Case Law Details
Nilkantha Saha Vs ITO (ITAT Kolkata)
AO Cannot Simultaneously Reject and Rely Audited Books And Make Additions Under Section 68 For Cash Deposit During Demonetisation Period Out Of Cash Sales
From a perusal of the cash deposits/ banking transactions, the Ld. A.R drew our attention to the fact that as per the audited books, especially the trading accounts it can be noted that assessee’s sales (total) in this year was to the tune of Rs. 4,76,78, 990/-(Rs. 4.76 crores) and the bank deposits tally i.e. Rs. 4,76,78,990/- in three (3) bank accounts. It was brought to my notice that before November, 2016 (demonetization on 08.11.2016) i.e. from April to October, 2016, the assessee had deposited Rs. 2,37,84,953/- and from November to March, 2017, the assessee had deposited Rs. 2,38,94,037/-. And out of which only Rs. 12,41,704/- was added by the AO since it were invalid currencies. So looking at the volume of business according to Ld. A.R this amount Rs. 12,41,704/- cannot be termed as from any tainted source and it is probable that this amount is from genuine business transaction. It has been brought to my notice by the Ld. A.R that assessee is into dry fish business and his accounts are audited for the last seven (7) years. From a perusal of the trading account it is revealed that assessee has shown total sales in this year for a sum of Rs. 4,76,78,990/- and closing stock of Rs. 71,93,896/- and Gross profit to the tune of Rs. 16,83,317/- and net profit declared is shown at Rs. 6,00,240/-. The AO has not disturbed the returned income of Rs. 7,42,118/- so, it can be safely inferred that the profit embedded in sales of Rs. 4,76,78,990/- has been accepted by the AO, so, question is whether separate addition of Rs. 12,41,704/- is justified and whether this action of AO amounts to double addition of the same trading receipt.
No doubt in such a factual scenario, it amounts to double addition. When the justifiability of separate addition of Rs. 12,41,704/- is to be examined, it should be borne in mind that the AO is making a ‘guess’ about the source of demonetized currency. And the assessee is assailing the ‘guess work’ with an explanation which should be tested; and if the explanation given by the assessee is a plausible/probable from a traders/business man’s/prudent man’s angle/view, then that cannot be brushed aside by the AO, without disproving the explanation / facts or by giving cogent reasons. So the explanation of assessee in respect of receipt of invalid currencies to the tune of Rs. 12,41,704/- need to be tested as discussed. The explanation of assessee is that other than the cash credit of Rs. 11,08,796/- in the books as on 08.11.2016 (which has been accepted by the AO) the assessee had received Rs. 12,41,704/-during the demonetization period, which represents the amount collected from sundry debtors, which formed part of his sales credited to the P & L account during pre-demonetization period (i.e. before 8th November, 2016). So according to assessee, when the AO has accepted the cash credit of Rs. 11,08,796/- as on 08.11.2016, the sundry debtors as on 08.11.2016 should be accepted to the extend received by the assessee even if it is by way of invalid currencies. Explaining further on this point the Ld. A.R submitted that the assessee being a local dry fish dealer, had sold dry fish on credit to several sub-dealers/traders (before 8th November, 2016), who had deposited in the assessee’s account (Post-demonetization i.e. after 8th November, 2016) the earlier payments/debts of the dry fish sold on credit (i.e. pre-demonetization) which included currencies which were no longer valid. According to the assessee, he had no control over the sundry debtors depositing the trade debts as afore-stated in his bank account and so such sale consideration cannot be separately taxed as unexplained cash credit, particularly when it was credited by way of sales in the books which was duly audited and accepted by the AO. Therefore, the plea of the Ld. A.R is that taking into consideration the peculiar facts of the case, separate addition Rs. 12,41,704/- was not warranted. In this backdrop when I examined the statement of bank accounts of assessee (3 bank accounts) it is noted that assessee has deposited in his three bank account (pre-demonetization) an amount to the tune of Rs. 2,38,94,037/- and during (Post-demonetization period) the assessee had deposited to the tune of Rs. 2,38,94,037/- and it is found that the total bank deposit tallys with the figure shown in trading account i.e., Rs. 4,76,78,990/- (Rs. 4.76 crores). So taking into account all these facts and circumstances and demonetization being declared on the night of 8/9th November, 2016, it is noted that AO has accepted the invalid currencies to the tune of Rs. 11,08,796/- because it was shown by the assessee in his regular books maintained as on 08.11.2016. The assessee’s explanation in respect of Rs. 12,41,704/- is that it is the amount which has been deposited by the sundry debtors as on 08.11.2016 which is found to be correct for the reason that the sundry debtors as on 08.11.2016 was to the tune of Rs. 14,93,120/-.
So on the same reasoning as adopted by the AO to have accepted Rs. 11,08,796/-(invalid currency notes) as genuine (trade receipt), I find no reason not to accept the explanation of assessee that Rs. 12,41,704/- was deposited by the sundry debtors reflected in the books as on 08.11.2016. And since the AO has accepted the sales/turnover of the assessee which were reflected in the audited books of accounts, as well as the explanation of assessee is supported by material on record, the AO/Ld. CIT(A)’s action of addition of Rs. 12,41,704/- cannot be countenanced. So on this factual finding the assessee’s explanation regarding Rs. 12,41,704/- is plausible. And it is noted that the AO / Ld. CIT(A) / Ld. D.R could not disprove or controvert this fact and so it is accepted. In the aforesaid facts and circumstances, the assessee depositing invalid notes to the tune of Rs. 12,41,704/- cannot be dis-believed as from any tainted source or termed as black money. So taking into consideration the peculiar over all facts and circumstances discussed supra, it is directed that the addition of Rs. 12,41,704/- be deleted.
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