ITO Vs Zee Bangles Pvt Ltd (ITAT Mumbai)
ITAT Mumbai held that provision of Sec. 69A of the Income Tax Act cannot be applied in respect of cash deposited which have been duly recorded in the books of account and had already been declared income in the return of income filed by the assessee.
Facts- The assesse was engaged in the business of jewellery making and selling on both retail and wholesale basis. During the course of assessment proceedings the assessing officer pointed out that assesse company had deposited substantial cash in bank account during the demonetization period 09.09.2016 to 30.12.2016.
On query, the assessee explained that the amount of cash deposit made during the period 09.11.2016 to 30.12.2016 was out of sales made to various parties. The AO had not agreed with the submission of the assessee and observed that no genuine cash sale had taken place. Therefore, the assessing officer had treated the cash deposited of Rs.6,92,00,000/- as undisclosed out of books and added to the total income of the assessee u/s 69 of the Act.
CIT(A) allowed the appeal of the assessee. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that AO has failed to justify in applying section 69A to the case of the assessee when the assessee itself declared the cash sales in its return of income duly recorded in the audited books of accounts maintained by the assesse. Therefore, the CIT(A) has correctly held that provision of Sec. 69A of the Act cannot be applied in respect of cash deposited which have been duly recorded in the books of account and had already been declared income in the return of income filed by the assessee. Therefore, the grounds of appeal of the revenue is dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal filed by the Revenue is directed against the order of CIT(A) NFAC, Delhi, dated 05.12.2021 for A.Y. 2017-18. The Revenue has raised the following grounds before us:
“1. On the facts and in the circumstances of the case, the Ld. CIT(A) NFAC was not justified in facts and in law in deleting the addition made on account of specified currency notes deposited during demonetization period since the assessee company did not furnish details of cash deposits made in earlier year or subsequent year as per clear finding recorded in the assessment order vide Table-4.”
2. Fact in brief is that return of income declaring total income at Rs.29,54,846/- was filed on 29.10.2017. The assesse was engaged in the business of jewellery making and selling on both retail and wholesale basis. The case of the assessee was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 11.08.2018. During the course of assessment proceedings the assessing officer pointed out that assesse company had deposited substantial cash in bank account during the demonetization period 09.09.2016 to 30.12.2016 in the financial year 2016-17 relevant assessment year 2017-18. On query, the assessee explained that the amount of cash deposit made during the period 09.11.2016 to 30.12.2016 was out of sales made to various parties. It was also explained that an amount of Rs.10,00,000/- declared by the assessee under PMGKY scheme, and the amount of Rs.6,94,00,000/- was pertained to the sales made by the assessee. The AO asked the assessee to provide name/address and PAN of the parties to whom the sales have been made. The assesse explained that it has maintained the complete detail along with PAN of the transactions exceeding Rs.2,00,000/- and in case sale is less than of Rs.2,00,000/- from one person/party from which detail of PAN/address is not required to be maintained. The AO had not agreed with the submission of the assessee and observed that no genuine cash sale had taken place. Therefore, the assessing officer had treated the cash deposited of Rs.6,92,00,000/- as undisclosed out of books and added to the total income of the assessee u/s 69 of the Act.
3. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assesse. The relevant operating part of the decision of ld. CIT(A) is reproduced as under:
“2.3 I have gone through the assessment order and considered the submission filed by the appellant. The issue is regarding cash deposit in assessee’s bank accounts. The Appellant is engaged in business of gold bullion and gold jewellery as a wholesaler and retailer AO issued show cause notice to the assesse to explain the source of the deposit Assesse in response explained that the cash deposit is out of sales/counter sales of less than Rs.2,00,000/- from one person/party wherein according to Income tax Act details of address and PAN are not required to be maintained by appellant company. Hence, confirmations from such persons/ parties could not be made available. Total cash deposit was Rs.7,04,00,000. The AO added the cash deposit of Rs. 6,92,00,000/-( as reduced by amount of Rs.10,00,000/- declared in PMGKY and Rs. 2,00,000/- deposited in new currency) as unexplained money under section 69A of the Income Tax Act, 1961 to the total income of the assesse. From the facts as described in the assessment order and as coming out from assessee’s submission, it is a dealer in bullion. Sales are made in cash as well as in cheque. In respect of sales below Rs.2 lakh, assessee is not required to keep the details. Assessee has duly maintained name, address and PAN of purchases above Rs. 2,00,000/-. These details were provided to the AO who seems to have not given credence. Same has been provided at Pg No 73-76 Of Paper Book filed during the appellate proceedings. Assessee has also maintained name, address and PAN of Sales above Rs. 2,00,000/- which were also provided to the AO and which have been made part of submission at pages No 77-85 Of Paper Book All Purchases of assessee have been accepted. It is undenited that without purchases sales are not possible. All cash as well as credit sales are duly recorded in books which has been accepted. The assesse has maintained books of account which are duly audited by Tax Auditor as well as VAT Auditor. The stock remaining after the sales out of purchase have been maintained. Copy of cash statement for FY 15-16 (AY 2016-17). FY 16-17 (AY 2017-18) and FY 17-18 (AY 2018-19) were also made available which is part of submission at page No. 64-69 of Paper Book. Also Copy of Stock Statement for AY 2016-17, 2017-18 and 2018-19. and copy of monthly purchase and sales chart for existing and previous year are also provide. If assessee has maintain books of account depicting the generation of cash and has shown that the cash received from customers has been deposited in bank account, the cash deposit cannot be treated as unexplained. On examining the book results of the assessee, following state of affairs emerges.
The total sales and cash sales have increased from previous years sales:
