2024 (6) TMI 594 - AT - Income Tax

Addition u/s 68 - unexplained cash credits - no sources of cash deposits during the demonetization period provided - HELD THAT - Sales including cash sales cannot be questioned. We also find that no evidence has been bought on record to prove that the cash-in-hand shown by the assessee was used for any other purpose so that sufficient cash was not available to make deposits in the bank account, as claimed by the assessee. The appellant has submitted that cash sales and realisation in cash from debtors were 1.68% and 5.37% of the turnover respectively, which is a very small portion of the turnover. AO has not given any finding that assessee was having any other source of income which is not recorded in the books of account and cash generated therefrom was deposited in the bank account. We find that cash realised from debtors and cash sales etc. have been duly recorded in the books of accounts. The impugned deposits have been made from cash balance available in the books of account. We also find that such books have not been rejected by the AO nor any defect has been found out by him. When cash deposits were out of the cash in the bank as per the books of account, there is no question of treating the said deposits as unexplained cash deposit u/s 68 - Hence, we do not find any infirmity in the order of learned CIT(A). The decisions relied upon by him also support his findings. Accordingly, the grounds of appeal raised by Revenue are dismissed.

Summary

Issues Involved:

1. Deletion of addition of Rs. 75,57,500/- made by the Assessing Officer on account of unexplained cash credits u/s 68 of the Income-tax Act.
2. Satisfaction of the explanation offered by the assessee for sources of cash deposits during the demonetization period.
3. Acceptance of the cash book produced by the assessee during the assessment proceedings.

Summary:

Issue 1: Deletion of Addition of Rs. 75,57,500/- u/s 68

The Revenue appealed against the deletion of Rs. 75,57,500/- added by the Assessing Officer (AO) as unexplained cash credits u/s 68 of the Income-tax Act. The AO had accepted only the initial cash deposit of Rs. 1,10,000 on 10.11.2016 and treated the subsequent deposits as unexplained. The learned CIT(A) deleted this addition, observing that the AO did not dispute the sales, purchases, quantitative details, or financials of the assessee company. The CIT(A) noted that the cash sales and receipts were within tolerable limits and that the AO failed to establish that the cash deposits were from undisclosed sources. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the order.

Issue 2: Explanation for Sources of Cash Deposits During Demonetization

The assessee explained that the cash deposits during the demonetization period were from cash-in-hand, derived from cash sales, customer collections, and cash withdrawals. The AO was not satisfied with this explanation, citing higher cash receipts and sales compared to the previous year. However, the CIT(A) accepted the assessee's explanation, noting that the cash sales were a small portion of the total turnover and that the AO did not find any other source of income for the assessee. The Tribunal agreed with the CIT(A), noting that the cash deposits were recorded in the audited books of account, which were not rejected by the AO.

Issue 3: Acceptance of Cash Book

The AO had questioned the acceptance of the cash book produced by the assessee, citing discrepancies in cash receipts and sales. The CIT(A) found that the AO did not dispute the stock, cash received from customers, or other financial details. The CIT(A) also noted that the cash deposits were from the cash balance available in the books of account, which were not rejected by the AO. The Tribunal upheld the CIT(A)'s findings, noting that the cash deposits were duly recorded in the books of account and that there was no evidence of the cash being used for any other purpose.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 75,57,500/- made by the AO u/s 68 of the Income-tax Act. The Tribunal found that the cash deposits were duly recorded in the books of account, which were not rejected by the AO, and that the assessee's explanation for the sources of cash deposits was satisfactory. The Tribunal also noted that there was no evidence of the cash being used for any other purpose, and that the addition by the AO was based on assumptions and presumptions.