Basant Kumar Aggarwal vs ITO, Ward 47(4)

“The reply of the assessee is considered. It is found assessee has not submitted any explanation in respect steep high cash sale in the months of October and November (in first week only) 2016. Further why assessee has kept Rs. 198226543 with himself without depositing it in the bank account where as it was doing other regular banking transactions during this period. Assessee was incurring interest expense and having several other expense pending. Income of the assessee as per his ITR is only Rs. 64,93,410 and as such he can't leave his cash sale balance of Rs.19,82,26,543 unused. As such reply of the assessee is found without any merit and as such the same is rejected. After examination of reply of the assessee and facts of the case observation of assessing officer in this case is given here under:-

“6.1

Statement for the F.Y. 2014-15, 2015-16 & 2016-17 regarding cash sale and cash deposited in the bank account has been obtained. The statement is here under:-

2014-15				2015-16
Month	Cash sale	Cash deposit		Month	Cash sale	Cash deposit
April	0	0		April	163786536	165500000
May	0	0		May	19896052	20600000
June	0	0		June	54880907	55250000
July	0	0		July	518089733	521500000
August	0	0		August	35775061	35900000
September	0	0		September	0	1000
October	1165406	500000		October	0	0
November	172088	0		November	1187085001	1199500000
December	618635	600000		December	518457508	523000000
January	497919	0		January	71820625	73700000
February	0	0		February	741697	0
March	0	0		March	0	0
Total	2454048	1100000		Total	2570533120	2594951000

2016-17
Month	Cash sale	Cash deposit
April	0	0
May	0	0
June	0	0
July	0	0
August	0	0
September	0	0
October	198226543	0
November	68856281	26,89,50,000
December	0	0
January	0	0
February	0	0
March	0	0
Total	267082824	269850000

6.2

The assessee has booked cash sale of Rs. 19, 82, 26,543/- in the month of October, 2016 and Rs. 6, 88, 56,281/- in the month of November, 2016 in a week prior to demonetization period. This trend of the assessee has not been observed in any week as well as any month in F.Y. 2016-17.

6.4

After comparing the above F.Y. statements it has also been revealed that assessee is depositing amount of cash sale in bank when the figure is reaching to a particular stage. But in the month of October, 2016 he has booked cash sale of Rs. 19,82,26,543/- which is highest cash sale booked by the assessee in any month. However, surprisingly he has not deposited single rupee in the bank out of this cash sale.

6.5

Cash sale made in the first week of November, 2016 of Rs. 6, 88, 56,281-was also deposited in the bank after demonetization. Moreover, cash sale of Rs. 6, 88, 56,281/- in a week makes it very high looking to the fact that it is a period after Diwali.

6.6

No business man will keep his cash unused (cash sale of October, 2016 of the assessee amounting to Rs. 19,82,26,543/-) in his hand when he is paying interest paid to bank O/D a/c amounting to Rs. 1,52,845/- and on car loan Rs.63,112/-. At the same time claim of the assessee that he kept his cash balance of Rs. 19, 82, 26,543/- without depositing the same in bank account is not acceptable. It is also found that assessee was doing regular bank transaction during the month of October, 2016 yet he was not depositing his cash balance in the bank account.

Conclusion

7.

On the basis of observation drawn at Para No. 6 above, assessing officer reached to a conclusion that concocted cash sale has been booked by the assessee to adjust his undisclosed income during the demonetization period.

7.1

Assessee was having sufficient stock which he has pretended that he has sold and cash received from the sale is deposited in the bank. This connotation of the assessee is not accepted because no business man will keep cash in hand while he has to pay interests on loans as well as other expenditures are pending. Therefore it is held that part of the cash deposit made by the assessee is his unaccounted cash amount which he was forced to deposit in his bank account because of the decision of Govt. of India and respect of demonetization. The assessee has created bogus cash sale in his books of accounts in order to create source for such unaccounted cash deposits.

7.2

Actually assessee has sold his such stock (stock pertains to cash sale of October and 1st week of November, 2016) out of the books, may either, after the demonetization period or during it (in new currency notes but has not shown in these receipts in the books). However, in order to adjust his undisclosed money during demonetization period he has booked concocted cash sale in the month of October, 2016 and November, 2016 and on paper claims that he sold such stock.

7.3

Concocted cash sale is booked through manipulation in books of account and in this case assessees have manipulated his books of account and therefore, book result of the assessee is not reliable. Therefore, the same is rejected u/s 145(3) of the Income Tax Act, 1961.

