Cash deposits during demonetisation treated as recorded sales - addition under assessment deleted; commission disallowance reversed.

Where cash deposits during the demonetisation period are duly recorded in audited books as sales and business receipts, treating the same amounts as unexplained cash under the revenue's claim is unsustainable; the addition under the income tax assessment was therefore deleted. Payments characterised as commission were sustained where they were remitted through banking channels, subject to tax deducted at source, and previously accepted in earlier years; absent any finding that the expenses were bogus or not incurred for business purposes, the disallowance was deleted. The assessee's appeal was allowed.

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Issues: (i) Whether the addition of Rs. 48,02,549/- under section 68 in respect of cash deposits recorded as sales in audited books of account during the demonetisation period is sustainable; (ii) Whether the disallowance of commission expenses of Rs. 19,92,025/- is supportable; (iii) Whether section 115BBE and penalty under section 271AAC are properly applicable consequential to the confirmed additions.

Issue (i): Whether the addition of Rs. 48,02,549/- under section 68 can be sustained when the amounts are reflected as sales in regular audited books of account which have not been rejected.

Analysis: The amounts in question are recorded in the cash book and bank book and the corresponding sales are credited to the profit and loss account and offered to tax. The assessing exercise did not dispute the quantitative sales details or reject the books of account. Binding authorities establish that where receipts are shown as sales in regular books and not found to be fictitious, the same receipts cannot be taxed again as unexplained cash credits; reliance was placed on recent decisions of the jurisdictional High Court and Tribunal applying that principle.

Conclusion: The addition of Rs. 48,02,549/- under section 68 is deleted; decision is in favour of the assessee on this issue.

Issue (ii): Whether the disallowance of commission expenses of Rs. 19,92,025/- is justified.

Analysis: The payments were made through banking channels, tax was deducted at source, and similar expenses were allowed in earlier years. No finding of bogusness or non-incurrence of the expenditure was recorded.

Conclusion: The disallowance of commission expenses is deleted; decision is in favour of the assessee on this issue.

Issue (iii): Whether section 115BBE and penalty under section 271AAC are applicable consequent to the confirmed additions.

Analysis: The applicability of section 115BBE and the initiation/sustaining of penalty proceedings were premised on the additions which have been set aside on the substantive point that the receipts were recorded sales in accepted books. With the foundational additions deleted, the consequential statutory measures cannot be sustained.

Conclusion: Sections 115BBE and 271AAC are not sustained as a consequence of the deletion of the additions; decision is in favour of the assessee on this issue.

Final Conclusion: The Tribunal set aside the impugned addition under section 68 and the disallowance of commission expenses, and accordingly the consequential tax computation and penalty findings could not be sustained; the appeal is allowed.

Ratio Decidendi: Where amounts are recorded as sales in regular audited books of account that have not been rejected and the sales are not shown to be fictitious, those receipts cannot be treated as unexplained cash credits under section 68 and taxed again, as that would result in double taxation.

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