2021 (5) TMI 447 - AT - Income Tax

Deletion of additions under s.68 r/w s.115BBE upheld for specified bank-note receipts after demonetisation due to documentary proof

ITAT upheld the CIT(A)'s deletion of additions under s.68 r/w s.115BBE relating to receipts in specified bank notes after demonetization. The tribunal ... Treatment of receipts credited as sales vis-a -vis unexplained cash credits under section 68 - consequence of books of account and stock records being accepted by authorities - double taxation/double addition by treating admitted sales as unexplained income - burden of disproving recorded sales by tangible evidenceTreatment of receipts credited as sales vis-a -vis unexplained cash credits under section 68 - consequence of books of account and stock records being accepted by authorities - burden of disproving recorded sales by tangible evidence - Whether cash receipts recorded and offered as sales in the books of the assessee could be treated as unexplained cash credits and taxed again under section 68 read with section 115BBE where purchases, sales and stock records are intact and accepted by the revenue. - HELD THAT: - The Tribunal examined section 68 and observed that sums credited in the books are chargeable as income only when the assessee offers no explanation or the explanation is unsatisfactory. In the present case the assessee consistently recorded the transactions as sales, produced sale bills, trading accounts, P&L and audit reports, and offered the receipts for taxation. Both the investigating authority and the Assessing Officer conducted surveys yet did not find defects in the books, stock or closing stock; the movement of stock corresponded with the recorded sales. The Tribunal held that purchases, sales and stock are interlinked and that suspicion, however strong, is insufficient to discard recorded sales unless the revenue can disprove them with tangible evidence (for example non existence of stock or discrepancies in trading accounts). The Tribunal further distinguished the case law relied upon by the revenue as relating to scenarios where credits were not offered as income or books were not accepted. Having found that the books and stock records supported the sales and that profits were not abnormal, the Tribunal concluded there was no justification to recharacterise the admitted sales as unexplained cash credits and tax them again under section 115BBE. [Paras 7, 9]The deletion of the addition made under section 68 read with section 115BBE is upheld; the cash receipts recorded and offered as sales are not liable to be taxed again as unexplained cash credits.Final Conclusion: Revenue appeal dismissed; order of the CIT(A) deleting the addition under section 68 read with section 115BBE is upheld and the assessee's cross objection is rendered infructuous. Issues Involved:1. Deletion of addition made under Section 68 read with Section 115BBE of the Income Tax Act, 1961.2. Justification of sales recorded on 08.11.2016 post demonetization.3. Acceptance of books of accounts and stock records by the Assessing Officer (AO).4. Application of relevant case laws and precedents.Issue-wise Detailed Analysis:1. Deletion of Addition under Section 68 read with Section 115BBE:The primary issue in this case was the deletion of an addition of Rs. 4,71,35,500/- made by the AO under Section 68 read with Section 115BBE of the Income Tax Act, 1961. The AO treated the sales recorded on 08.11.2016 as unexplained cash credits, suspecting them to be a device to introduce unaccounted money. However, the CIT(A) found merit in the assessee's argument that the sales were genuine and recorded in the books of accounts, and hence, the same amount could not be taxed again under Section 68 as unexplained cash credit. The Tribunal upheld the CIT(A)'s decision, stating that the cash receipts represented sales and were rightly offered for taxation.2. Justification of Sales Recorded on 08.11.2016:The assessee, a jewellery trading firm, recorded sales of Rs. 5.50 crores on 08.11.2016, out of which Rs. 4.72 crores were treated as unexplained cash credits by the AO. The assessee argued that the sales were genuine and resulted from a rush to liquidate old notes due to the demonetization announcement. The CIT(A) and the Tribunal accepted this explanation, supported by newspaper clippings and the fact that there was no abnormal profit recorded. The Tribunal noted that the sales were supported by bills and stock records, and there was no defect found in the stock registers during the surveys conducted by the DDIT (Inv.) and the AO.3. Acceptance of Books of Accounts and Stock Records:The AO conducted surveys and did not find any defects in the stock registers or the books of accounts. The Tribunal emphasized that purchases, sales, and stock are interlinked and inseparable. Since the AO accepted the books of accounts and the stock records, and there was no discrepancy in the closing stock, the Tribunal found no reason to disbelieve the sales. The Tribunal cited various case laws to support the view that once the books of accounts are accepted, there is no basis for making additions as unexplained cash credits.4. Application of Relevant Case Laws and Precedents:The Tribunal considered several case laws cited by both parties. The AO relied on decisions such as Durga Prasad More and Sumati Dayal, which deal with circumstantial evidence in the absence of direct evidence. However, the Tribunal found these cases distinguishable as the assessee had explained the sales with sufficient evidence. The Tribunal also referred to decisions like CIT v. Associated Transport (P.) Ltd. and Lalchand Bhagat Ambica Ram v. CIT, which support the view that if the books of accounts are genuine and the cash balance matches, the source of income is well disclosed. The Tribunal concluded that the case laws cited by the AO were not applicable in this case, as the sales were duly accounted for and offered for taxation.Conclusion:The Tribunal upheld the CIT(A)'s order, confirming that the sales recorded on 08.11.2016 were genuine and could not be treated as unexplained cash credits under Section 68. The Tribunal dismissed the revenue's appeal and the cross-objection filed by the assessee, concluding that the cash receipts represented genuine sales and were rightly offered for taxation. The decision was pronounced in the open court on 12th May 2021.