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Judgment
PER AMITABH SHUKLA, AM,
This appeal is by the Revenue arising out of order of National Faceless Appeal Centre/learned Commissioner of Income Tax (Appeals), New Delhi [hereinafter referred to as ‘ld. CIT(A)] in appeal no. CIT(A), Delhi-9/10714/2019-20, vide order dated 28.02.2025. Assessment was framed u/s 143(3) of the Income Tax Act, 1961[hereinafter referred to as ‘the Act’] for Assessment Year 2017-18.
The only issue in this appeal of the Revenue is as regards to the order of the ld. CIT(A) deleting the addition made by the Assessing Officer under section 68 of the Act being cash deposit made during demonetization period of Rs.2,89,13,855/-. For this the Revenue has raised following ground no.1 is as under:-
“1.Whether on the facts and circumstances of the case and in law, the/Ld. CIT(A) has erred in deleting the addition of Rs.2,89,13,855/- made u/s 68 of the IT Act, without appreciating the finding of the AO as assessee had failed to prove the genuineness of the Sales and comparative of cash deposits on account of cash sales.”
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the assessee deposited total cash in assessee’s bank account during demonetization period amounting to Rs.2,88,38,558/-. The Assessing Officer during the course of scrutiny assessment proceedings required the assessee to explain the cash deposit made during demonetization period. The assessee explained by filing the detail that the assessee is in the business of manufacturing and sale of probiotic fermented milk drink i.e. Yakult in the Indian market. The assessee before Assessing Officer stated that the entire cash deposit during demonetization period was out of cash sales made by the assessee company and assessee during the assessment proceedings filed following details :-
Opening and closing balances of cash in hand as required in the format attached (vide submission dated 3 December 2019);
Reconciliation of cash deposited from AY 2015-16 to AY 2018-19 and justification with respect to same (vide submission dated 3 December 2019);
Details of cash deposited during demonetisation period (vide submission dated 18 December 2019);
Reconciliation of cash sales with respect to last year (vide submission dated 18 December 2019);
Details of cash in hand as on various dates as per the required format (vide submission dated 18 December 2019);
Month-wise details of cash sales and cash deposited by the Appellant during the subject year (vide submission dated 24 December 2019);
Comparative details of cash sales and cash deposited for FY 2015-16 vis-à-vis FY 2016-17 (vide submission dated 24 December 2019);
Party-wise details of cash sales made to various retail outlets (vide submission dated 24 December 2019);
Details of cash sales made by ‘Yakult Ladies’ out of which cash was deposited by the Appellant during the demonetization period (vide submission dated 26 December 2019).
The Assessing Officer in his assessment order noted and rather reproduced the chart of balance cash sales month wise from April, 2016 to March, 2017, wherein closing balance of cash in hand is disclosed. It was the contention of the assessee that the entire cash deposit during demonetization period is out of cash sales but the Assessing Officer noted that no details of sale receipt has been provided by the assessee and hence the Assessing Officer treated the entire cash deposits made during demonetization period at Rs.2,89,13,855/- was treated as unexplained and added under section 68 of the Act. Aggrieved assessee preferred appeal before the ld. CIT(A).
The ld. CIT(A) after examining in entirety the submissions of the assessee and entire cash receipts deleted the addition by observing as under:-
“6.The AO treated the entire cash deposited during demonetisation as unexplained. Thus an addition of Rs.2,89,13,855 was made u/s 68 and this amount was brought to tax under the head 115BBE. The AO held that cash sales in the months August, September and November was higher compared to April to July. According to the AO since these months represent the monsoon winter period, the sales should have been lower. The AO held that details of cash sales effected directly to the customer through Yakult ladies were not furnished. Based on these observations, the AO made the addition u/s 68. 6.1. The appellant has a turnover of Rs.58,92,75,904 for the year under consideration. It admits cash sales of Rs.27,63,00,556 for the year under consideration. As per the ITS, during demonetisation period, the cash deposited in ICICI bank bearing account number 629405038794 was Rs.2,88,38,558. This bank account is part of the books of the appellant.
6.2.According to the AO cash sales during the month of August to September was higher compared to cash sales during the month of April to July. According to the AO, the cash sales should have been more from April to July being warmer months. The appellant has explained that it is manufacturing and selling a probiotic drink which aids in digestion and that its sales are not related to seasonal changes.
6.3.During the previous year 2016-17, the cash sales remained steady through out the year. There were no dramatic increases in any particular month. Also the pattern was similar to the preceding year.
