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TMI Blog2023 (12) TMI 1392X X X X Extracts X X X X X X X X Extracts X X X X ..... cases before the CIT (A) and request for consolidated hearing in all these cases. Shri Madan Lal Aggarwal, the Karta of the HUF who looks after the cases was suffering from gangrene and finally died on 9-8-2022 after prolonged illness. That no manual copy of ld CIT (A) order was received and the order uploaded by the office of the ld CIT (A) on portal could not be noticed under the impression that appeal is pending. All other 22 cases are still pending with ld CIT (A) for orders. In the month of January 2023, while checking the portal, it was noticed that order of ld CIT (A) was passed in the case of assessee and immediately thereafter, the appeal was filed. There is a delay of 350 days in filing of appeal caused due to facts narrated above which may please be condoned in the interest of substantial justice. In this regard it was further submitted that the assessee has not make any benefit in late filing of the appeal and is keenly interested to pursue the appeal filed on merits and in support reliance was placed on the following decisions: * Improvement Trust Ludhiana Vs. Ujagar Singh & Ors Civil Appeal No. 2395 of 2008 of June 9, 2010 * Jayvantsinh N Vaghela Vs. Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstantial delay of 350 days as rightly pointed out by the Registry and the assessee has failed to submit reasonable cause which has caused the delay in filing the present appeal except the fact that the Karta of the HUF had died in the interim on 09/08/2022. It was submitted that even if the period of ill health and the expiry of the Karta of the HUF is excluded still there is delay which has happened in filing the present appeal and therefore the delay so happened in filing the present appeal should not be condoned. 5. We have heard the rival contentions and pursued the material available on record. We find that the assessee has reasonably explained the reasons for the delay in filing the present appeal due to non-receipt of the appellate order, prolonged illness and death of the Karta of the family and thereafter, time taken by the new Karta to take stock and file the present appeal. Given the facts and circumstances of the case, we are satisfied that there was reasonable cause for the delay in filing the present appeal and in the interest of substantial justice, the delay is hereby condoned and the appeal is admitted for adjudication on merits. 6. In the present appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus is on the assessee to prove the source of cash deposits post demonetization in its various bank accounts and the assessee has tried to explain the source of cash deposits post demonetization as its sales receipts for the period just preceding demonetization, however the said explanation is found not satisfactory. 7.4 It was further held by the AO that every day sales are deposited on day to day basis in the bank account and the same is evident from the bank account statement of the assessee in which the sales are credited from time to time. Therefore, it is not possible that the source of cash deposits post demonetization are out of sales proceeds of the assessee. Further the AO carried out the comparison of cash sales for the month of October and November for the year under consideration with the last two years and came to conclusion that the sales shown by the assessee during the year under consideration are unreasonably high and therefore bogus and not genuine as they are incomparable to previous year sales. Further the AO referred to the total number of cash sales transactions for the period 25/10/2016 to 08/11/2016 and compared with total number of cash sales during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before us. 10. During the course of hearing, the Ld. AR reiterated the submissions made before the Ld. CIT (A) and it was submitted that the Ld. CIT (A) has failed to appreciate the submission so made and the legal authorities so submitted in right perspective and the contents of the submission so made read as under: "2. The above grounds of appeal are inter-related and as such are taken up together and to explain / present the submissions to support the above grounds. FACTS IN BRIEF A. That during the year in question post demonetization period assessee has deposited cash of Rs. 21,00,000/- in between 9-11-2016 to 31-12-2016 in bank and copy of cash book was filed before AO and copy attached at page 2-35. That cash was deposited out of cash sales made to various parties against sales Bills and relevant evidences supporting such sales were also produced for verification of the AO. B. That AO did not accept the explanations of assessee and held that Rs. 4,00,000/- cash as genuine and treated the balance sales of Rs. 17,00,000/- as unexplained cash credit u/s 68. This conclusion of AO is based on suspicion and not based on any adverse finding dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocument in parts and casting suspicion without any evidence. B. Comparative Cash Sales of October and November of last 2 years as detailed at page 4 of the Assessment order. The finding of AO was that cash sales are not comparable to previous year. All sales are subject to VAT @ 12%. Sales has been accepted by VAT department and applicable VAT was paid to department. There is no justification