2024 (8) TMI 741 - AT - Income Tax

Unexplained cash credit u/s. 68 r.w.s.115BBE - appellant could not establish source for cash deposits into bank account during demonetization period - CIT(A) deleted addition - HELD THAT - As in absence of any contrary findings to the effect that the sales declared by the assessee is not backed by corresponding purchase or supported by stock in hand, in our considered view, simply sales cannot be rejected on the ground that sale for the particular month or period is higher when compared to corresponding previous period. There cannot be any reason for uniform sales in all days or month or year. There may be various reasons for increase or decrease in sales which depends upon various factors, including festival sales, clearing sales, yearend sales, etc. Therefore, in our considered view, the explanation of the assessee that it has received cash from various customers towards sale of jewellery and subsequently the advances have been converted into sales, appears to be bona fide and reasonable. We find force in the arguments of the assessee for simple reason that as per the details furnished by the assessee like bank statements, cash book, it is undoubtedly clear that assessee was having sufficient withdrawals from very same bank accounts before the date of demonetization which was recorded in the books of accounts of the assessee. The cash balance maintained by the assessee as per books of accounts as on 08.11.2016 was much higher than the amount of cash deposited to bank account during demonetization period. Therefore, when the assessee is able to file necessary evidences to prove that there was sufficient cash withdrawal from very same bank account which is further backed by bank statements, where it has been clearly evident that there are sufficient cash withdrawals, in our considered view, there is no reason for the AO to reject explanation of the assessee that cash deposit is out of cash withdrawals from very same bank account. Respectfully following the decision of M/s. Sahana Jewellery Exports Pvt Ltd 2024 (1) TMI 112 - ITAT CHENNAI we are of the considered view that the assessee has satisfactorily explained source for cash deposits into bank account during demonetization period, out of cash balance in hand as on 08.11.2016 and further, said cash in hand has been explained out of known source of income. AO, without appreciating relevant facts simply made additions towards cash deposits u/s 68 of the Act and also brought to tax u/s. 115BBE - CIT(A), after considering relevant facts, has rightly deleted additions made by the AO. Thus, we are inclined to uphold the findings of the ld. CIT(A) and dismiss appeal filed by the revenue.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Assessment of cash deposits during the demonetization period.
3. Applicability of Section 68 of the Income Tax Act.
4. Validity of the Assessing Officer's findings and the CIT(A)'s decision.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The appeal was filed with a delay of 136 days. The Assessing Officer (AO) attributed the delay to a technical glitch in the ITBA portal, which prevented the order from being downloaded until 31.03.2023, and the AO's preoccupation with time-barring assessments. The delay was not intentional or for wanton benefit. Both parties agreed to condone the delay. The tribunal found the reasons reasonable and condoned the delay in the interest of substantial justice.

2. Assessment of Cash Deposits During the Demonetization Period:
The assessee, engaged in the business of trading in gold jewelry and bullion, deposited Rs. 90,80,86,500/- during the demonetization period. The source of these deposits was claimed to be from:
- Opening cash in hand as on 08.11.2016: Rs. 90,75,10,005/-.
- Cash withdrawals from the bank before demonetization: Rs. 39,33,30,165/-.
- Direct cash sales: Rs. 15,58,58,464/-.
- Advances received from customers for a gold scheme: Rs. 32,43,85,989/-.

The AO issued summons and notices to verify the claims, which were returned unserved or received non-cooperative responses. The AO concluded that the assessee failed to prove the receipt of trade advances and made additions of Rs. 90,80,86,500/- as unexplained cash credits under Section 68 of the Act.

3. Applicability of Section 68 of the Income Tax Act:
The CIT(A) opined that trade advances, subsequently converted into sales and accounted for in the books, cannot be treated as cash credits under Section 68. The CIT(A) noted that the AO did not find any discrepancies in the books of accounts, stock registers, or sales and purchases. The CIT(A) relied on judicial precedents, including the Supreme Court's decision in Lalchand Bhagat Ambica Ram v. CIT, which held that if the books of accounts are accepted and there is sufficient cash balance, the entries must be considered genuine.

4. Validity of the Assessing Officer's Findings and the CIT(A)'s Decision:
The CIT(A) found that the AO's assessment was based on suspicion and lacked proper enquiry. The AO failed to consider the sufficient cash balance and the genuine business transactions recorded in the books. The CIT(A) highlighted that the AO accepted cash deposits for other periods but not for the demonetization period, showing inconsistency. The CIT(A) directed the AO to delete the additions, citing that the same income cannot be taxed twice.

The tribunal upheld the CIT(A)'s decision, emphasizing that the assessee had satisfactorily explained the source of cash deposits with proper documentation and that the AO's findings were based on suspicion without concrete evidence. The tribunal also referenced similar cases where courts ruled in favor of the assessee under comparable circumstances, reinforcing the CIT(A)'s conclusions.

Conclusion:
The tribunal dismissed the revenue's appeal, agreeing with the CIT(A) that the assessee had adequately explained the source of cash deposits during the demonetization period. The tribunal found that the AO's additions under Section 68 were unwarranted and based on suspicion rather than substantive evidence.