Income Tax Appellate Tribunal - Amritsar
M/S. R.M. Sales Corporation , Jalandhar vs Income Tax Officer Ward-2 (3), ... on 6 June, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER
AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER
I.T.A. No. 288/Asr/2023
Assessment Year: 2017-18
M/s R. M. Sales Corporation Vs. Income Tax Officer
72-73, Gulab Singh Nagar, Ward-2(3), Jalandhar
Behind Industrial Estate,
Jalandhar
[PAN: AADFR 0918H]
(Appellant) (Respondent)
Appellant by : Sh. Surinder Mahajan, CA
Respondent by : Sh. Rajiv Wadhera, Sr. DR
Date of Hearing : 30.04.2024
Date of Pronouncement : 06.06.2024
ORDER
Per Dr. M. L. Meena, AM:
The captioned appeal has been filed by the assessee against the order of the National Faceless Appeal Centre [NFAC/CIT(A)], Delhi dated 13.09.2023 in respect of Assessment Year: 2017-18 which is arising out of 2 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO the Assessment Order passed by the Income Tax Officer, Ward-2(3), Jalandhar u/s 143(3) of the Income Tax Act, 1961.
2. The assessee has raised the following grounds of appeal:
"1. That on the facts and circumstances of the case, addition of Rs.
57,32,048/- made by invoking provisions of section 69A of the Act is illegal and bad in law since provisions of section 69A of the Act are attracted if a person is found to be owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or other valuable article is not recorded in books of accounts whereas cash deposited in the bank account stood duly recorded in books of accounts. Addition confirmed is illegal and bad in law.
2. That on the facts & circumstances of the case, Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, has grossly erred in confirming addition of Rs. 57,32,048/- u/s 69A of the Act in respect of cash deposited in bank account out of sale proceeds which stood recorded in books of accounts and credited to profit and loss account.
3. That addition of Rs. 57,32,048/- u/s 69A of the Act made by the Assessing Officer by holding that sales are bogus and represented unaccounted income is illegal and bad in law since neither purchases made nor owning of stocks at the time of sales have been disputed by the Assessing Officer.
4. That on the facts & circumstances of the case, conclusion drawn by the Assessing Officer that out of total turnover of Rs. 85,98,563/-, turnover of Rs. 57,32,048/- is on account of unaccounted income brought in the shape of sales is illegal and bad in law since neither details of sale bills of which total comes to Rs. 57,32,048/- alleged to be unaccounted income of the assessee nor details of material sold through these bills have been provided and confronted to the assessee.
5. That on the facts & circumstances of the case, Ld. Assessing Officer has grossly erred in law in making addition of Rs. 57,32,048/- u/s 69A of the Act chargeable to tax u/s 115BBE of the Act since provisions of amended section 115BBE of the Act are attracted w.e.f. A.Y. 2018-19 and are not applicable to A.Y. 2017-18.3 ITA No. 288/Asr/2023
R.M. Sales Corporation v. ITO
6. That order confirmed by Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi wherein adhoc addition of Rs. 57,32,048/- u/s 69A of the Act has been made is based on assumptions & presumptions far away from facts of the case. Orders based on assumptions and presumptions are not permitted under law and are void ab-initio.
3. The main issue involved pertains to confirmation of addition of Rs.
57,32,048/- u/s 69A of the Act, in respect of cash deposited in bank account being challenged in multiple grounds by the appellant as above.
4. The facts of the case are that the assessee is a partnership firm engaged in the business of trading of rubber goods and allied items.
Assessee filed return declaring income of Rs.11,161/- on 07.11.2017 and its case was selected for scrutiny under CASS on account of cash deposited during demonetization period. During assessment proceedings, the assessee explained that cash of Rs. 67,62,200/- has been deposited during demonetization period out of cash available with the firm on account of cash sales and recovery from debtors with the support of copies of VAT returns, sale bills and purchase bills. However, the AO being not satisfied with the reply of the assessee observed that assessee has included unaccounted income of Rs. 57,32,048/- in his gross sales/turnover and accordingly conclude that cash deposit of Rs. 57,32,048/- made in the bank account during demonetization period as unexplained income of assessee 4 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO u/s 69A of the Act to be taxed under provisions of section 115BBE of the Act.
