2024 (8) TMI 1362 - AT - Income Tax

Unexplained cash credit u/s 68 - AO has established that the assessee had used Gold purchaser as conduct of unaccounted money bring into Bank account as He/Gold purchaser never deal with trading in gold in his life time before demonetization - CIT(A) deleted addition - HELD THAT - Apart from the first two payments which were made on the same date as the said transaction, the third payment was received by the assessee in advance. In the present case, the Revenue has only raised doubts about the sales bills and did not dispute the aforesaid receipt of money through the banking channel. Even though stock statements were also furnished by the assessee, in response to notice issued u/s 131 there is no dispute or doubt on the same by the Revenue. Such being the facts, when the sale transaction has been declared as revenue receipt by the assessee, we find no infirmity in the impugned order in deleting the addition made u/s 68. Addition on account of cash deposit - In the present case, it is undisputed that the assessee has submitted a copy of the sales register, purchase register, stock statement, cash book, bank book and bank statements. There is no material available on record to show that the AO has pointed out any mistake in the availability of stock as of 08/11/2016. Just because only on the one-day out of 365 days in a year, the assessee has shown cash sales AO proceeded to make the addition u/s 68, without appreciating the fact that on the date, i.e. 08/11/2016, the Government had announced demonetisation of old notes and it was an exceptional day and various people anxiously converted the old currency notes into other form and some purchased gold or other jewellery. In the absence of any material to doubt the availability of stock of gold with the assessee, we are of the considered view that the learned CIT(A) has rightly deleted the addition made by the AO on account of cash deposits. Revenue s appeal is dismissed.

Summary

Issues:
1. Deletion of addition on account of unexplained cash credit under section 68 of the Income Tax Act.
2. Deletion of addition of Rs. 48,98,152 on account of cash deposit.

Analysis:

Issue 1: Deletion of addition on account of unexplained cash credit under section 68 of the Income Tax Act:
The Revenue challenged an order deleting the addition of Rs. 70,91,351 as unexplained cash credit under section 68 of the Act. The Assessing Officer (AO) found the assessee utilized Mr. Dhanraj G Parmar to convert unaccounted income during demonetization. However, the Commissioner of Income Tax (Appeals) noted that payments for gold purchases by Mr. Parmar were made through banking channels, sales were accepted, and VAT returns were unmodified. The CIT(A) upheld the deletion, stating the sales were recorded in the profit and loss account, and taxes were paid. The Tribunal upheld the CIT(A)'s decision, as the Revenue only raised doubts on sales bills, not on the banking channel receipts.

Issue 2: Deletion of addition of Rs. 48,98,152 on account of cash deposit:
The AO added Rs. 48,98,152 as unexplained cash credit due to cash deposits on a single day during demonetization. The CIT(A) deleted this addition, noting the sales were duly reflected in the trading account, supported by various documents submitted by the assessee. The AO failed to reject the book results under section 145(3) of the Act and did not find errors in purchases or sales. The Tribunal agreed with the CIT(A), emphasizing the exceptional circumstances of demonetization and lack of evidence questioning the availability of stock. The addition was deemed unsustainable without concrete evidence of wrongdoing. The Tribunal dismissed the Revenue's appeal on both issues, upholding the CIT(A)'s decisions.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of additions related to unexplained cash credit and cash deposits, emphasizing the lack of evidence supporting the Revenue's claims and the assessee's compliance with tax regulations.