Kent Cables Pvt. Ltd. Vs ACIT (ITAT Delhi)
BOOK ENTRY IS NOT A MAGIC WAND—ABNORMAL DEMONETISATION CASH SALES MUST BE PROVED WITH CUSTOMERS, COLLECTIONS & UNDERLYING BILLS U/S 68/145(3)
Background
The assessee-company was subjected to scrutiny assessment u/s 143(3). During the proceedings, the AO noticed an abnormal increase in cash deposits immediately before & during the demonetisation period. According to the AO, the deposits did not correspond with the normal business pattern or the details & evidence furnished by the assessee.
The assessee claimed that the cash represented genuine business receipts comprising cash sales & recoveries from debtors. The AO, however, rejected the books u/s 145(3) & treated ₹1,60,24,414 as unexplained cash credit u/s 68 r.w.s. 115BBE.
The CIT(A) confirmed the addition. The assessee therefore approached the Tribunal with a single ground challenging the addition.
Why the Authorities Doubted the Cash Sales
The CIT(A) found that the assessee had offered different explanations at different stages. Initially, the assessee claimed that the unusually high cash deposits arose because its sales representatives had efficiently recovered outstanding amounts from customers in rural areas of Bihar & Uttar Pradesh.
Later, the assessee claimed that new products had been launched, which became popular due to improved marketing & resulted in substantially higher sales. However, no convincing evidence relating to the new product launch, additional advertising expenditure or special marketing campaign was produced.