5. Being aggrieved with the assessment order the assessee prefer an appeal before the Ld. NFAC/CIT(A) who has confirmed the finding of the AO by observing as under:
6.2 The main issue involved in this case pertains to addition of Rs.57,32,048/- on account of unexplained cash deposits in the bank account during the demonetization period u/s 69A r.w.s 115BBE of the IT Act, 1961. Other grounds are therefore being dealt in hereunder together to decide the main issue involved 6.2.1 During the course of assessment proceedings, the Assessing Officer in his assessment order dated 30/12/2019 has stated that:-
"3.2 In the present case, it has been found that the assessee has made total cash deposits of Rs. 67,60,200/- in various bank accounts during the period of demonetization i.e. from 09.11.2016 to 30.12.2016 as under:
Bank Account No. Cash Deposits
Kotak Mahindra Bank 9411734238 67,60,000
Oriental Bank of Commerce 308861010000220 2,000
Total 67,62,000
Vide notice u/s 142(1) dated 12.09.2019 and 21.12.2019, the assessee was asked to furnish the detail of the source of this cash deposit in the bank with other details. The assessee vide reply dated 24.12.2019 explained that the cash deposit has been made out of books of accounts. The assessee also furnished comparative chart of monthly sales made in cash out of total sales for F. Y. 2015- 16 and 2016-17, comparative chart of date wise sales made in the month of 5 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO November, 2015 and November, 2016, month wise comparative chart of cash deposited in F. Y. 2015-16 & 2016-17 and comparative chart of expenses made in cash for F.Y. 2015-16 and 2016-17.
3.3 The details submitted by the assessee were perused and the following facts were noticed:
It has been noticed that the firm has hardly done any business during the year except in the month of October, 2016 and the first week of November, 2016, just prior to demonetization or on very small scale in February & March, 2017.
It has been noticed that during the F.Y. 2016-17, total sales of Rs.85,98,563/- has been made out of which sales amounting to Rs. 61,37,010/- has been cash sales whereas during the F. Y. 16, total sales has been made at Rs.40,33,116/- but that includes no cash sales. This means that the cash sales have only been made during the current year. It has also been noticed that during the F. Y. 2016-17 in the pre- demonetisation period, the entire of Rs.59,12,010/- that too in cash have been made in the month of October, 2016 and upto 8th November, 2016. Thereafter, in postdemonetisation period cash sale of only Rs. 2,25,000/- has been made.
Comparative details of total sales viz-a-viz cash sales show that during the F. Y. 2016-17 and upto October, 2016 before the demonetisation period in F.Y. 2016-17, shows that there has never been any cash sales made by the assessee whereas just prior to demonetisation period, sudden cash sales have been made in the month of October, 2016 & upto 8th November, 2016 at Rs.59,12,000/-. After, 8.11.2016, again there is again no cash sale except a minor sale of Rs.2,25,000/-, has been made in the remaining part of F.Y. 2016- 17 The opening cash in hand as on 01.04.2016 is Rs.3,04,068/- but due to the sudden cash sale in Oct. 2016 amounting to Rs.50,81,760/- and in November, 2016 upto 8th, amount to Rs. 8,30,250/-, the cash in hand soared to Rs.67,64,482/- as on 08.11.2016 which was deposited in the bank accounts during the demonetisation period.
The cash from the cash sales made in Oct.,2016 has been kept as cash in hand upto 08.11.2016 and not deposited into the bank accounts whereas there is daily activities of bank transactions made by the assessee which is also not normal business practice.6
ITA No. 288/Asr/2023
R.M. Sales Corporation v. ITO The comparative chart of bank deposits made revealed that in the F.Y. 2015- 16, cash deposits of Rs.22,000/- has been made between 01.04.2015 and 08.11.2015 and whereas in the F. Y.17, cash deposit of Rs.5,49,221/- has been made in pre-demonetisation period and Rs.67,62,000/- has been deposited in the demonetisation period.
Apart from the above facts, it is also submitted that:
The purchase in the month of October, 2016 has been made from the sister concern M/s R. M. Exports.
