When purchases & sales found genuine deposit out of cash sales can be treated as non-genuine – ITAT
In a recent judgment, ITAT has set aside addition u/s 68 and held that When purchases & sales found genuine deposit out of cash sales can be treated as non-genuine.
ABCAUS Case Law Citation:
ABCAUS 3953 (2024) (04) ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the addition as unexplained cash credits u/s 68 of the Income Tax Act, 1961 (the Act) towards cash deposited in bank account.
The assessee was engaged in the business of selling kirana products. The Assessing Officer (AO) observed that the cash book revealed that assessee had made cash sale within a week during the demonetization period and after that he had deposited cash in the bank.
The AO further observed that after the said cash sales there was no cash sale till next 30 days. According to the AO, it was very unusual and unrealistic conduct of the assessee.
Statement u/s 131 of the Act of assessee was recorded in which replying to a specific question of not making cash sales subsequently, the assessee replied that due to him not well he was not going to the market and therefore, cash sales were not made.
The AO noted that assessee had given contrary statement replying to one question he had admitted that after last cash sales, he had not made any cash sale because he was not well and not coming to the market. But in reply to another question, he admitted that he had not deposited cash in bank on account of festival seasons. The statement was contrary which proved concocted cash sale booked by the assessee.
Accordingly, the AO opined that entire cash deposit in the bank during demonetization period was manipulated and made addition u/s 68 of the Act for entire cash deposit and brought it under higher tax rates applying the Section 115BBE of the Act.
The CIT(A) confirmed the addition.
Before the Tribunal the assessee submitted that it was not the case of the assessing officer that the appellant did not possess stock in his trading account. It is a settled proposition of law that once purchases have been accepted by the assessing officer, corresponding sales of trading stocks ought to be accepted.
The assessee further submitted that no apprehension on cash sales and subsequent deposits in the bank account was ever casted by the revenue authorities. Therefore, the allegation of the assessing officer that no amount was deposited in the subsequent year, was incorrect.
It was submitted that the assessing officer had made the addition only on surmises and conjectures. It was not the case of the assessing officer that corresponding purchases, the sales whereof have been made by the appellant in cash and deposited in bank, was still available with the appellant. It was substantiated from the fact that in subsequent year, the closing stock of the preceding year was treated as the opening stock. In a situation of no sales, as presumed by the assessing officer, the closing stock of the year under consideration would have been higher and corresponding adjustment should have been made by the assessing officer, which was not the case currently.
It was also submitted that major kirana sales are contingent on the onset of the festive season in India. The appellant operated from the biggest wholesale markets in Asia for such items. The footfall usually begins a few weeks prior to the actual festivals. The festivities in October’ 2016 began with Navratri in the first week to Dussehra, Karwa- Chauth, Dhanteras, Diwali and Bhai-Dooj till the end of the month. Considering the anticipated rush on account of such festivals, it was also sensible for the appellant to deposit the cash once festive season was over. It is henceforth contended that sales made during September and October, as claimed by the appellant and deposited in bank must be accepted.
The Tribunal opined that the CIT (A)’s order was a non-speaking one. The fact that assessee had produced books of accounts which were rejected by the AO but were not considered by the CIT (A) at all.
The Tribunal noted that from the books of account, it transpired that when purchases and sales had been found genuine how deposit out of the cash sales can be treated as non-genuine. In this regard, the contention of the assessee had cogency which needed to be considered at the level of CIT (A).
Hence, the Tribunal remitted the issue to the file of CIT(A) to consider the issue afresh after providing an opportunity of being heard to the assessee.
Download Full Judgment ABCAUS 3953 (2024) (04) ITAT Click Here >>
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