2024 (8) TMI 548 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - Deposits of the money during the demonetization period - HELD THAT - The present case in hand is that appellant has explained the nature as well as sources of cash deposit that is the said cash deposits were made out of sales in ordinary course of carrying on business. Accordingly, we are in this view that the appellant has duly discharged its responsibility u/s 68 - We find that collection in deposits has duly been recorded in the books of accounts. Hence, there is no reason to treat the same as unexplained cash credit/unexplained money. We find force in the argument of assessee that merely due to the contravention of the notification issued by RBI does not mean that the amount collected by the appellant against sales and duly recorded in the books of accounts treated as unexplained cash credit of the appellant. We are of this view that appellant has been able to succeeded in establishing his case and accordingly, the order of the CIT(A) with regard to the unexplained money is hereby set aside and the appeal of the assessee is hereby allowed.

Summary

Issues Involved:
Appeal against order u/s 250 of the Income Tax Act, 1961 for AY 2017-18 regarding unexplained cash deposits during demonetization period.

Detailed Analysis:

Issue 1: Unexplained Cash Deposits
The appellant, engaged in the business of fabrication and trading, faced scrutiny due to cash deposits during demonetization. The Assessing Officer treated a significant cash deposit as unexplained income under section 68 of the Act. The CIT(A) partially allowed the appeal. The appellant contended that the cash deposits were from sales to reduce credit risk. The appellant provided documentary evidence of cash deposits before, during, and after demonetization, emphasizing sales-related cash deposits. The AO disregarded the evidence, leading to the appeal.

Issue 2: Arguments and Citations
The appellant argued that the AO overlooked submitted details and added all cash deposits as unexplained. The appellant cited various judicial decisions supporting their case, emphasizing the importance of sales proceeds and proper recording in the books of account. The Departmental Representative supported the CIT(A)'s order.

Issue 3: Tribunal's Analysis
The Tribunal examined the documentary evidence provided by the appellant, including bank statements, financial reports, and cash books. It noted substantial cash deposits before and after demonetization, supported by sales transactions. The Tribunal highlighted that the appellant explained the nature and sources of cash deposits, fulfilling obligations under section 68 of the Act. Citing relevant case laws, the Tribunal emphasized that sales proceeds already declared as income should not be treated as unexplained cash credit.

Issue 4: Decision
After considering the facts, evidence, and legal precedents, the Tribunal set aside the CIT(A)'s order regarding unexplained money. The Tribunal allowed the appellant's appeal, concluding that the appellant successfully established the legitimacy of cash deposits from sales. The order was pronounced in favor of the appellant on 8th August, 2024.

This detailed analysis outlines the key issues, arguments, tribunal's assessment, and final decision regarding the appeal against unexplained cash deposits during demonetization, providing a comprehensive overview of the judgment.