The assessee claimed to have sold such huge stocks in retail in Oct. and November, 2016 but no corresponding expenses such as freight, carriage, labour etc. has been shown in the P&L account. Even no salary has been claimed in the P&L account.
There is no proof of movement of stocks involved in purchase and sale of the stocks.
There is a clear deviation from the normal course of business as far as the cash sales are concerned which is clear from the comparative data of cash sales for last years for which no valid reason has been given by the assessee.\ The details submitted by the assessee shows that there has never been any history of cash sales.
The cash in hand has been kept by the assessee with himself for about a month despite despite having access to all the banking facilities as if the assesse was waiting for announcement of demonetisation. . All the cash sales have been made to unidentified persons.
It is evident that the assessee has attempted to generate enough cash in hand just before demonetization to cover the cash deposited in the bank during demonetization by booking cash sales in its books of accounts in October, 2016 and upto 8th November, 2016 by making purchases from the sister concern. The above details show that although the assessee has tried to create a credible picture of bringing in cash in hand in the garb of cash sales just before the date of demonetization but the abnormality of these transactions point to the other direction which has been discussed above. The failure of the assessee to satisfactorily and reasonably explain these abnormalities shows that the cash sales have been introduced into the books of accounts as an afterthought and are not genuine.
It is clear that these sales have been booked into the books of accounts just to create enough cash in hand just before demonetization i.e. on 7 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO 08.11.2016 to camouflage the income from unaccounted sources in the shape of SBNs held by the assessee which was deposited in the bank accounts during demonetization period. The purchases & cash sales have been entered in the books of accounts starting in the month of October, 2016 because the VAT returns for Q.E. Sept., 2016, has already been filed with the Excise Department where the correct sales figures have already been shown. After demonetization, there was scope for manipulation in the books of accounts for only the month of Oct., 2016 and upto 8th day of November, 2016 which has been done by the assessee.
The assessee has submitted copies of VAT returns filed in support of his claim of sales made but the same does not hold water in view of the decision of Hon'ble Delhi High Court in CIT Vs. Nestle India Ltd. - 337 ITR 103 wherein it has been held that "we are of the view that the Tribunal is not correct in observing that since the permission is given by the Reserve Bank of India, the reasonableness and genuineness of the expenditure could not have been gone into by the Assessing Officer. The purpose for which such permission is given by the RBI is only concerned with the foreign exchange and therefore, would look into the matter from the point of view. The RBI at the time of giving such permission would not keep mind the provisions of the Income Tax Act and that is the function of the Income-tax authorities and, therefore, they can validly go into such an issue. '' The reliance is also placed on Gem Granites vs. CIT [2004] ITR 322(SC).
3.6 The above findings are supported by the following factual position and judicial pronouncements:
(i) Section 69A gives a statutory recognition to the principle that the unexplained money which are not satisfactorily explained may be assessed as income. Reliance is placed on 140-ITR- 151, 155(AII) reported in the case of Nanak Chand Laxman Dass V/s CIT.
(ii) It was held in the decision of Hon'ble Supreme Court in the case of Roshan Di Hatti relevant para of the judgment is reproduced as under:-
"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. If he disputes the liability for tax, it is for him to show either that the receipt was 8 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Revenue is entitled to treat it as taxable income. To put it differently, where the nature and source of a receipt, whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the Revenue to hold that it is the income of the assessee and no further burden lies on the Revenue to show that the income is from any particular source."
(iii) It is also trite law that the Income Tax Authorities can apply the test of human probabilities to see whether the transactions could be considered as genuine or not. Reliance in this regard is placed on the judgment of Hon'ble Supreme Court in the case of Sumati Dayai V/s CIT 214- ITR-101.
"The question is whether the apparent can be considered as real. As laid down by the court, the apparent must be considered as real until it is shown that there are reasons to believe that the apparent is not the real and taxing authorities are entitled to look into the surroundings circumstances to find out the reality and matter has to be considered by applying the test of human probabilities. "
(vi) Their lordships of the Supreme court in the case of CIT V/s Durga Parshad More, 82-ITR-540, have held that taxing authorities were entitled to look to surrounding circumstances to find out the reality or otherwise of transactions.
