Additions under Section 68 upheld for unexplained cash credits during demonetization period

ITAT Raipur upheld additions under section 68 for unexplained cash credits and rejected books of accounts. During demonetization period, assessee made cash deposits of Rs. 75.69 lacs (81% of total turnover of Rs. 93.17 lacs) between November-December 2016. Transactions were primarily with unidentifiable buyers without PAN and sister concerns that could not be located during verification. Assessee failed to provide adequate explanations for fictitious purchase/sale transactions and personal cash deposits. CIT(A) correctly confirmed additions, and section 115BBE provisions were held applicable. Appeal dismissed.

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Issues Involved:

1. Sustaining addition of Rs. 85,78,000 as unexplained cash credit under Section 68.
2. Sustaining addition of Rs. 2,00,000 as unexplained cash credit under Section 68.
3. Application of Section 115BBE.
4. Validity of assessment under Section 143(3) after rejecting books under Section 145(3).

Detailed Analysis:

1. Sustaining Addition of Rs. 85,78,000 as Unexplained Cash Credit under Section 68:

The primary issue is whether the addition of Rs. 85,78,000 as unexplained cash credit under Section 68 was justified. The assessee argued that the cash deposits were sourced from cash sales made during the demonetization period. However, the Assessing Officer (AO) found discrepancies in the assessee's books, noting that the business transactions appeared to be fictitious, primarily because the alleged sales were made in cash to unidentifiable persons without PANs. The AO rejected the books under Section 145(3) and treated the cash deposits as unexplained, adding them to the income under Section 68. The CIT(A) upheld this addition, emphasizing the improbability of conducting genuine business within such a short period and the lack of credible evidence supporting the transactions. The tribunal concurred with the CIT(A)'s findings, noting that the AO did not rely on the rejected books to quantify the additions, but rather on bank statements, thereby dismissing the assessee's appeal on this ground.

2. Sustaining Addition of Rs. 2,00,000 as Unexplained Cash Credit under Section 68:

The assessee contended that the Rs. 2,00,000 deposited in a personal bank account were personal savings. However, due to the absence of documentary evidence to substantiate this claim, the AO treated the amount as unexplained cash credit under Section 68. The CIT(A) upheld this addition, and the tribunal agreed, as the assessee failed to provide a satisfactory explanation for the source of the cash deposit.

3. Application of Section 115BBE:

This issue pertains to the applicability of Section 115BBE, which imposes a higher tax rate on income assessed under Section 68. Since the tribunal upheld the additions under Section 68, the application of Section 115BBE was deemed consequential and applicable as per law. The tribunal disposed of this ground accordingly.

4. Validity of Assessment under Section 143(3) After Rejecting Books under Section 145(3):

The assessee argued that once the books were rejected under Section 145(3), the AO should have resorted to a best judgment assessment under Section 144, rather than proceeding under Section 143(3). However, the tribunal found that the AO did not rely on the rejected books for making additions but used bank statements, which were undisputed. Therefore, the tribunal upheld the validity of the assessment under Section 143(3), dismissing the assessee's contention.

Conclusion:

The tribunal dismissed the appeal, upholding the additions under Section 68 and the applicability of Section 115BBE, while affirming the validity of the assessment under Section 143(3). The tribunal found no merit in the arguments presented by the assessee, leading to the dismissal of all grounds of appeal.

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