Revenue's appeal dismissed as assessee proves source of bank deposits under Section 68 unexplained cash credits

ITAT Chennai dismissed revenue's appeal against CIT(A)'s deletion of additions under Section 68 for unexplained cash credits. The assessee company demonstrated export turnover of Rs. 178.81 crores and received duty drawback of Rs. 2.02 crores from Government of India for export promotion. Bank credits shown as business receipts exceeded the amount in Section 148 notice (Rs. 138.83 crores). ITAT found assessee successfully proved source of bank deposits, upholding CIT(A)'s order deleting unexplained cash credit additions.

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Issues Involved:
1. Legality and correctness of the CIT(A)'s order.
2. Treatment of deposits/credits in the assessee's bank accounts as sales/turnover receipts.
3. Deletion of additions by CIT(A) without further inquiries.
4. Remittance of the matter back to the AO for verification and scrutiny.

Detailed Analysis:

Issue 1: Legality and Correctness of the CIT(A)'s Order

The Revenue contended that the order of the CIT(A) was contrary to law, facts, and circumstances of the case. The CIT(A) had concluded that the deposits/credits in the assessee's bank accounts were sales/turnover receipts without supporting documents and evidence, which the Revenue argued rendered the order perverse.

Issue 2: Treatment of Deposits/Credits in the Assessee's Bank Accounts as Sales/Turnover Receipts

The assessee, a private limited company engaged in the export of pulses and spices, had filed its return of income for AY 2017-18, declaring a total income of Rs. 57,64,200/-. The AO issued a notice u/s 148, and due to technical glitches in the income tax portal, the assessee could not file the return in response. The AO treated the credits in the assessee's bank accounts amounting to Rs. 138,83,31,016/- as unexplained cash credits under section 68 of the Act, adding the amount to the total income of the assessee and taxing it at 60% under section 115BBE.

The CIT(A) found that the credits in the bank accounts were due to the company's turnover of Rs. 178.81 crores, which was supported by audited financials, tax audit reports, and monthly GST returns. The CIT(A) concluded that the credits were from export sales and were duly accounted for in the books of accounts, thus deleting the addition made by the AO.

Issue 3: Deletion of Additions by CIT(A) without Further Inquiries

The Revenue argued that the CIT(A) deleted the addition without ascertaining further facts from the AO or causing further inquiry to establish the factual correctness of his decision. The CIT(A) noted that the AO failed to make further inquiries on the information filed by the assessee and that the assessee had discharged the initial burden by submitting the necessary information and details.

Issue 4: Remittance of the Matter Back to the AO for Verification and Scrutiny

The Revenue suggested that given the details furnished by the assessee towards the end of the assessment, the matter should be remitted back to the AO for verification and scrutiny. However, the CIT(A) found that the turnover and credits in the bank accounts were already reflected in the audited financials and the return of income filed under section 139(1). The CIT(A) held that treating the turnover as unexplained cash credit would result in double taxation, which is against the principles of taxation.

Conclusion

The Tribunal upheld the order of the CIT(A), noting that the assessee had provided sufficient evidence to prove that the credits in the bank accounts were from export sales and were duly accounted for in the books of accounts. The Tribunal found no infirmity in the CIT(A)'s order and dismissed the appeal filed by the Revenue.

Order pronounced on 30th August, 2024.

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