(v) The Hon'ble Supreme Court in the case of Commissioner of Income Tax, West vs. Durga Prasad More 82ITR 540 observed the often quoted following relevant observation:
"It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real. In a case of the present kind a party who relies on a recital in a deed has to establish the truth of those recitals otherwise it will be very easy to make self- serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were 9 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents."
(vi) Hon'ble Apex Court in the case of McDowell & Co Ltd. v CTO (1985) 154 ITR 148 (Supreme Court) has held that:-
"Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid payment of tax by resorting to dubious methods''.
Tax planning should not be done with an intent to defraud the revenue; though all transactions entered into by an assessee taken individually could be legally correct, yet on the whole these transactions may be devised to defraud the revenue. Thus, planning for tax should be correct both in form and substance. All such methods which are resorted to deceive and impairing the true construction of the statute, resulting in availing non-sacrosanct advantage of law would be termed as colourable devices. Those devices where statue is followed in strict words but actually spirit behind the statue is marred would be termed as colourable devices."
3.7 The above judicial pronouncements are squarely applicable in the instance case as the Assessee has failed to satisfactorily discharge his onus to prove that the source of cash deposits made during the period of demonetization was his genuine cash in hand from business. The contention of the assessee fails the human probability test. Thus, the logic of preponderance of human probability constitutes that even though the transactions seem to be explained but there genuineness can be challenged on the ground of human probability.
3.8. Therefore, it is clear that the assessee has tried to bring in the unaccounted money held by him as cash deposits in the bank account during the demonetization period by camouflaging the same as cash in hand of business as on 08.11.2016. However, it is reasonable to expect that the assessee may be having a genuine cash in hand as the opening cash in hand as on 01.04.2016 has been shown at Rs.3,04,068/- and as on 01.10.2016 the same has been reflected at Rs. 10,29,952/-. Therefore, to be fair and judicious to the assessee, the benefit of cash in hand of Rs.10,29,952/- is allowed to the assessee on the basis of comparative figures of cash in hand in the previous year. Therefore, a total amount of Rs. 10,29,952/- is held as 10 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO genuine source of cash deposit made in the bank during demonetization out of total deposit of Rs. 67,62,000,/-. The balance deposit of Rs. 57,32,048/- is considered as unexplained income of the assessee held as on 08.11.2016 and deposited in the bank account during period of demonetization. The cash deposits of Rs. 57,32,048/- by the assessee during demonetization also includes the unaccounted income of the assessee from undisclosed sources. And the same is considered as unexplained income of the assessee held as on 08.11.2016 and deposited in the bank account during period of demonetization.
3.9 Since, the assessee has included the above unaccounted income of Rs.57,32,048/- in his gross sales/turnover, therefore, the same has to be reduced from the declared gross sales/turnover of Rs.85,98,563/- and corresponding G.P. @4.65% declared by the assessee which comes to Rs. 2,66,540/- is also reduced from the gross profit declared at Rs.3,99,152/-. Therefore, the trading results are altered to the above extent and the books of accounts of the assessee are hereby rejected to the extent of Rs. 57,32,048/- only u/s 145( 3) of the Income Tax Act, 1961.
3.10. Therefore, in view of the discussion made above, the cash deposit of Rs.57,32,048/- made in the bank account during demonetization period is held to be the unexplained income of the assessee as per section 69A of the Income Tax Act, 1961 to be taxed as per provisions of section 115BBE of the Income Tax Act, 1961. The assessee has unexplained income to the tune of Rs.57,32,048/- to be assessed as per provisions of section 69A of the Income Tax Act, 1961."
6.22 I have carefully considered the AO's viewpoint contained in the Assessment Order and the submission made by the appellant including relevant judicial decisions in the matter.
6.23 It is noticed from the assessment order that the assessee has made total cash deposits of Rs.67,60,200/- in various bank accounts during the period of demonetization. During the course of assessment proceedings, the assessee was asked to furnish the details of the source of cash deposit in the bank with other details. In this regard, the assessee has explained that 11 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO the cash deposit has been made out of books and furnished comparative chart of monthly sales made in cash out of total sales for FY 2015-16 and 2016-17.
