Case Law Details
ITO Vs Sh. Sunil Nayyar (ITAT Delhi)
In the instant case, the AO has not pointed out any accounting defects in the books of accounts. Rather he is summarily ignored the books of accounts but has proceeded to invoke section 145(3) which is bad in law.” 14. The ld. CIT (A) held that there is no doubt about the fact that the assessee was dealing in milk on whole sale basis. All the trade creditors were shown outstanding as on 31.03.2012 but paid in the beginning of the subsequent year. There was no accumulation of fund either in the shape of unsecured loan or sundry creditors. The entire sales and purchases was made through banking channels only except marginal sale of Rs.48,89,100/. There was no purchase made in cash. All the relevant bills/vouchers were produced before the AO for verification. The trading activity was supported by quantitative details as separate stock register was maintained. Regular books of account were maintained by the assessee, which were duly audited by the tax auditor. There was running account of trade creditors and debtors maintained by the assessee, which can be verified from the details given by the assessee in this regard. The AO has not considered all these facts while estimating the profit and rejecting the books of account. On the contrary, the AO has held that no such business was carried out by the assessee. It is not understood as to when there was no business carried out by the assessee, then how the profit of the same business can be estimated. I do not find any reason for rejection of books of account, whereas, all the relevant details including books of account were filed by the assessee before the AO for verification. There was no specific defect pointed out by the AO in the books of account
19. It was also submitted that the entire sale including the sale pointed out by AO is supported by corresponding purchase whose payment has been made through banking channel. The AO has also not disputed the purchase because complete ledger of purchase as well as sale account was furnished to the AO at the time of assessment itself. To substantiate the contention, the assessee submitted copy of purchase ledger for the relevant days which clearly shows that the cash sale made to the retail traders is duly supported by the corresponding purchase.
21. The cash generated from the sale shown in the above table was deposited in the bank on 03.11.11 & 06.03.12 along with the opening balance shown in the cash book which comes to more than Rs. 51,00,000/-. Copy of cash book for the relevant dates and the corresponding purchase and sale ledger are submitted here with. 22. It is the business compulsion in the trade of the assessee as well as in many other retail trades that part of the sales has to be made in cash.
23. Reliance is placed on the decision of Hon’ble Rajasthan High Court in the case of Smt. Harshiia Chordiavs ITO (2008) 298 ITR 349 in which it was held that “Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them”. Also on the decision of Hon’ble ITAT, Nagpur Bench in the case of M/s Heera Steel Limited vs ITO (2005) 4 ITJ 437 in which it was held that cash sales cannot be equated with cash credit under section 68. 24. The AO has made addition by invoking the provision of section 68. The precondition for invoking section 68 is that there has to be credit of the amount in the books maintained by the assessee. [CIT vs P. Mohanakala (2007) 291 ITR 278 (SC)]. The section is applicable only when a sum is found credited in the books of the assessee [Rakesh Kalia v. CIT, (2006) 286 ITR 357 (Dei.)]. In the case of assessee neither any sum has been credited in the books of accounts or in the bank account even for a single day throughout the year which is evident from the peak analysis of bank account is submitted here with. As evident from the bank account, sale proceeds realized were deposited in the bank and are utilized on the same day for making payments of purchases. The sale proceeds realized was not lying as credit in the books of accounts of the assessee even for a single day. Hence by any stretch of imagination, payments received from the trade debtors cannot be covered within the meaning of credits under section 68.
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