Addition u/s 68 towards unexplained cash credit unsustainable as cash sales already reflected in P&L

DCIT Vs Kundan Jewellers Pvt Ltd (ITAT Mumbai)

ITAT Mumbai held that addition under section 68 of the Income Tax Act towards unexplained cash credit unsustainable as cash proceeds already reflected in Profit & Loss account, hence addition u/s 68 will amount to double taxation.

Facts- The assessee company is engaged in the business of wholesale and retail trade of all kind of gold, diamond jewellary, silver articles and other precious stones. On perusal of the financial statements, AO found that during the demonetization period there are cash deposits in the bank accounts aggregating to Rs. 13,29,50,000/-. Based on the submission, AO observed that, the month wise cash sales and cash deposits on comparing to F.Y 2015-16 has significantly increased, especially during the month of October 2016 to November 2016 and the assessee was issued show cause notice as to why the cash deposited during the demonetization period should not be treated as unexplained cash receipts u/s 68 of the Act.

AO was not satisfied with the explanations and observed that the assessee has neither furnished the details of parties / customers with names, address, party wise cash sales and the AO is of the opinion to treat the cash deposits as unexplained cash credits u/s 68 of the Act. Further the assessee has furnished the form -1 form of declaration u/s 199C of the Finance Act, 2016 in respect of taxation and investment regime for Pradhan Mantri Garib Kalyan yojana Rules, 2016 and on record no other facts were filed regarding the disclosure of income under the scheme and finally assessed the total income of Rs. 17,18,37,993/- and computed the book profit u/s 115JB of the Act of Rs. 3,78,90,828/- and passed the order u/s 143(3) of the Act on 23.12.2019.

Conclusion- Since the cash sales proceeds/receipts received from the customers are reflected in the Audited Profit & Loss account as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation.

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