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TMI Blog2025 (5) TMI 1573X X X X Extracts X X X X X X X X Extracts X X X X ..... on the total turnover declared by the assessee at Rs. 72,14,75,371/- and further made addition of Rs. 21,55,41,500/- u/s 69A of the Act on account of cash deposit during demonetization as undisclosed investment. 3. Against such order, assessee preferred an appeal before the ld. CIT(A) who vide order dated 24.11.2022 allowed the appeal of the assessee. Aggrieved by the said order, Revenue is in appeal before the Tribunal. 4. The Revenue has taken following grounds of appeal:- 1. "Whether in the facts and circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs. 21,55,41,500/- made on account of unexplained cash deposits u/s 69A of the Act ignoring the fact that the assessee failed to furnish majority of cash bills (1218) raised on 08.11.2016 during the proceedings? 2. Whether in the facts and circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs. 21,55,41,500/- made on account of unexplained cash deposits u/s 69A of the Act ignoring the fact that details of stock for A.Y 2018-19 was not produced/submitted by the assessee during assessment proceedings? 3. Whether in the facts and circumstances of the case, Ld. CIT(A) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever was pointed out by the AO except stating that the certain bills of cash sales made on 08.11.2016 were not produced. Ld. AR further submitted that even after invoking the provisions of section 145(3) of the Act, the AO has not doubted the sales declared thus the cash deposit out of the such cash sales could not be held as unexplained investment. 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 bringing on record any material to hold that the assessee has made cash deposit out of unexplained sources. Only allegation of the AO was that majority of cash sales was in the month of October and November, 2016. It was further submitted that there was no ban to accept the SBN upto the closing hours of 08/11/2016 and the assessee has duly declared such sales in the VAT return which were also duly accepted. Ld. AR further submitted that the AO has made independent enquiries from the suppliers and their statements we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement of Sh. Raj Kumar of M/s Ram Lal Kimat Rai have been recorded at the back of assessee and no adverse view have been pointed out in the assessment order and, in fact, no statement was confronted to the assessee and, thus, the purchases stood confirmed. Even, the statement of Sh. Mangat Rai Jain, the main Director was also recorded and no adverse view has been drawn by the AO. 12. We have provided the detail of the parties from whom, the purchases have been made alongwith copies of accounts and no adverse conclusions has been drawn. 13. Even, the confirmed copy of account from whom, the purchases have been furnished to the Assessing officer and no adverse view has been drawn. 14. No defects pointed out in the books of accounts for rejection u/s 145(3) and on the other hand, the books are duly audited. All purchases and sales are vouched. 15. The G.P. rate is higher than the earlier year and the finding of the AO is contradictory in the sense that on one hand, he has rejected the sales and on the other hand applied an average G.P. rate on the same sale figures as per books of account. 16. The method of averaging of the last three years G.P. is not correct method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the similar issue of cash deposits during demonetization period and also again reliance was placed on the judgment of 'Delhi High Court' in the case of Akshit Kumar at pages 46 to 48 of the order. 25. Another submissions were made vide our submissions, dated 04.10.2022 and it was contended on the basis of various case laws at page 50 of the order of the Chandigarh Bench of the ITAT and there are other similar cases at pages 51 to 55 of the order and under such circumstances, no addition could be made of the unexplained deposits. 26. Further consolidated submissions on the same issues were made vide submissions, dated 27.10.2022 from pages 55 to 108 of the order, which are, in fact, repetition of earlier submissions. FINDING OF CIT (APPEALS) 27. The finding of CIT(A) starts from page 106 and at page 106 to 108, first paragraph, he has discussed the basis of addition by the AO and then from para 4.8, he has given his finding. 28. Para 4.8 He has discussed that no specific defects pointed out in the audited books of accounts and purchases from "M/s Ram Lal Kimat Rai' have not been doubted and rather that party had appeared before the AO and confirmed the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s direct nexus with the sales. The movement of stock is directly linked to the purchases and the sales." 