2025 (2) TMI 759 - AT - Income Tax

Unexplained cash credit u/s 68 r.w.s 115BBE - HELD THAT - AO made the addition u/s 68 as unexplained cash credit of the same amount which was accounted in the books as sales. The explanation from a business entity should be on the basis of facts supported by some evidences which will establish that in due course of business such income could have been generated by the assessee. It is not a case of survey or search but scrutiny. Thus AO could have only relied the financials or other evidences supporting the financials to see if the onus is duly discharged. In the instant case the assessee had explained the source as sales produced the sale bills and admitted the same as revenue receipt. Purchases sales and the Stock are interlinked and inseparable. We find that primarily the AO has not doubted the sales on the basis of suspicious sales through 221 invoices and that no stock register was maintained. The reasons to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in the span of 4 hours non availability of KYC documents for sales non writing of tag of the jewellery to the sale bills non-availability of CCTV footage for huge rush of public etc. were not found to be good enough to make addition u/s 68. Also the contention of the assessee that due to demonetization the public became panic and the cash available with them in old denomination notes becomes illegal from 09.11.2016 and made the investment in jewellery thereby thronged the jewellery shops appear to be reasonable and deserved due consideration as done by the Ld. CIT(A). Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

Whether the deletion of the addition of Rs. 3,10,47,499/- by the CIT(A) on account of unexplained cash credit under Section 68 of the Income Tax Act, 1961, was justified.
Whether the CIT(A) erred in relying on the decision of ITAT, Vishakhapatnam in the case of Hirapanna Jewellers, and whether the facts of the present case were distinguishable from the relied case.
Whether the CIT(A) was correct in deleting the addition despite the assessee's failure to provide complete customer details during the assessment proceedings.
Whether the CIT(A) erred in holding that the non-supply of a list of customers who bought jewellery for less than Rs. 2 Lakhs cannot be held against the assessee.
Whether the CIT(A) ignored the decision of the Punjab & Haryana High Court in the case of Sudhir Kumar Sharma (HUF), which was upheld by the Supreme Court.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Deletion of Addition under Section 68

Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act, 1961, deals with unexplained cash credits, where the onus is on the assessee to explain the nature and source of any sum credited in the books of accounts.
Court's Interpretation and Reasoning: The Tribunal noted that the assessee had explained the source of the cash as sales, produced the sale bills, and admitted the same as revenue receipt. The Tribunal emphasized that purchases, sales, and stock are interlinked, and the AO had not doubted the sales based on the invoices or the absence of a stock register.
Key Evidence and Findings: The assessee had issued 195 invoices on 8th November 2016, with multiple billing points, which was deemed plausible given the circumstances of demonetization. The CIT(A) found no mistakes in the stock ledger or stock movement.
Application of Law to Facts: The Tribunal found that the AO had not examined the books of accounts to show any defect or inconsistency and had not disproved the sales with tangible evidence.
Treatment of Competing Arguments: The Tribunal considered the revenue's argument regarding the absence of customer details but found the assessee's explanation and documentation sufficient.
Conclusions: The Tribunal upheld the CIT(A)'s decision to delete the addition, as the assessee had adequately explained the cash sales.

Issue 2: Reliance on Hirapanna Jewellers Case

Relevant Legal Framework and Precedents: The decision in Hirapanna Jewellers was used as a precedent where similar circumstances of cash sales during demonetization were considered.
Court's Interpretation and Reasoning: The Tribunal found the facts of the present case similar to those in Hirapanna Jewellers, where the rush to dispose of specified bank notes was a reasonable explanation for the cash sales.
Application of Law to Facts: The Tribunal agreed with the CIT(A) that the reliance on the Hirapanna Jewellers case was appropriate given the similar circumstances.
Conclusions: The Tribunal found no error in the CIT(A)'s reliance on the Hirapanna Jewellers decision.

Issue 3: Non-provision of Customer Details

Relevant Legal Framework and Precedents: The Income Tax Act does not mandate the collection of PAN for sales below Rs. 2 Lakhs.
Court's Interpretation and Reasoning: The Tribunal noted that the non-supply of customer details for sales below Rs. 2 Lakhs could not be held against the assessee, as it was not legally required.
Key Evidence and Findings: The CIT(A) found the assessee's explanation reasonable and consistent with the law.
Conclusions: The Tribunal upheld the CIT(A)'s decision, finding no fault in the assessee's actions regarding customer details.

Issue 4: Ignoring Sudhir Kumar Sharma Case

Relevant Legal Framework and Precedents: The Sudhir Kumar Sharma case dealt with the requirement to provide a list of persons advancing cash.
Court's Interpretation and Reasoning: The Tribunal distinguished the present case from Sudhir Kumar Sharma, as the circumstances and legal requirements differed.
Conclusions: The Tribunal found no error in the CIT(A)'s decision not to apply the Sudhir Kumar Sharma precedent.

3. SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed that unexplained cash credits under Section 68 require the assessee to provide a satisfactory explanation, which was deemed fulfilled in this case through documented sales.
Final Determinations on Each Issue: The Tribunal upheld the CIT(A)'s decision to delete the addition, finding the assessee's explanations and documentation sufficient and consistent with legal requirements.
Preserved Verbatim Quotes: The Tribunal noted, "Suspicion however strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence."

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