9911796707
TMI Blog2025 (5) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... b). Acquiring valid justification (c). Without appreciating the facts that assessee maintenance regular book of accounts and day to day stock records (d). Without doubting opening stock, purchases and sales (e). On mistaken belief of quantum of cash deposits and cash sales made during demonetisation, Which is highly unjustified, illegal and liable to be quashed entirely. 2. Assessee deserves right to amend, alter, delete and modify any ground of appeal on or before the date of hearing of appeal." 3. Succinctly, the fact as culled out from the records is that the assessee filed return showing total income at Rs. 19,63,760/- on 04.08.2017, which was processed u/s 143(1) of the I.T. Act. Subsequently, the case was selected for Limited Scrutiny under computer assisted selection for scrutiny (CASS) to examine of the cash deposited during the year. Accordingly statutory notice u/s 143(2) was issued on 08.08.2018 which was duly served upon the assessee through ITBA portal. The assessee is engaged in the business of manufacturing of Jewellery. 3.1 Ld. AO from the records noted that the assessee has deposited huge cash of Rs. 3,88,57,665/- in his bank account with ICICI Bank Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the cash deposited in bank account and for the deficiencies pointed out the cash deposited was not considered as supported by cash sales declared by the assessee and therefore a show cause notice dated 05.07.2019 and 26.11.2019 were issued to the assessee requiring explanation as to why the unexplained cash of Rs. 3,88,57,665/- should not be added back in his income for taxation. The assessee furnished reply of the show cause notice on ITBA portal on 13.07.2019. The assessee contended that Rs 70,00,000/- were deposited just after demonetization on dated 11.11.2016. Assessee was a registered firm doing retail trade in gold ornaments wherein most of the sales were made to customers in cash. Assessee being in the eligible business and had turnover below Rs 2 crore opted for presumptive taxation u/s 44AD. Although he was not required to maintain regular books of accounts but since he was also registered with RVAT Act 2003, he maintained cash book, ledger day to day stock register, invoices bills etc. Entire payments to suppliers were made through banking channel and sales were made to customer for which assessee issued bills. Assessee stated in earlier reply that the invoices not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o support the claim of deduction under IDS 2016 assessee has submitted copies of form no.4 (Certificate of IDS2016) of all the partners naming Soniya Agarwal, Anandita Agarwal and Pallavi Agarwal. Ld. AO considered that explanation and considered the Rs. 2,60,00,000/- as explained. As the assessee has also deposited cash of Rs. 70,00,000/- on 11.11.2016 in his bank account with ICICI Bank and the source of which has been stated to be the cash sale made by the assessee. However, on verification of the details ld. AO noted that the assessee has claimed to be received the cash on sale from 77 persons from whom claimed to made sale Rs. 66,85,647/- in November 2016 just before depositing the cash in the bank account on 11.11.2016 and which is the source of cash deposited in a single day of Rs. 70,00,000/- in his bank account with ICICI Bank. From the scrutiny of the list ld. AO noted that the date of payment received against the sale from these persons. Further, the sale bill produced by the assessee are incomplete and appears fabricated issued just to cover up the unaccounted cash deposited by the assessee in his bank account on 11.11.2016 for which the assessee has mischievously gone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in whomsoever name they are entered in the Books. The section has applicability in the cases of search as well being section 68 is provision of general application and there is nothing in section 68 of the Act or elsewhere excludes the application of this general provision. Even the presumption under section 132(4A) of the Act does not override or exclude section 68 of the Act, i.e. it does not prevent the necessity to establish by independent evidence the genuineness of the cash credits u/s 68 of the Act nor does it do away with the burden which is on the appellant to establish the requisites of the cash credit. It is fact that the postal address and the identity are not provided by the appellant which could be substantiated the sales. 8.2 In Khandelwal Constructions v. CIT 227 ITR 900 (Gau.) it has been held by the Hon'ble Guwahati High Court that Section 68 of Act, empowers the Assessing officer to make enquiry regarding cash credit and If satisfied that these entries are not genuine, Assessing Officer has every right to add these as income from other sources. But before rejecting the assessee's explanation Assessing Officer must make proper enquiries and in the absenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account. The assessee has to prove the identity of the creditors with complete address, his credit worthiness or capacity to pay the amount in question, PAN, Copy of his computation of income. Only when these things are proved prima facie by the appellant and only after this appellant has adduced evidence to establish the aforesaid facts then only the onus shift on to the Department. Merely proving identification and showing movement of money through banking channels was not sufficient to establish that transaction was genuine. In this case the appellant has taken the advance against the future sales, thus onus was on the appellant to prove the identity and creditworthiness of the persons who have made the advances and also genuineness of transactions but the appellant failed to prove all the three limbs of section 68 of the Act. 8.6 It is responsibility of person who has received the money provide the name of the lender, genuineness of transaction and creditworthiness of the lender. However in this case nothing has been provided by the appellant complete and fully. 