2026 (5) TMI 1699

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.... that, the Assessee filed return of income for Assessment Year 2017-18 declaring total income of Rs. 7,48,680/-. The case was selected for scrutiny for following two reasons: i. Abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period. ii. Opening WDV of fixed assets as per ITR of current year is greater than closing WDV of fixed assets as per ITR of preceding year. Assessment proceedings have been initiated against the Assessee and the assessment order came to be passed u/s 143(3) of the Income Tax Act, 1961 ('Act' for short) and an assessment order came to be passed on 23/12/2019 by making an addition of Rs. 50,60,000/- u/s 68 of the Act on account of unexplained....

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....order of the AO and that of the Ld. CIT[A]: Grounds taken by the appellant are general in nature and/or consequential which are strongly opposed in view of the detailed discussions in the order of AO/Ld. CIT(A) and further following submissions. The Hon'ble Supreme Court has dismissed an SLP as withdrawn by the assessee in the case of Sanjay Kapur Vs ACIT /2022] 138 taxmann.com 207 [SC/ order dated 16.03.2022. In this case there was cash deposit of Rs. 11.40 in bank account during demonetization. Though the said entry was reflected in the return of income yet not supporting evidences were available to prove source of such deposit. In Writ Petition Hon'ble High Court was of the view that there was reason to believe ....

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.... books of accounts are accepted as such no addition is permissible or in other words addition u/s 68 can not be made without rejecting books of account or that section 68 does not apply to a sum already disclosed as income. My counter argument is that it is not correct and not acceptable because section 68 is outside the Chapter-IVD [Sections 28 to 44DB) of the Income Tax Act, 1961 which is related to the computation of total income with regard to 'Profits and Gains of Business or Profession'. Rejection of books of account comes under section 145[3] and section 145[1] which specifically provides that it is for computation of income under the heads "Profits and Gains of Business and Profession" or "Income from Other....

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....y the A.O. and the same has been confirmed by the Ld. CIT(A). It is found that during the Assessment Year 2016-17, the cash deposited was in-line with the cash sales in the preceding years compared to the relevant year. In the Assessment Year 2016-17, the cash sales was Rs. 77,62,163/- and cash deposit was Rs. 77,59,000/- and in the year under consideration, the cash sales was Rs. 54,34,523/- and the cash deposit was Rs. 50,60,000/-. Admittedly the books of accounts of the Assessee have not been rejected. The A.O. committed error by treating portion of sales as unexplained without rejecting the books of account which is contrary to the settled principal of law. The Hon'ble High Court of Delhi in the case of CIT vs. Kailash Jwelllery Hou....