Unexplained cash credit principle: recorded and taxed sales with books intact should not be treated as unexplained cash credits.

Issue concerns treatment of receipts recorded as sales and taxed in the assessee's books vis-a -vis characterization as unexplained cash credits. The analysis applies the principle that where receipts are recorded as business sales, resultant profit is offered to tax and the books of account are not rejected, such amounts should not be treated as unexplained cash credits absent independent evidence displacing the recorded sales. Coordinate bench precedent is relied on to conclude that an addition on unexplained cash credit basis is unsustainable without rejection of books or separate proof to contradict the accounting records.

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Issues: Whether the addition of Rs. 2,81,87,500 made by the Assessing Officer under Section 68 of the Income-tax Act, 1961 can be sustained where the amount is recorded as sales in the assessee's books and the resultant profit is offered to tax and the books of account have not been rejected.

Analysis: The assessee sold booking rights and credited Rs. 2,81,87,500 as sales in the profit and loss account; the resultant profit of Rs. 2,57,50,000 was offered to tax. The Assessing Officer made an addition under Section 68 treating the receipt as unexplained cash credit, but did not reject the assessee's books of account nor the sales recorded. The order under appeal relied on the principle that amounts already recorded as sales and taxed as part of business income are not to be treated as unexplained cash credits for the purposes of Section 68. The appellate authority also relied on coordinate bench precedent applying the same principle and found the AO's addition unsustainable in the absence of rejection of books or separate evidence displacing the recorded sales.

Conclusion: The deletion of the addition of Rs. 2,81,87,500 is upheld in favour of the assessee.

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