No addition for cash receipts can be made under section 68.

Facts and Issue of the case

This appeal filed by the assessee is arising out of an order passed by the National Faceless Appeal Centre [here in after referred to as NFAC] by dated 19-08-2021 for the assessment years 2012-13. The assessee has raised the following grounds of appeal:-

On the facts and in the circumstances of the case, the ld. AO has legally and factually erred in not making discreet enquiries as per directions of the Hon’ble ITAT Jaipur Bench, Jaipur to find out the Truth. For the purpose, the Ld. AO was required to examine the trading account of the appellant vice versa witness critically as to how such trading transactions were finally squared up. Instead of undertaking such discreet enquiries, the ld. AO felt satisfied with the formal verification u/s 133(6) of the Act without examining these details critically, in absence of this exercise, no conclusive and logical findings can be arrived at. Thus the findings so arrived at on the basis of such formal enquiries were factually and legally incorrect and illogical so the same deserved to be quashed summarily. On the facts and in the circumstances of the case, the ld. AO has factually and legally erred in appreciating the facts of the case in right perspective to conduct the discreet enquiries to find out the Truth. Thus the assessment order so passed is devoid of merits and deserved to be quashed summarily.

On the facts and in the circumstances of the case, the ld. Hon’ble Faceless Appeal Centre have factually and legally erred in not taking note of such deficiencies in the Assessment Order and had decided the appeal on the basis of the invalid assessment order as pointed out above. Thus the Authorities below have legally and factually erred in not passing a well reasoned order after addressing the various contentions as made by the appellant in the Assessment and Appeal Proceedings. Thus the orders so passed by the Authorities Below are devoid of merits and deserves to be quashed.
On the facts and in the circumstances of the case, the Authorities Below have erred to appreciate the provisions of Evidence Act correctly. As per provisions of Evidence Act, the onus is on the concerned Authorities to decide the correctness of the evidences as procured by the concerned parties in support of their contentions. The Authorities Below had failed to undertake such exercise to find out the Truth by making independent and discreet enquires. In absence of this exercise, the findings of the Authorities Below do not hold good, to be quashed summarily.
On the facts and in the circumstances of the case, the Authorities Below have factually erred in not appreciating the Principles of Accountancy and the Provisions of Section 68 of the Act in right perspective. The Provisions of section 68 of the Act do not come into play in respect of the ‘Outstanding Trade. Debtors’ and the ‘undisputed’ and ‘admitted’ sales recorded in the regular books. Once the Sales and the ‘Outstanding Trade Debtors’ are accepted and are not disputed by the Revenue, then the provisions of section 68 of the Act do not come into Play as per Accountancy principal and provisions of the Income Tax Act. Thus the Authorities Below have erred in invoking the provisions of section 68 of the Act to make addition of Rs.3,19,380/-. Thus the addition of Rs.3,19,380/-made by the id. AO and confirmed by the Appeal Centre is bad in law and the same deserves to be deleted summarily.

On the facts and in the circumstances of the case, the National Faceless Appeal Centre, Delhi has legally and factually erred in passing the appellate order in a mechanical manner solely on the plea that the purchaser did not make such cash payments without verifying such claim of the purchaser in the back-ground of various contentions of the appellant and the sale vouchers as adduced in support of receiving such cash payments. Thus the appeal order so passed without critically verifying the contentions of the parties, is bad in law. Thus the addition so confirmed on the basis of such formal enquiries deserved to be deleted.
In the second round of litigation against the confirmation of addition by the ld. AO, assessee preferred an appeal against the set-a side assessment order. As the assessee left heavenly abode, vide letter dated 25th January, 2022 legal heirs Smt. Kanchan (Widow) and Yogesh Sharma (Son) filed modified Form No. 36 duly signed by them in the case of Late Sh. Sita Ram Sharma
The appellant craves the right to add, amend and alter the grounds on or before the hearing.

Observation of the court

Looking to the facts stated court has considered the revised form 36 filed by the legal heirs and taken up the appeal for hearing on merits. The ld. AR appearing on behalf of the assessee/legal heirs has placed their written submission.
In addition to the given written arguments the ld. AR of the assessee argued that the department has not issued any show cause notice for rejection of the books of account. The receipt in question is arising out of the sales made to the party named M/s. Vijay Laxmi Agro Implements which is not proved to be bogus even by that party and they have just denied to given cash against sales, sales is supported by a delivery challan mentioning the vehicle number, items sold and is supported by a invoice having sr no. of bill book. The sale invoice shows complete details of the party and this invoice is as prescribed under the VAT laws. This sale made is accepted by the ld. AO and if so the cash receipt from such sales can be believed that it is unexplained. He further argued that even if the sales are made to anyone than also the receipt of cash of sales invoice will not come under the purview of provision of section 68 of the Act as the credit is perfectly proved by the sale of item and receipt of money in cash from the parties to whom the goods sold.

Not only that law neither prohibit the assessee to sold the goods on cash basis nor restricted under the law prevalent at that time to accept the cash on such sales. Thus, he prayed that the issue being very limited on this receipt of cash of sales proceeds may be deleted as it is not under the purview of the cash credit but it is the proceeds of the sales made Per contra the ld. DR stated that the source of cash receipt is not clearly established by the assessee in these two round of litigation for receipt of the money. AO has made an effort by issuing the notice u/s. 133(6) but no such information were filed by the party in whose name such cash receipt on account of sales is shown. Therefore, ld. DR heavily relied upon the findings of the lower authorities.

Court has heard the rival contentions and persuaded the material available on record. The ld. AO in the second round of litigation admitted the fact that the appellant has made the sales supported by delivery challan and invoice and copy of party’s ledger account. This sale since accepted and the receipt of the sales in cash cannot be considered as an amount of income under the provision of section 68 of the Act. As the credit in the books of account first is sales made as it is evident from the copy of the ledger filed by the assessee thus, the source of money received is clearly proved and there is no rejection of the books produced before the assessing officer. If the sales are accepted to have been made the related cash receipt recorded in the books of account arising out of the said sales is same receipt for which source is sales made. Thus, the separate receipt of cash on account such sales after accepting the cash sales as genuine the receipt does not fall within the purview of section 68 and thus the addition of Rs. 3,19,380/- is required to be deleted.