8.7 As already discussed provision of section 68 of Income Tax Act 1961, as per provision where any sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were written by the postal authorities and the Inspectors were unable to locate the addresses of persons. Since amount which was received in cash against the future sale on 08.11.2016 were not verifiable, the Assessing Officer has added Rs. 5.66 crore as unexplained credit under section 68 of the Act. 8.10 In the cases where credit entry has been made in the books of the assessee, the ambit of Section 68 is wide and inclusive. Provision applies to all credit entries. In the case of Gumani Ram Siri Ram v. CIT [1975] 98 ITR 337 (Punj. &Har.), it was held that the language of Section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they may stand, that is, whether in the name of the assessee or a third party. 8.11 The Assessing Officer when starts enquiry, specifically to satisfy himself/ herself of the source of such credit, and if during the enquiry, he/she is satisfied that the entries are not genuine, then he/she has every right to add the said sum represented by such credit entry as income of the assessee. The satisfaction of the assessing officer is the basis of invocation of provisions of Section 68. 8.12 The enquiry envisaged und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. The Law on the subject has been illustrated in a number of decisions prior to 1968. Hon. Supreme Court, in Kale Khan Mohd. Hanif Vs. CIT (supra), pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. The law after Section 68 is not different. 8.16 Even the particulars from assessment records, where the creditor is assessed, may not be sufficient as observed in CIT vs. Korlay Trading Co. Ltd. (1998) 238 ITR 820 (Cal). Further, in the case of Kamal Motors v. CIT [2003] 131 Taxman 155 (Raj.) it was held that the responsibility is on the assessee to discharge the onus that the cash creditor is a man of means to allow the cash credit. The burden to prove the source of receipt is in respect of each entry as held in the case of CIT v. R.S. Rathore [1995] 212 ITR 390 (Raj.), that while explaining the various credits and investments, it is possible that the assessee may be successful in explaining some of them, but that does not by itself mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors is not proved. The assessee also has to prove the capacity to give credit of the creditor. 8.20 In the case of Shankar Ghosh v ITO [1985] 23 TTJ (Cal.), the assessee failed to prove the capacity of the person from whom he had allegedly taken loan. Further the assessee could not explain the need for the loan and the manner in which the loan amount was spent. The creditor issued two letters demanding repayment but did nothing on non-compliance therewith; such letters did not therefore carry any conviction about the explanation of the assessee. Loan amount was rightly held as assessee's own undisclosed income. 8.21 In the cases of Shankar Industries Vs CIT (Cal) 114 ITR 689, Hari Chand Virender Paul Vs CIT (P&H) 140 ITR 148, CIT Vs Biju Patnaik (SC) 160 ITR 674 CIT Vs Precision Finance P. Ltd. (Cal) 208 ITR 465 Dhanalakshmi Steel Re-rolling Mills Vs CIT (AP) 228 ITR 780 and in the case of Sanil K.M.P. Vs CIT (Ker) 177 Taxman 481, the assessee failed to prove the genuineness of credit-mere proof of identity of creditor or that transaction was by cheque, is not sufficient - Addition under Section 68 upheld. 8.22 There is nothing in law which prevents Assessing Officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have made the contributions has not established. The assessing authority had put the result of his enquiries to the assessee granting him opportunity to after its explanations. The appellant however failed to establish the genuineness of the cash contributions as well as the capacity of the persons to have made such contribution in the first place." 8.26 In the case of Commissioner of Income Tax Vs. N.R. Portfolio (P)Ltd, (Delhi) (2014), the Hon'ble High Court of Delhi held that, "what we perceive and regard as correct position of law is that the court or Tribunal should be convinced about the identity, credit worthiness and convinced about the identify, credit worthiness and genuineness of transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee knowledge. Mere production of incorporation details, PAN Nos. or the fact that third person or company had filed income tax details in case of a private Itd. company may not be sufficient when surroundings and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, credit-worthiness, identify are deeper and obtrusive. