Unexplained cash credit treatment barred where recorded sales and books are accepted; excess stock addition upheld as afterthought.

The tribunal addressed two issues: first, it held that cash deposits arising from recorded cash sales cannot be treated as unexplained cash credit where books of account, cash sales entries, corresponding stock movements and GST returns were accepted, because that would amount to taxing the same profit twice; the addition on this ground was deleted. Second, it sustained an addition for excess stock found on survey because the assessee's contemporaneous statement attributed the variation to counting error while a later claim that goods were non-dispatched was an unsubstantiated afterthought; that addition was upheld.

---

---

Issues: (i) Whether addition of Rs. 40,00,000/- made by the Assessing Officer treating cash deposits as unexplained cash credit is sustainable; (ii) Whether addition of Rs. 7,88,943/- made on account of excess stock found during survey as unexplained investment is sustainable.

Issue (i): Whether the cash deposits of Rs. 40,00,000/- can be treated as unexplained cash credit when the books of account, cash sales, stock movements and GST returns recording those sales have been accepted.

Analysis: The books of account were not rejected and the net profit declared was accepted. Cash sales are recorded in the books, corresponding stock reduction is reflected in stock records and sales are reported in GST returns. No defect in the books, stock records or GST returns was pointed out by the Assessing Officer. Treating deposits arising from recorded and taxed sales as unexplained cash credit without rejecting the books would amount to taxing the same income twice.

Conclusion: Deletion of the addition of Rs. 40,00,000/- is directed; this part of the appeal is allowed in favour of the assessee.

Issue (ii): Whether the addition of Rs. 7,88,943/- on account of excess stock found during survey can be sustained in view of the assessee's explanations.

Analysis: During survey the assessee attributed the stock variation to inaccurate physical stock counting in the statement recorded at survey. The later explanation that the excess stock represented non-dispatched goods against accounted sales is contrary to the contemporaneous statement and is unsupported by documentary evidence before the authorities. The revised explanation is therefore an afterthought and not substantiated.

Conclusion: The addition of Rs. 7,88,943/- on account of unexplained investment in stock is upheld; this part of the appeal is dismissed in favour of the revenue.

Final Conclusion: The appeal is partly allowed by deleting the addition of Rs. 40,00,000/- and upholding the addition of Rs. 7,88,943/-, resulting in a partial relief to the assessee.

Ratio Decidendi: Where the assessing authority accepts the books of account and the profit element of recorded sales has been taxed, cash deposits arising from those recorded sales cannot be treated as unexplained cash credit without rejecting the books of account, otherwise the same income would be taxed twice.

---