Assessee not bound to keep record of parties to whom cash sales made

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INCOME TAX APPELLATE TRIBUNAL AHMEDABAD

I.T.A. No. 896/ Ahd/2011 – (Assessment year 2007-08)

M/s. Nitisha Silk mills Pvt. Ltd. Vs. ITO

584. Adarsh Market,

Date of pronouncement: 20.07.2012

Assessee has claimed to have effected cash sales of grey cloth on three dates i.e. 16.5.2006, 17.5.2006 and 31.3.2007 totaling an amount of Rs.9,95,870/-. The A.O.’s objection is this that why cash sale is only on these three dates in the year and not on other dates. With regard to this objection of the A.O., it was submitted by the assessee before the A.O. vide written submission dated 29.12.2009 that since the assessee decided to discontinue the business, major quantity of grey cloth lying in various process houses were called back without processing and the grey cloth so received was sold in cash. It is also submitted that some of the process houses could not trace grey cloth of the assessee and therefore, cash equal to that value of grey cloth was given by the owners of the process houses. Considering these facts of the present case, in its entirety, we are of the considered opinion that the claim of the assessee regarding cash sales under peculiar conditions that the assessee was discontinuing its business and therefore some sales were made in cash cannot be summarily rejected. We also find that it is observed by the Ld. CIT(A) on pages 51-52 of his order that the assessee could not provide even the names and addresses of those parties to whom cash sales were claimed to have been made. This is the main basis on which Ld. CIT(A) has confirmed the decision of the A.O. In our considered opinion, it cannot be said that in the case of cash sales, the assessee is bound to keep record of the names and addresses of the buyers. The judgement of Hon’ble Bombay High Court cited by the Ld. A.R. rendered in the case of R B Gurnam Fatehchand vs ACIT as reported in 75 ITR 33 also supports the case of the assessee. In that case also, the assessee was not in a position to give the addresses of the customers to whom cash sales were made. Under these facts, it was held by the Hon’ble Bombay High Court that this cannot be the basis to reject the book results.