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is not satisfactory. It is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression 'the assessee offer no explanation' means where the assessee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. ....Section 68 itself provides that where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assessee of the previous year, if the explanation offered by the assessee, about the nature and source of such sums found credited in the books of the assessee, is in the opinion of the Assessing Officer not satisfactory. Such opinion formed itself constitutes a prima facie evidence against the assessee, viz., the receipt of money, and if the assessee fail to rebut the said evidence, the same can be used against the assessee by holding that it was a receipt of an income nature." 8.30 In the case of Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR1(SC), the Hon'ble Apex Court observed as under: "It is well established that the onus of proving th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial cash during the year except demonetization period. 8.33 It is in this context that the issue of circumstantial evidences and preponderance of probabilities as emphasized for the purposes of Income Tax Act, 1961 by various courts gain importance. In this regard, the following observations of the Hon'ble Apex Court in the case of Sumati Dayal vs CIT214ITR801(SC), are worth noting: "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance; because if the appellant had purchased the winning ticket after the event she would behaving the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that" fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice that was noticed by the District Taxes Enquiry Committee and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to look into the surrounding circumstances to find out the reality of the recitals made in those documents." 8.34 It is therefore obligatory on the part of the appellant that it explains the nature and source of cash credits to its books of accounts. However, in the instant case, the appellant has failed to discharge its legal obligation by furnishing any explanation, which is found satisfactory. 8.35 The reliance is being placed in the case of Vaishnavi Bullion (P.) Ltd. v. ACIT, the Hon'ble ITAT HYDERABAD BENCH 'B', [2022] 145 taxmann.com 197 (Hyderabad Trib.) A.Y. 2017-18 vide order dated November 28,2022wherein it has held that- "Section 68 of the Income-tax Act, 1961 Cash credit (Demonetization deposits) - Assessment year 2017-18-Assessee-company was engaged in business of trading in gold, diamond jewellery etc. - During search and survey conducted on premises of assessee, huge deposits were found in its bank account after demonetization was announced Initially MD of assessee claimed that said amount was received as advances of less than Rs. 2 lakhs from 2153 customers for purchase of gold bullion on date of announcement of demonetization of Rs. 500 and Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention notification and the Act. The withdrawal of legal tender character was one of the significant steps in weeding out the fake currency and to curb the black money in the country. The persons like assessee have given a setback to well-intended and well-thought policy of Government of India and they have used this as an opportunity to convert their or others' ill-gotten money into bullions. In the present case the bank account. The above said act of the assessee is not only against the law but also against the interests of the nation. In the present case, the bank account with the AXIS Bank was only opened on 10-11- 2016. As per the notification, the assessee cannot deposit more than the amount of Rs. 50,000/- in its account till KYC is completed. It is not the case of the assessee that the KYC had been completed on the date of opening of its account. It is not understandable how the bank permitted the deposit of huge amounts in the newly opened account, on the date of its opening itself. The concerned agency must look into the role of the bank employees in this regard. When the assessee itself cannot deposit more than Rs. 50,000/-as per notification, then how a third par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame day from the systems available in your premises in tally software and issued to all the customers. Likewise, in the case of M/s VBPL, you have received Rs. 40,11,50,000/-as cash advances from one customer (2100 customers earlier) and followed the same procedure as was done in the case of M/s MGJPL? Ans. Yes. I confirm that in M/s MGJPL, I have received approximately Rs. 57 crores from six customers and Rs. 40 crores from one customer in M/s VBPL. Entered the details of cash advances bifurcating all below Rs. 2 lakhs in the name of various persons (as provided by six and one customer respectively) started generating cash receipts on 8th Nov. 2016 to 09th Nov. 2016, from the systems available in our premises in Tally software and handed over the receipts to the respective seven customers. 