Cash deposits during the demonetization: If amount deposited is out of the sale proceeds, addition under section 68 of the Act that will amount to double taxation
Here is an interesting case before Mumbai ITAT as under:
DCIT, CIRCLE – 2 (1) (1) , MUMBAI
M/S. KUNDAN JEWELLERS PVT LTD,
ITA No. 1035/Mum/2022
Dated.- May 29, 2023
On the issue of validity of addition, ITAT observed as under:
CIT(A) has considered the details of sales, the stock register and the turnover is consistently maintained.
Assessee has submitted the details of cash sales/receipts and party wise details of sales above Rs. 2 lakhs and when a query was raised to Ld.AR on submissions of details were the cash sales are below Rs. 2 Lakhs. The Ld.AR mentioned that the assessee has submitted details of sales below Rs. 2 lakhs and highlighted rule 114B of the I T Rules r.w.s 139(a)(5)(c) of the Act and there was no KYC required.
AR demonstrated the sample Tax Invoice below Rs. 2 lakhs in the demonetization period and the invoice contains, name and address etc. Further there is no significant increase in the cash sales out of total sales, whereas for F.Y. 2016-17 it is @ 31.27% and in comparison to F.Y. 2015-16 @ 31.44%, the Ld.AR referred to the cash flow statement, cash book and demonstrated the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs. 68.07 crs for the F.Y 2015-16 and for F.Y 2016-17 it was maintained at Rs. 65.38crs and the cash sales are part of the stocks maintained which is not disputed.
Further the addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the cash sales proceeds/receipts received from the customers are reflected in the Audited Profit & Loss account as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. The AO has not pointed out any specific adversity but made a generalize addition without considering the factual aspects and primary evidences.
The A.O has failed to make further enquiries on the information filed and the assessee has discharged the initial burden placed by submitting the information and details. We find the CIT(A) has dealt on the facts, provisions of law, notes and judicial decisions. Decided against revenue.