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TMI Blog2025 (3) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Faceless Appeal Centre (NFAC) has grossly erred both in law and on facts in disposing off the appeal ex-parte without granting any fair and proper opportunity of being heard to the appellant company. 2.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that there was reasonable cause for the appellant company for not causing appearance on the dates fixed for hearing and as such disposal of the appeal without granting fair, meaningful and proper opportunity is untenable 2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that non appearance of the appellant on the date of hearing was neither intentional nor deliberate and is not a case where applicant is not interested in prosecuting its appeal. 3.1 That, the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) has erred both in law and on facts in upholding an addition made of Rs. 4,07,89,150/- representing alleged unexplained cash deposits in the bank account of the appellant company during the period of demonetization and brought to tax under section 68 of the Act read with section 115BBE of the Act. 3.2 That, the learned Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de and sustained by the learned Commissioner of Income Tax (Appeals) be deleted and appeal of the appellant be allowed." 2. The brief facts of the case are that the assessee is a company and filed its return of income electronically on 31/10/2017 declaring total income of Rs. 1,01,47,804/-. The case was selected for scrutiny under CASS and notice u/s 143(2) of the Income Tax Act, 1961, were issued. The assessee is engaged in the business of gold, silver and diamond jewellery on wholesale and retail basis. During the year under consideration, the assessee has made cash deposit in the bank account during the period of demonetization of Rs. 20,59,29,500/-. The Assessing Officer after considering the submissions of the assessee after comparing the average cash sales and average cash deposits in the bank account during the year under appeal with immediately preceding year, was of the opinion that the cash deposit of Rs. 15,06,14,350/- could be held as explained cash deposited during the demonetization period and made the addition of the balance amount of Rs. 4,07,89,150/- u/s 68 as unexplained income in the hands of the assessee. 3. In first appeal, the Ld. CIT(A) confirmed the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of accounts and cash books, no addition could be made on account of cash deposited made from the regular sales. Ld. AR argued that when sales have already been offered for tax, the cash generated out of such sales could not be doubted and if the such cash deposits out of such cash sales is taxed it would tantamount to double taxation. The Ld. AR further submitted that the AO has rejected the explanation of the assessee without brining on record any contrary material to hold that the assessee has made cash deposit out of unexplained sources. Once the explanation of the assessee could not be controverted by any corroborative material brought on record by making the inquiry solely on conjecture and surmises, based on estimation of average sales, addition cannot be made. Further the Ld. AR also filed the rebuttal on the allegations made by the AO page 6 of the assessment order which are as under:- "Rebutting the AO allegation on Page 6 of the assessment order: 36. On pages 3 to 6 of the assessment order, the AO has reproduced tables comparing financial data with the previous year. Thereafter, the AO has analyzed the same which are factually incorrect, as highlighted below 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities and stated that the AO has made analysis of the cash sales made by the assessee during the year under appeal and immediately preceding year and after considering the facts has concluded that out of the total cash of Rs. 20,29,28,500/- deposited in SBN during the year Rs. 15,06,14,350/- is the average cash balance as on closing hours of 08/11/2016 which is worked out by AO on the basis of average cash sales made during the year and treated as it explained, therefore, the Assessing Officer was very much reasonable in making addition of only Rs. 4,07,89,150/- which deserves to be upheld. 6. We have heard the rival submissions and perused the materials available on record. In the instant case, the books of accounts of the assessee are subject to audit and from the perusal of the financial statement, we find that neither the auditor has pointed out any deficiency in the maintenance of the books of accounts nor the Assessing Officer has pointed out any defects in the same who has accepted the books of accounts and had not disturbed the trading results declared by the assessee. It is also seen that the assessee is having substantially amount of cash sales throughout the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bted the availability of stock prior to sales. When the assessee has submitted complete details and thus discharges its onus, whereas no contrary material whatsoever was brought on record by the AO to disprove the details filed by the assessee. As observed above, assessee has already included the entire cash sales in the total sales and the profits have been derived which were offered for tax, thus taxing the same income twice once in the sales and other when the sale consideration was realised and deposited in the bank account which is doubted on conjectures and surmises. 8. At this juncture provisions as contained in section 68 is reproduced as under: 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. 9. From the perusal of the provisions of section 68 of the Act it is very clear that assessing officer can make addition u/s 68 only under two circumstances, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales ratio was higher - Whether once, it had been established that sales representing outflow of stocks was duly accounted in books of account and there was no abnormal profit during year, then there was no justification to treat deposits made in bank account out of cash sales to be income from undisclosed sources - Held, yes - Whether, therefore addition made under section 68 was to be deleted -Held, yes [Para 14] [In favour of assessee] 12. The hon'ble Delhi High court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 (Delhi High Court) has held as under: In the facts of above case cash of Rs. 24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results, there is no avenue for the CIT(A) to reject such explanations. This expression "explanation is found not satisfactory to the AO" is purely relates to the money found with the assessee which are not recorded in the books of account. In this case, the above expression has no relevance since the assessee had already declared the cash sales in its books. In the similar situation, the coordinate bench has held in the case of J.R.Rice India (P) Ltd as under: "At the cost of repetition, to the extent of sales made, the stock position is also correspondingly reduced by the assessee which goes to prove the genuineness of the claim of the assessee. On examination of the cash book of the assessee, it is found that the assessee had cash balance of Rs. 55.94 lakhs as on 8-11-2016, i.e., the date on which demonetization was announced, which sufficiently explains the source of deposit of Rs. 52.60 lakhs in specified bank notes. Apart from this, the assessee had duly furnished the month wise details of sales, month wise details of purchase, corresponding freight charges incurred month wise, month wise power and fuel expenses and month wise selling expenses in the form of rebate and disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When the assessee gives any reply or submission or any documents to the Assessing Officer, it is duty of the Assessing Officer to examine the same in the light of the available evidence. In the present case the Assessing Officer and the ld CIT(A) have concluded the findings on the basis of conjectures and surmises. The Assessing Officer has to establish the link between the evidence collected by him and the addition to be made. The entire case has to be dependent on the Rule of evidence, the assessee in this case explained the source of bank deposits are from cash sales. The Assessing Officer proceeded to disbelieve the explanation of the assessee on the presumption basis without bringing the corroborative material on record. The Assessing Officer is required to act fairly as reasonable person and not arbitrarily capriciously. The assessment should have been made based on the adequate material and it should stand on its own leg. The Assessing Officer without examining any parties to whom the goods are sold by the assessee, came to conclusion that the sales are not genuine, without even rejecting the books of account which is in our opinion is erroneous. 21. Respectfully, followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to show bogus sales to cover up cash deposited during the demonetization period" * In the case of JCIT V. M/s Pari Agencies Pvt Ltd. ITA No. 2006/DEL/2023, dated 14.12.2023, Hon'ble ITAT Delhi held that- 11. Nowhere in the assessment order the Assessing Officer has mentioned that after inflating the alleged cash sales the assessee has frequently revised its VAT returns. It is not the case of the Assessing Officer that the assessee has shown alleged cash sales without having sufficient stock in hand during that period. Not a single instance of defect is pointed out in the audited books of account. The entire assessment is based on assumptions/presumptions, surmises and conjectures de hors of the facts on record." * Further reliance in this regard is being placed on the Judgment of ITAT Visakhapatnam in the case of ACIT, CC-1 Visakhapatnam V. M/S Hirapanna Jewellers And (Vice-Versa), 2021 (5) TMI 447, dated: 12-5-2021 held as under:- "9. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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