35. Then again at page 113 of the order of CIT(A), the following finding has been given:- "10.13 In the present case also the cash deposited post demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the AO, there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October 2016 prior to the making of the cash deposit in the bank account out of the sales. So, respectfully following the aforesaid referred orders by the various Hon'ble High Courts and the Coordinate Benches of the ITAT, we are of the view that the impugned addition made by the AO And sustained by the Ld. CIT(A) was not /justified, accordingly, the same is deleted." 8. In view of the above submission, it is prayed by ld AR that ld. CIT(A) has rightly deleted the addition made on account of cash deposit in SBN during demonetization and requested for the confirmation of the said order on this issue. 9. We have heard the rival submissions and perused the materials availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the announcement of demonetization, people rushed to the market and bought many items in exchange of old currency. Assessee has raised 1218 invoices on 08.11.2016 is not an exception under these circumstances. The Assessing Officer failed to find any error in the details and evidences filed by the assessee. 11. The assessee has deposited cash during the demonetization out of the cash available as on the closing hours of 08.11.2016 i.e. the date when the demonetization was announced by the Hon'ble Prime Minister and was the last day upto which the SBN could be accepted as valid currency. The AO is required to consider the records of the assessee such as stock register, bank statement, monthly sales summary, possibility of back-dating of cash sales or fictitious sales etc. before making any allegation about the genuineness of the cash deposited in SBN during the demonetization period. 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk. Further it is seen that the assessee not only offered explanation regarding nature and source of deposits but also substantiated the same with documentary evidences in the shape of Audited Financial Statements, Sale Register, Purchase Register, Stock Register and Cash book. It is not understood as to how the AO could invoke the provisions of section 69A for making addition when the source of such cash deposits, being cash sales, was duly recorded in the books maintained in regular course. Even no discrepancy was pointed out by the VAT department in respect of purchases and sales made by the assessee. Therefore, addition so made u/s 69A of the Act is unjustified and be deleted. 16. The Co-ordinate Bench of ITAT, Mumbai in the case of ACIT v. Ramlal Jewellers (P.) Ltd. Reported in [2023] 154 taxmann.com 584 (Mumbai - Trib.) under similar circumstances, deleted the addition made u/s 68 on account of cash deposit in SBN during the demonetization into bank by making following observations: "Section 68 of the Income-tax Act, 1961- Cash credit(Cash deposit in bank)- Assessment year 2016-17- Assessee-company was engaged in jewellery business - During assessment proceedings, Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Coming to the issue of stock movement and excess sales, we observed that the assessee has submitted relevant stock reconciliation and auditors report of stock movements and there is no negative stock movement which will indicate that the assessee has booked excess sales without there being proper purchases. 19. In our considered view, there are chances that during the demonetization period the regular customers may have choose to buy the spare parts and bearing by making payment by cash so that their excess SBN is transferred. We noticed that the credit sales has come down during this period and the sales of the assessee is more or less maintained during this period. Therefore, it shows that the changes in the patterns recorded in the sales are not abnormal. 20. Whether the recording of cash sales which is already declared in the books of account will attract the deeming provisions of sec.68 or 69A of Act. We observed that the assessee has declared all the cash transactions in its books of account and merely because the cash deposits are more during the demonetization period, whether the CIT(A) can invoke the provisions of section 69A of the Act. As per provisions of the sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s held as under: 22. "In the case in hand the reason for disbelieving the cash deposit is that the assessee has been deposited below Rs. 2 lakh in every transactions that lead to the conclusion of the Assessing Officer that the same has been done to avoid the application of provision of section 285BA read with Rule 114E of the Act. The said observation made by the Assessing Officer without any material in his hand. There is no prohibition under law to make sale transaction below Rs. 2 lakhs as such the assessee had at liberty to manage his own affairs. From the action of the assessee in raising the sales bill below Rs. 2 lakhs the Assessing Officer cannot interpret as the sale are bogus only to give colour to non-genuine transaction as genuine transaction. The evidence brought on record by the Assessing Officer are not enough to hold that sales were not genuine. More so, the other wing of the Govt