20. As you are aware, as per page 3 of the impounding order, the five systems available (one Compaq CPU SG 34401L, one assembled PU -Intex, One Lenovo CPU S.No.LQCH015, One Lenovo CPU S.No.L9C3LC60 (belonging to MGJPL) and Lenovo CPU S.No.ES0Q7220256 (belonging to M/s VBPL) in your premises on the date of survey in which you have claimed to have entered the cash advances were impounded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or its participation in an illegal activity. Though the memorandum to the Finance Bill, 1998 elucidated the ambit of Explanation 1 to include "protection money, extortion, hafta, bribes, etc.", yet, ipso facto, by no means is the embargo envisaged restricted to those examples. It is but logical that when acceptance of freebies is punishable by the MCI (the range of penalties and sanction extending to ban imposed on the medical practitioner), pharmaceutical companies cannot be granted the tax benefit for providing such freebies, and thereby (actively and with full knowledge) enabling the commission of the act which attracts such opprobrium. ........................ 24. Even if Apex's contention were to be accepted that it did not indulge in any illegal activity by committing an offence, as there was no corresponding penal provision in the 2002 Regulations applicable to it -there is no doubt that its actions fell within the purview of "prohibited by law" in Explanation 1 to section 37(1). 25. Furthermore, if the statutory limitations imposed by the 2002 Regulations are kept in mind, Explanation (1) to section 37(1) of the IT Act and the insertion of section 20A of the Medic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng into a partnership agreement. While dealing with the recognition of such a partnership under the IT Act, this Court held that allowing the same would attract the very mischief sought to be avoided: avoided: "This object will be defeated if the licencee is permitted to bring in strangers into the business, which would mean that instead of the licencee carrying on the business, it would be carried on by others - a situation not conducive to effective implementation of the excise law and consequently deleterious to public interest. It is for this very reason that transfer or subletting of licence is uniformly prohibited by several State Excise enactments. It, therefore, follows that any agreement whereunder the licence is transferred, sub-let or a partnership is entered into with respect to the privilege/business under the said licence, contrary to the prohibition contained in the relevant excise enactment, is an agreement prohibited by law. The object of such an agreement must be held to be of such a nature that if permitted it would defeat the provisions of the excise law within the meaning of section 23 of the Contract Act. Such an agreement is declared by section 23 to be unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant to the Plaintiff. The original Possession Certificate is also said to be handed over to the Plaintiff. The agreement, even according to the Plaintiff, contemplated that within three months of conveyance of the site in favour of the first Defendant, the first Defendant was to convey her rights in the site to the Plaintiff. It is quite clear that the parties contemplated a state of affairs which is completely inconsistent with and in clear collision with the mandate of the law. On its term, it stands out as an affront to the mandate of the law. 79. The illegality goes to the root of the matter. It is quite clear that the Plaintiff must rely upon the illegal transaction and indeed relied upon the same in filing the suit for specific performance. The illegality is not trivial or venial. The illegality cannot be skirted nor got around. The Plaintiff is confronted with it and he must face its consequences. The matter is clear. We do not require to rely upon any parliamentary debate or search for the purpose beyond the plain meaning of the law. The object of the law is set out in unambiguous term. If every allottee chosen after a process of selection under the Rules with reference t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him." 8.37 The appellant has placed its reliance in the case of Smt. Harshil Chordia v. ITO(Rajasthan High Court) 2008 298 ITR349 Raj wherein it has been held that- "23. So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract Section 68 because the cash deposits become self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise." 8.38 The above cited cases pertain to period prior to demonetization; therefore due to factum of the time ratio of these case laws are not applicable to the present case. The facts of cited cases cannot be compared with the facts of present case and therefore the ratio of these case laws cannot be applied. 8.39 In effect, the ground No. 1of the appeal is hereby dismissed. 9.1 Ground No. 2. Assessee deserves the right to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout appreciating the facts that assessee maintenance regular book of accounts and day to day stock records (d). Without doubting opening stock, purchases and sales (e). On mistaken belief of quantum of cash deposits and cash sales made during demonetisation, Which is highly unjustified, illegal and liable to be quashed entirely. 