2022 (11) TMI 74 - AT - Income Tax

Addition u/s 68 - unexplained cash towards cash deposits made during the demonetisation period - CIT-A deleted the addition - HELD THAT - AO is not questioning the source of the cash deposit since he has recorded a finding that cash sales during the demonetisation period is brought to tax u/s. 68 which makes it clear that it is admitted fact that sales is the source for cash deposits. The revenue is contending that there is a requirement as per the Circular that the Doctors prescriptions and identity of the persons purchasing medicines needs to be kept in record to substantiate the cash sales during demonetisation period. However, from the plain reading of the said Circular, there is no specific mention as contended by the department. AO did not reject the books of accounts of the assessee and has not brought anything contrary on record to show that cash sales is not the source for the cash deposited during demonetisation period. We are therefore of the opinion that there is no case here for making the addition as unexplained u/s.68. In view of this discussion, we see no reason to interfere with the order of the CIT(A). Appeal of the revenue is dismissed.

Summary

Issues:
- Whether deletion of addition made under section 68 of the Income Tax Act by the CIT(A) was justified?
- Whether the delay in filing the appeal should be condoned?

Analysis:

Issue 1: Deletion of addition under section 68 by CIT(A)

The appeal by the revenue challenged the deletion of the addition made under section 68 of the Income Tax Act by the CIT(A). The revenue contended that the assessee failed to comply with the requirements of maintaining complete records of stock, sales transactions, and identities of persons as mandated by notifications. The revenue argued that the cash deposits were unexplained and justified the addition under section 68. However, the CIT(A) accepted the assessee's explanation that the cash deposits were from sales, duly accounted for in books and statutory returns. The CIT(A) observed that the assessing officer did not provide contradictory findings to reject the explanation offered by the assessee. Consequently, the CIT(A) held that the addition made by the assessing officer under section 68 was unwarranted and directed its deletion, allowing the appeal in favor of the assessee.

Issue 2: Condonation of Delay

The revenue sought condonation of a 38-day delay in filing the appeal, attributing it to a substantial number of cases of reopening under section 148A post a Supreme Court decision. The revenue explained that the delay was due to the cascading effect of pending approvals. The Tribunal, following the precedent set by the Supreme Court in Collector, Land Acquisition Vs. MST. Katiji and Others, found reasonable cause for the delay and thus condoned it.

In conclusion, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to delete the addition under section 68. The delay in filing the appeal was condoned based on valid reasons provided by the revenue. The judgment emphasized the importance of maintaining complete records and complying with regulatory requirements to substantiate financial transactions during demonetization.