2024 (12) TMI 519 - AT - Income Tax

Addition u/s 69A r.w.s. 115BBE - cash deposited during the demonetization period - as argued assessee has demonstrated the cash sales for the past years and the addition has been made purely on the basis of presumption - HELD THAT - Revenue has not brought any adverse material controverting the contention of the assessee that the amount so deposited was out of cash sales. The accounts of the assessee are audited. Revenue ought to have brought some adverse material against the assessee. Admittedly, it is the case of the assessee that the assessee has made cash sales and books of accounts are audited. Revenue has not rejected the accounts and sales have been accepted. Assessing Authority ought to have verified the correctness of the claim of the assessee by verifying the stocks of the assessee if there was no mis-match between the sales and purchases, no addition would be called for. When the assessee has claimed to have made sales in cash and has been regularly doing so. Therefore, without bringing any adverse material, the AO ought not to have made addition merely on the basis of suspicion that the amount was deposited in cash by the assessee. Assessee appeal allowed.

Issues Involved:

1. Justification of the addition of INR 8,90,000/- under Section 69A read with Section 115BBE for cash deposited during the demonetization period.
2. Consideration of cash deposits recorded in audited books of accounts as cash sales.
3. Allegation of double taxation on the same income.
4. Validity of treating the cash deposits as unexplained income despite being recorded in the books.
5. Application of Section 115BBE to income from a single business source.
6. Acceptance of books of accounts without rejection under Section 145(3).

Issue-wise Detailed Analysis:

1. Justification of the Addition under Section 69A:
The primary issue revolves around the addition of INR 8,90,000/- made by the Assessing Officer (AO) under Section 69A, which was sustained by the CIT(A). The assessee argued that the cash deposited during the demonetization period was from cash sales and was duly recorded in the cashbook. The AO had not rejected the books of accounts, which were audited, and there was no adverse finding against the purchases, sales turnover, and closing stock. The Tribunal noted that the AO should have verified the correctness of the claim by checking the stock records. The addition was made based on presumption without any adverse material against the assessee.

2. Consideration of Cash Deposits Recorded in Audited Books:
The assessee maintained that the cash deposits were recorded in the audited books of accounts as cash sales. The Tribunal observed that the entire cash sales were duly recorded, and the closing balance as per the bank statement matched the bank balance shown in the Income Tax Return and audited balance sheet. The Tribunal emphasized that the Revenue failed to provide any adverse material to counter the assessee's claim that the deposits were from cash sales.

3. Allegation of Double Taxation:
The assessee contended that taxing the cash deposits under Section 69A, when they were already recorded as sales, amounted to double taxation. The Tribunal agreed with this argument, referencing several judgments that support the principle that once sales are recognized as revenue, they should not be taxed again as unexplained income.

4. Validity of Treating Cash Deposits as Unexplained Income:
The Tribunal found that the AO's decision to treat the deposits as unexplained income was unjustified, as the books of accounts were audited and not rejected. The Tribunal highlighted that the assessee had consistently made cash sales and deposited the proceeds in the bank, following a regular business practice. The Tribunal directed the AO to delete the addition, as there was no adverse material to support the claim of unexplained income.

5. Application of Section 115BBE to Income from a Single Business Source:
The Tribunal noted that the assessee had only one source of income from the brick kiln business, which was accepted by both the AO and CIT(A). Therefore, the application of Section 115BBE to treat the income as from other sources was deemed incorrect.

6. Acceptance of Books of Accounts Without Rejection:
The Tribunal observed that the AO did not reject the books of accounts under Section 145(3), and book results were accepted without disturbing sales, purchases, and stock. The Tribunal emphasized that sustaining the addition based on the erroneous inference that the cashbook was rejected was unjustified.

In conclusion, the Tribunal allowed the appeal, directing the deletion of the addition of INR 8,90,000/-, as the Revenue failed to provide any adverse material against the assessee's claims, and the books of accounts were duly audited and accepted.

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