Cash Sales Can't Take Place Before Commencement Of Business: Delhi ITAT Deletes Addition U/s 69A On Receipts From Such Sale
Pankaj Bajpai
18 July 2024 11:15 AM GMT
The New Delhi ITAT held that a business man deposits consideration from sale of his products on respective dates of sales as per his needs and prudence, and therefore, the AO cannot tax the receipts and income embedded therein together.
Hence, the ITAT deleted the addition made u/s 69A on account of cash sales during demonetization.
As per Sec 69A of Income tax Act, where in any financial year the assessee is found to be the owner of any money, bullion, or other valuable article and such money, bullion or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion or other valuable article may be deemed to be the income of assessee for such financial year.
The Bench of Madhumita Roy (Judicial Member) and Avdhesh Kumar Mishra (Accountant Member) observed that “The purchases are entirely through imports. Further, the revenue has also failed to place any material on the record to demonstrate that the VAT returns of the relevant year have not been accepted by the VAT authority and the Custom authority has not accepted the imports/purchases”.
Facts of the case:
The assessee, a trader in electrical goods trader, filed its return declaring income of Rs.4,700/-. During scrutiny, the AO held the cash sales aggregating to Rs.65,53,340/- deposited in the bank during the demonetization period non-genuine and taxed it u/s 69A r.w.s 115BBE of the Act.
Observation of the Tribunal:
The Bench observed that the reasons for revising the VAT returns were justified and the cash sales cannot take place before import/commencement of business in Sept., 2016.
Further, pointing that cash deposits prior to commencement of business cannot take place, the Bench opined that the AO's observation that cash deposit was only Rs.2,000/- during the period from Apr 01, 2016 to Nov 08, 2016 loses relevance.
As far as addition on account of cash deposits during demonetization period is concerned, the Bench admitted that the assessee has made cash sales as well as credit sales, and had maintained sales vouchers and filed VAT return within the stipulated time.
The Bench stated that revision of VAT return has not affected the turn over shown in the original VAT return, and the Revenue has not placed any material on record to demonstrate that the details of cash sales shown by the assessee are fictitious/bogus.
Hence, referring to the decision of Co-ordinate Bench in case of Ramesh Kochar - ITA No. 171/Del/2022, the ITAT deleted the addition of Rs.65,53,340/- made u/s 69A and dismissed Revenue's appeal.
Counsel for Appellant/ Revenue: Neeraj Mangla
Counsel for Respondent/ Assessee: Kanv Bali
Case Title: ITO verses Appliances Forever
Case Number: ITA No.2842/De l/2023
