Motor Fab Sales Pvt. Ltd. Vs DCIT/ACIT-4 (ITAT Lucknow)
The Income Tax Appellate Tribunal (ITAT), Lucknow, decided cross-appeals filed by the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals) for Assessment Year 2017-18. The assessee, engaged in the business of automobiles and jewellery, had declared total sales of over ₹329.07 crore. During scrutiny, the Assessing Officer observed a sharp rise in cash sales during October and the first eight days of November 2016 and concluded that a substantial portion of the cash sales represented bogus receipts introduced to facilitate cash deposits during the demonetisation period. Based on an estimated comparison of average daily sales, the Assessing Officer treated ₹17.50 crore as unexplained cash deposits under Section 68 and invoked Section 115BBE. The Commissioner (Appeals) deleted the addition under Section 68 but directed that 20% of certain sales be taxed as premium allegedly earned on those transactions, while also allowing credit for the amount declared under the Pradhan Mantri Garib Kalyan Yojana. Both the assessee and the Revenue challenged the appellate order before the Tribunal.
The Revenue argued that the abnormal increase in cash sales during the demonetisation period, absence of customer details, lack of corresponding increase in infrastructure expenditure, and the level of opening stock justified the addition under Section 68. The assessee contended that the cash deposits represented opening cash balance and recorded business turnover, that audited books of account, stock registers and VAT records had been produced, and that neither the books nor the stock records had been rejected or found defective. It was further submitted that the cash sales had already formed part of the disclosed turnover and, therefore, taxing the same amount again under Section 68 would result in double taxation.
