9911796707
TMI Blog2025 (5) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... 15,94,740/-. The assessee is an authorized dealer of PIAGGIO Auto Rickshaw and Honda two wheelers. Case of the assessee was selected for scrutiny under "CASS", accordingly, notice u/s 143(2) and 142(1) along with questionnaire were issued. In compliance, assessee furnished its response through online mode from time to time. After examining the details and documents furnished by the assessee, Ld. AO observed that the assessee has violated the provisions of section 68 therefore, an addition on account of unexplained cash credit for Rs. 56,95,458/- was made. 2.1 While making the aforesaid addition, it was the observation by Ld. AO that during the demonetization period from 09.11.2016 to 31.12.2016, there was a total cash deposit of Rs. 2,14,91,400/- in old notes / SBN's in the two accounts of the assessee. This issue is confronted to the assessee, accordingly, in compliance, assessee submitted that this money was available with it as closing balance on 08.11.2016, in support copy of cash books was furnished before the Ld. AO, showing closing cash-in-hand as on 08.11.2016 for Rs. 2,15,65,473/-. To verify the authenticity of books of account and claim of the assessee, Ld. AO asked th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elivered after 05.11.2016. The next shipment followed on 05.11.2016, happened to be delivered and billed to the customers only after 11.11.2016. It is clarified that further similar 6 shipments were followed from 06.11.2016 to 19.11.2016 and all these 8 shipments in total have carried 320 vehicles, which were procured by the assessee, out of which 89 vehicles were booked during the festive season of Deepawali for which the cash payment were received in advance and duly account for in the books of the assessee. Assessee, further explained before the Ld. AO that the Brand 'Activa' is very popular amongst the various category of customers like students, working / non-working ladies, housewives, office going as well as retired persons, middle class businesspeople etc. It was the submission that the brand has number of variants and colors, it is impossible to maintain stock as per the demand of the customers. 4. it is further stated that, accordingly, various customers had booked the vehicle by paying advance to ensure the delivered-on time and date. Before the Ld. AO, assessee furnished details of all the customers with the name and address and for information available with the reque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as having unaccounted / unexplained money. Accordingly, it had declared and paid the taxes thereon. Ld. AO further rejected the books of account of the assessee stating that the audited books of account of the assessee are not projecting the true and correct picture of its financial statement. Ld. AO further worked out the amount of advance received from customers on 08.11.2016, with the reasoning that in such cases there may be certain constrained for which insurance could not have been made and the same was generated on the next date i.e., 09.11.2016, therefore, such cases are considered to be bonafide receipts. Accordingly, after describing such reason, the amount unexplained receipt worked out at Rs. 15,18,434/- for APE division and Rs. 66,15,025/- for two wheelers division. Which in total aggregates to Rs. 81,95,458/- out of which the declaration of Rs. 25/- lacs under PMGKY was reduced, balancing of Rs. 56,95,458/- has been treated as unexplained cash credit u/s 68 of the Income Tax Act and added back to the income of assessee. 6. Another addition u/s 68 was made by the Ld. AO for Rs. 32/- lacs, for which, it was the observation by Ld. AO that huge cash amounts were deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition on account of unexplained cash credit u/s 68 IT Act, 1961, as discussed in para 3 above Rs. 56,95,458/- Add- Addition on account of unexplained cash credit u/s 68 in respect of receipts from Shiv Kripa Honda, Lakholi of Income TAx Act, 1961, as discussed in para 4 above Rs. 32,00,000/- Total Income Rs. 1,04,90,198/- 9. Aggrieved with the aforesaid additions, assessee preferred an appeal before the Ld. CIT(A), who had discussed and deliberated on the issues and have decided in favor of the assessee by allowing the appeal of the assessee. Relevant observations of the Ld. CIT(A), while deciding the issues, are extracted hereunder for the sake of clarity and completeness of facts: 5. DISCUSSION, REASON & DECISION: 5.1 On careful examination of the facts of the case, grounds of appeal and submission of the appellant against the addition of Rs. 56,95,458/- u/s 68 of the IT Act w.r.t. u/s 115BBE of the Act on the ground of unexplained cash credit with another addition of Rs. 32,00,000/- on account of unexplained cash credit u/s 68 of the Act in respect of receipts from Shiva Kripa