ITO Vs Ankit Gold Ltd. (ITAT Ahmedabad)
ITAT Ahmedabad held that once cash sales are accepted as genuine for the purpose of determining profit, the same cannot be added again as unexplained cash credit by invoking provisions of section 68 of the Income Tax Act. Accordingly, appeal of revenue dismissed.
Facts- The assessee is engaged in the business of manufacturing, retail, and wholesale of gold jewellery. During the assessment proceedings, AO noted that during the demonetization period, from 09.11.2016 to 30.12.2016, the assessee deposited a sum of Rs. 3,02,62,000/- in cash, which as per the assessee had come from cash sales duly recorded in the books of account. The assessee submitted that the sales were supported by proper documentation, including audited books, purchase and stock registers, cash and bank books, bills, and vouchers. However, AO proceeded to treat the entire cash deposit during the demonetization period as unexplained cash credit u/s. 68 of the Act. Thus, an addition of Rs. 3,02,62,000/- was made to the assessee’s income, by holding that the cash deposits represented unexplained income masked as fabricated sales.
CIT(A) allowed the appeal. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that the genuineness of the sales was supported by various documentary evidence submitted by the assessee, including audited financial statements, VAT returns, month-wise stock details, stock and purchase registers, purchase bills, sales register, cash book, bank statements, and break-up of cash sales. No specific defect was pointed out by the AO in the stock records or purchases corresponding to the sales. The cash deposits were linked to these documented sales, and there was no evidence brought on record by the AO to demonstrate otherwise. Therefore, once the AO accepted the sales as genuine for the purpose of determining profit, he could not invoke section 68 of the Act for taxing the same amount again as unexplained cash credit. Thus, in light of the above facts and consistent with numerous judicial pronouncements, in our considered view the Commissioner (Appeals) has correctly held that the addition under section 68 of the Act was uncalled for and directed deletion of the same. Therefore, the deletion of the addition of ₹3,02,51,598/- made under section 68 of the Act is justified and deserves to be upheld.
