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TMI Blog2024 (11) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of trading of Dilbagh Pan Masala and tobacco. During assessment proceedings, Assessing Officer observed that assessee has deposited huge cash during demonetization period and observed that assessee has deposited Rs. 21,00,000/- in Central Bank of India, Rs. 7,49,50,000/- in HDFC Bank and Rs. 4,85,00,000/- in Axis Bank Ltd. The assessee was asked to submit details of source and details of cash deposited in SBN during the demonetization period with documentary evidences, total income of the assessee along with percentage of cash deposits to gross total income and also details of cash deposits month-wise during the period including specific period of cash deposits i.e. 01.11.2016 to 08.11.2016, 09.11.2016 to 30.11.2016, 01.12.2016 to 30.12.2016, for 31.12.2016 and 01.12.2016 to 31.12.2016. In response, assessee submitted detailed submissions during assessment proceedings. For the sake of clarity, the same is reproduced below :- Table-1 Amount in Crore Month Cash sale in FY 2017-18 CASH DEPOSITED IN BANK in FY 2017- 18 Cash sale in FY 2016-17 CASH DEPOSITED IN BANK in FY 2016- 17 Cash sale in FY 2015-16 CASH DEPOSITED IN BANK in FY 2015- 16 April 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e during 01.12.2016 to 31.12.2016 decrease from Rs. 8.99 Cr. to Rs. 5.39 cr. however cash deposit in bank account was escalated from 8.17 cr to 17.82 cr. The cash deposit in bank account is 111 % of total cash sale of the month. But, the assessee failed to substantiate the increased cash deposit in bank account. * On further perusal of the Table-2, it has been noticed that cash sale during the demonetized was decreased to the lowest level i.e. 3% to 4%. In contrast the cash sale was increased at the highest level during the F.Y. 2016-17. * The assessee company failed to justify the cause / reason to keep huge cash of Rs. 7,11,53,135/- in hand on 09.11.2016 whereas its average cash sale in one day was Rs. 50 lac (approx). It can be further construed that total cash in hand as on 09.11.2016 was of 14 day's cash sale which was not possible at all. A prudent businessman could not keep the huge cash in hand. * Further during the demonetization period, there was scarcity of cash flow in the market. The basic necessities were hard to meet out in paucity of cash flow during the period. * On 08.11.2016 the SBN was banned to use in general market except for meet out some basic ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he stock available with assessee. (b) The books of account have not been rejected by the A.O. This proves that the A.O. has relied on the entries given in the books of account. Without rejecting the books of account, it was wrong on the part of assessing officer to add an amount of Rs. 12,55,50,000/- which was already declared by the assessee as cash sales. Thus, it tantamounted to double addition. (c) The A.O. failed to appreciate that the assessee is in the business of trading of Pan masala in which almost 100% turnover of the assessee is in cash. The same is reflected in the table given below:- AY Cash sales including VAT (In Rs. ) Total Cash deposited (In Rs. ) Cash deposited 09.11. to 30.12. (In Rs. ) 2016-17 197,56,44,419 195,92,79,350 32,50,74,400 2017-18 181,32,61,874 180,68,50,150 16,70,50,000 2018-19 136,12,49,147 136,13,14,000 13,92,00,000 Further, Breakup of Cash sales and Credit Sales for A.Y.17-18 is as under:- Particulars Cash sales (In Rs. ) Credit Sales (In Rs. ) Total Sales (In Rs. ) Cash Sales % Taxable Value 157,11,45,185 75,24,232 157,86,69.417 99.52 Tax/VAT 24,21,154,89 9,42,853 24,30,58,342 Rou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Cash Balance Available for Deposit During 09.11.16 to 30.12.16 18,28,87,518 These figures being taken from the audited books of account in which no discrepancy has been found either during course of survey under section 133A of the act or during the assessment proceedings, fully explain the source of cash deposit during the demonetization period. (h) The A.O. failed to appreciate that complete purchases are made by assessee through banking channels from one group who manufactures Dilbagh Gutka. No discrepancy has been pointed out in the purchases either at the time of survey or during assessment