The Income Tax Appellate Tribunal (ITAT), Visakhapatnam Bench ruled that no cash inflow involved due to demonetization as the assessee explains the reason for huge sales with evidence.
The assessee, M/s Hirapanna Jewellers is a firm with two partners i.e. Mahendra Kumar Jain and his son Sri Rajendra Kumar Jain engaged in the business of jewelry trading has filed its return of income, admitting a total income of Rs.95,59,210/-.
A survey was conducted in the business premises of the assessee by the Deputy Director of Income Tax (Investigation) wherein it was found that the assessee had deposited the sum of Rs.5,72,00,000/- in high denominations of specified bank notes (SBNs) post demonetization. The assessee has explained the sources of cash deposits as cash sales and the advances received against the sales.
In support of its explanation, the assessee also produced the sale bills and books of accounts before the DDIT(Inv.). However, the DDIT was not satisfied with the assessee’s explanation of sales, since, the assessee could not furnish proper KYC documents of the buyers during the course of the survey, the average sales of the firm was not matching with peak and non-peak season.
Even on special occasions like Akshaya Tritiya, Dhanteras, Ugadi, etc. the average sales were Rs. 1.5 to 2.0 crores and whereas on 08.11.2016, on a single day, the sales were increased by Rs.4.72 crores during 7.50 P.M to 12 A.M consisting of 270 bills and the cash was received only in high denomination notes which were hitherto banned by Government of India from 09.11.2016.
There were no details of the customers like phone number, address, etc. and no signatures were obtained in sale acknowledgments of the ornaments. There were no tag number details for some bills and CCTV footage was also not available to support the entry of a large number of customers on 08.11.2016. Since, the Managing Partner was unable to produce the above details to support the sales of Rs.4.72 crores increase, the DDIT(Inv.) viewed that the assessee has taken shelter of sales to divert the black money of the assessee as well as his friends.
The CIT(A) held that since, the sales were credited in the assessee’s books of accounts as revenue receipt and offered for taxation, the same amount cannot be taxed again u/s 68 of the Act as unexplained cash credit.
The coram of N.K.Choudhry and D.S.Surendra Singh in the light of the trading account and find that there was sufficient stock to affect the sales and we do not find any defect in the stock as well as the sales. Since the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again.
The tribunal observed that no cash inflow is involved due to demonetization. In the assessee’s case, there were no such deductions or exempt income and the profits were also not abnormal. The assessee explained the reason for huge sales with evidence.
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