of suspicion without any evidence. Moreover, learned AO has applied the deeming provision contained in s.68 and there can not be any deeming within deeming. C. AO has further observed that Number of Cash Sales vouchers are on higher side in October and November. D. The cash in hand on 8-11-2016 was Rs. 20,63,712/- whereas cash in hand on 8-11-14 was Rs. 7,22,554/-. E. Cash Deposit in October and November 2016 is Rs. 24,50,000/- whereas cash deposit in earlier years were Rs. 7,50,000/-. All the transaction are in the regular course of business and recorded as it happened. F. That against the cash sales of Rs. 11,94,308/- in October and Rs. 10,47,311/- in November, Cash sales of Rs. 4,00,000/- was considered genuine. If cash sales is red ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mere suspicion, conjectures or perceptions. It would also be necessary to reiterate that it is not perceptions but concrete facts that underline quasi judicial determinations and where concrete facts are not available, relevant facts, as would raise a credible inference of culpability requiring an assessee to rebut the inference so raised. D. In the case in hand the question is whether Cash Sale recorded as Income can be alleged to be Cash Credit u/s 68 without any evidence on record. It is a settled judicial preposition of law that "If deeming within deeming provision is allowed then it may lead to absurdity." E. It is submitted that such proposed actions based upon suspicion and doubts in absence of any evidence on record are not valid as per the provisions of the Act. Kind attention in this regard is invited to the decision of jurisdictional High court in the case of CIT vs Jawahar Lal Oswal[2016] 382 ITR 453 wherein the court has clearly held that once assessee offers explanation regarding sources of its credit, the same can be treated as deemed income only on the basis of tangible evidences brought on record by the AO and not on basis of suspicions and doubts. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be made by the AO. Relevant extracts of the decision are as under: "The assessee having discharged his onus by providing a credible explanation, the onus to prove the falsity in the assessees explanation now rested with the AO. Having failed to do so and having not availed of the opportunity to examine the witnesses, which was presented to him by the assessee himself, the Revenue now cannot make the addition under section 68 of the Act. The Hon'ble Punjab and Haryana High Court has dealt at length on the issue of onus under the deeming provisions of the Act such as section 69A, in the case of CIT (c) Ludhiana vs Sh. Jawahar Lal Oswal in GTA No. 5/Chandi/99 dated 29.1.2016. The Hon'ble High Court has held that if the assessee fails to give a credible explanation the AO can draw inference against the assessee, but if the assessee gives a credible explanation and discharges the onus cast upon it under the deeming provisions, the onus reverts to the Revenue to prove the falsity in the facts and without doing so it cannot draw inference merely on suspicions and doubts." G. Similarly, the Allahabad HC in the case of Sri Ram Tandon vs CIT, [1961] 42 ITR 689 (All), also r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. Kishore Jeram Bhai Khaniya Vs ITO (ITAT Delhi) (ITANO. 1220/Del/2011) as long as stock is available and nothing adverese against the cash memo is found then cash sale con not be doubted. Cash sale is offered as Income hence same can not be added u/s 68 "6. There is another dimension to this issue. The AO made addition of Rs. 22.06 lacs u/s 68 of the Act, which contemplates the making of addition where any sum found credited in the books of the assessee is not proved to the satisfaction of the AO. It is only when such a sum is not proved that AO proceeds to make addition u/s 68 of the Act. We are dealing with a situation in which the assessee has himself offered the amount of cash sales as his income by duly including it in his total sales as his income. Once a particular amount is already offered for taxation, the same can not be again considered u/s 68, in fact such addition has resulted into double addition." No additions u/s 68 for deposit against Sales - when purchases accepted sales can not be ignored. D. Shree Sanad Textiles Industries Ltd. V. DCIT (Ahmedabad ITAT) ITA No. 1166/Ahd/2014 "Para 9.5 From the above, we note that the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be made once again in respect of the same. The Hon'ble High Court dismissed the appeal filed by the Department. Para 2 of the judgment reads as "....On examination of the orders passed by the Assessing Officer, the Commissioner of Income-tax (Appeals) and the impugned order passed by the Tribunal, we find that both the appellate authorities below have disagreed with the Assessing Officer and have deleted the said addition on the ground that the cash sales were duly recorded in the books and that they had found place in the profit and loss account." Para 3 reads as "The Commissioner of Income-tax (Appeals) had returned a finding that the stock and cash found at the time of search had been examined by the Assessing Officer and was compared with the stock and cash position as per books. The stock and cash position as per the books had been arrived at after the effect of the aforesaid cash sales. The stock position as well as the cash position as per the said books had been