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TMI Blog2024 (1) TMI 791X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and circumstances of the case and in law, the ld. CIT (A), NFAC Delhi is justified ignoring the facts the assessee was suppressed interest income by formulating colourable device by claiming abnormal and inflated expenses thereby generated business loss which was set off from interest income and thereby deleting the addition of Rs. 25,00,578/- made by the AO. 2. The brief facts of the case are that the assessee is engaged in the business of trading in precious and semi precious Gem Stones under the trade name of M/s. Sunrise Enterprises and besides that assessee is also engaged in builder ship work. The assessee e-filed his return of income for the year under consideration on 31.10.2017 declaring total income of Rs. 24,27,960/- which was processed under section 143(1) of the IT Act, 1961. The case of the assessee was selected for Complete Scrutiny under CASS to examine the issue of abnormal increase in cash deposits during demonetization period i.e. from 09.11.2016 to 31.12.2016 as compared to average rate of cash deposits during pre-demonetization period. Accordingly statutory notice under section 143(2) of the IT Act was issued on 29.09.2018 which was duly served upon t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated to boost up cash availability by resorting to cash sales and therefore no reliance could be placed upon such books of accounts. Therefore, considering the severity of issue, non maintenance of stock register, non furnishing of cash book and bank book, meager gross profit margin and non reliability of books of accounts, show cause notice was issued to the assessee on 26.12.2019 asking the assessee as to why books of accounts should not be rejected by resorting to the provisions of section 145(3) of the IT Act, 1961, why fabricated cash sales to the tune of Rs. 2,45,38,000/- credited in the books of accounts to justify the undisclosed cash deposited into bank account should not be considered as unexplained cash credit within the meaning of section 68 of the IT Act. In compliance to the show cause notice, the assessee submitted details as required vide written reply dated 27.12.2019. The submission of the assessee was examined very carefully but could not be found acceptable and rejected the books of accounts by invoking provisions of section 145(3) of the IT Act,1961. Accordingly, the AO completed the assessment at a total income of Rs. 3,07,85,253/- by making addition under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT and the revenue has not brought any positive material to prove it as bogus sales. It is not the case of the A.O. that the assessee did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. As regards not providing the name, address and PAN of the customers to whom cash sales was made, the assessee has explained that the sales were below the prescribed limit so it is not compulsory or mandatory under the Income Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee and such practice was accepted by the AO. We find the explanation of the assessee is genuine and the sales c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash book and available cash balance on different dates was deposited in bank account. The AO doubted the cash sales for the reason that the buyers were not identified and each sale was below Rs. 2,00,000/-. In respect of no details of buyers, each being below Rs. 2,00,000/- the ld. A/R contended before us that the law nowhere mandates to obtain, maintain/retain identification details of the buyers when each sale below Rs. 2,00,000/-. For this proposition, ld. A/R has relied upon the judgment of Hon'ble Jurisdictional High Court in the case of Smt. Harshila Chordia vs. AITO (2008) 298 ITR 349, Hon'ble Bombay High Court judgment in the case of R.B. Jessaram Fathehchand vs. CIT (1970) 75 ITR 33 and Mumbai ITAT decision in the case of ACIT vs. Hirapanna Jewellers (2021)212 TTJ 117. 5.1 Further, on perusal of the order of ld. CIT (A), we find that the ld. CIT (A) while dealing with the issue, has analyzed in detail various aspects of the matter relating to addition of Rs. 2,58,56,715/- and taking into consideration various judicial pronouncements, deleted the addition by observing in para 2.3 at pages 15 to 19 of his order as under :- "2.3 I have gone through the assessment order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the Hon'ble High Court at Para 2 of the order held as under: "In these circumstances, the reason given by the Income-tax Officer for rejecting the book results shown by the assessee's accounts or for not accepting the cash transactions as genuine cannot be accepted as good and sufficient unless there was an obligation on the part of the assessee to keep a record of the addresses of the cash customers. It could not, therefore, be said that the failure on his part to maintain the addresses was a suspicious circumstance giving rise to a doubt the genuineness of the transactions entered into by the assessee." I find that the purchases are cannot be doubted when these have been confirmed by the other party. I find no reason to doubt the sales. I have also gone through the following judicial pronouncements relied upon by the appellant. I appreciate that the all judicial pronouncements duly support the case of the appellant. Assessing Officer has also objection to the deposits in cash being in installments and keeping the cash in hand in spite of the fact that CC limit was bearing interest. The assessee has explained the reason for keeping the amount as cash in ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h during the course of business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee and such practice was accepted by the AO. We find the explanation of the assessee is genuine and the sales cannot be doubted merely on surmises and conjectures on the ground of non-furnishing of address and PAN of the customer. The AO did not make any enquiry on the material submitted by the appellant. She merely proceeded on statistical analysis to make the addition on account of cash deposits. We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact the AO neither found any concrete and conclusive evidence of back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e year. It was not that idle funds were invested and interest was earned on the same. In this background, it is submitted that the interest income is rightly credited by the assessee in its profit and loss account and it has rightly been offered for tax under the head business income. Ld. AO has observed at page 20 of his order that assessee has incurred abnormal and inflated expenses. Ld. AO nowhere has bothered to mention which are the expenses which have been inflated nor have any expenses of abnormal nature been pointed out by the ld. AO. On this account without substantiating the allegation, ld. AO has adopted a peculiar stand of adding a sum of Rs. 48,13,847/- as separate interest income and a further deduction of Rs. 20,68,145/- towards interest paid on cash credit limit and Rs. 2,45,124/- on interest paid to private parties is allowed and the resultant figure of Rs. 25,00,578/- is added as income from interest. The fact remains that the ld. AO has not given any reasoning for treating the interest income as income from other sources where the said income was offered by the assessee as business income. When the head of income is changed it was the duty of the ld. AO to fully ..... X X X X Extracts X X X X X X X X Extracts X X X X
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