Honda. I am of the Opinion that the AO has erred in making such addition thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by assessee throughout year, impugned addition made under section 68 would not be sustainable. In one another decision decided by hon'ble ITAT CHENNAI BENCH 'A' in the case of Raju Dinesh Kumar v. Deputy Commissioner of Income-tax vide ITA1321(CHNY) OF 2023 dt. 19.01.2024 where it is held: - Where assessee, a dal manufacturer, made cash deposits into bank account during demonetization period, since assessee had pre-dominantly cash sales and he was able to file various evidences to prove availability of cash-in-hand as on 8-11-2016 and that there was no abnormal variation in total sales, cash sales and cash deposits, impugned addition made towards such cash deposited in bank account of assessee under section 69A read with section 115BBE was to be deleted. In the case of Income Tax Officer v. Sahana Jewellery-Exports Pvt. Ltd, it was held by ITAT-Delhi that the books of account were rejected without crystallizing the defect in the books of account, which could have been done only after examining the same. Furthermore, according to the Tribunal, even if it is assumed that the books of account could be rejected, the profit had to be estimated based on proper mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of Spares and Accessories from the appellant. An Affidavit as confirmation on behalf of Shiva Kripa Honda was submitted by the appellant during the course of assessment proceedings, where the Proprietor Shri Shiv Jaiswal had confirmed that such sale has been made by him on behalf of the appellant in lieu of discount on purchase of Spares and Accessories from the appellant. Further More, such sale made by Shiva Kripa Honda on behalf of the appellant has already been incorporated as sale by the appellant. That AO did not considered the affidavit of Shri Shiv Jaiswal as duly submitted during the assessment proceedings, which in itself is a Legally Enforceable agreement and falsifying which is a Cognizable Offence but also ignored the fact that there was continue business relation in between appellant and Shiva Kripa Honda where business transactions with that firm also continued for the whole year which can be evidenced from the copy of ledger submitted by appellant and such sales were never objected by AO and on other side sales realization was put on doubt without any material evidence on record under assumption. The authenticity of the affidavit was also never doubted by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Shiv Jaiswal was not an authorized dealer of the assessee in this case cash in old notes/SBNs was deposited in Shiv Jaiswal's bank account and immediately on the same day it was transferred to assessee's account, it is crystal clear that it is the assessee's own unaccounted money which was deposited in the bank account of Shiv Jaiswal during demonetization period in the grab of cash receipts from prospective customers by him and which was immediately brought back into its own books of account. Hence, AO treated this amount as unexplained cash credit u/s 68 of the Account and added to income of the assessee. 13. Based on aforesaid submissions, it was the prayer by revenue that the order of Ld. CIT(A) is liable to be set aside, and the additions made by the Ld. AO, deserves to be restored back. 14. Per contra, Shri B. Subramanyam, Chartered Accountant, Authorized Representative of the assessee supported the order Ld. CIT(A), have submitted that the Ld. CIT(A) had appreciated the facts of the case in proper perspective and have very judiciously decided the issue after considering the facts of the case in totality. It was the submission that no infirmity in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arations and paid the taxes thereon. So, to say that books of account are audited and give true & correct picture of its financial statement is not correct. Hence, its books of accounts are rejected. b. Although, the Ld. AO has rejected Books of accounts of the assessee but finally an addition of Rs. 56,95,458 u/s 68 of the Income Tax Act, 1961 has been added to the returned Income of the Assessee. Thus, the Book results. i.e. returned income has been accepted and in that addition of Rs. 56,95,458/- u/s 68 of the Act has been made whereas Rs. 56,95,458/- has already been included or part of Gross Turnover. Thus books of account have been rejected by the Ld. AO without any concrete evidence and finding any particular mistake in the books of accounts. Books of accounts have been rejected on arbitrary basis with presumptions and surmise which is not according to law as well as proved on the basis of any concrete facts. c. In case it is presumed that, rejection of books of accounts is not as per law and correct, following case laws squarely applies in the case on which assessee has relied. 