Back
2025 Supreme(Online)(ITAT) 3187
INCOME TAX APPELLATE TRIBUNAL (CHANDIGARH BENCH)
KRINWANT SAHAY, A.M
Revenue – Appellant
Versus
Assessee – Respondent
Income Tax Appeal|ITA No. 188/Chd/2023
For the Appellants/Petitioners: Dr. Ranjit Kaur
For the Respondents: Shri Sudhir Sehgal
Cash sales recorded in accounts cannot be deemed unexplained without evidence of discrepancies or manipulation in the accounts.
Headnote:(A) Income Tax Act - Sections 68 and 115BBE - Appeal filed by Revenue against CIT(A) order allowing assessee's appeal and deleting addition of Rs. 1,54,37,576/- made by Assessing Officer as unexplained cash credit - The Assessing Officer's basis for addition was deemed inadequate as the books of accounts were not rejected and no discrepancies were found. (Paras 12, 14, 22)
(B) Legal Principles - The principle that cash sales recorded in the books of accounts cannot be deemed unexplained unless there are defects pointed out in the accounts or evidence of manipulation. (Paras 20, 22)
Facts of the case:
The assessee, engaged in trading high-end watches and jewellery, faced scrutiny due to substantial cash deposits during demonetization, which the Assessing Officer deemed unexplained. The assessee contended that these deposits stemmed from legitimate cash sales and provided supporting documentation. (Paras 3, 4)
Findings of Court:
The CIT(A) found that the cash sales were backed by adequate stock and documentation, and the addition made by the Assessing Officer was not justified. (Paras 12, 24)
Issues: The court addressed whether the addition of unexplained cash was justified given the absence of defects in the books of accounts. (Paras 20, 22)
Ratio Decidendi: The court held that the Assessing Officer's addition of unexplained cash was not sustainable as the books of accounts were accepted without rejection, and the cash sales were supported by adequate documentation. (Paras 20, 22)
Result: Appeal of the Revenue dismissed.
| Table of Content |
|---|
| 1. grounds of appeal by revenue. (Para 1 , 2) |
| 2. facts regarding assessment and cash deposits. (Para 3 , 4 , 5 , 6 , 8) |
| 3. assessee's response to show cause notice. (Para 10 , 12) |
| 4. arguments regarding validity of cash sales. (Para 13 , 15 , 16) |
| 5. court's analysis of cash sales and books of accounts. (Para 14 , 20) |
| 6. ratio regarding addition of unexplained cash. (Para 18 , 21) |
| 7. final conclusion and dismissal of appeal. (Para 24 , 25) |
आदेश Order
PER KRINWANT SAHAY, A.M:
This is an appeal filed by the Revenue against the order of the Ld. CIT(A)/NFAC, Delhi dt. 09/02/2023 pertaining to Assessment Year 2017-18.
2. In the present appeal Revenue has raised the following grounds of appeal:
1. "The Ld. CIT(A) has erred on facts and in law by allowing the appeal of assessee without appreciating the facts of the case.
2. The Ld. CIT(A) has erred on facts and circumstances of the case in deleting the addition of Rs. 1,54,37,576/- that was made on account of disallowance u/s 68 r.w.s.115BBE of the Act.
3. The Ld. CIT(A) has erred on facts and circumstances of the case in allowing the highly disproportionate amounts of cash deposited by assessee in demonetized old currency notes ignoring the well recognized principal of Human Probabilities in Income Tax proceedings and civil liabilities.
4. It is prayed that the order of the Ld. CIT(A) be cancelled and that of the assessing officer may be restored.
5. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or is disposed off."
3. The facts, in brief, as highlighted in assessment order are that the case of the assessee was taken under scrutiny and during the course of assessment proceedings, various queries were made which were replied by the assessee from time to time. It has been stated in the assessment order that the assessee is engaged in trading of high-end watches and jewellery and various details as submitted by the assessee were scrutinized.
4. It was noticed by the Assessing Officer that there was cash deposits during demonetization period and in order to verify the nature and source of above said cash deposits, the assessee was asked to explain the source of cash deposits during demonetization period amounting to Rs. 3,17,96,000/-. It was stated by the assessee that the said deposits were from cash sales of traded goods i.e. watches, jewellery and advances against the goods to be supplied and filed the copies of cash book and detail of cash sales.
5. It was stated by the assessee that earlier also, Investigation Wing, Chandigarh had called for the same detail, which was duly considered and that information was passed on to the Assessing Officer.
6. The Assessing officer made a comparison of the percentage of cash sales to total sales in financial year 2015-16 and 2016-17 and found that during the month of October 2016, the cash deposit was 41.85% ,against the cash sales of 7.12% in October 2015 and similarly in November 2016, the cash sales were 14.22, against 9.09% in November 2015. On the basis of above data, the Assessing Officer observed that the percentage of cash sales in the month of October 2016 are much more than the cash sales in the month of October 2015.
7. Further, it was noticed that even the cash in hand in financial year 2016-17 is much more than the cash in hand in the preceding financial year 2015-16. Accordingly, the AO issued a show cause notice as to why excess cash deposited during the demonetization period should not be added to the income of the assessee as unexplained cash credit u/s 68 r.w.s. 115BBE of the Act.
8. The assessee filed a detailed reply to the show cause notice and which have been reproduced at pages 5 to 8 of the assessment order and contended that even in the month of May & June 2015, the cash sales were 51.04% and 58.78% as against 26.94 and 31.01% in May & June 2016. As such, there has been at times sales more in certain months on account of various reasons. It was further submitted that there has been
