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TMI Blog2024 (8) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... : "1. The Ld. AO has erred in making the impugned addition tune of Rs. 1,36,90,000/- merely based on surmises and conjectures, by completely ignoring the fact that the cash deposited in bank account of the Appellant was out of the cash sales which had been already offered to tax by reflecting the same in the trading and profit and loss account, and thus the impugned addition amounts to double addition." 3.1 In support of the admission for additional ground, the learned Counsel for assessee contended that it is well settled that a question of law can be raised at any stage of the proceedings as held by the Hon'ble Supreme Court in the case of Chitturi Subbanna v. Kudapa Subbanna & Others [1965 AIR 1325]. A reference was also made to the judgment rendered by the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. Commissioner of Income-tax [1998] 229 ITR 383 (SC) for admission of additional ground. 3.2 The prayer for admission of additional ground noted above, which is not set forth in memorandum of appeal is being admitted for adjudication in terms of Rule 11 of Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objection raised in the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made were out of purchases, majority of which are imported goods for which the payment have been made through banking channel and the purchases have not been doubted by the AO at all. Thus where the purchases have been accepted as genuine, the corresponding sale and consequent reduction of stock declared in the books cannot be doubted in isolation (b) the total sales including cash sales are duly reported and vouched by VAT returns. (c) the cash sales have been duly offered to tax by reflecting the same in the 'statement of trading and Profit and Loss' and thus impugned addition has the effect of double additions; one on account of cash sales through trading in Profit and Loss account and two, additions on account of unexplained sources. 7.1 Elaborating further, the learned Counsel submitted that the total purchases of Goods (fabric) during the F.Y. 2016-17 stands at Rs. 18.10 crore majority of which i.e. Rs. 17.83 crore is purchased by way of import and remaining sum of purchase Rs. 27.52 lakh is carried out by way of domestic purchase. The purchases so carried out were duly recorded in its books of accounts and the respective customs duty and other levy on such imports were paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed completes the cycle and a separate addition linked to cash sales is beyond comprehension. The action of the AO is also squarely opposed to rudimentary accounting principles, which in effect, seeks to tax the income twice one in the form of profits and other in the form of cash deposits under section 68 of the Act. 7.3 The learned Counsel submitted that the action of the Revenue authorities are a mere ipsi dixit whereas the transactions reported by the assessee are objectively justifiable. Both profits from sales and the cash sales itself has been assessed driven by misplaced suspicion and conjectures and based on some unfounded contemplation. While holding the source of cash deposits explained to be out of cash sales, to be unsatisfactory, the books of accounts have not been rejected. The learned Counsel exhorted that where the AO believed on the existence of alleged irregularities in the books of accounts, it was incumbent upon him to exercise the powers conferred under section 145(3) of the Act which mandates the AO to make an assessment in the manner provided under Section 144 of the Act. For doing so, the books of accounts requires to be ordinarily rejected. Nothing of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, 1963 together with case laws adverted to in the course of hearing. 9.1 It is the case of the assessee that the source of cash deposits in question bears direct nexus to cash sales made prior to such deposits. The cash sales are stated to be out of purchases made which are predominantly import goods. The cash sales, when seen in the context, is quite negligible hovering in the vicinity of about 4% of the total sales. The assessee is engaged in trading of fabric which are prone to be obsolete and perish over a period of time. Having regard to the very low capital invested in the business and operations being carried out on working capital debt, the assessee was compelled to save reputations and indulge in cash sales for immediate redemption of stark paucity of financial resources and also to get rid of perishable component of stock. It is thus the case of the assessee that in the context of peculiar factual matrix, there is no warrant to make such additions solely on on suspicion, surmises and conjectures. 9.2 It is thus alleged that the additions were carried out disregarding the facts and are coloured by irrelevant considerations. The assessee has broadly discharged the onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment of cash sales twice which is not permissible in law. 11. It is trite that suspicion, howsoever strong, cannot take the place of proof as held in Umacharan Shaw & Bros. vs. CIT (1959) 37 ITR 271 (SC). The Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd v. Commissioner of Income Tax (1954) 26 ITR 775 (SC) has observed that powers given to the Revenue authority, howsoever, wide, do not entitle him to make the assessment on pure guess without reference to any evidence or material. The assessment cannot be framed only on bare suspicion. The assessment should rest on principles of law and one should avoid presumption of evasion in every matter. The assessee, in the instant case, has sufficiently demonstrated the source of cash deposits. On a broader reckoning, the apprehension raised by the Revenue authorities militates against the tangible material and is thus extraneous. The additions made under section 68 of the Act is thus unsustainable in the facts of the case. The order of CIT(A) is thus set aside and vacated on this count. The Assessing Officer is directed to cancel the impugned additions towards cash deposits. 12. In the result, the appeal of the ass ..... 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