Unexplained income cannot be imputed to recorded cash sales without book rejection or material discrepancy, Gujarat HC confirms.

Recorded cash deposits shown as sales in the books could not be treated as unexplained income under Section 69A where the Assessing Officer had not rejected the books under Section 145(3) and no material discrepancy was found in stock movement, VAT returns or financial statements. The assessee's supporting documentation and higher gross profit further supported the cash sales, so the Revenue could not dislodge the concurrent factual findings. The Gujarat HC accordingly found Section 69A inapplicable to the recorded sales and rejected the challenge for want of any substantial question of law.

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Issues: Whether cash deposits recorded as sales in the books of account could be treated as unexplained income under Section 69A of the Income-tax Act, 1961 in the absence of rejection of books of account or any material discrepancy, and whether any substantial question of law arose from the Tribunal's order.

Analysis: The recorded concurrent findings were that the assessee had entered the cash deposits as sales in its books, the Assessing Officer had not rejected the books under Section 145(3) of the Income-tax Act, 1961, and no material discrepancy was shown in stock movement, VAT returns, or financial statements. The authorities below also accepted that the assessee had disclosed higher gross profit and supported the cash sales with documentation. On those facts, the cash deposits could not be arbitrarily treated as unexplained income merely on suspicion, and the Revenue failed to dislodge the factual findings.

Conclusion: Section 69A of the Income-tax Act, 1961 was held to be inapplicable to the recorded cash sales, and the Revenue's challenge failed because no substantial question of law arose.

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