Revenue fails to prove unexplained cash credits against gold trader with proper banking records and stock maintenance

ITAT Mumbai dismissed Revenue's appeal challenging CIT(A)'s deletion of additions under Section 68 for unexplained cash credits and cash deposits. The assessee, a gold trader, received payments through banking channels and maintained proper books including sales register, purchase register, stock statements, and bank records. AO made additions suspecting unaccounted money conversion, particularly regarding cash sales on demonetization day (08/11/2016). ITAT held that Revenue failed to dispute receipt of money through banking channels or point out stock availability errors. The tribunal noted that cash sales on demonetization day were exceptional circumstances as people converted old currency notes. Without material evidence doubting stock availability, the additions were properly deleted.

---

---

Issues:
1. Deletion of addition on account of unexplained cash credit under section 68 of the Income Tax Act.
2. Deletion of addition of Rs. 48,98,152 on account of cash deposit.

Analysis:

Issue 1: Deletion of addition on account of unexplained cash credit under section 68 of the Income Tax Act:
The Revenue challenged an order deleting the addition of Rs. 70,91,351 as unexplained cash credit under section 68 of the Act. The Assessing Officer (AO) found the assessee utilized Mr. Dhanraj G Parmar to convert unaccounted income during demonetization. However, the Commissioner of Income Tax (Appeals) noted that payments for gold purchases by Mr. Parmar were made through banking channels, sales were accepted, and VAT returns were unmodified. The CIT(A) upheld the deletion, stating the sales were recorded in the profit and loss account, and taxes were paid. The Tribunal upheld the CIT(A)'s decision, as the Revenue only raised doubts on sales bills, not on the banking channel receipts.

Issue 2: Deletion of addition of Rs. 48,98,152 on account of cash deposit:
The AO added Rs. 48,98,152 as unexplained cash credit due to cash deposits on a single day during demonetization. The CIT(A) deleted this addition, noting the sales were duly reflected in the trading account, supported by various documents submitted by the assessee. The AO failed to reject the book results under section 145(3) of the Act and did not find errors in purchases or sales. The Tribunal agreed with the CIT(A), emphasizing the exceptional circumstances of demonetization and lack of evidence questioning the availability of stock. The addition was deemed unsustainable without concrete evidence of wrongdoing. The Tribunal dismissed the Revenue's appeal on both issues, upholding the CIT(A)'s decisions.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of additions related to unexplained cash credit and cash deposits, emphasizing the lack of evidence supporting the Revenue's claims and the assessee's compliance with tax regulations.

---