has already accepted the sale transaction under VAT, hence, the Assessing Officer is precluded from making contrary findings on the issue when the sales are not doubted. The other contention of the ld. DR is that the assessee has not maintaining stock register properly and date wise sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: [i] M/S Godwin Tourism Pvt. Ltd. V. DCIT 2024 (8) TMI 1173 (ITAT, Delhi), dated- August 21, 2024, held that- 19. "Considered the rival submissions and material placed on record, we observed that the assessee has submitted cash book in the Paper Book wherein assessee has received share application money on various dates and received the same by way of cash on verification of the cash book submitted before us. We observed that on various dates, the assessee has maintained sufficient cash which are out of share k withdrawals and it is substantiated that sufficient source application money and some bank of cash available with the assessee to make the bank deposit of Rs. 8 lacs. After considering the facts on record, we observed that assessee has sufficient cash in hands to make above said dash deposit. Accordingly, additions made by the Assessing Officer is deleted." [ii] ITO V. M/s J.K. Wood India Pvt Ltd, 2024 (1) TMI 1262, dated 03.01.2024, Hon'ble ITAT Delhi held that- 14. "We have given thoughtful consideration to the factual matrix discussed hereinabove The undisputed fact is that there is not even a whisper of any defect, error or infirmity in the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld." 22. Thus, by respectfully following the ratio laid down in above cases and also looking to the facts that Assessing Officer has tried to support his finding merely on the basis of incorrect comparison of daily cash sales and cash deposits in the bank accounts in the year before us as well as in preceding year and such observations have already been answered by the assessee and not controverted by Revenue. In view of these facts, we find no infirmity in the order of ld. CIT(A) deleting the addition of Rs.21,55,41,500/- made u/s 69A of the Act towards cash deposited in the bank account during demonetization and such order is hereby upheld on this issue. The grounds of appeal No.1 & 2 of the Revenue are dismissed. 23. In Ground No.3 raised by the Revenue, action of Ld.CIT(A) in deleting the addition of Rs.2,39,52,982/- made by applying G.R. rate @ 3.2% based on the assessee's average G.P. rate of last three years is challenged. 24. Before us, the ld.CIT DR for the Revenue supported the order of the AO and submits that during the course of assessment procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as increased by Rs.72.14 crores with G.P.5 of 3.24%. According to Ld.AR, it is accepted business principal that every increase in turnover would be a result of compromise in the profits margins. As is evident from the results, the turnover has increased by more than 150 % however, the reduction in G.P. rate is very insignificant. In the last, the Ld.AR for the assessee submits that the Ld.CIT(A) has appreciated these facts and thereafter, rejected the action of the AO invoking the provision of section 145(3) of the Act and further deleting the additions made which order deserves to be accepted. 26. After considering the arguments put forth by the parties, we find that the AO himself has accepted that the assessee has filed stock records for AY 2017-18 and merely for the reason that there was substantial increase in sales in the month of October and November, 2016 for which the cash invoices generated were not produced before the AO, the provision of section 145(3) of the Act were invoked. We find that the Ld.CIT(A) has dealt with this issue at length and has observed as under:- 4.18. "Assessment Order shows that the AO has accepted the sales as declared in the audited books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra), Hence, I do not get any reason for not accepting the result of audited books of accounts of the assessee. Hence, the action of the Assessing Officer in rejecting the books of accounts u/s 145(3), applying the gross average rate and addition of Rs. 21,55,41,500/- is not justified and same is therefore deleted." 27. Before us, the Revenue has failed to controvert the findings given by the Ld.CIT(A) and reiterated the observations made by the AO in the assessment order. 28. On the contrary, the Ld. Counsel for the assessee submitted that all the evidences were filed with regard to the availability of the stock and to establish genuineness of the purchases made. The Ld.AR for the assessee further drew our attention at page 47 to 56 of the Paper Book which are copies of some invoices submitted by the assessee before the AO raised during the month of the November, 2016 in which no error was found by the AO. It is also seen that AO has made direct enquiries from the suppliers and their statements were also recorded. However, the AO do not find any discrepanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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