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        <h1>Cash deposits from retail sales cannot be added separately when sales already assessed for tax</h1> <h3>DCIT Central Circle-II Noida. Versus Nagpal Fabrics Pvt. Ltd.</h3> DCIT Central Circle-II Noida. Versus Nagpal Fabrics Pvt. Ltd. - TMI Issues Involved:1. Deletion of addition towards unexplained cash deposits.2. Admission of additional evidence by the CIT(A) in contravention of Rule 46A of the Income Tax Rules, 1962.3. Verification of the genuineness of cash sales and the corresponding cash deposits.4. Alleged double taxation of cash sales and cash deposits.5. Examination of the creditworthiness of debtors and the legitimacy of sales transactions.Detailed Analysis:1. Deletion of Addition Towards Unexplained Cash Deposits:The Revenue challenged the deletion of an addition of INR 1,46,84,779/- made by the Assessing Officer (AO) on account of unexplained cash deposits in the assessee's bank account. The AO treated these deposits as unexplained money under Section 68 of the Income Tax Act, 1961, due to the assessee's failure to satisfactorily explain the source of the cash deposits. However, the CIT(A) found that the cash deposits were sourced from cash sales, which were a regular feature of the assessee's business, constituting less than 10% of the total turnover. The CIT(A) noted that the books of accounts, including cash sales, were duly audited and accepted, and the sales were reflected in GST returns. Consequently, the CIT(A) concluded that the cash deposits could not be treated as unexplained income, as they were already accounted for in the books, thus avoiding double taxation.2. Admission of Additional Evidence:The Revenue contended that the CIT(A) erred in admitting additional evidence in contravention of Rule 46A of the Income Tax Rules, 1962. The CIT(A) had directed the assessee to provide confirmations from parties to whom cash sales exceeding INR 1 lakh were made, which were not initially submitted to the AO. However, the CIT(A) justified the admission of this evidence, stating that it was necessary for ensuring natural justice and was called for during appellate proceedings. The Tribunal upheld this decision, emphasizing that the CIT(A) has plenary powers to admit additional evidence and conduct inquiries under Section 250(4) of the Act.3. Verification of Genuineness of Cash Sales:The AO questioned the genuineness of the cash sales, suspecting them to be a means to introduce unaccounted money. However, the CIT(A) and the Tribunal found that the cash sales were genuine and supported by evidence, including ledger accounts, sale invoices, and confirmations from customers. The Tribunal observed that the AO did not provide any evidence to disprove the sales or the corresponding cash deposits. The cash sales were consistent with the assessee's business pattern and were made to GST-registered customers, further validating their authenticity.4. Alleged Double Taxation:The Tribunal addressed the issue of alleged double taxation, where the AO assessed the cash sales and also made additions for the same cash deposits, resulting in double taxation of the same transaction. The Tribunal emphasized that the cash deposits were a result of cash sales, which were already accounted for in the books. Therefore, taxing the cash deposits separately would lead to double jeopardy, which is not permissible under basic accounting principles. The Tribunal upheld the CIT(A)'s decision to delete the addition, as the cash deposits were not unexplained but were part of the recorded sales.5. Examination of Creditworthiness of Debtors:The Revenue raised concerns about the creditworthiness of the debtors and the legitimacy of the sales transactions. However, the Tribunal found these objections to be unfounded, as the assessee's responsibility was limited to proving the sales and the corresponding cash deposits. The sales were made to GST-registered customers, and the AO had accepted the purchases and trading results. The Tribunal noted that the AO did not provide any evidence to challenge the sales' authenticity or the cash deposits' legitimacy.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the addition of INR 1,46,84,779/- towards cash deposits. The Tribunal found that the cash deposits were adequately explained as arising from genuine cash sales, which were duly recorded in the books of accounts. The Tribunal also upheld the CIT(A)'s admission of additional evidence, emphasizing the principles of natural justice and the CIT(A)'s authority to conduct inquiries. The objections regarding the creditworthiness of debtors and the alleged double taxation were also rejected, as the cash sales and deposits were consistent with the assessee's business practices and supported by evidence.

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