6.24 It is evident that the assessee has attempted to generate enough cash in hand just before demonetization to cover the cash deposited in the bank during demonetization by booking cash sales in its books of accounts in October, 2016 and up to 8th November, 2016 by making purchases from the sister concern. The assessee claimed to have sold such huge stocks in retail in Oct. and Nov., 2016 but no corresponding expenses such as freight, carriage, labour etc. has been shown in the P&L account. Even no salary has been claimed in the P&L account. There is no proof of movement of stocks involved in purchase and sale of the stocks. There is a clear deviation from the normal course of business as far as the cash sales are concerned which is clear from the comparative data of cash sales for last years for which no valid reason has been given by the assessee.
6.2.5 In this regard, the Assessing Officer placed reliance on the following judicial pronouncements-
140-ITR- 151, 155(AII) reported in the case of Nanak Chand Laxman Dass V/s CIT.
Hon'ble Supreme Court in the case of Roshan Di Hatti Hon'ble Supreme Court in the case of Sumati Dayal V/s CIT 214- ITR-
101. CIT V/s Durga Parshad More, 82-ITR-540, Commissioner of Income Tax, West vs. Durga Prasad More 82ITR 540 McDowell & Co Ltd. v CTO (1985) 154 ITR 148 (Supreme Court) 6.2.6 It is seen from the assessment order, no further documentary evidence, whatsoever, has been produced to prove the genuineness of the transaction. Apart from written submission, the appellant has produced copies of documents produced before AO as mentioned above in appellant's submission. Instead of supporting the case of appellant, these documents only reinforces the findings of the AO which are based on his detailed analysis of the facts and circumstances of the case. In support of his case, the appellant's filed its reply has been considered and examined but the same has not been found satisfactory. Appellant was not able to satisfy AO with the explanation and also not able to explain the genuineness of the transaction at the appellate stage as well.
12 ITA No. 288/Asr/2023R.M. Sales Corporation v. ITO 6.2.7 In view of the facts and circumstances borne out of the assessment order and legal precedents as discussed above, I am of the view that documents submitted as evidences to prove the genuineness of transaction are themselves found to serve as smoke screen to cover up the true nature of the transactions.
6.2.8 Keeping in view of the above and on the basis of the detailed findings and reasons given by the AO in his assessment order, the addition made by the Assessing Officer amounting to Rs 57,32,048/- u/s 69A r.w.s.155BBE of the IT Act is hereby confirmed and grounds of appeal raised by the appellant in this regard are hereby dismissed."
5. The ld. counsel for the submitted that the ld. CIT(A) has grossly erred in confirming the addition of Rs.57,32,048/- u/s 69A of the Act in respect of cash deposits made in bank a/c during demonetization period, being out of sale proceeds which stood recorded in the books of account and credited to profit & loss account. He argued that the Ld. CIT(A) has treated the disputed cash deposits as bogus sales representing unaccounted income without either disputing the purchases made or the stock owned by the appellant assessee out of which the alleged sales claimed by the assessee. In support, he has filed a written synopsis which reads as under:
"1. That Assessing Officer has himself admitted that assessee carried out business in the month of Oct 2016 and first week of Nov 2016. (Para 3.3 bullet 1 page 3 of the assessment order).
2. That case of the Assessing Officer that cash sales of Rs. 59,12,010/-
made in the month of October 2016 and upto 08.11.2016 were not deposited in the bank account despite having assess to all banking facilities does not call for adverse inference since there is no prohibition 13 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO under the Income Tax Act for keeping cash in hand. (Para 3.3 page 3 of the assessment order).
3. That case of the Assessing Officer that purchases in the month October 2016 have been made from RM Exports sister concern of the assessee and no expenses on account of freight, cartage and salary have been claimed is nothing but assumptions and presumptions since RM Exports sister concern of the assessee during the year under consideration was engaged in export business only and Indian sales were only on account of sale of export surplus and sale of semi finished material which was not upto mark for finished product for export. Profit and loss account of RM Exports for the year under consideration is enclosed at page no. 31 and 32 of the paper book. Perusal of the profit and loss account reveals that total sales of R.M. Exports amounted to Rs.41,81,06,498 out of which export sales amounted to Rs. 40,25,81,701 and Indian sales amounted to Rs. 1,55,23,797 only. Out of Indian sales of Rs. 1,55,23,797 sales of Rs. 49,56,248 have been made to assessee. Indian sales of R.M. Exports given above are mainly on account of sales of export surplus and sale of semi finished products which could not have resulted in finished products of export quality. These items were sold to assessee and assessee in turn has sold to the retail customers on cash basis. Observation of the Assessing Officer that there were no expenses on account of freight, cartage and salary, it is submitted that this issue was never raised during assessment proceedings otherwise assessee could have comfortably explained that there were no expenses since assessee was carrying on business in the adjoining building and M/s RM Exports supplied goods through their staff.