accepted by the Assessing Officer. The Commissioner of Income-tax (Appeals) also noted that the appellant had furnished the complete set of books of accounts and the cash books and no discrepancy had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer will recompute the income accordingly. No additions u/s 68 on account of Cash Sales out of Stock O. ITAT DELHI in the case of AKSHIT KUMAR VERSUS ACIT, CIRCLE-59 (1), NEW DELHI, ITANo:-6527/Del/2017 The assessee is engaged in the business of trading in fabric. The AO has made an addition of Rs. 4,20,62,550 u/s 68 on account of cash deposit representing in the bank account of assessee's as unaccounted income which has been claimed as sale of opening stock by the assessee. The additions made by the AO was sustained by the CIT (A) which was deleted by ITAT: Para 17 'Thus, in our opinion the sale made by the assessee out of his opening stock cannot be treated as unexplained income to be taxed as 'income from other sources'; firstly, the stock was available with the assessee in his books of account and trading in such stock including purchase, sale, opening and closing stock (quantity wise and value wise) has been accepted by the department year after year and in some years under scrutiny proceedings, therefore, non existence of stock or business cannot be upheld; secondly, the sale of stock in the earlier years and the sale of balance left out st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus application of section 68 by the A.O. on those receipts is not justified." In view of the above uncontroverted finding more specifically when the Assessing Officer has not doubted the genuineness of the purchases and when the stocks tally has been accepted by the Assessing Officer then there is no reason to doubt the sales. The broker from Gwalior who arranged the sales with the said party also confirmed in his statement recorded by the department confirming that he made the dealing with M/s A.K. Impex and consequently the assessee recorded the sales in its regular books of accounts. Even otherwise, the goods were supplied to the parties after receiving the advance payments which were credited through cheques/DDs/RTGs, etc. Therefore, we hold that the CIT (A) has rightly come to the conclusion that the addition made by the Assessing Officer u/s 68 of the Act by considering the sale proceeds as cash credits cannot be sustained Likewise, the learned CIT (A) very elaborately dealt with the issue with regard to other parties like M/s Pravin Trading Co., M/s Mohan Traders and MaaBhagwati Traders, etc. wherein the goods were delivered on the same day and sale invoices were issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrectness of the cash book entries or the statements made by those deponents in their affidavits. The Tribunal also fell into the same error. It could not negative the possibility of the appellant being in possession of a substantial number of these high denomination currency notes. It, however, considered that it was impossible for the appellants to have had 61 such notes in the cash balance in their hands on 12th January, 1946, and then it applied a rule of the thumb treating 31 out of such 61 notes as within the bounds of possibility, excluding 30 such notes as not covered by the explanation of the appellants. This was pure surmise and had no basis in the evidence, which was on the record of the proceedings. VENKATARAMA AYYAR, J.--I agree to the order just proposed ;but I prefer to rest my decision on the ground that the finding of the Tribunal that high denomination notes of the value of Rs. 30,000 represented the concealed profits of the appellant is not supported by any evidence, and is, in consequence, erroneous in point of law and liable to be set aside. The evidence on record has been exhaustively reviewed in the judgment just delivered, and there is no need to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein they categorically said that they have collected their fee directly from the patients and that the amount collected by them is not charged to the accounts of the assessee. The said statement gets prima facie credibility. Merely because the assessee has examined some of the specialists is not a ground to reject the statement of other specialists who are not examined. In the joint statement, the names and addresses of the specialists is given in detail. The Assessing Officer should have conducted suomotu enquiry of the specialists who are not examined before him to find out the truth of the joint statement. The technical insistence by the Assessing Officer that the assessee should have examined all the specialists is an untenable view. In the absence of contra material, the Assessing Officer cannot reject the genuineness and correctness of the statement. In that view of the matter, the question of law in both the appeals is answered in favour of the assessee. Both the appeals are dismissed. Suspicion cannot take place of Proof F. That additions in the present case based on suspicion is contrary to law that "suspicion however strong can not take place of legal proof." As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account an appropriate satisfaction on part of assessing officer as required and stipulated in section 145 is essential to claim that books are incorrect and incomplete etc. So where cash deposits are validly supported by regular & audited books of accounts then