied on sales declared in the VAT returns to conclude that cash deposited in the bank account during demonetization period corresponds to the sales since VAT returns by themselves cannot stand as evidence for genuineness of sales" 4. "On the facts and circumstances of the case and in law, the Ld. CIT(A) ought not to have deleted the addition made u/s 68 of the Act inspite of the assessee's failure to prove the genuineness of transactions of sales and receipt of cash against these sales immediately before the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial years, which were as under:- FY Amount (in Rs.) 2014-15 4,32,78,000 2015-16 4,43,75,000 2016-17 7,63,10,000 2017-18 7,71,00,000 5. Further, AO also noted that specifically in F.Y. 2016-17, the cash deposit in the month of November 2016 was very high, i.e., Rs. 3,64,50,000/- as compared to the less cash sales in the earlier years. From the cash book produced for F.Y. 2016-17 he noted the following facts:- 1. From April, 2018 to Sept 2016, the average cash balance is hovering around Rs. 15 Lakh to Rs. 40 Lakh and it is never above Rs. 40 Lakhs. 2. Suddenly in the month of Oct. 2016, there is a huge increase in cash sales, and balance at the month end goes upto Rs. 2 crore. In the next 8 more days, there is further speedy increase in cash sales and the balance goes upto Rs. 3.36 crore at the end of November 8, 2016. 3. Again after deposit of the cash, the balance cash in hand is reduced substantially to the pre-September level. From 20th November onwards, again it hovers around Rs. 15 lakhs to Rs. 40 lakhs in the similar fashion as happened from April to Sept, 2016. 6. He also analysed the replies from the persons to whom notices u/s. 133(6) were issued wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... season, the admissible cash deposit for the month of November, 2016 is taken at Rs. 45,00,000/-. Accordingly, the assessee is given benefit of Rs 49,92,300/- (45,00,000 + 4,92,300) (on the basis of Average cash sales / cash sales to identifiable person without PAN). Thus balance cash sales of Rs. 2,57,59,680/- (1,05,20,302 + 2,02,31,678 49,92,300) is considered as not explained Therefore, the sum of Rs. 2,57,59,680/- is added to the total income of the assessee u/s 68 of the IT Act under the head income from Other Sources. The total income assessed is taxed u/s 115BEE of the Act at the rate 60%. Penalty proceedings are separately initiated u/s 271AAC of the Act in respect of unexplained income. 8. The ld. CIT(A) deleted the addition by making the following observations:- "7.5 The appellant has maintained regular books of accounts which are duly audited a Chartered Account and the said books of accounts are not rejected by the AO, which imply that though the AO has accepted the sales to such retail customers as genuine but the realisation of sales proceeds as non-genuine. Further, the appellant has produced contemporaneous documentation such as its books of accounts, availabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. Suspicion however strong it may be, it should not be decided against the appellant without disproving the sales with tangible evidence. The additions cannot be made in the demonetization cases by the assessing authorities on the basis of deviation/variance in cash deposits and cash sales ratio of the demonetization period with that of the earlier periods since the appellant has established the authenticity and genuineness of the cash sales. There can't be a fixed sales pattern in any business. In-fact appellant has explained the reasons for such high sales being Diwali period, marriage season etc. which reasons are not rebutted by the Assessing Officer The Hon'ble Delhi Tribunal in the case of AGSONS GLOBAL P LTD v. Asstt. CIT [2020] 115 taxmann.com 342 (Delhi - Trib.) has held that the addition being made on the sole ground of deviation in ratio of cash sales and cash deposits during the demonetization period with that of earlier period, is not proper and lawful." 7.8.............. 7.9.............. 7.10........... 7.11........... 7.12........... 7.13........... 7.14.......... 7.15 It is also discernible from records that the size of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereafter, the ld. CIT(A) held that in the present case already entire sales have been offered for taxation and same cannot be taxed again. Finally, he concluded as under:- "7.19 As regards the addition of Rs. 2,57,59,680/- u/s 68 invoking the provisions of Section 115BBE is concerned, the order of the AO and the detailed submissions of the appellant has been thoroughly considered. The contention of the appellant had been that, it is not a case of unexplained deposits having been deposited in the bank account of the appellant and it is the sale of gold ornaments/jewellery which have deposited in the bank account and such entries have duly been recorded in the audited books of accounts. I have also considered the submissions of the appellant about the sales declared in the VAT returns and the remand of VAT through banking channel and the assessment for the year under consideration by the VAT Department. Whatever turnover has been disclosed by the appellant in the audited books of accounts are found to be in order. Hence, cash realised on account of sales of the stock cannot be held to be unexplained deposits and as such the addition of Rs. 2,57,59,680/- is without valid ground. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly taxed the cash deposits u/s. 68. 11. On the other hand, ld. Counsel for the assessee submitted that, firstly, nowhere the ld. AO has rejected the sales or the quantity of purchase stock and the quantity of sales. Once the purchase and sales are verifiable, then such cash sales deposited in the bank account cannot be treated as undisclosed income. He thus, completely relied upon the order of the ld. CIT (A). 12. We find that the only reason given by the ld. AO for treating the entire cash deposited in the bank account is that, there was abnormal growth on the cash sales in the month of November 2016 and corresponding cash deposits from the month of November to December, which alone cannot be the ground when deposits are directly linked with sale duly disclosed in the books. Another point raised by him was that, some of the cash sales made to different parties cannot be identified and the parties who responded were unable to explain the source of their funds. From the perusal of the material placed on record and also the explanation given by the assessee before the ld. AO, it is seen that assessee has maintained regular books of accounts which was subject to audit and has produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were issued have confirmed the purchases but also filed the purchase bills. The ld. AO cannot disbelieve the purchases made from the assessee simply on the ground that those parties could not submit the source of their funds which is not the requirement of the assessee to prove specifically when assessee is a retail seller of jewellery and even law does not prohibit any cash sales or there is any requirement to seek any further detail. For this compliance assessee has also filed Form 61A before the ld. AO. Once, it has been established that sales representing outflow of stocks is duly accounted in the books of accounts and there are no abnormal profits during the year, then there is no justification why AO should treat the deposits made in the bank account out of cash sales to be income from undisclosed sources. Thus, aforesaid finding recorded by the ld. CIT(A) which is based on correct appreciation of facts on record and there is no adverse finding by the ld. AO with regard to the availability of stock and quantity of items shown in the stock register and the corresponding sales, no addition can be made. Accordingly, order of the ld. CIT (A) is confirmed and the grounds raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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