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2025 (1) TMI 1488 - AT - Income TaxUnaccounted cash credit u/s 68 - Addition at higher tax rate of 60% u/s 115BBE - deposits during demonetization period - ignorance of documentary evidences filed by the appellant during the appellate proceedings - whether sales taken place in October and November 2016 are non-genuine and taxability of such sales under section 68 justified? - HELD THAT - AO doubted such sales because the average cash sales were highly abnormal than the average sales during the corresponding period of preceding years and backdating of sales during October and November 2016 could not be ruled out as the due date of filing of VAT Return for the third Quarter (October November December 2016) was 31.01.2017. However there is no reference of any corroborating material to buttress such inference in the assessment order. Revenue has not placed any material to demonstrate that the details of cash sales shown by the appellant/assessee are fictitious/bogus. The books of account have not been rejected by the AO. The AO has not-doubted/questioned either purchases or stock-in-trade. AO has taxed the income embedded in the doubted/questioned sales of Rs. 63, 37, 500/- @ 30% and again taxing the doubted/questioned sales of Rs. 63, 37, 500/- u/s 68 @ 60%. Such contradictions; prima-facie do not seem justified. The 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. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core issues considered in this appeal were:
ISSUE-WISE DETAILED ANALYSIS Taxability of Cash Deposit under Section 68 Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act, 1961, deals with unexplained cash credits. If any sum is found credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof, or the explanation offered is not satisfactory, the sum so credited may be charged to income tax as the income of the assessee. Section 115BBE prescribes a higher tax rate for certain unexplained income. Court's Interpretation and Reasoning: The Tribunal evaluated whether the sales recorded during October and November 2016 were genuine. The Assessing Officer (AO) had questioned the authenticity of these sales, citing abnormal sales figures compared to the previous periods. However, the Tribunal noted that the AO had not rejected the books of accounts or questioned the purchases and stock-in-trade. The Tribunal emphasized the absence of any corroborating evidence to support the AO's inference that the cash sales were fictitious or bogus. Key Evidence and Findings: The Tribunal observed that the appellant had provided details of cash deposits, sales registers, and VAT returns to the AO and the CIT(A). The VAT returns were consistent with the sales registers, and the VAT Department had accepted the inter-state sales. The Tribunal found no evidence from the Revenue to demonstrate that the cash sales were fictitious. Application of Law to Facts: The Tribunal applied the principles of Section 68 and found that the AO's action of taxing the same income twice-once as regular sales and again as unexplained cash credits-was contradictory and unjustified. The Tribunal relied on the precedent set in the case of Ramesh Kochar, ITA No. 171/Del/2022, to conclude that the addition under Section 68 was uncalled for. Treatment of Competing Arguments: The appellant argued that the sales were genuine and supported by documentary evidence, while the Revenue contended that the sales were abnormal and indicative of money laundering. The Tribunal sided with the appellant, noting the lack of evidence from the Revenue to substantiate its claims. Conclusions: The Tribunal concluded that the addition of Rs. 63,37,500/- under Section 68 was unjustified and deleted the addition. The Tribunal found no basis for the AO's conclusions and emphasized the absence of any contradictory material from the Revenue. Initiation of Penalty under Section 271AAC The Tribunal did not specifically address the initiation of penalty under Section 271AAC, as the primary issue concerning the addition under Section 68 was resolved in favor of the appellant. The deletion of the addition likely rendered the penalty proceedings moot. SIGNIFICANT HOLDINGS Core Principles Established: The Tribunal reiterated the principle that additions under Section 68 require corroborative evidence and cannot be based solely on assumptions or conjectures. The decision emphasized the importance of consistency in taxing income and the necessity of rejecting books of accounts if sales are to be doubted. Final Determinations on Each Issue: The Tribunal held that the addition of Rs. 63,37,500/- under Section 68 was uncalled for and deleted the addition. The Tribunal did not explicitly address the penalty under Section 271AAC, but the deletion of the addition implies that the penalty proceedings would not proceed. In conclusion, the Tribunal allowed the appeal of the assessee, setting aside the order of the CIT(A) and deleting the addition of Rs. 63,37,500/-. The Tribunal's decision underscored the necessity of evidence-based assessments and the avoidance of double taxation on the same income.
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