Decision

8 In view of above facts and circumstances of the case addition of 35% of Rs.26,89,50,000/- i.e. Rs. 9,41,32,500/- of the cash deposit in the bank in demonetization period as being manipulated and held as unexplained cash deposited by the assessee. Keeping the view of the facts of the case and its previous year details and all aspects of the case it is held that, Rs. 9, 41, 32,500/- i.e. 35% of the total cash deposit in the bank in demonetization period amounting to Rs. 26,89, 50,000/- is added back to the income of the assessee u/s 68 of the Income Tax Act, 1961. Penalty proceedings u/s 271AAC (1) of the Income Tax Act, 1961 is hereby initiated separately. It is specifically mentioned that the addition is being made u/s 115BE of the income Tax Act 1961.”

“7.3

The contention of the appellant and material available on record have been perused. Return for the A.Y. 2017-18 was filed by the assessee on 29.10.2017 at an income of Rs. 64,93,410/- after claiming deduction under chapter VIA of Rs.1,69,075/. The case was selected in scrutiny through CASS on the following main issues: -

1.

Abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period.

2.

Large value cash deposit during demonetization period.

During the month of November, 2016, the appellant had made cash deposit Rs. 26,89,50,000/- in its bank account. The appellant contented that the cash deposits is out his cash on hand and from the cash sales which is mainly in the month of October and November, 2016 as the festival session like Diwali, Bhai Dhuj and Dhanteras. All these festivals are auspicious in buying and gifting jewellery items. Further, the appellant submitted that the cash sales for the year under consideration is much less than the last years sale which is Rs. 118 Crs. as compared to this year's sale which is around Rs. 26 Crs. Further, the appellant submitted that the amount of sale and purchase entered in the books of accounts tallied with VAT returns, thus authenticity of sales and purchases made by the appellant during the year under consideration cannot be doubted. On perusal of cash ledger submitted by the appellant, it is substantiating that the appellant had sufficient cash balance as on 08.11.2016 i.e. of Rs. 26,93,49,391/- for depositing the cash into the bank account and all the cash sales made by the assessee during the month of October, 2016 had been duly recorded in the books of accounts. There is no dispute as to availability of stock, cash balance and cash deposited in the bank account out of the cash available in hands.

7.4

The contention of the appellant is not acceptable in view of the following narrated facts. On perusal of the cash comparison of cash sales and cash deposited chart depicted at page no. 8 and 9 of the Assessment Order, it has been found that the appellant in AY 2016-17 has made cash sales from the month of April and simultaneously deposited the same in the bank accounts throughout the year. However, in the year under consideration i.e. AY 2017-18, the appellant has shown cash sales only in the month of Oct. and Nov., 2016, and deposited the cash amount of Rs. 26,89,50,000/- in the bank account in the month of November, 2016. It is common practice in the business that the person is doing cash sales than he will deposit the cash regularly in its bank account and moreover record the sales either in cash or through banking channel in its books of accounts. It has come to the notice from the details submitted by the appellant that the appellant had declared cash sales and deposited the cash in the bank account regularly during the AY 2016-17. But here the appellant had declared cash sales only in the month of October and November, 2016 and deposited cash of Rs. 26,89,50,000/- in the month of November,2016. It was an afterthought and appellant had declared cash sales only for two months, which is just before, the demonetization period as it was mandatory to deposit the Specified Bank Notes (SBN)in the bank account. The appellant had deposited the SBN in its bank account and later concocted the story of cash sales of bullion. Further, the cash sales for the month of October, 2016 have been shown as Rs. 19,82,26,543/- but this amount was only deposited in the month of November, 2016. As we know margin in the bullion sales is very low, therefore the dealers deposited the cash in the bank account regularly as they have to make payments for the purchase of bullion. It is quite surprising since, the appellant had deposited the cash arising out of cash sales in the month of October, 2016 in the month of November, 2016. The appellant further contented that there is no bar on cash sales. The contention of the appellant is considered, however, the appellant failed to establish the fact that how, the cash sales only restricted to the month of Oct. & Nov., 2016 and there were no sales except these months during the AY 2017-18. Further, the appellant has not submitted cash books for AY 2018-19 which can substantiate the reasons of the appellant. Actually, the appellant has made a concocted story to justify the cash deposited during the demonetization period.

