2023 (3) TMI 1229 - AT - Income Tax

Addition u/s 68 - deposit of cash in two bank accounts of the assessee, during demonetisation period and creditors amount related to unsecured loan - HELD THAT - The assessee has placed the documents and the primary evidence related to stock report of inspection of stock by the Excise and Taxation department of Punjab. We find that the assessee has a sufficient stock to convert in sale. Accordingly, the source of cash was explained which are generated from the sale of goods. The ld. AO pointed out that the sales are made by cash. Counsel placed that the stock of assessee was never be disputed. The assessee already declared the cash as turnover paid the tax accordingly. The stock and purchase was never be disputed by the revenue. As relying on Om Overseas 2008 (3) TMI 44 - HIGH COURT PUNJAB AND HARYANA assessee s books of account were rejected by the AO and the addition was made without pointing out any specific defect in the books of account, impugned addition was rightly deleted - thus addition made by the ld. AO is liable to be quashed. In verification of the loan creditors the assessee has filed the document related to identity, transaction, the entire transaction was made through bank account which was produced before the bench. We set aside the order of the ld. CIT(A). The addition amount related to loan creditors u/s 68 of the Act is liable to be quashed. Appeal of assessee allowed.

Summary

Issues Involved:
The appeal against the order of the ld. Commissioner of Income Tax (Appeals) for A.Y. 2017-18 based on additions made by the ld. AO related to cash deposits during demonetization period and unsecured loan, confirmed by the CIT(A) under sections 68 and 115BBE of the Income Tax Act 1961.

Grounds Raised by the Assessee:
1. Challenge to the addition of cash deposits during demonetization period, despite being recorded in regular books and generated from genuine cash sale.
2. Dispute over the alleged cash sale amount before demonetization as part of cash in hand.
3. Objection to addition of fresh unsecured loan received through regular banking system.
4. Dispute regarding applicability of Section 68 and Section 115BBE for income tax computation.
5. Claim of CIT(A)'s order being bad in law on facts.
6. Request for the liberty to add, modify, or amend any ground of appeal subsequently.

Detailed Summary:
The assessee appealed against the CIT(A)'s order confirming additions made by the ld. AO regarding cash deposits and unsecured loan. The assessee provided documents and explanations to support their case. The first issue related to cash deposits was supported by sales during the period, with evidence from a survey conducted by the Excise and Taxation department before demonetization. The assessee presented trading accounts and documents to demonstrate the legitimacy of the cash deposits. Regarding the unsecured loan addition, the assessee submitted bank account proofs, confirmations, and ITR of the loan creditors to validate the transactions.

The ld. Sr. DR argued in favor of the revenue, highlighting abnormal sales during demonetization. However, after considering the submissions and documents, the Tribunal found that the assessee had sufficient stock to explain the source of cash generated from sales. The Tribunal referred to relevant case laws and jurisdictional High Court judgments to support the decision. Consequently, the addition of cash deposits and unsecured loan under sections 68 and 115BBE was deemed unjustified and liable to be quashed.

In conclusion, the Tribunal allowed the appeal of the assessee on specific grounds, while dismissing others as academic or general in nature. The appeal was ultimately allowed, and the order was pronounced in open court on 15.03.2023.