same carry huge relevance and cant be brushed aside lightly. C. The additions in this case made by AO on account cash sales treated as deemed Income u/s 68/69A is without rejecting the books of accounts. The learned AO has placed suspicion on sales bills but not rejected the books of accounts. It is settled law that no additions as applicable to the present case can be made by AO without rejecting the books of account. The following position of law will make the position absolutely clear: D. The basic principle is the same in the law relating to income-tax as well as in civil law, namely, that if there is no challenge to the transaction represented by the entries or to the genuineness of the entries, then it is not open to the other side -in this case the revenue to contend that that which is shown by the entries is not the real 'state of affairs. As held in the case of 1980 (6) TMI 10 - GUJARAT HIGH CO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion that the cash balance did not include 140 high denomination notes when they were presented to the bank for encashment." Sales credited against cash deposit - books not rejected - no additions u/s 68 G. ITAT INDORE in the case of ACIT 1 (2) INDORE VERSUS M/S S.S.P. ENTERPRISES PVT. LTD. AND VICE-VERSA, I.T.A. No. 278/Ind/2014, CO NO.29/Ind/2014 Arising out of ITA No. 278/Ind/2014, I.T.A. No. 320/Ind/2014 The assessee is engaged in trading business of plastic granules. AO has made an addition of Rs. 35.05 lakh u/s 68 on account of cash deposit made in bank account out of cash sales. CIT (A) deleted the additions and ITAT confirmed the additions made by CIT (A) and held that: Para 5 'We have considered the submissions of both the sides. After careful perusal of record we find that the assessee has made cash sales and the collection from the parties has been deposited in the bank. The entire deposit to the bank account has been recorded in the books of the assessee and the books were produced before the Assessing Officer. The total sales of the assessee were of Rs. 8511415/-. Out of the total sales, the assessee has cash sales of Rs, 449338/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in the gross profit rate to which a reply was given that it was due to increase in expenditure on salaries and wages, fuel consumption and stores consumption. The assessee was directed to furnish the details of the percentage of consumption of the different items but, in spite of repeated reminders, he failed to furnish the same. It was held by the IAC that the assessee-company had failed to discharge the onus of proof regarding the fall in the gross profit rate to the extent of 6.4 per cent. and the conclusion was that the expenses under various heads had been inflated. On appeal, the learned Commissioner of Income- tax took into consideration the change in the gross profit rate for 11 years and various other factors including the maintenance of accounts, which have not been rejected and that the IAC had not pointed out any single instance of inflation in expenditure. The appeals of the assessee were allowed in part. In appeal, the Tribunal did not discuss the matter, but simply stated that the opinion of the Commissioner of Income-tax was correct and that the Inspecting Assistant Commissioner had been unduly influenced by the action of his predecessor and had not applied his ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er can proceed to make assessment to the best of his judgment under section 144 of the Act only in the event of not being satisfied with the correctness of the accounts produced by the assessee. In the instant case the Assessing Officer has not rejected the books of accounts of the assessee. To put it differently the Assessing Officer has not made out a case that conditions laid down in Section 145(3) of the Act are satisfied for rejection of the books of accounts. Thus, when the books of accounts are maintained by the assessee in accordance with the system of accounting, in the regular course of his business, same would form the basis for computation of income. In the instant case it is noticed that neither the Assessing Officer nor CIT(Appeals) have rejected the books of accounts maintained by the assessee in the course of the business. As such tribunal has rightly rejected or set aside the partial addition made by Assessing Officer for arriving at gross profit and sustained by the CIT(Appeals) and rightly held that entire addition made by the Assessing Officer was liable to be deleted." - Decided in favour of assessee In the light of above there is no justification in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anteed under Article 19(1)(g) of the Constitution of India, 1950 'right to practise any profession, or to carry on any occupation, trade or business' and therefore, invalid and unconstitutional. D. It is, therefore, imperative to understand the stance of the judiciary with respect to retrospective amendments in law in so far as they are prejudicial to interests of the taxpayer. It has been held in a catena of judgements that the principle of 'fairness' must be the basis for every legal rule. In this regard, reliance is placed on the following judicial precedents: E. The Hon'ble Supreme Court in the case of D Cawasji &Covs. State of Mysore 1984 AIR 1780 held that a retrospective amendment which instead of removing the lacuna which it intended to remove, merely legislates to impose