Viren Chopra vs Income Tax Officer

O R D E R

“1.

The Ld. CIT(A) has erred both on facts and in law in upholding the impugned addition of Rs. 1,00,00,000/- u/s 68 of IT Act r.w.s 115BBE of IT Act treating the cash deposits to that extent during demonetization period as unexplained cash credits ignoring the fact that the above cash deposit is as a result of cash sales which has duly recorded in P&L Account and therefore the addition made u/s 68 of IT Act r.w.s 115BBE of IT Act is not sustainable in law.

2.

The Ld. CIT(A) has erred both on facts and in law in upholding the impugned addition of Rs. 1,00,00,000/- u/s 68 of IT Act r.w.s 115BBE of IT Act treating the cash deposits to that extent during demonetization period in bank account as unexplained cash credits ignoring the fact that the above provision has no application to the facts of the case as the same has been invoked for debits in bank book of the appellant and simultaneous credit in the bank account of the appellant maintained by the bank.

3.

The action of the Ld. CIT(A) has erred both on facts and in law in upholding the impugned addition of Rs. 1,00,00,000/- u/s 68 of IT Act r.w.s 115BBE of IT Act which is unsustainable in law as the same has been made without complying with mandatory provisions of Section 145(1) of IT Act under which the income of the appellant need be computed on the basis of the books of account so maintained.

4.

The appellant craves leave to add, delete, modify / amend the above grounds of appeal with the permission of the Hon'ble appellate authority.”

“8.

We have heard the rival submissions and perused the materials available on record. The assessee is engaged in the business of trading of multiple general items, details of which were duly submitted before the Id AO. All of assessee's purchases are imports made from outside India and which were brought into India only after passing through custom barriers by filing a Bill OF Entry (BOE) on payment of customs duty as levied by the Customs Department. It is not in dispute that the assessee had made cash deposits of ₹1,66,70,000/- in his bank account during demonetization period. The assessee during the course of assessment proceedings before Id AO, submitted the item-wise details of stock of all the items containing opening quantity, quantity purchased during the year, quantity sold during the year and closing quantity. The details were provided along with their price and total value and the details so submitted by the assessee were duly accepted by the Id AO. The assessee when confronted to explain the source of cash deposits made in the bank account, the assessee submitted that the same was out of cash sales made prior to demonetization and all the details with respect to the same along with copy of quarterly VAT returns in support of total sales made during the year were uploaded online on 08.12.2019. The assessee submitted the complete summary of cash along with quarterly VAT returns along with sales ledger before the Id AO. The assessee submitted the complete details with respect to sales made during the year in the required format sought by the Id AO. Despite furnishing all the relevant details, the Id AO ignored the evidences on record and proceeded to pass the order by making an addition on account of cash deposits by holding that the cash sales were bogus sales. This action of the Id AO stood upheld by the Id CIT(A).

9.

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 as part of total sales disclosed by the assessee in the sum of ₹5.39 crores 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. Sates 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 assets

g. The assessee has furnished month-wise, purchase and sales, both cash as well as credit for the year under consideration as well as for the immediately preceding year. The assessee has furnished complete details of purchase and month-wise details of sales (both cash as well as credit) for the wholle year.

h. The assessee has furnished the complete cashbook, showing the month wise movement before the ld AO.

i.

There is no negative cash balance on any day that has been alleged by the ld AO.

10.

Further, we find that the Id 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 ₹1,66,70,000/- 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 Id 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. Accordingly, the addition made is hereby directed to be deleted. Further, we also find that Hon'ble Madras High Court in the case of of SMILE Limited vs ACIT in MicrofinanceLimited 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 original grounds raised by the assessee are allowed”.

“3.

We have heard both the parties and perused the records. At the time of hearing, Ld. Counsel for the assessee submitted that once the purchases declared in the books of account were accepted, there is no basis to treat the sales made out of such purchases as unexplained cash credits taxable under section 68 of the Act. It was further submitted that the cash deposits which has already declared in the return of income as part of total sales and that it amounts to double taxation of the same amount. It was further submitted that even assuming that the additions were warranted under section 68 of the Act, the Ld. CIT(A) has erred both on facts and in law in confirming the demand computed in accordance with rate specified in section 115BBE of the Act as amended by Taxation Laws (Second Amendment) Act, 2016. Ld. DR relied upon the orders of the authorities below. We find that Ld. CIT(A) has not disputed the sales made which were duly disclosed in VAT return and also in books of accounts maintained by the assessee audited and also under section 44AB of the Act, no adverse inference could be drawn in respect of the declared sales by the assessee. We further note that once the purchases declared in the books of accounts were duly accepted then no subjective assumption and presumption could be made a basis to assume, allege and conclude that sales made out of such purchases were unexplained cash credits taxable under section 68 of the Act. It is settled law that once the books of accounts, sales have been accepted, the same could not be regarded as unexplained credits. It is also noted that aforesaid sales as made by the assessee were supported by the availability of stock in the books of accounts whose availability is not disputed and is otherwise too supported by genuineness of creditors and also sales bills maintained. In view of the aforesaid peculiar facts and circumstances of the case, we are of the considered view that addition in dispute confirmed by the Ld. CIT(A) deserve to be deleted. We hold and direct accordingly. So far as assessee's assessment u/s. 115 BBE of the Act is concerned, Hon'ble Madras High Court in SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) has already settled the issue against the department that the law applies to the transaction on or after 01.04.2017 only. Ordered accordingly.”