2024 (10) TMI 347 - AT - Income Tax

Addition u/s. 68 - unexplained cash credit for cash deposited in a bank during the demonetization period - DR submitted that the assessee is not having any history of business and, therefore, the transaction in jewellery especially that of gold is not justifiable only through the mere production of few bills in gold transaction. HELD THAT - AO has accepted the transactions about purchase and sale of jewellery in gold and silver without raising any doubt regarding books of account, purchase and sale stock registers and the bills produced by the assessee. The cash transaction before the demonetisation period was also revealed by the assessee as the period before the demonetisation was also the period of Diwali and that itself shows that why the cash transaction took place in that particular period. There was no doubt created by the AO in respect of purchase and sale of stock register as well as books of account. Since the stock register as well as the family evidences produced by the assessee are found to be genuine, the cash transaction has also been proved by the assessee being genuine transaction. These factual aspects were totally ignored by the AO and CIT(A). Therefore, the appeal of the assessee is allowed.

Summary

Issues:
Assessment of unexplained cash credit under Section 68 of the Income Tax Act for cash deposited during demonetization period for A.Y. 2017-18.

Detailed Analysis:

1. Assessment of Unexplained Cash Credit:
The assessee filed the return of income for A.Y. 2017-18, reporting total income of Rs.7,55,990, including income from business, rent, and interest. The case was selected for scrutiny due to cash deposits during the demonetization period. The Assessing Officer issued notices under Sections 143(2) and 142(1) to gather details on cash deposits made by the assessee. It was observed that the assessee deposited Rs.35,19,500 during demonetization in the bank account. The Assessing Officer deemed the cash sales shown by the assessee as fabricated and treated the cash deposit as unexplained cash credit under Section 68 read with Section 115BBE of the Act, making an addition of Rs.35,29,394 to the income.

2. Appeal to CIT(A) and Arguments:
The assessee appealed the Assessment Order before the CIT(A), contending that the cash generated through selling gold ornaments and deposited during demonetization was properly explained. The assessee argued that huge cash sales were not indicative of undisclosed income, as the transactions were recorded in the books of account and supported by bills related to jewelry sales and purchases. The AR highlighted that no adverse findings were made regarding the books of account, stocks, or cash sales by the Assessing Officer.

3. Arguments by the DR and Tribunal's Decision:
The DR argued that the assessee lacked a business history, questioning the justification of gold transactions based on a few bills. The Tribunal noted that the Assessing Officer did not raise doubts about the purchase and sale of jewelry in gold and silver, books of account, or stock registers. It was observed that the cash transactions before demonetization were genuine, supported by stock registers and family evidence. The Tribunal found that the factual aspects were overlooked by the Assessing Officer and CIT(A), leading to the allowance of the assessee's appeal.

4. Tribunal's Decision and Conclusion:
After hearing both parties and reviewing the material on record, the Tribunal allowed the assessee's appeal, emphasizing the genuine nature of the cash transactions supported by evidence. The Tribunal overturned the addition made by the Assessing Officer under Section 68 of the Act, as the transactions related to the purchase and sale of jewelry were found to be genuine and properly recorded. The appeal was allowed, and the decision was pronounced in the open court on 4th June 2024.