6.4.From the above, the assumption by the AO that the appellant has exaggerated cash sales during the period August to October to explain the cash deposit during demonetisation does not appear to be correct.
6.5.The appellant maintains books and its books are audited. The bank account in question is part of the books of the appellant. The AO has not rejected the books. The AO has treated as cash deposits during demonetisation are unexplained on the basis of assumptions without pointing out any specific mistake in the accounts. From the foregoing discussion, it is clear that the cash deposits in bank during November or any of the preceding months is not unusual.
6.6.With effect from 08.11.2016, high denomination notes were withdrawn from circulation. Therefore cash deposit if any during demonetisation (if made in SBN-high denomination currency) has to be explained from cash balance as on 08.11.2016. The cash balance in the books of the appellant as on 08.11.2016 was only Rs.20,83,932. It not clear whether the balance amount deposited during demonetisation was in SBN or non SBN.
6.7.This issue was directly confronted before the appellant in a query raised during appeal proceedings:
From your submission, the cash balance as on 8.11.2016 was 20,83,932. Therefore, legally you could deposit Rs.500 and thousand rupees only to the extent of Rs.20,83,932 during demonetisation. However, you have deposited cash totalling 2,89,13,855 in bank account during the monetisation, does this contain consistently of lower denomination currency?
6.8.The reply given by the appellant is reproduced below:
The appellant is engaged in the business of manufacturing and sale of probiotic formatted drink in the Indian market. As the business model followed by the Yakult group from past 90 years, Yakult products are are offered through two channels, that is home delivery sales, and retail store sales. After the manufacturing of finished goods, Yakult in factory, stock is dispatched to various sales centres located in multiple states across India and subsequent sale finished goods made through retailers and home delivered.
The cash sales made by the Apple and under both the market segment of home delivery and retail stores is deposited in bank during the relevant month itself through cash collection facility provided by banks at respective sales centres.
Under the home delivery market segment, which represents direct marketing sales by the appellant, Yakult is home delivered directly to the customers by Yakult ladies who are provided via third-party vendor in accordance with the manpower supply agreement. The Yakult ladies are an essential part of home delivery sales. It is to be noted that the details of cash sales made by Yakult ladies are vast and voluminous as the cash sales made by them is very small in amount.
In respect of sales made through Yakult ladies, under home delivery market segment, the appellant has already submitted the following details documents before your honour vide submission dated 5 June 2023: Details with respect to sales made by Yakult ladies to customers, including identity details, address, pan, Aadhaar number, and contact number of ladies during the demonetisation period.
Copy of receipts on sample basis in relation to sales made by Yakult ladies to the customers.
Further, it is to be noted that no separate customer wise details have been maintained by the appellant in respect of the sales made through Yakut ladies by selling Yakult customers at home as the cash sales made by Yakult ladies is very small in amount. Thus it is very difficult for the appellant to maintain customer wise details of cash sales made via Yakult ladies as they are vast and voluminous.
Further party wise details of sales made to identifiable persons/retail stores along with supporting documents has already been provided by the appellant vide submission dated 05.06.2023.
6.9.The argument of the appellant is that since the appellant resorts to direct marketing through “yakult ladies” the amount deposited was in Non SBN currency.
6.10.In this case, despite request made by the AO during remand proceedings, bank has not furnished the break up of SBN and Non SBN during demonetisation. I have examined the statement of ICICI Bank account number 629405038794 during the period of demonetisation. The cash deposits and CMS deposits are numerous and are spread throughout the period of demonetisation. The deposits are almost always less than Rs.1 lakhs. Therefore the claim of the appellant appears to be acceptable. In any case, decisive contrary evidence is not available on record. Ground 2 is allowed.”
We have heard rival contentions and gone through the facts and circumstances of the case. Before us, the ld. Counsel for the assessee Ms. Supriya Mehta, CA, heavily relied upon the order of the ld. CIT(A) and submissions made during assessment proceedings as well the details filed by the assessee of cash sales and stated that entire details of sale and purchase, books of accounts and stock details was produced before the AO as well as the ld. CIT(A). On the other hand, ld. Sr. DR could not controvert the findings given by the ld. CIT(A). He/she however sated that the AO has categorically recorded as fact that sale receipts are not produced but we noted that the assessee has filed complete details before the AO, which is also noted by the ld. CIT(A) and even Assessing Officer that cash deposit during demonetization period is out of sales made by assessee. We find no infirmity in the order of the ld. CIT(A). Accordingly, the appeal of the Revenue is dismissed.
In the result, the appeal of the Revenue is dismissed.