7.5

From, the above narrated facts, it is obvious that the appellant had not made any cash sales but it is an afterthought which appellant has applied to justify the cash deposited during the demonetization period. Therefore, the AO was right to hold that the appellant had not maintained his books of account properly and manipulated his accounts, therefore, rejected the books of accounts. Further, since, the addition has been made u/s 68 of the Act on account of cash credits. The provisions of Sec. 115BBE were held to be applicable from the assessment year 2013-2014. This section is contained in Chapter XII of the Income Tax Act, 1961. The title of the section is "Tax on income referred to in section Sections 68, 69, 69A, 698, 69C or 69D -the specified sections. Any income falling under the above said section shall be subject to tax at a flat rate of 30%. This section has been amended by the Taxation Laws(Second Amendment has increased the rate of tax from 30% to 60%) Act, 2016 to be made applicable from assessment year 2017-18 onwards. Hence, the issue raised by the appellant do not have validity and hence, dismissed.”

“1.

On the facts and circumstances of the case, the order passed by the Learned Commissioner of Income Tax (Appeals), ["hereinafter referred to as CIT (A)] is bad, both in the eye of law and on the facts.

2.

On the facts and circumstances of the case, the learned CIT(A), has erred both on facts and in law in confirming the action of AO despite the fact that notice issued u/s 143(2) of the Income Tax Act (hereinafter referred to as 'Act) and consequent assessment order passed by the AO are invalid, non-est and liable to be quashed as notice under section 143(2) of the Act has been issued violating the mandatory guidelines issued by CBDT vide Instruction no. 225/157/2017/ITA.II dated 23.06.2017.

3.

On the facts and circumstances of the case, the learned CIT(A), has erred both on facts and in law in rejecting the contention of the assessee that the assessment order under section 143(3) of the Act passed by the AO is illegal, invalid and liable to be quashed as the same has been passed without assumption of valid jurisdiction upon the assessee and without there being any valid order passed under section 127 of the Act.

4.(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on fact and in law, in confirming the addition of Rs. 9,41,32,500/- made by the AO on account of cash deposits under section 68 read with section 115BBE of the Income Tax Act, 1961

(ii)

That the abovesaid addition has been confirmed rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee to justify the source of deposit made in the bank account.

(iii)

That the abovesaid addition has been confirmed despite the fact that the same has been made arbitrarily on estimation basis at the adhoc rate of 35% of total cash deposits without there being any justification of the same.

5.

On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid addition, rejecting the contention of the assessee that cash deposits were made out of cash sales which were already recorded in the books of accounts, and any further addition by the AO will lead to double taxation of the same amount in the hands of the assessee.

6.

On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the abovesaid addition despite the fact that the same has been made by the AO by rejecting the books of account of the assessee, without pointing out any specific defect as contemplated under section 145(3) of the Income Tax Act.

7.

On the facts and circumstances of the case, the learned CIT(A) has grossly erred both on facts and in law in confirming the above addition despite the fact that addition has been made by the AO, without pointing out any defect in the evidences furnished by the assessee during the assessment proceedings.

8.

On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of AO despite the fact that the assessee has been maintaining proper books of accounts and cash sales were made out of the purchases that have not been doubted and rejected by the AO.

9.

On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition, despite the fact that the assessee has been regularly maintaining books of accounts, audited as per law and nothing adverse were pointed out by the AO during the course of assessment proceedings.

10.

On the facts and circumstances of the case, the learned CIT(A) has grossly erred both on facts and in law in confirming the addition made by the AO despite the fact that the same has been made by indulging in surmises and conjectures without bringing on any direct evidence against the assessee, only on the basis of presumption and assumption.

11.

Without prejudice to the above, the learned CIT(A) has erred both on facts and in law in confirming the AO's action of charging tax under section 115BBE of the Act at an exorbitant rate of 60% with surcharge of 25% despite the fact that the provisions of section 68 as well as provisions of section 115BBE are not applicable.

12.

Without prejudice to the above, the learned CIT(A) has erred in law in confirming the retrospective application of the amendment brought by The Taxation Laws (Second Amendment) Act, 2016 under Section 115BBE, effective from 01.04.2016, despite the Act being notified only on 15.12.2016.

13.

The appellant craves leave to add, amend or alter any of the grounds of appeal”

“On perusal of cash ledger submitted by the appellant, it is substantiating that the appellant had sufficient cash balance as on 08.11.2016 i.e. of Rs. 26,93,49,391/- for depositing the cash into the bank account and all the cash sales made by the assessee during the month of October, 2016 had been duly recorded in the books of accounts. There is no dispute as to availability of stock, cash balance and cash deposited in the bank account out of the cash available in hands.”