4. That observation of the Assessing Officer that no valid reasons for cash sales have been given when there has never been any history of cash sales has never been raised during assessment proceedings otherwise assessee could have comfortably explained that during this year only assessee purchased export surplus of M/s RM Exports and t he same was sold to retail customers on cash basis.
5. That as regards allegation of the Assessing Officer that cash sales have been introduced in books of accounts is an attempt on the part of the assessee to have cash in hand just before demonetization to cover cash deposited in bank during demonetization and further allegation of the Assessing Officer that purchases and sales have been affected in books of accounts in the month October 2016 upto 08.11.2016only because 14 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO there was scope to manipulate books of accounts of October 2016 and upto 08.11.2016 because last date for filing VAT return for the month of September had passed at the time of announcement of demonetization of currency, it is submitted that both these allegations are based on assumptions and presumptions far away from the facts of the case. There is no material in possession of the Assessing Officer to justify allegations except assumptions only.
6. That in support of allegations, reliance of the Assessing Officer on judgments reported in 140 ITR 151, 214 ITR 0101, 182 ITR 0540, 154 ITR 0148 is uncalled for since facts of the judgments relied upon have no bearing on facts of the case.
7. That it is not in dispute that assessee has maintained proper books of accounts consisting of cash book, ledger, stock register and sale bills, purchase bills and vouchers. Books of accounts of the assessee have been audited and tax audit report has been obtained and filed with the Income Tax department. Cash deposited in the bank account is out of cash available in the books of accounts. Cash available in books of accounts is on account of cash sales and realization of debtors. Purchases recorded in books of accounts have been accepted by the Assessing Officer. Profit on sales declared by the assessee is normal profit and not exorbitant profit. Sales made by the assessee have been declared in VAT returns. VAT has been paid amounting to Rs. 3,25,178/- to State Govt. VAT returns filed have been accepted as declared sales by Punjab State Sales Tax Department.
8. That sales already credited in profit and loss account means credits have already been offered to tax as income of the assessee warranting no inference u/s 69A of the Act.
Reliance is being placed on
a) Gujarat High Court - CIT vs VISHAL EXPORTS OVERSEAS LIMITED TAX (APPEAL No.2471 of 2009 (Page 84-88 of case laws index)
b) Kishore Jeram Bhai Khaniya, Vs Income Tax Officer (ITAT Delhi) (ITA No. 1220/Del/2011) (Page 89-93 of case laws index)
c) Shree Sanand Textiles Industries Ltd. V. DCIT vide ITA No. 1166/AHD/2014(Page 94-111 of case laws index) 15 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO
d) ASST CIT & ANR. vs. HIRAPANNA JEWELLERS & ANRIN THE ITAT VISHAKAPATNAM 96ITR (Trib) 0024 (Visakhapatnam), I.T.A.No.253/Viz/2020 (Page 112-120 of case laws index)
e) CIT vs. K.C. MALHOTRA, HIGH COURT OF PUNJAB AND HARYANA (2008) 304 ITR 0149(Page 121-126 of case laws index)
f) DCIT vs Roop Fashion ITA NO. 136/Chd/2021 ITAT Chandigarh (Page 127-148 of case laws index)
g) PR. CIT & ORS. vs. AGSON GLOBAL PVT. LTD. & ORS. HIGH COURT OF DELHI (2022) 441 ITR 0550 (Delhi(Page 149-181of case laws index)
h) SMT. HARSHILA CHORDIA vs.-. INCOME TAX OFFICERHIGH COURT OF RAJASTHAN2008) 298 ITR 0349(Page 182-189 of case laws index) Ground of Anneal No. 3 & 4 Case of the A.O. That Assessing Officer concluded that Rs. 57,32,048/- represented bogus sales Para 3.9 page 6 of the assessment order) Case of the Ld. CIT(A) That Ld. CIT(A) has confirmed the addition with his observation in para 6.2.8 page 28 of the appellate order.
