Unexplained Cash Deposit: ITAT Orders Verification of Rs. 47.8 Lakh Claimed to Be from Gas Cylinder Sales [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) directed the Assessing Officer (AO) to verify the source of Rs. 47.8 lakh deposited in the bank account of the assessee, claimed to be proceeds from gas cylinder sales.

Neha Modi (assessee) is engaged in the business of trading, loading, and unloading of IOC Gas Cylinders. The assessee deposited Rs. 47.8 lakh but failed to furnish supporting evidence to justify the source of the cash.

During the assessment proceedings, the assessee submitted that the amount was generated from cash sales of gas cylinders and that the corresponding sales were duly recorded in the books of accounts.

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The AO was not satisfied with the explanation due to discrepancies in the reported sales figures and the bank deposits. The AO treated the amount as unexplained cash credits under Section 68 of the Income Tax Act and added it to the assessee’s income.

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Aggrieved by the assessment order, the assessee approached the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) upheld the AO’s decision and affirmed the addition of Rs. 47.8 lakhs.

Aggrieved by the CIT(A) order, the assessee preferred an appeal before the ITAT. The counsel for assessee submitted that the cash deposits were business receipts from gas cylinder sales and produced additional invoices and ledger entries to substantiate the claim. The counsel also submitted that cash received had been made to IOC for purchase of fresh gas cylinders.

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The two-member bench, comprising Dr. BRR Kumar (Vice President) and T. R. Senthil Kumar (Judicial Member), observed that the assessee made cash deposits in the bank account from april to march which arises from sale of gas cylinders to the customers.

The tribunal also observed that the source of cash deposits was said to be sale of gas cylinders to the customers. Therefore, the tribunal held that the information needed to be verified in order to substantiate the source.

The tribunal directed the AO to obtain detailed information related to the cash received from the customers and also the amount paid to the IOC for the purchase of fresh gas cylinders. The tribunal also directed the AO to examine loading and unloading charges. 

The appeal of the assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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