2. Assessee deserves right to amend, alter, delete and modify any ground of appeal on or before the date of hearing of appeal. Assessee, during the course of hearing, advanced all the facts and submission, which are as under :- 1.1 Assessee was a partnership firm doing trading, manufacturing of gold jewellary and ornaments. During the year under consideration the income was declared under presumptive scheme of taxation u/s 44AD of the Income Tax Act, 1961. Return was filed u/s 139(1), which was picked for scrutiny assessment u/s 143(3) for limited purpose to verify the source of cash deposited after demonetization. During the course of assessment proceeding, it was stated that in spite of opting for presumptive taxation u/s 44AD still, regular books of accounts was being made. All the details i.e., financials, purchase bills, bank statements, sales i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts and financial declared before AO. (Copies of quarterly VAT returns are placed at page no 58 to 74 of PB) 9 Book results were not rejected by AO. Closing Stock of Rs. 49885580.96 Inventory of closing stock available with AO with quantity and vale and was accepted by Ld AO. Thereafter, Ld AO issued show cause notices for which compliances were made. Assessee explained with factual evidences, all the defects pointed out by Ld AO, which I reproduce hereunder:- 2 Show cause 2.1 In your reply submitted on ITBA you have furnished the comparative chart of cash and credit sale for FY 2015-16 and 2016-17 relevant to AY 2016-17 and 2017-18. On verification of the chart it is noted that during the AY 2016-17 your total sale was Rs. 1,30,83,627/- (cash sale Rs. 77,59,808 + credit sale of Rs. 53,23,819) and during the AY 2017-18 under consideration you have shown the total sale of Rs. 1,98,99,241/- (cash sale of Rs. 1,23,88,953 + credit sale of Rs. 75,10,288). Further, in your reply you have also submitted that during the demonetization period total sales were Rs. 26,12,469/- only. 2.2 Since, your total cash sales for the period from 01.04.2016 to 31.03.2017 has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales were Rs. 26,12,469/- only. 3.1 Since, your total cash sales for the period from 01.04.2016 to 31.03.2017 has been declared at Rs. 1,23,88,953/- and during this period you have deposited cash of Rs. 3,88,57,665/- in your bank accounts mentioned above, which does not match with the cash sales declared by you during the year hence, it is the cash deposited from the undisclosed sources. Assessee filed reply to this show cause notice on dated 13.07.2019 in which assessee dealt with each and every issue of show cause notice. Important aspect of the reply of show cause notice is as under:- Submission filed before AO 3.1 Assessee is asked to explain the sources of cash deposits amounting to Rs 38857665.00 into bank account held with ICICI Bank and Bank of Baroda. As I have submitted earlier that Rs 7000000.00 were deposited just after demonetisation on dated 11.11.2016. Assessee was a registered firm doing retail trade in gold ornaments; most of the sales were made to customers in cash. Assessee being in the eligible business and had turnover below Rs 2 crore opted for presumption taxation U/s 44AD.Although he was not required to maintain regular books of accounts but since was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that most of customers are well known to the assessee and he maintains names and address details of customers separately. Generally, invoices contain only name. However, we have submitted complete list of customers name and addresses. 4 Apart from this, the assessee vehemently tried to explain the nature of credits and sources thereof by filing of proof of sales and credits appeared in the name of partners by filing of their declaration under IDS-2016, ITR V and Computation of Total Income. But, Ld AO invoked the provision of section 68 of the Income tax Act, 1961 on the amount of cash deposited on 11.11.2016 of Rs. 70 lakhs instead of the credits on account of particular sales. In the appeal order, Ld CIT (A) observed various allegations and advanced the bunch of case laws. But, I can humbly and safely say that the observations are made without considering the submission and facts put forth by assessee and even without going through the assessment order. Cases relied upon by Ld CIT (A) are either irrelevant, not applicable on the facts of assessment or even favour to assessee. Now, I deal with the Ld. CIT (A) order :- Observation of CIT (A) Under para 7.1 That the Sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O was even satisfied and did not repeat the allegations in assessment order. The CIT (A) main allegation was that how assessee was able to deposit cash in banks during whole of the year amounting to Rs. 38857865/- when the sales turnover was only Rs. 19899241/-. Assessee explained the sources of cash deposits with the help of cash book and cash flow statements that during the year partners had introduces cash in their capital account amounting to Rs. 2.60 crores. To explain the sources in the hand of partners, assessee filed their declaration of income under Income Disclosure Scheme (IDS-2016) for which certificate issued by the CIT for this effect were filed. Confirmations and ITR V and Computation of Total; income of respective partners had also been filed. Certainly, Ld AO was satisfied and that's why the addition of this cash deposit over and above cash sales and realisation from trade debts were not added into income u/s 69. Also, Ld CIT (A) did not choose to make enhancement of this amount of Rs. 38857865-19899241 minus Rs, 70 lacs made by AO. The allegation was for the sake of allegation only with casual manner and without going through entire order of assessment. It w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make enquiry regarding cash credit. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee's explanation A.O. must make proper enquiries and in the absence of proper enquiries, addition cannot be sustained. In the present case, there is cash deposit of 5.67crore during the demonetization period and regarding the source it has been explained that the amount under question has been received on 08.11.2016 against the future sales for gold coins which was not in the stock at that time. The amount of advance received from each person was below Rs. 2,00,000/-. This plea of the assessee was not accepted and during the post search inquiry summons were issued and sent through registered post for verification of genuineness of transaction. Further certain inquiries have been made through Income Tax Inspectors, however letters were written by the postal authorities and the Inspectors were unable to locate the addresses of persons. Since amount which was received in cash against the future sale on 08.11.2016 were not verifiable, the Assessing Officer has added Rs. 5.66 crore as unexplained credit un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further exercise." Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases such as Kale Khan Mohammad Hanif v CIT[1963] 50 ITR 1 (SC) and Roshan Di Hatti v CIT [1977] 107 ITR (SC) it has been held by the Apex Court that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the burden of proof is fluid for the purposes of Section 68. Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then Assessing Officer must do some inquiry to call for more details to invoke Section 68. Assessee explained the nature receipts that the receipts were sales. Name and address are on record. Sales was proved from invoices, VAT returns, purchases, stock register. Onus was shifted to revenue to disprove. No inqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of Income Tax Act,1961 by various courts gain importance. In this regard, the following observations of the Hon'ble Apex Court in the case of Sumati Dayal vs CIT214ITR801(SC), are worth noting: "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance; because if the appellant had purchased the winning ticket after the event she would behaving the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that" fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice that was noticed by the District Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act, 1972whereby the exemption from tax that was available in respect of winnings from lot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of cash credits to its books of accounts. However, in the instant case, the appellant has failed to discharge its legal obligation by furnishing any explanation, which is found satisfactory. Both the above case relied upon by the Ld CIT (A) even favour to assessee. The sales are made against the stock available with assessee. Purchases are fully vouched, undisputed and supported by books of accounts and stock records. Names and address of buyers are available The sale is apparent and pre-pondrence of probabilities are in assessee's favour. Under para 8.35 The reliance is being placed in the case of Vaishnavi Bullion (P.) Ltd. v. ACIT, the Hon'ble ITAT HYDERABAD BENCH 'B', [2022] 145 taxmann.com 197 No search or survey was taken placed. Sales are made against well-kept stock. No statements of assessee found wrong. Further, cases relied upon by assessee before Ld CIT (A) were said to be pertaining the pre-demonetisation period and brushed aside without considering contents. 5.1 Apart from above, Ld AO wrongly invoked the provision of section 68. Ld AO added Rs. 7000000.00 on account of cash deposits on 11.11.20216. When the books are maintained and cash deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see to prove that the receipt is not the income. This is the case where receipt has come against release of assets. Both incoming and outgoing are happened. Sales declared by assessee are the income of assessee. Addition of sales u/s 68 is the double taxation of income. This was held by the Hon'ble Income Tax Appellate Tribunal (Ahmedabad) in the case of Shree Sanand Textiles Industries Ltd Vs The Dy.CIT (OSD), Circle-8, Ahmedabad (ITA 995 / AHD / 2014) dated 06/01/2020 where the Hon'ble ITAT that the amount of sale as claimed by the assessee was already offered to tax by the assessee by reflecting the same in its trading and profit and loss account. This fact had not been doubted by the authorities below. The Tribunal further noted that the impugned amount had been taxed twice firstly the same was treated as sales and secondly the same was treated as unexplained cash credit under section 68 of the Act. The Tribunal observed that the provisions of section 68 of the Act can be attracted where there is a credit found in the books of accounts and the assessee failed to offer any explanation or the offer made by the assessee is not satisfactory in the opinion of the assessing offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, section 68 can be applied only where credit is found in books of accounts. As stated earlier, assessee offered tax under presumptive scheme of taxation u/s 44AD. Books of accounts are not required to be made in view of section 44AD. However, he was registered under VAT Law and hence the books ware maintained. But he is not in duty bound to explain each and every entry of receipts. I relied upon a decision of Punjab & Haryana High Court in case of CIT vs Surinder Pal Anand appeal ITA No 156 of 2010 dated 29.06.2010. Some direct decisions are also available on this issue pertaining to demonetization period of jurisdictional bench of ITAT in ITA. No. 161/JP/2022 dated 29.07.2022 in case of ACIT Central Circle