DCIT Vs Artex Textile Private Limited (ITAT Delhi)
No Double Taxation on Recorded Cash Sales- Section 68/115BBE Not Applicable Where Cash Sales Are Duly Recorded
Assessee, engaged in fabric trading, had deposited ₹7.04 crores in cash during demonetization (Nov–Dec 2016). AO rejected books u/s 145(3), alleging abnormal spike in October–November sales & nil sales in later months, treating deposits as unexplained u/s 68. Additions were also made for estimated NP & cash receipt from vehicle sale.
CIT(A), after detailed examination, held rejection of books as void-ab-initio, noting that sales, stock register, purchases & audited accounts were duly filed. It was observed that AO accepted trading results but simultaneously treated recorded sales as unexplained, leading to impermissible double taxation. Relying on precedents (PCIT Vs. Forum Sales Pvt. Ltd., ACIT Vs. Vikas Gutgutia, JR Rice India Pvt. Ltd.), CIT(A) deleted all additions, including ₹7.04 crores.
Before Tribunal, Revenue argued that AO issued multiple notices & assessee failed to explain source of cash. It contended that CIT(A) wrongly accepted VAT returns without remand report.
Tribunal, however, upheld CIT(A)’s reasoning. It held that once books are accepted as valid, recorded cash sales cannot be treated as unexplained u/s 68. Suspicion on demonetization deposits cannot override evidence from audited accounts. It emphasized that cash sales reduce inventory & form part of regular business, hence cannot be taxed again as unexplained. Consequently, additions u/s 68 & levy u/s 115BBE were found unjustified. Accordingly, Tribunal dismissed Revenue’s appeal & upheld deletion of ₹7.04 crores along with other additions.
