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TMI Blog2023 (10) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts in upholding the cash deposit out of cash sales at Rs.59,95,000/- u/s.68 in as much as that the Provision of Section 68 are not applicable to the facts of the assessee. 4) He has erred in law and on facts in upholding the rejection of books of accounts of the assessee to justify addition of gross profit and addition of cash deposits out of cash sales u/s.68 of the Act. 5) He has erred in law and on facts in upholding the application by A.O. of principle of preponderance of probability by relying upon various decisions mentioned in the order inasmuch as that the ratio of these decisions are not applicable to the facts of the assessee. 6) He has erred in law and on facts in confirming the treatment of the cash sales as cash credits u/s.68 of the Act inasmuch as that there being no other source of income, other than business income, the Provision of section 68 has been wrongly applied. 7) He has erred in law and on facts in confirming the application of the Provision of Section 115BBE to the business income of the assessee arising out of sales including cash sales. 8) He has erred in law and on facts in confirming the cash sales as inflated sales inasmuch as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was abnormal increase in cash deposits in the demonetization period. (iii) In the immediate previous assessment year, the assessee shown total cash sale for Rs. 8,05,174/- only whereas in the year under consideration claimed cash sales of Rs. 56,81,842/- only. Thus, cash sale during the year increased by 606.66% (iv) Out of total cash sale of Rs. 56,81,842/- in the year under consideration majority of the cash sale was claimed in the month of September & October 2016 only to the tune of Rs. 3,05,254/- and Rs. 52,58,725/- (total Rs. 55,63,979). Before that there was only cash sale for Rs. 78,790/- in the month of May 2016. Again, there is an abnormal trend in cash sale just before the demonetization period. (v) The bills issued by the assessee against the cash sales in the month of October 2016 were written by the same person, the invoice does not contain complete details of the buyer. The invoice amount ranged between Rs. 1 Lakh to 2 Lakh to avoid the applicability of section 206C(ID) of the Act. It is also very abnormal that 30 odd customers came in the month of October 2016 and all purchased gold jewelry in cash for the amount ranging between Rs. 1 Lakh to 2 Lakh. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in books of account are duly supported by purchase registers, stock registers, bills/voucher, GP/NP working, VAT return. All these details were furnished before the AO but the AO without pointing out any defects in supporting document rejected the books merely by raising doubts over cash deposits during the demonetization. The learned CIT(A) after considering the facts in totality confirm the order the AO by observing as under: - "6.0 I have considered the grounds of appeal and statement of facts of assessment order. I have carefully analysed the submission filled by the appellant and contents of the assessment order. 6.1 So far the main issue of addition of Rs 59,95,000/- u/s 68 is concerned, the AO found that the assessee had deposited cash amount of Rs 59,95,000 during demonetization period [19.11.2016 to 30.12 .2016] in his bank account A/c No.03280200002419 held in Bank of Baroda. The appellant explained that the aforesaid cash deposits is out of cash sales of goods The AO compared cash deposits, cash sales, month wise sales in the whole FY 2016-17 with FY 2015-16 as well as utpo 8th November and thereafter and found that there was sharp increase of 989% in cash sales b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of account. The cash deposited amount was not generated from the business activities. So the AO deducted the cash deposited amount from the turn over. The AO estimated the GP on the basis of previous year GP. As the GP for AY 2015-16 was 13.80% and for AY 2016-17 it was 13.34%. So, the GP ratio for the AY 2017-18 was taken at 13.34% . After deducting the amount of cash deposit during the demonetization period, the resultant turn over comes Rs.1,19,27,5204 (1,79,22,520-59,05,000) and after applying average gross profit estimated @13.34% on such turnover, net profit comes at Rs 15,91,131/-. The assessee already declared the net profit of Rs. 15, 14,756. Therefore, the AO added the difference amount of net profit of Rs 75,375 (Rs. 15,91,131- Rs.15,14,756) to the total income of the assessee on account of estimation of gross profit. The approach of the AO is found to be proper an logical and hence the rejection of the books of accounts and estimation of G.P is also confirmed. To conclude, all the grounds of appeal are hereby dismissed." 7. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 8. The learned AR before us has filed a paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness/incompleteness of accounts in terms of section 145(3) of the Act. But the case would be different where the above-mentioned mistakes are coupled with other findings. In the given case, AO has rejected the book results because the assessee has not provided the details of quality wise quantity of the stock asked for during assessment and on account cash deposits in the bank. In this connection, we find that the assessee has maintained proper books of account and furnished details as required by the A.O. except the details of the stock in the desired format. The details submitted by the assessee include audited financial statement, details of the purchases, gold stock summery and other information about the sales, GP of different years which are available in the paper book filed before us. In these documentary evidence no defect was pointed out by the AO except nonmaintenance of stock register in the desired format. Therefore, without bringing any corroborative material on record suggesting specific defect in the books of account the book result cannot be rejected merely for not providing certain detail which the AO requires to verify. In holding so we draw support and guidan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such manner as he may determine. So far as the latter is concerned, the Assessing Officer is empowered to make a best judgment assessment as provided in section 144, that is, after taking into account all relevant materials which he has gathered. Further, section 145(1) is an enabling provision. It is intended to enable the Assessing Officer to make the correct assessment which is the paramount object. It is not intended to confer any right or benefit upon an erring assessee. Thus, this section is intended to make the correct assessment in compliance with the law and not to by-pass the statutory provisions. It is a fair proposition that if an overall estimate of income has been made, there would not be any scope for making any disallowances and applying section 40A(3). This is not because the statutory provisions can be ignored or excluded but because they must be deemed to have been applied in making the estimate so that there is no scope for any further deductions. Thus, if an estimate is made on the basis of gross profit by using comparative instances, there would be no scope for further deductions applying section 40A(3). Therefore, all depended upon the manner of making the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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