2024 (6) TMI 321 - AT - Income Tax

Addition u/s 68 - Cash sales proceeds were deposited during the demonetization period - HELD THAT - We find merit in the submissions of the Ld. AR that the nature and source of cash recorded by way of credit entries in the cash book, which in turn was deposited into the bank account, had been explained in as much as the source comprised of the sale proceeds of gold and precious jewellery. On these specific facts therefore, according to us, the averments made by the AO regarding non mentioning of narrations in the cashbook or non-provision of daily running cash balance cannot be sufficient reason to disbelieve the nature and source of cash recorded by way of credit entries in the cashbook, as the same had indeed been explained by the assessee and no adverse material in this regard was unearthed by the survey authorities in the course of survey conducted u/s 133A during the relevant year. As sale proceeds which were deposited during demonetization period and offered by way of revenue receipts from Business by the assessee-firm, is found to be explained and therefore we hold that the lower authorities were unjustified in assessing these sale proceeds as unexplained cash credit u/s 68 of the Act. Accordingly, the addition made u/s 68 of the Act is hereby deleted and the grounds of appeal raised by the assessee stands allowed.

Summary

Issues Involved: Appeal against addition u/s 68 of the Income Tax Act, 1961.

Issue 1: Addition u/s 68 of the Income Tax Act

The appellant, a partnership firm engaged in retailing gold and precious jewelry, appealed against the addition of Rs. 5,72,90,000/- u/s 68 of the Income Tax Act, 1961. The Assessing Officer (AO) doubted the explanation provided by the appellant regarding cash deposits post-demonetization, citing abnormal increase in sales without supporting evidence. The AO rejected the books of accounts, accepted part results, and added the cash deposits u/s 68, assessing the total income at Rs. 5,83,75,640/-. The Commissioner of Income Tax (Appeals) upheld the AO's decision. The appellant contended that the sales turnover was genuine, recorded in various registers, and offered for taxation. The Tribunal found the AO's selective rejection of sales proceeds deposited during demonetization unjustified, as the sales were reconciled with stock movement and purchases. The Tribunal held that the AO's doubts on sales turnover lacked merit, as the stock movement and purchases were accepted. The Tribunal also dismissed the AO's objection regarding lack of customer details, citing the nature of retail trade and legal requirements. The Tribunal concluded that the addition u/s 68 was unwarranted, deleting the Rs. 5,72,90,000/- addition and allowing the appeal.

Separate Judgement by Judges: Not Applicable.