proceedings. When the purchases have been accepted by the A.O., there has to be corresponding sales for which the A.O. has remained silent and thus erred. (i) The stock maintained by the assessee have also not been disputed either at the time of survey or at the time of assessment proceedings. It is obvious that purchase, sales and stock are interlinked. The A.O. erred in not accepting sales on one hand while on another hand he accepted the purchase and stock disclosed by the assessee. (j) The assessing officer made the addition by comparing percentage of cash sales with percent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s it cannot be a case of. diversion of income. The assessee is well within his right to pay salaries according to the benefit he gets in return. Smt. Sunita Sharma and Smt. Anita Sharma are both old employees of the company. Smt. Sunita Sharma is a post graduate and looks after account section. Sh. Anita Sharma is a graduate who looks after office and administrative works of the assessee. Considering all these factors and submission of assessee, I find that the AO, erred in making the addition of Rs. 1,06,80,000/- under section 37(1) of the Act. Therefore, the grounds of appeal No. 11 to 13 are allowed." 8. Aggrieved with the above order, Revenue is in appeal before us by raising following grounds of appeal :- "1. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the additions made by the Assessing Office of Rs. 12,55,50,000/- u/s 68 r.w.s 115BBE of the Act on account of Unexplained Cash deposit during the period of demonetization and ignored the facts that the AO has made the addition as the assessee company failed to justify the same. 2. Whether on the facts and circumstances of the case, the Ld. CIT(A) erred in deleting the disallowances m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi HC); (ii) Hirapanna Jewellers vs. ACIT (2021) 128 taxmann.com 291 (Visakhapatnam - Trib.); (iii) Charu Aggarwal vs. DCIT (2022) 140 taxmann.com 58 (Chandigarh - Trib.); (iv) Narendra G. Goradia vs. CIT (1998) 234 ITR 571 (Bombay HC); (v) Lakshmi Rice Mills vs. CIT (1974) 97 ITR 258 (Pat.)(HC); (vi) Lakhmichand Baijnath vs. CIT (1959) 35 ITR 416 (SC); (vii) Gur Prasad Hari Das vs. CIT (1963) 47 ITR 634 (All.)(HC); (viii) Kanpur Steel Co. Ltd. vs. CIT (1957) 32 ITR 56 (All.)(HC); (ix) Sri Sri Nilkantha Narayan Singh vs. CIT (1951) 20 ITR 8 (Pat.)(HC); (x) Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 (SC). 12. With regard to disallowance of salary expenses, ld. AR for the assessee submitted that assessee has submitted before the ld. CIT (A) that Satya Prakash Sharma is the key employee and backbone of the business and has been getting high salary in previous years which duly accepted by the Revenue. He brought to our notice page 35 of the paper book wherein assessee has given details of the related parties and their services in the notes to account. With regard to other related employees, he submitted that they all are graduate and looking after the acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the Assessing Officer has disallowed the salary expenditure claimed by the assessee of Satya Prakash Sharma who is brother of the Director and received the salary of Rs. 90,00,000/- during the year. It is a fact on record that assessee has not submitted any detail before the Assessing Officer. However, assessee has submitted before the ld. CIT (A) that Satya Prakash Sharma, respondent to the notices issued u/s 133 (6) of the Act by the Assessing Officer and ld. CIT (A) held that Satya Prakash Sharma is the key employee and backbone of the business of the assessee and he has regularly received the abovesaid salary and the same was accepted by the Department. It is also brought to our notice that Satya Prakash Sharma regularly declares his huge income and the same was accepted by the Revenue and also pays highest possible tax bracket. After considering the submissions of the parties and findings of the ld. CIT (A), we observed that Satya Prakash Sharma is a regular employee and key employee of the assessee and whatever salary received by him is properly disclosed in its return of income not only during this year but also in the past which was accepted by the Revenue. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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