Our Submissions
1. That during the year under consideration total sales of the assessee amounted to Rs. 85,98,563/- (page 34 of paper book) as detailed below:
Sr. Period Sales VAT VAT input VAT paid Paper Book
No. charged on page
sales
01.04.2016to NIL NIL NIL NIL 47-49
1.
30.06.2016
16
ITA No. 288/Asr/2023
R.M. Sales Corporation v. ITO
01.07.2016 to NIL NIL NIL NIL 50-53
2.
30.09.2016
3. 01.10.2016 to 5912010 357677 270950 86727 54-57
31.12.2016
4. 01.01.2017 to 2686553 13613 11798 1815 58-61
31.03.2017
Total 8598563 371290 282748 88542
2. That Assessing Officer has not provided bill wise details of sales alleged to be bogus. Total sales upto 31.12.2016 amounted to Rs. 59,12,010/- out of which Assessing Officer has alleged bogus sales amounting to Rs 57,32,048/- of which neither bill wise details nor material wise details have been provided. No adverse inference has been drawn by sale tax department and VAT returns have been accepted as is it. Sales represented sales out of stocks consisting of opening stock and purchases made.
Ground of Appeal No. 5Our Submissions
1. That assessment has been framed by invoking provisions of section 69A read with amended section 115BBE of the Act as per which income tax is to be calculated at 60% of income determined u/s 68, section 69, section 69A, section 69B, section 69C and section 69D. Jurisdiction thus assumed is not valid jurisdiction since provisions of amended section 115BBE are attracted with effect from A.Y. 2018-19 and are not applicable to A.Y. 2017-18. The last amendment to section 115BBE was made through Taxation Laws (2nd amendment Act 2016) which received the assent of the President on 15.12.2016 and was published vide gazette dt. 15.12.2016. The law is well settled that the Income Tax Act as it stands amended on the 1st day of April of any financial year must apply to the assessments of that year.
Reliance is being placed on:-
a) KARIMTHARUVT TEA ESTATE LTD. vs. STATE OF KERALA 60 ITR 262 (S.C) (Page 1-5 of case laws index)
b) CIT vs. SCINDIA STEAM NAVIGATION CO. LTD. 42 ITR 589(Page 6-25 of case laws index) 17 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO
c) ANGLO-AMERICAN DIRECT TEA TRADING CO. LTD. & ORS. vs. CpMMSSIONER OF AGRICULTURAL INCOME TAX (1968) 69 ITR 0667(Page 26-31 of case 'aws index)
d) RELIANCE JUTE & INDUSTRIES LTD. vs. CIT120ITR 0921(Page 32-35 of case laws index)
e) CIT vs. S.A. WAHAB HIGH COURT OF KERALA 182 ITR 0464(Page 36-39 of case laws index)
f) ANDHRA CEMENTS CO. LTD. vs. COMMISSIONER OF INCOME TAXHIGH COURT OF ANDHRA PRADESH (1998) 232 ITR 0364(Page 40-43 of case laws index)
g) CIT(Central)-l Vs. Vatika Township Private Limited (2014) 367 ITR 466(SC) (Page 44-68 of case laws index)"
6. Per contra, the ld. DR stands by the impugned order. However, he has failed to rebut the contentions raised by the assessee.
