10 September 2009
The assessing officer, while scrutiny assessment of a Pvt. Ltd Company, intends to disallow all the cash sale done by the Company as bogus and wants to add it to the income. He intends to verify the purchaser in all the cases involved.
Is he rightful in doing so?? What remedy do the assessee have against the AO rejecting cash dales as bogus???
How can he prove the genuineness of the sales transaction?? What happens if any of the purchaser is not verifiable or is not found by the AO??
10 September 2009
If you maintain proper cash sales invoices in serial order and your business is such that, that forces you to sale on cash basis..like retailer...then the AO cannot challenge the genuineness of cash sales...
10 September 2009
Burden is on assessee to prove source of receipt - The law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. Where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source - Roshan Di Hatti v. CIT [1977] 107 ITR 938 (SC)/ Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 (SC).
It is for the assessee to prove that even if the cash credit represents income, it is income from a source which has already been taxed - CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 (SC).
Department need not locate source of receipt - Where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assessee, it is not necessary for the department to locate its exact source - CIT v. M. Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC).
The principle laid down in Ganapathi Mudaliar’s case (supra) applies alike to cases in which an entry is found in the books of account of the assessee and to cases in which no such entry is found. If the amount represented the income of the assessee of the previous year, it was liable to be included in the total income and an enquiry whether for the purpose of bringing the amount to tax it was from a business activity or from some other source was not relevant - CIT v. Durga Prasad More [1969] 72 ITR 807 (SC).
If explanation of assessee is unsatisfactory amount can be treated as assessee’s income - If the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory, there is prima facie evidence against the assessee, viz., the receipt of money, and if he fails to rebut the same, the said evidence being unrebutted can be used against him by holding that it is a receipt of an income nature. While considering the explanation of the assessee, the department cannot, however, act unreasonably - Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC).
11 September 2009
The company in question is showing full records of the cash sale including the sale tax return. The AO wants to verify the purchaser citing it as bogus sale. He is of the opinion that there was a cash shortage and that has been made good by way of bogus cash sales. He intends to take an statement on oath from all the purchasers for the goods purchased by them in cash.
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