Income Tax Appellate Tribunal

Vijay Kumar Jain, Delhi vs Income Tax Officer

MANU/ID/0763/2024

31.07.2024

Direct Taxation

Assessment cannot be framed only on bare suspicion

The assessee is an individual engaged in the business of trading of fabrics. The case of the assessee was subjected to scrutiny assessment by issuance of notice under Section 143(2) and Section 142(1) of the Income Tax Act, 1961 (IT Act). The AO enquired into source of cash deposits during demonetization period. The explanation placed by the assessee before the AO towards source of cash deposit during demonetisation was however, not found satisfactory by the AO.

The Assessing Officer accordingly treated the cash deposits of ₹ 1,36,90,000 made by the assessee during demonetisation period i.e. from 09.11.2016 to 31.12.2016 as undisclosed income of the assessee in the form of cash credit within the meaning of Section 68 read with Section 115BBE of the Act. Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) also, however, confirmed the action of the AO.

Sale of goods has corresponding effect on the closing stock as well as the profitability. These aspects have not been questioned. The Assessing Officer has picked up the amount declared by way of cash sales and treated that as non-existent to hold the corresponding cash deposits as unexplained. The assessee, on the other hand, has demonstrated the factum of cash sales to be genuine by the direct and circumstantial evidences.

The Revenue, has based itself findings on suspicion and conjectures and on improper rejection of tangible material. The assessee on the other hand has successfully demonstrated the propriety of cash sales by corresponding purchases, reduction in stock and declaration of profits on sales.No defect has been pointed out on the declarations made towards purchases, the closing stock and the profits either. The additions made have resulted assessment of cash sales twice which is not permissible in law.

It is trite that suspicion, howsoever strong, cannot take the place of proof as held in Umacharan Shaw & Bros. vs. CIT. The Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd v. Commissioner of Income Tax has observed that powers given to the Revenue authority, howsoever, wide, do not entitle him to make the assessment on pure guess without reference to any evidence or material. The assessment cannot be framed only on bare suspicion. The assessment should rest on principles of law and one should avoid presumption of evasion in every matter.

The assessee, in the instant case, has sufficiently demonstrated the source of cash deposits. On a broader reckoning, the apprehension raised by the Revenue authorities militates against the tangible material and is thus extraneous. The additions made under Section 68 of the Act is thus unsustainable in the facts of the case. The order of CIT(A) is thus set aside. The Assessing Officer is directed to cancel the impugned additions towards cash deposits. The appeal of the assessee is allowed.

Tags : Assessment Addition Legality

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