7. We have heard both the sides, perused material on record, impugned order, written submission, and case laws cited before us. It is not disputed that assessee has maintained proper books of accounts consisting of cash book, ledger, stock register and sale bills, purchase bills and vouchers. The Books of accounts of the assessee have been audited and tax audit report has been filed with the Income Tax department. The Ld. AR contended that Cash deposited in the bank account stands explained as being made out of cash available in the books of accounts on account of cash sales and realization of debtors. He further argued that the purchases recorded in books of accounts have been accepted by the Assessing Officer and Profit on sales declared by the assessee was ar normal profit and not exorbitant 18 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO profit. Again, the Sales made by the assessee have been declared in VAT returns with payment VAT amounting to Rs. 3,25,178/- to State Govt. where the sales declared in the VAT returns have been accepted by Punjab State Sales Tax Department. In our view, since the cash sales during the demonetization period constitute the basic foundation of the cash deposit in bank credited as per profit and loss account and hence such cash sales have already been offered to tax as income of the assessee and therefore, further no inference u/s 69A of the Act was unwarranted based on assumptions and presumptions, surmises and conjectures by the authorities below to treat the cash sales as unaccounted income amounting to Rs. 57,32,048/-.
8. The Ld. CIT(A) ought to have rebutted the contention raised by the assessee in the hearing with support of the written submission, and copies of relevant documents produced in addition to what was produced before the before AO. We find that the Ld. CIT(A) has neither appreciated the facts on record and the documentary evidence produced nor rebutted the contention of the assessee. The finding and decision of the Ld. CIT(A) ignoring the submission based on facts and merits and reinforces the findings of the AO in mechanical manner is not justified. Merely stating that the appellant's filed its reply has been considered and examined but the 19 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO same has not been found satisfactory cannot be approved because the Ld. CIT(A) has neither controverted nor disproved the contention with valid reasons and corroborative documentary evidence. The case law cited by the CIT(A)/AO are not applicable to the facts of the present case.
9. The ITAT DELHI BENCH 'B' in the case of Income-tax Officer Vs. J.K. Wood India (P.) Ltd. in ITA NO. 1550 (DELHI) OF 2020, [ASSESSMENT YEAR 2017-18] dated JAN. 3, 2024 has observed that Where assessee, engaged in business of trading wood, deposited cash in bank account during demonetization period out of sales made to various parties in cash, since such sales were duly recorded in books of account which were audited under various laws applicable and supported by credible evidence like copies of invoices, stock register maintained on a day to day basis, VAT returns filed from time to time and order of VAT authorities accepting sales made by assessee during year under consideration, impugned addition made under section 69A was to be deleted. Relevant part of judgement reads as under:
"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 account maintained by the assessee which were audited both under the Companies Act and under the Income tax Act. The books of account have been maintained in the regular course of business and cash deposits in the books of account are duly reflected in the books of account.20
ITA No. 288/Asr/2023
R.M. Sales Corporation v. ITO
15. Sales made by the assessee and shown in the regular books of account have been accepted as such by VAT authorities while framing the VAT assessment. The assessee was having sufficient stock in hand for making the impugned sales during the demonetization period and it is not the case of the Assessing Officer that the assessee has shown bogus purchases to show bogus sales to cover up cash deposited during the demonetization period."
10. In the present case, Sales made by the assessee and shown in the regular books of account have been accepted as such by VAT authorities while framing the VAT assessment; that the assessee was having sufficient stock in hand for making the impugned sales during the demonetization period and that it is not the case of the Assessing Officer that the assessee has shown bogus purchases to show bogus sales to cover up cash deposited during the demonetization period.
11. In view of the factual matrix and judicial pronouncements, we hold that the Ld. CIT(A) decision in infirm and perverse to the facts on record in confirming the addition u/s 69A of the Act. Accordingly, the addition amounting to Rs. 57,32,048/- made by invoking provisions of section 69A of the Act is held to be illegal and bad in law and as such, same is deleted.
12. Since the addition of Rs. 57,32,048/- made by invoking provisions of section 69A of the Act is deleted being held to be illegal, and hence the issue of invoking of section 69A treating the deposits as income from 21 ITA No. 288/Asr/2023 R.M. Sales Corporation v. ITO undisclosed sources and applicability of the tax rate as per provisions of section 115BBE is stand rejected, accordingly.
13. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 06 .06.2024
Sd/- Sd/-
(Udayan Dasgupta) (Dr. M. L. Meena)
Judicial Member Accountant Member
*GP/Sr.PS*
Copy of the order forwarded to:
(1)The Appellant:
(2) The Respondent:
(3) The CIT concerned
(4) The Sr. DR, I.T.A.T.
True Copy
By Order