2024 (10) TMI 993 - AT - Income Tax

Unexplained cash credit u/s 68 - addition of cash advance received from customers - invoking provisions of section 115BBE for taxing the addition made - scope of preponderance of probabilities - HELD THAT - The bench noted that out of the 93 parties AO choose the 58 parties and served the notices. Out of the notices so issued 69 % notices were duly served upon the address and the details submitted by the assessee. Therefore, the contentions of the revenue that the assessee fails in proving the identity of the parties has no merits because out of the selection the assessee details were correct to the extent of 69%. Even out of the notices so issued confirmation were filed and the parities have expressed their willingness to confirm the said facts in persons and ld. AO did not went to verify the reals facts by issuing the summons. He merely relied upon the the reply of two parties who negated having been given any advance to the assessee and the ld. AO made that as basis to reject the whole amount as unexplained money. Here the preponderance of probabilities as held by the apex court in the case of Durga Prasad More 1971 (8) TMI 17 - SUPREME COURT come to the rescue of the assessee. The books of accounts were duly audited, purchase and sales are duly supported by invoices. There is no iota of doubt on the records so produced by the assessee. Merely the assessee has taken the advances for purchase of gold by those parties and that too on the eve of demonetization, cannot be doubted when the assessee has provided all the details related to the advances so received and the same were verified on majority cases. Thus, source for the sales is already considered and assessed as such as income and the profit from that has already been considered and not objected by placing any contrary evidence. The assessee shifted the burden casted upon him to the revenue to establish that the amount that the assessee has received is the unaccounted income of the assessee. Nothing contrary to the records were proved in even though all the details were placed on record by the assessee regarding the receipt of the advances, sales, and purchases from the said source of money. The assessment has been completed in the case of the assessee u/s. 143(3) of the Act without rejecting the book results. Therefore, once the sales is accepted the source of making that sales again cannot be added as unexplained receipt in the hands of the assessee as per provision of section 68 of the Act. See Smt. Harshila Chordia v. ITO 2006 (11) TMI 117 - RAJASTHAN HIGH COURT as found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. the assessee made sales out of the money so received as advances cannot be considered as unexplained money u/s. 68 of the Act. Assessee has placed on record all the details related to the sales and that of the advances received by the assessee. The assessee has furnished all those details which the ld. AO has also verified by issuance of notice u/s. 133(6) of the Act, majority of the notices were served and they have confirmed the transactions. Thus, the contention raised by the assessee cannot be rejected without placing anything contrary on record. If the assessee supports the contention based on the evidence, department cannot act unreasonably and reject that explanation to hold that it was unexplained income. The fact that there was receipt of money as an advance from the customer is even verified by issuance of notice u/s. 133(6) of the Act is itself prima facie evidence support the contention of the assessee. Not only that the parties who have replied the notices have also shown willing to support the contention if required in person. Thus, once all this evidence placed on record merely based on surmises and conjecture that the assessee has taken the advance before the receipt of the stock where the identity and sales made by the assessee is not disputed cannot be added in the hand of the assessee as unexplained money. Decided in favour of assessee.

Summary

Issues Involved:

1. Addition of cash advance received from customers as unexplained cash credit under Section 68 of the Income Tax Act.
2. Invocation of Section 115BBE for taxing the addition made under Section 68.

Issue-wise Detailed Analysis:

1. Addition of Cash Advance as Unexplained Cash Credit under Section 68:

The crux of the case is whether the cash advances amounting to Rs. 1,71,28,000/- deposited by the assessee during the demonetization period were unexplained cash credits under Section 68 of the Income Tax Act. The Revenue contended that the assessee failed to satisfactorily explain the source of these cash deposits. The Assessing Officer (AO) found discrepancies in the assessee's claim that the cash was received as advances from customers for the purchase of gold bars. The AO noted that the assessee had no significant sales activity prior to the demonetization period and questioned the genuineness of the transactions due to lack of verifiable evidence, such as the identity and creditworthiness of the alleged customers.

The CIT(A) upheld the AO's decision, emphasizing that the onus was on the assessee to prove the genuineness of the transactions and the identity of the creditors. The CIT(A) noted that the assessee's explanation lacked credible third-party evidence and was not convincing enough to discharge the burden under Section 68.

However, upon appeal, the Tribunal found that the assessee had provided substantial evidence, including details of customers and confirmations from a significant number of them. Notices issued under Section 133(6) were served to many customers who confirmed the transactions. The Tribunal held that the assessee had discharged the initial burden of proof, and the Revenue failed to provide contrary evidence. The Tribunal noted that the cash deposits were linked to sales transactions already recorded in the books, and thus, the addition under Section 68 was not justified. The Tribunal allowed the appeal on this ground, finding the addition of Rs. 1,71,28,000/- as unexplained cash credit unsustainable.

2. Invocation of Section 115BBE:

Section 115BBE of the Income Tax Act imposes a higher tax rate on income assessed under certain sections, including Section 68. The AO and CIT(A) had invoked this section, following the addition under Section 68. However, since the Tribunal found that the addition under Section 68 was not justified, the invocation of Section 115BBE became moot. The Tribunal did not need to adjudicate this issue separately as the primary addition itself was deleted.

Conclusion:

The Tribunal's decision highlights the importance of the assessee's ability to substantiate claims with credible evidence and the necessity for the Revenue to provide substantial counter-evidence when rejecting such claims. The Tribunal allowed the appeal, deleting the addition under Section 68 and rendering the invocation of Section 115BBE irrelevant. The appeal was decided in favor of the assessee, emphasizing that the transactions were genuine and supported by adequate documentation.