2024 (11) TMI 891 - AT - Income Tax

Unexplained cash credit u/s. 68 - taxation under the provisions of section 115BBE - CIT(A) deleted the addition by accepting the submissions of the assessee that the cash receipt by various sources i.e., cash sales, debtors outstanding realization and debtors of current year realized is matching with the VAT returns and hence, he accepted the cash deposited during the year before demonetization - HELD THAT - As noted that the assessee has explained the cash deposit in SBNs received during demonetization period on account of cash sales during the relevant assessment year, realization of debtors outstanding in previous years and also debtors during current year which is a fact as per books of accounts. Admittedly, there are amount received on account of current debtors from specified parties - assessee has also reconciled the cash sales, debtors outstanding, viz-a-viz VAT returns. Admittedly, the assessee s turnover during the year is Rs. 810 crores as compared to last year turnover of Rs. 383 crores, which means that the turnover has jumped 211.48% during the year. These facts show that the cash realized through cash sales, debtors is not abnormal and the AO could not point out any defect in the same. Admittedly, these parties, from whom the assessee has realized the debts, the confirmation was received late and assessee now before us filed the confirmed account statement, which were filed before CIT(A). Once there is no defect in the books of accounts and the VAT returns which accepted as it is and corresponding sale is also not disturbed, we find no infirmity in the generation of this cash on or before 08.11.2016. This cash generation is over the period from 01.04.2016 to 08.11.2016. Out of total cash available in assessee s books of accounts as on 08.11.2016 of Rs. 3,09,45,227/-, a sum of Rs. 3,05,14,820/- is in demonetized currency i.e., Specified Bank Notes. As the cash is explained and sources are recorded in books of accounts and books of accounts are not rejected by AO and there is no iota of evidence that the assessee has introduced unaccounted cash, the cash deposited by assessee during demonetization period in SBNs stands explained. Further, we find that this issue is covered by the decision of TamilNadu State Marketing Corporation Ltd 2024 (10) TMI 1614 - ITAT CHENNAI wherein it is held that simpliciter the SBNs will not be added when the source of cash is explained. Thus, no fault in the order of CIT(A) and hence, the same is confirmed. Accordingly, this appeal of Revenue is dismissed.

Summary

Issues Involved:

1. Delay in filing the appeal by the Revenue.
2. Addition of cash deposits as unexplained cash credit under Section 68 of the Income Tax Act.
3. Taxation of unexplained cash credit under Section 115BBE of the Income Tax Act.
4. Acceptance of evidence and explanation provided by the assessee regarding cash deposits.

Issue-wise Detailed Analysis:

1. Delay in Filing the Appeal:

The appeal by the Revenue was delayed by 28 days. The Revenue explained that the delay was due to the involvement of a Transfer Pricing (TP) issue, which required comments from the Transfer Pricing Officer (TPO). These comments were received on 06.05.2024, which led to the delay in filing the appeal. The Tribunal noted that the assessee did not object to the delay and, therefore, decided to condone the delay and admit the appeal.

2. Addition of Cash Deposits as Unexplained Cash Credit:

The core issue was the addition of Rs. 3.05 crores as unexplained cash credit under Section 68 of the Income Tax Act. The Assessing Officer (AO) argued that the cash deposited during the demonetization period was unexplained, as the assessee failed to provide credible evidence for the source of cash. The AO noted discrepancies in the cash transactions and cash deposits, suggesting manipulation of books to show available cash balance. The AO concluded that the cash deposits were held outside the books and added the amount as unexplained cash credit.

3. Taxation of Unexplained Cash Credit under Section 115BBE:

The AO taxed the unexplained cash credit of Rs. 3.05 crores at 60% under Section 115BBE of the Act, which deals with taxation of unexplained income, investments, and credits without allowing any deductions or set-offs.

4. Acceptance of Evidence and Explanation by the Assessee:

The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition made by the AO, accepting the assessee's explanation of cash deposits. The CIT(A) considered the evidence provided by the assessee, including VAT returns, cash book details, and confirmations from debtors. The CIT(A) noted that the sales recorded by the assessee matched the VAT returns, and the confirmations from debtors supported the cash deposits. The CIT(A) found no tangible evidence to prove that the cash deposits were unaccounted, concluding that the transactions were genuine.

Tribunal's Conclusion:

The Tribunal upheld the order of the CIT(A), agreeing that the assessee had satisfactorily explained the source of cash deposits. The Tribunal noted that the cash deposits were supported by evidence such as VAT returns and confirmations from debtors. The Tribunal also referenced a similar case where it was held that specified bank notes (SBNs) would not be added as unexplained income if the source was explained. The Tribunal emphasized that merely violating notifications related to demonetization does not justify additions under Sections 69 or 69A unless the source of cash is unaccounted. Consequently, the appeal by the Revenue was dismissed.

In conclusion, the Tribunal found no fault in the CIT(A)'s decision to delete the addition of Rs. 3.05 crores as unexplained cash credit and dismissed the Revenue's appeal.