Averaging Annual Turnover to Disprove Single Day Cash Sales Held Invalid

1. Core Facts & Background

• The assessee deposited cash into their bank account during the relevant financial year.
• The assessee maintained that the deposits represented legitimate cash sales generated in the regular course of business.
• The sales figures and turnover were duly accounted for and reflected in the statutory VAT returns.
• An ex-parte assessment order was passed against the assessee treating the cash deposits as unexplained income.

2. Revenue / Department’s Action

• The Assessing Officer made an addition under Section 69A by treating the cash deposits as unexplained money.
• The Assessing Officer divided the assessee’s total annual turnover by 365 days to determine an average daily turnover of approximately Rs. 30,000.
• The department contended that it was implausible for the assessee to achieve a cash sale of Rs. 2,50,000 on a single day given the daily average.
• The first appellate authority upheld the order of the Assessing Officer and confirmed the addition.

3. Assessee’s Defense & Arguments

• The assessee argued that the cash deposits represented actual realization from business sales proceeds.
• The assessee demonstrated that all sales were duly reported in the periodically filed VAT returns.
• The assessee furnished comprehensive documentary evidence before lower authorities substantiating sales and corresponding bank deposits.
• The assessee contended that the lower authority’s decision ran contrary to verified records and relied on flawed mathematical assumptions.

4. Final Ruling & Outcome

• The appellate tribunal held that determining daily turnover by dividing annual turnover by 365 days is based purely on conjectures and surmises.
• The tribunal noted that Revenue failed to bring any adverse material to rebut the sales figures recorded in the VAT returns.
• The impugned addition under Section 69A was held unsustainable and ordered to be deleted in full.