2024 (12) TMI 1109 - AT - Income Tax

Unexplained Cash Credits u/s. 68 - assessee is engaged in the business of computer peripherals who has deposited a sum in Specified Bank Notes (SBNs) post-demonetisation - only reason given by the AO for making the addition is that assessee was not authorised to receive SBNs post-demonetisation - HELD THAT - As undisputed fact that assessee has shown the books of account including cash book and sales ledger for verification of ld. AO. Source of cash deposit is the sales accounted for by the assessee in his books of account. Neither the ld. AO nor the ld. CIT(A) made any enquiry with respect to sales shown by assessee out of which cash is deposited. No doubt, the assessee was not authorised to received SBNs after demonetisation, but when assessee has received and deposited the same and also offered the same as his income, no further addition could have been made in the hands of assessee. Here assessee has also shown the nexus of sales and amount of cash deposited. In the decision of Sreelekha Banerjee 1963 (3) TMI 47 - SUPREME COURT held that when the assessee has shown sales of SBNs and same remains undisputed, no addition can be made in the hands of assessee. In view of this, we reverse the order of the ld. CIT(A) and direct the AO to delete the addition on account of SBNs deposited by the assessee in his bank account. Ground nos. 1 2 of the appeal are allowed.

Summary

Issues:
Late filing of appeal by the assessee, condonation of delay, addition of unexplained cash credit under section 68 of the Income-tax Act, 1961, during demonetization period, justification of addition by the CIT(A), applicability of previous ITAT decision, sufficiency of cause for delay, business activities of the assessee, rejection of explanation by AO, confirmation of addition by CIT(A), source of cash deposit, verification of sales proceeds, authority to accept cash, reversal of CIT(A) order, deletion of addition, nexus between sales and cash deposit.

Analysis:

The appeal was filed by the assessee against the appellate order passed by the National Faceless Appeal Centre, Delhi, dismissing the appeal against the assessment order that added Rs. 12 lakhs as unexplained cash credit under section 68 of the Income-tax Act, 1961. The assessee raised grounds challenging the justification of the addition during the demonetization period, the treatment of accumulated cash sales proceeds, and the alleged deviation from established legal principles in a previous ITAT decision.

The delay in filing the appeal by 62 days was explained by the assessee, attributing it to the inadvertent misplacement of the appeal document by the counsel. The Tribunal accepted the explanation, noting the absence of any malafide intent and the risk borne by the assessee due to the delayed filing. Consequently, the delay was condoned, and the appeal was admitted.

The case involved the assessment of the assessee, engaged in the sale and service of computer peripherals, who deposited Rs. 12 lakhs during the demonetization period. The Assessing Officer (AO) added this amount to the assessee's income, alleging it was unexplained cash credit. The CIT(A) upheld the AO's decision, stating the source of the cash deposit remained unexplained, and the assessee was not authorized to accept the cash. The Tribunal, however, found that the cash deposit was sourced from accounted sales proceeds, as evidenced by the books of account provided by the assessee.

The Tribunal observed that the AO and CIT(A) did not investigate the sales shown by the assessee, which formed the basis for the cash deposits. Despite the unauthorized receipt of specified bank notes (SBNs) post-demonetization, the Tribunal held that since the sales were accounted for and undisputed, no further addition should have been made to the assessee's income. Citing legal precedent, the Tribunal reversed the CIT(A)'s order and directed the AO to delete the Rs. 12 lakhs addition. Grounds 1 and 2 of the appeal were allowed, while ground 3, which was not argued, was dismissed.

In conclusion, the Tribunal partially allowed the appeal, emphasizing the nexus between the sales proceeds and the cash deposits, leading to the deletion of the addition made by the AO. The judgment highlighted the importance of substantiating sources of income and the relevance of legal precedents in determining tax liabilities.