Anand Anand Choudhury Vs ACIT (ITAT Ranchi)
Recorded Cash Sales Can’t Be Branded Unexplained -Demonetisation Deposits Backed by VAT Sale
Assessee, proprietor of M/s Anand Hardware & Tools, filed return declaring income of ₹45.26 lakh. His case was selected for scrutiny through CASS. During assessment, AO questioned heavy cash deposits of ₹1.92 crore during the demonetisation period & made an addition of ₹1.67 crore u/s 68, treating it as unexplained cash credit, despite Assessee’s explanation that deposits arose from cash sales in October 2016 (Diwali season clearance with incentives).
Assessee contended that all sales were supported by bills, VAT returns, & duly recorded in audited books of account. It was argued that AO could not disregard recorded cash sales without rejecting books u/s 145(3). Further, VAT returns filed contemporaneously corroborated the turnover & AO had not disputed purchases or stock records. The addition, therefore, amounted to double taxation of the same sales already offered in P&L.
Revenue relied on the principle of “test of human probabilities,” citing Durga Prasad More (82 ITR 540, SC) & Sumati Dayal (214 ITR 801, SC), to argue that abnormal cash sales just before demonetisation were improbable.
Tribunal noted that the fact remains that the products dealt in by Assessee are VATABLE. The assessee has filed its VAT returns on regular basis as is required under VAT law. Assessee could have never known about the demonetization declared by the Govt. In any case, this demonetization currency which has been deposited by Assessee in the bank account has been considered by AO for the purpose of addition. Assessee having disclosed its turnover in VAT return in October, 2016 itself, it cannot be said that Assessee has manipulated his sales in the month of October, 2016. Tribunal noticed that the cash deposited in the bank account is fully explained by assessee as available in the cash book. If AO is questioning the cash deposit in the bank when such cash is recorded in the cash book, then obviously, the stock of assessee is being to be disputed. This has also not been disputed. AO is not disputing the stock statement of Assessee. AO is not disputing the sales of assessee. The addition as made by AO of Rs.1,67,68,000/- would no effect mean that the sales of assessee has been reduced to that extent. This has also not been done by AO. This being so, Tribunal was of the view that the addition as made by the AO & confirmed by CIT(A) is unsustainable. Consequently, AO is directed to delete the addition as made to the extent of Rs.1,67,68,000/- u/s 68 in the assessment.