a new/higher burden is unconstitutional. In the said case the Mysore Sales Tax Act, 1967 was modified by the State Government to raise the rate of tax with retrospective effect to avoid the liability of refunding the excess amounts collected. The enhancement of the rate of tax was, therefore, clearly arbitrary, unreasonable and it could not be considered as rectifying any defect. The Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter that date; and that the assessee was not liable to pay tax on the sum because the fourth proviso to section 10(2)(vii) of the Income-tax Act under which it was sought to be taxed was not in force in respect of the assessment year 1946-47. I. As per the settled judicial pronouncement, any retrospective amendment can be made only on the fulfilment of following conditions i) Whether retrospective amendment was to mitigate hardships caused to assessee? ii) Whether the amendment is clarificatory in nature? Both these conditions are not fulfilled, as provisions of s .115BBE as on 1-4-2016 mandate to charge tax at maximum marginal rate and rate of tax can not be enhanced to 75% under the garb of clarification. J. In the light of above, there is no justification of retrospective application of enhanced rate of tax @75% to the transaction prior to 15-12-2016. The transaction in question was executed on 10-11-2016 & 11-11-2016 and applicable rate of tax u/s 115BBE was 30% on that date." 11. It was further submitted that a complete set of books of accounts were maintained and audited by a Chartered Accountant and these books are not rejected by AO but at the same time, part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the whims and fancies of the authorities." 11.3 Further, reference was drawn to the decision of the Hon'ble Supreme court in case of Mehta Parikh and Company vs. CIT (1956) 30 ITR 181 (SC) wherein it was held as under: "It has to be noted, however, that beyond these calculations of figures, no further scrutiny was made by the Income-tax Officer or the Appellate Assistant Commissioner of the entries in the cash book of the appellants. The cash book of the appellants was accepted and the entries therein were not challenged. The Tribunal also fell into the same error. It could not negative the possibility of the appellant being in possession of a substantial number of these high denomination currency notes. It, however, considered that it was impossible for the appellants to have had 61 such notes in the cash balance in their hands on 12th January, 1946, and then it applied a rule of the thumb treating 31 out of such 61 notes as within the bounds of possibility, excluding 30 such notes as not covered by the explanation of the appellants. This was pure surmise and had no basis in the evidence, which was on the record of the proceedings. To put the matter in a nut-shell, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that there was no justification to make addition u/s 68 of the Act on account of cash sales recorded in books of accounts. The Ld. AR also questioned retrospective applicability of section 115BBE of the Act. After taking into consideration the above facts , the opportunities vide letter dated 24.08.2021 and 17.09.2021 were granted to the appellant to produce complete sale bill books and complete books of accounts for the year under consideration in order to verify the grounds of appeal and to verify the above contention. In response , the appellant submitted only copy of sales account, however, failed to produce the complete sale bill books for the period under consideration. Upon perusal of the submission of the appellant, it is noted that the cash sales shown by the appellant during the months of October and November, 2016 are considerably higher than the respective months of F.Y. 2015-16 and F.Y. 2014-15 .The onus to substantiate the cash sales was on the appellant which it has failed to discharge both during the assessment and appellate proceedings. The appellant has failed to furnish documentary evidence sought during the appellate proceedings thereby failing to establi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re duly audited. No defect has been pointed out by the AO in terms of availability of stock or in any of the documentation so submitted by the assessee or in the books of accounts. Therefore, merely the fact that certain cash deposits have been made by the assessee during the period of demonization and such deposits are on a higher side considering the past year figures cannot be basis to hold the explanation so made by the assessee as unsustainable and treat the cash sales as bogus and bringing the cash deposits to tax u/s 68 of the Act. The comparative figures for past years can no doubt provides a starting point for further examination and verification but basis such comparative analysis alone and without any further examination which points out any defect or manipulation in the documentation so submitted or in terms of availability of requisite stock in the books of accounts, the sales so undertaken by the assessee which is duly recorded in the books of accounts cannot be rejected and treated as bogus. In view of the same, we find the explanation of the assessee as genuine and reasonable duly supported by the documentation and books of accounts and the addition so made by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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