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2021 (2) TMI 737 - AT - Income TaxUnexplained cash credit u/s 68 - cash deposited during the demonetization period - AO acknowledges that the assessee has filed audited accounts and produced copy of the ledger of the sales and purchases along with copy of the books related to the purchase and sales made by the assessee without supporting bills and invoices - HELD THAT - As brought to notice by the Ld. A.R that assessee is into dry fish business and his accounts are audited for the last seven (7) years. - the profit embedded in sales amunt has been accepted by the AO, so, question is whether separate addition is justified and whether this action of AO amounts to double addition of the same trading receipt. No doubt in such a factual scenario, it amounts to double addition. When the justifiability of separate addition is to be examined, it should be borne in mind that the AO is making a guess about the source of demonetized currency. And the assessee is assailing the guess work with an explanation which should be tested; and if the explanation given by the assessee is a plausible/probable from a traders/business man s/prudent man s angle/view, then that cannot be brushed aside by the AO, without disproving the explanation / facts or by giving cogent reasons. Statement of bank accounts of assessee (3 bank accounts) it is noted that assessee has deposited in his three bank account (pre-demonetization) an amount to the tune of ₹ 2,38,94,037/- and during (Post-demonetization period) the assessee had deposited to the tune of ₹ 2,38,94,037/- and it is found that the total bank deposit tallys with the figure shown in trading account i.e., ₹ 4,76,78,990/- (₹ 4.76 crores). So taking into account all these facts and circumstances and demonetization being declared on the night of 8/9th November, 2016, it is noted that AO has accepted the invalid currencies to the tune of ₹ 11,08,796/- because it was shown by the assessee in his regular books maintained as on 08.11.2016. The assessee s explanation in respect of ₹ 12,41,704/- is that it is the amount which has been deposited by the sundry debtors as on 08.11.2016 which is found to be correct for the reason that the sundry debtors as on 08.11.2016 was to the tune of ₹ 14,93,120/- as is evident from the list of sundry debtors . So on the same reasoning as adopted by the AO to have accepted ₹ 11,08,796/- (invalid currency notes) as genuine (trade receipt), I find no reason not to accept the explanation of assessee that ₹ 12,41,704/- was deposited by the sundry debtors reflected in the books as on 08.11.2016. And since the AO has accepted the sales/turnover of the assessee which were reflected in the audited books of accounts, as well as the explanation of assessee is supported by material on record, the AO/Ld. CIT(A) s action of addition of ₹ 12,41,704/- cannot be countenanced. So on this factual finding the assessee s explanation regarding ₹ 12,41,704/- is plausible. And it is noted that the AO / Ld. CIT(A) / Ld. D.R could not disprove or controvert this fact and so it is accepted. In the aforesaid facts and circumstances, the assessee depositing invalid notes to the tune of ₹ 12,41,704/- cannot be dis-believed as from any tainted source or termed as black money. So taking into consideration the peculiar over all facts and circumstances discussed supra, it is directed that the addition of ₹ 12,41,704/- be deleted - Appeal of the assessee is allowed.
Issues Involved:
1. Addition of ?12,41,704/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961. 2. Doubts regarding the genuineness of the assessee's business. 3. Rejection of books of accounts under Section 145(3) of the Act and subsequent addition under Section 68. 4. Double addition of the same amount as income. Detailed Analysis: 1. Addition of ?12,41,704/- as Unexplained Cash Credit: The primary issue in this case was the addition of ?12,41,704/- by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, as unexplained cash credit. The AO accepted the cash deposit of ?11,08,796/- but added the remaining ?12,41,704/- as unexplained. The assessee contended that this amount was from the sale of dry fish and should not be treated as unexplained. 2. Doubts Regarding the Genuineness of the Assessee's Business: The Commissioner of Income Tax (Appeals) [CIT(A)] expressed doubts about the genuineness of the assessee's business of selling/trading dry fish. However, the Tribunal noted that the AO did not doubt the business's genuineness. The assessee provided evidence, including a survey report, bank statements, and licenses, to support the business's legitimacy. The Tribunal found the CIT(A)'s doubts to be unfounded and directed them to be ignored. 3. Rejection of Books of Accounts and Subsequent Addition: The AO rejected the assessee's books of accounts under Section 145(3) of the Act but still made an addition under Section 68. The Tribunal referred to judicial precedents, including the Karnataka High Court's decision in CIT Vs Bahubali N Muttin, which held that once books of accounts are rejected, the AO cannot rely on them for making additions under Section 68. The Tribunal found the AO's action impermissible in law and cited similar cases to support this view. 4. Double Addition of the Same Amount as Income: The assessee argued that the addition of ?12,41,704/- amounted to double addition since the AO had already accepted the income shown in the return, which included this amount. The Tribunal referred to its decision in New Pooja Jewellers Vs. ITO, where it was held that once a receipt is accounted for as income, no separate addition under any other section can be made as it would result in double addition. The Tribunal found this argument valid and noted that the AO's action was erroneous. Conclusion: The Tribunal concluded that the AO's addition of ?12,41,704/- was unjustified. The assessee's explanation that this amount was from sundry debtors and part of the sales was plausible. The Tribunal directed the deletion of the addition, allowing the assessee's appeal. The order was pronounced on 17th February 2021.
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