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Judgment
PER M. BALAGANESH, A. M.:
The appeal in ITA No.3519/Del/2024 for AY 2017-18, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 2219.06.2024 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 21.12.2019 by the Assessing Officer, ITO, Ward-43(8), Delhi (hereinafter referred to as ‘ld. AO’).
The only effective issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the addition made by ld AO on account of cash deposits in the sum of Rs 1,54,95,500/- in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the material available on record. The assessee is a jeweler operating under the name and style of M/s Shree Krishna Jewellers, engaged in the trade of gold, silver, bullion and its jewellery for more than 15 years and have started some dealings in metals such as copper and aluminum for around 3 years. The return of income for assessment year 2017–18 was filed by the assessee declaring taxable income of Rs 5,05,000. The assessee furnished the entire computation of income, audited financial statements, tax audit report together with its annexures before the ld AO. The ld AO noticed that the assessee had deposited cash amounting to Rs 1,54,95,500/- in his bank account during the demonetization period. The assessee was asked to explain the source of the same. The assessee explained that cash deposits were made out of cash sales and available cash balances as per its regular books of accounts. The assessee submitted the month wise cash book containing the opening balance, cash receipts, cash sales, cash withdrawals, cash deposits, cash purchases, cash payments and closing cash balance in the form of a tabular form before the ld AO for the financial years 2015-16 and 2016-17. It was submitted that the cash balance as on 8.11.2016 available with the assessee as per books of accounts was Rs 1,53,62,490/-. For the sake of convenience, the table containing the availability of cash with the assessee is reproduced below:-
| Month | Opening Balance | Cash Receipts | Cash Sales | Cash Withdra wals | Cash Deposits | Cash Purch ases | Cash Payments | Closing Balance |
| April 16 | 211101 | 283500 | 185000 | 322000 | 114462 | 243139 | ||
| May 16 | 243139 | 75000 | 317925 | 540000 | 193800 | 22900 | 959364 | |
| June 16 | 959364 | 299924 | 190000 | 442000 | 49038 | 958350 | ||
| July 16 | 958250 | 95864 | 130000 | 410000 | 31800 | 742314 | ||
| Aug 16 | 742314 | 550000 | 37000 | 61242 | 1194072 | |||
| Sep 16 | 1194072 | 5000 | 42500 | 62180 | 1094392 | |||
| Oct 16 | 1094392 | 9574364 | 85000 | 661700 | 41800 | 10050256 | ||
| Upto 8 Nov | 10050256 | 5333234 | 58000 | 58000 | 21000 | 15362490 | ||
| Nov 16 | 15362490 | 74000 | 13800000 | 113970 | 1522520 | |||
| Dec 16 | 1522520 | 193000 | 72000 | 1695500 | 55250 | 36770 | ||
| Jan 17 | 36770 | 37895 | 142000 | 137000 | 74550 | 5115 | ||
| Feb 17 | 5115 | 197139 | 307000 | 145000 | 358800 | 5454 | ||
| Mar 17 | 5454 | 296483 | 305000 | 159000 | 425782 | 22155 | ||
| 268000 | 1,64,36,328 | 2643000 | 18103500 | 1432774 |
The ld AO, however, did not agree with this contention and proceeded to make addition u/s 68 of the Act of Rs 1,54,95,500/- on account of cash deposits. The ld AO noticed that assessee had indeed shown cash sales and held that merely routing the same through sales and payment of VAT cannot preclude the ld AO to draw an inference that the cash sales were deliberately shown to cover the introduction of unaccounted cash in the books of account during the year under consideration. The ld CITA deleted the addition on the ground that the assessee was able to prove the source of cash deposits beyond doubt by way of documentary evidences.
It is not in dispute that the assessee had indeed shown cash sales and is part of the total turnover disclosed by it in the return of income and in the audited profit and loss account. The following points are undisputed and indisputable: –
a. The assessee had shown cash sales for month of October 2016 of Rs 95,74,364/- and from 01.11.2016 to 08.11.2016 of Rs 53,33,234/- and the same is part of total sales disclosed by the assessee in the sum of Rs. 2,89,80,009/- in the profit and loss account.
b The purchase made by the assessee has not been doubted by the revenue.
c. The total sales made by the assessee (both cash as well as credit sales) has not been doubted by the revenue.
d. The assessee had sufficient stocks to effect the said cash sales and generate cash as an independent source to prove the cash deposits.
e. To the extent of sales made by the assessee, corresponding reduction in stock had been duly made.
f . Sales made by the assessee, both cash as well as credit had been duly subjected to VAT and the VAT authorities had accepted the turnover declared by the assessee.
g. The assessee has furnished the complete cashbook for the whole financial year 2016-17, month wise and party wise sales details for the whole financial year 2016-17, month wise and party wise purchase details for the whole financial year 2016-17, VAT returns for the whole financial year 2016-17, bank statements for the whole financial year 2016-17, VAT assessment orders for the financial years 2015-16 and 2016-17 before the ld. AO.
There is no negative cash balance on any day that has been alleged by the ld AO.
Further, we find that the ld AO had accepted the return of income by the assessee, which included this cash sales also. Hence, separately, making an addition on account of cash deposits in the sum of Rs 1,54,95,500/- would only result in double addition. Hence, the addition made on account of cash deposits deserves to be deleted on that count itself. Further, we hold that the assessee had indeed proved the source of cash deposits by clearly establishing that the source emanated from the books of account and the cashbook regularly maintained. None of the books of account have been rejected by the ld AO. In these facts and circumstances, there is no case made out by the revenue for making an addition on account of cash deposit separately. We find that the ld CITA had duly appreciated the aforesaid contentions and documentary evidences of the assessee and had rightly deleted the addition. Further, we also find that Hon’ble Madras High Court in the case of of SMILE Microfinance Limited vs ACIT in WP (MD) No. 2078 of 2020 and WMP (MD) No. 1742 of 2020 dated 19-11-2024 had held that the provisions of section 115BBE of the Act which enhanced the rate of tax could be made applicable only from 01.04.2017, relevant to assessment year 2018-19 onwards and not earlier. Accordingly grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.