2024 (7) TMI 1051 - AT - Income Tax

Unexplained cash sales u/s 69A - Deposits in the bank during the course of demonetization period - CIT(A) deleted addition - HELD THAT - Assessee, engaged in the business of trading of Imported Electrical Goods, has made cash sales as well as credit sales. It has maintained sales vouchers and filed VAT return within the stipulated time period. The revision of VAT return has not affected the turn over shown in the original VAT return. Before us, revenue has not placed any material on record to demonstrate that the details of cash sales shown by the respondent/assessee are fictitious/bogus. The purchases are entirely through imports. Revenue has also failed to place any material on the record to demonstrate that the VAT returns of the relevant year have not been accepted by the VAT authority and the Custom authority has not accepted the imports/purchases. Hence, following the reasoning given in the case of Ramesh Kochar, addition under section 69A of the Act is uncalled for and the CIT(A) is justified in deleting the same. Appeal of the Revenue stands dismissed.

Summary

Issues:
Appeal against CIT(A) order deleting addition of unexplained cash sales under section 69A of the Income Tax Act for the Assessment Year 2017-18.

Analysis:
1. The Revenue challenged the CIT(A) order on grounds of unexplained cash sales during demonetization period. The AO considered cash sales of Rs. 65,53,340/- non-genuine and taxed it under section 69A r.w.s. 115BBE of the Act. The AO highlighted discrepancies in cash sales before and after demonetization, questioning the timing and deposits made. The AO deemed the cash sales unexplained as the source of such deposits remained unidentified.

2. The AR presented a detailed defense, emphasizing that the sales were genuine and supported by documentation. The AR argued that the AO's doubts were unfounded, as the business had legitimate imports and maintained proper records. The AR contended that the AO's approach led to double taxation and was contrary to accounting principles. The AR also highlighted that the VAT returns were revised to rectify clerical errors, maintaining the original turnover figures.

3. The Tribunal found merit in the AR's contentions, ruling in favor of the assessee. It noted that the sales were supported by documentation, and there was no evidence to suggest the sales were fictitious. The Tribunal held that the addition under section 69A was unwarranted, citing a precedent case for similar circumstances. The Tribunal concluded that the CIT(A) was correct in deleting the addition, and the appeal of the Revenue was dismissed.

In conclusion, the Tribunal upheld the CIT(A) decision, emphasizing the lack of evidence to support the Revenue's claims of unexplained cash sales. The Tribunal's ruling was based on the authenticity of the sales, proper record-keeping, and the absence of concrete proof to deem the cash deposits as undisclosed income.