The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the cash generated from sales and duly recorded in the books of account cannot be treated as unexplained cash credit under Section 68 of the Income Tax Act, 1961.
The assessee is an individual who claimed to be engaged in the business of trading gold and silver items under the name and style of M/s Adheshwer Jewelers. The assessee during the demonetization period deposited cash amounting to Rs. 50Lakh in the bank account held with Yes Bank and UCO Bank.
The assessee made cash sales of Rs. 50,47,147/- during the festival time of Diwali, Dhanteras, and Pushnanakshatra which are considered as good mahurat by the people for purchase of jewelry. The assessee further submitted that the proceeds of cash sales in the month of October 2016 were held in the business instead of depositing in the bank as the period was considered and for that, he needed liquidity to earn more profits.
The assessee immediately after demonetization was announced deposited cash in the bank in installments on different dates. As such, the assessee deposited cash amounting to 30 Lakh on 11th November and the remaining cash of Rs.20 Lakh on 2nd December 2016.
The Assessing Officer held that the entire submission of the assessee showing cash deposits out of trading of gold and silver is camouflaged and an afterthought. Therefore, the Assessing Officer rejected the same and treated the entire cash deposit of Rs. 50 Lakh as unexplained cash credit under Section 68 of the Income Tax Act and added to total income.
The Authorized Representative submitted that the business of the assessee was established 06-05-2016 which was evident from the VAT registration certificate. It was further submitted that the cash was deposited in the bank out of the sale proceeds. The Authorized Representative in support of his contention has drawn attention to the cashbook, sale register, stock register, and VAT returns which are placed in the paper book.
The Two-member bench comprising of Waseem Ahmed (Accountant member) and Madhumita Roy (Judicial member) held that the assessee has duly shown the cash receipt from the sale of gold/gold ornaments duly recorded in audited books of the account supported by sales bill and stock details. The Assessing Officer has not pointed out any defect in the books of accounts.
Therefore, the Assessing Officer cannot treat the cash generated from sales duly recorded in books of account from unexplained/unaccounted sources unless books of account are rejected based on valid reasons. The order of the Commissioner of Income Tax (Appeal) [CIT(A)] was set aside and the Assessing Officer was directed to delete the addition made by him. Thus, the appeal of the assessee was allowed.
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