1 ACIT Vs. Shri Chandra Surana ITA No. 166/JP/2022 (AY 2017-18) (DB) of notes. Thus all suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very basis for making of the addition by the A.O u/s. 69A of the Act, I am unable to persuade myself to subscribe to the same. In case, as observed by the A.O, the assessee had in guise of sales deposited her unaccounted money in his bank account, then, the A.O was obligated to have rejected the books of account of the assessee before recharacterizing the corresponding sales as the latters unaccounted money u/s. 69A of the Act, which, I find, had not been so done. I, say so, for the reason that while for the A.O had observed that the assessee in the guise of sales had deposited her unaccounted money in the bank account, but despite so observing he had while framing the assessment vide his order passed u/s. 143(3), dated 30.11.2019 accepted the sales as were disclosed by the assessee in his books of account. Accordingly, the very first basis for treating the amount of Rs. 6.86 lacs (supra) as the unexplained money of the assessee u/s. 69A of the Act fails. Adverting to the observation of the A.O that the assessee might have received the sales proceeds in the demonetized currency even after the specified time period allowed by the Central Government, the same in my considered view wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein Delhi High Court has held that i n so far as estimation of sales/gross profit rate is concerned, it being a best judgment assessment, based on past years results cannot be said to be arbitrary -In view of aforesaid decision, respectfully following same, in absence of any comparative instances of similar assessee's in same line of business, dehors any explanation, reasoning supported with evidence to show as to how profit of current year is low, any other factor brought to knowledge by either side in support of their contentions, past history of assessee herself would be best indicator / major / benchmark to estimate profits, particularly in a situation, wherein assessee is unable to produce proper books and evidence before AO-Accordingly, in present case, it is appropriate to estimate profit of assessee at a percentage worked out on basis of preceding 3 years profit of assessee herself-For this limited purpose only, issue raised in ground no. 2 & 3 by assessee are restored back to files of AO-Matter remanded. Held Estimation should be on a logical basis, might be on the basis of comparable instances and in case no comparable instances available then the best ratio t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69A) or that of the unexplained cash credits (under section 68) of the Act. As we hold a view that the revenue cannot be accept the part of the sales as explained and part of the sales not explained on the same set of evidence. Therefore, the cash deposited in the demonetized currency added as income of the assessee by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in statement of profit & loss account. Therefore, there is no occasion to consider the same as unexplained credit entry of the assessee by applying the provisions of section 68 of the Act. We get support of our view from the decision of our High Court of Rajasthan in the case of Smt. Harshila Chordia vs Income-tax Officer [2008] 298 ITR 349 (Rajasthan) "wherein it was held that no addition could be made in respect of the amount standing in the books of the assessee, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them." As the fact of this cash being similar that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sales were genuine and that the customers identity are not suspected. Ld. AO had observed that primary evidence in respect of claimed cash receipts from customers have not been produced for verification, whereas in the response furnished by the assessee before the Ld. AO, it was the categorical request by the assessee that the receipts handed over to the customers can be verified from them or the system generated copy of same can be produced as and when demanded, such request of the assessee was overlooked by the Ld. AO. Ld. CIT(A) also observed that the assessment order was silent about the stock, sales of the assessee, he accepted the entire sales by accepting the returned income of the assessee, there was no reduction of the corresponding sale, purchase or any adjustment to the stock of the assessee, such action of Ld. AO is found to be arbitrary, unjustified and suffering with infirmity. We may herein observed that, cash deposits in bank in SBN / demonetized currency cannot be the reason alone for any adverse inference, dehors any substantial material to dislodge the contentions of the assessee, to prove that there was a failure on the part of assessee to explain the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X
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