vs Moti Sons Jewellers Limited in which bench held that :- We have considered the rival contention and perused the orders of the authorities and the material available on record arguments advanced by both the parties and also gone through the judicial decision relied upon by both the parties to drive home to their contentions. We find from the records that show cause notice so as to rejection of books of account u/s 145(3) of the Act was not given by the AO and the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtors immediately at the time of Sales of Rs. 13,30,000/- and Rs. 2,49,515/- received after 8-11-2016 as genuine and verified. We feel that out of total amount of Rs. 12,17,48,500/- deposited into bank account, the cash realized from debtors was of Rs. 25,96,480/- which is a meager amount looking to the quantum of sales of the assessee and this cannot be treated as nongenuine. It is also noted from the record that the AO made the telephonic enquiry / verification from the debtors on test check basis for 6 cases only where the list contains more then 250 names, however, in case of discrepancy the opportunity of cross examination was required to be made by the assessee but it was not made by the AO. Therefore, it can be said that the assessee was deprived of cross examining the parties due to lapse on the part of the AO. As regards the genuineness of advance from customers, the assessee received advance of Rs. 11,86,250/- from the customers which the lower authorities considered the corresponding sales made to these customers as genuine and it happens in such business that receiving of advance from customer is regular feature and the same was also prior and after the period 03-11- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2024 held that no addition u/s 68 can be made for the sales already declared as per ration laid down by Rajasthan High Court in case of harshila Chordia. Prayer Your honour, assessee deserves the relief being :- a) Cash deposits of Rs. 70 Lakhs on dated 11.11.2016 stands explained from the sales affected during October, 2016 and thereafter up to 08.11.2016. b) No further cash was deposited during demonetisation period demonstrate bonafide of assessee. c) Sales were supported by VAT returns, which were never revised. d) Books of accounts were not rejected. e) Purchases are verified from the facts and evidences. f) Day to day stock registers are available. g) Production records are available. h) Names and addresses of buyers are available with AO. i) Sales already shown as income. j) Sales for the year and immediately preceding year are almost comparable. k) Assessee maintained a show room for retail sales. l) Binding decision of Rajasthan High Court in case of Harshila Choradia that sales declared as income cannot be exposed to section 68. m) Provisions of section 68 was wrongly invoked on cash deposits in bank instead of cash credit." 6. To support ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave received cash from the 77 persons and for that no proper details were submitted to the ld. AO. The case of cash deposited in the demonetization period is required to be seen differently that of the cash sales for the other period. Based on that submission ld. DR relied upon the finding of the orders of the lower authority. 9. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee preferred the present appeal whereby has raised five different aspect by which challenged the addition of Rs. 70,00,000/- made u/s. 68 of the Act. The brief fact related to the dispute are that the assessee filed return showing total income at Rs. 19,63,760/- on 04.08.2017. The case was selected for Limited Scrutiny under computer assisted selection for scrutiny (CASS) to examine of the cash deposited during the year. Statutory notices were issued and served upon the assessee which were complied by the assessee. Ld. AO noted that the assessee has deposited huge cash of Rs. 3,88,57,665/- in his bank account with ICICI Bank Limited and Bank of Baroda. The assessee was required to furnish the source of the cash deposited in the bank account includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from page 116 to 373 showing all the invoices of sales made by the assessee. Out of those invoices on the date of demonetization shows receipt from cheque [ page 117 of the paper book]. In that invoice address and mobile number both were mentioned. This shows that it was not that the assessee prompted cash sales by introducing the sale which has not been taken place. Majority of the sales invoices shows the mobile number or the address. Ld. AO has not issued any single letter u/s. 133(6) to the buyer when the assessee stated that on the date of demonetization sales was only for Rs. 26,12,469/-. The period were demonetization announced was of the festival and marriage seasons therefore, when the cash sales is not disputed how the cash sales be disputed with out bringing anything contrary on record. The sales is duly recorded in the books and in the records of the state value added tax records. When the cash is duly recorded in the cash book as proceeds of the sale the same again cannot be added as unexplained and that too without reduced that receipt from the turnover as the ld. AO has already taxed the income generated from the sales. The ld. AR of the assessee serviced the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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