Unexplained cash credits cannot be invoked where recorded sales, GST paid and banked receipts show turnover and profit offered.

Treating recorded sales as unexplained cash credits is not tenable where the amounts form part of turnover, are recorded in books, routed through banking channels, GST has been discharged and profit on those sales is offered to tax; section 68 therefore does not apply and the addition is deleted. Similarly, estimating additional profit is impermissible absent rejection of books, demonstrated suppression, or unreliability of trading results; where sales and profits are accepted and books stand, the CIT(A)'s uplift is deleted.

---

---

Issues: (i) Whether the addition made by the Assessing Officer treating recorded sales of Rs.55,11,843/- as unexplained cash credits under section 68 is sustainable; and (ii) Whether the estimation of profit by the learned CIT(A) at 4.5% (leading to a 2.73% addition) is sustainable when the sales have been recorded in books and profit thereon offered to tax.

Issue (i): Whether the Assessing Officer was justified in treating recorded sales as unexplained cash credits under section 68.

Analysis: The impugned amount forms part of the turnover and is recorded in the books of account, credited to trading results, with GST discharged and receipts routed through banking channels. The books of account were not rejected under section 145(3). Section 68 applies where a sum is found credited in the books and the assessee fails to satisfactorily explain its nature and source. Where the nature and source are disclosed as business receipts forming part of turnover and profit has been offered to tax, treating gross sales as unexplained credits would amount to taxing the entire turnover.

Conclusion: The addition treating the recorded sales as unexplained cash credits under section 68 is not sustainable and is deleted. This conclusion is in favour of the assessee.

Issue (ii): Whether the learned CIT(A)'s estimation of profit at 4.5% (resulting in a 2.73% addition) is sustainable despite acceptance of the sales as part of turnover and profit already declared thereon.

Analysis: Estimation of additional profit is permissible where books are rejected or trading results are shown to be unreliable or income suppression is demonstrated. There is no finding that the overall gross profit declared is abnormal, nor were the books rejected. The sales were accepted as part of turnover and profit on those sales has been offered to tax, so there is no legal basis to estimate further profit on the same sales absent rejection of books or demonstration of suppression.

Conclusion: The estimation sustained by the learned CIT(A) is not justified and the addition of 2.73% is deleted. This conclusion is in favour of the assessee.

---