CAN ADDITION BE MADE FOR CASH DEPOSIT IN DEMONETIZATION IF ASSESSEE IS NOT IN HABIT OF KEEPING CASH?
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Short note of today's case law for quick reference:
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[2024] 111 ITR (Trib) (S.N.) 12 (Raipur)
[BEFORE THE INCOME-TAX APPELLATE TRIBUNAL — RAIPUR BENCH]
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NEERAJ CAMELLIA P. LTD.
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DEPUTY COMMISSIONER OF INCOME-TAX
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1. The assessee company carried on wholesale and retail trade in gold, diamonds, and silver ornaments.
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2. The assessee made a cash deposit of Rs. 3.06 crores in its bank accounts during the period 09.11.2016 to 31.12.2016.
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3. Out of this deposit of Rs. 2.71 crores were made in specified bank notes i.e. old currency.
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4. Case selected for scrutiny to verify cash deposit.
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5. A.O. doubted the authenticity of the substantially high sales in the months of October and November, 2016.
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6. A.O. observed that upto September 2016, the assessee had deposited almost the entire amount of its cash sales in its bank accounts within 1 or 2 days, there was no justifiable reason why it had retained a substantial amount of cash in hand during the pre-demonetization period and deposited it during the period.
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7. A.O. made addition of 25% of cash deposit after taking cash in hand of Rs. 10,10,565/- by rejecting books which was confirmed by CIT(A).
On Appeal to ITAT, assessee pleaded that cash deposits made by assessee during the demonetization period from 09.11.2016 to 31.12.2016, were very much in conformity with those made during the same period in the immediately preceding year i.e. 08.11.2015 to 31.12.2015, cash deposit in preceding period was 4.88 crores.
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8. Apart from this as in the past, the sales of the assessee in the month of the festival of Diwali witnessed a manifold increase in comparison to those of the preceding months.
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9. Survey team officials had verified the stocks and cash and found them to be in order.
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10.? There was otherwise no basis for the A.O. to have presumed a net profit of 25% on basis of media clippings and status reports of the Department on operation clean money and the fact that certain jewelers had opted to make declarations under the Income Declaration Scheme, 2016 and the Pradhan Mantri Garib Kalyan Yojana and have offered 25% to 40% of their total cash deposits as undisclosed income.
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11.? The assumption of A.O. that the sales in question are antedated and earned super profit of 25% are based on mere suspicion, assumption, presumption, surmises and conjecture without any material to prove them.
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12.? The rejection of the books of account u/s 145(3) pre-supposes satisfaction of either of 2 conditions which were not proved in the case of the assessee and therefore rejection of its books results cannot be approved.
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a.? Dissatisfaction of the A.O. as regards the correctness and completeness of the accounts of the assessee.
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b. Failure on the part of the assessee in computing its income as per system of accounting regularly employed by him.
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13.? ITAT deleted the additions.