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Facts
The Assessing Officer (AO) made an addition of Rs. 88,05,000/- under Section 68 of the Income Tax Act, disbelieving the assessee's claim that the cash deposit in the bank was from cash sales in a gold jewellery shop during the demonetization period. The AO suspected it was unaccounted money.
Held
The Tribunal held that while there were suspicious features like abnormal sales and delayed VAT returns, the law requires conclusive evidence. Since the Revenue failed to provide evidence that the deposited cash was unaccounted money, Section 68 could not be invoked. The purchases were also found to be genuine.
Key Issues
Whether the addition made under Section 68 of the Income Tax Act for cash deposits is sustainable when the assessee claims it's from genuine cash sales, and the Revenue lacks conclusive evidence of it being unaccounted money.
Sections Cited
68, 44AD, 133(6), 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “G” Bench, Mumbai.
Before: Shri Rahul Chaudhary(JM) & Shri Omkareshwar Chidara (AM)
The main issue in the above cited appeal is the addition of Rs. 88,05,000/- under section 68 of the I.T. Act, where the Ld. AO disbelieved the version of appellant that the source of this cash deposit in the bank, is out of cash sales made in the gold jewellery shop during the demonetization period in F.Y. 2016-17.
The Revenue took the following ground of appeal :-
(a) "Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in directing the AO to delete the addition made u/s. 68 of the I.T Act of Rs. 88,05,000/- without appreciating the fact that the sales were abnormally increased in this year before the demonetization period as compared to preceding and succeeding years and that was unrealistic jump in the cash sales was not genuine as per the trend of cash sales in the preceding months/year. (b) Whether on the facts of the case and in law, the Ld. CIT (A) has erred in directing the AO to delete the addition made u/s.68 of IT Act of Rs. 88,05,000/- without appreciating the fact that for purchase of jewelry made in June 2016, payment Was made in January and February 2017 when there was sufficient cash available with the assessee in the month
2 Girish Nanddas Agrawal of November 2016 indicating that unaccounted cash in hand was given colour of business transactions. (c) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in directing the AO to delete the addition made u/s. 68 of the I.T Act of Rs. 88,05,000/- without appreciating the fact that the assessee has failed to explain the nature and source of entries in the cash book and that the addition u/s. 68 of the I.T Act was made on the basis of cash book.
The Ld. AO, as mentioned above, did not believe the appellant’s version relating to source of cash deposit as cash sales. The summary of the assessment order, is as follows and Ld. DR relied on the same :-
a) There is an unrealistic jump in cash sales during August 2016 to November 2016. Hence, the same is not genuine as per trend of cash sales in preceding months/year. b) The appellant suddenly booked huge credit purchase of Rs. 1.06 crore in August 2016. c) Some purchases made in September 2016 were returned in January 2017 which is abnormal because if the appellant feels the goods are not upto the mark, the same would be returned immediately or within reasonable time but not after 5 months. Hence, purchases were not genuine. d) For the purposes of depositing cash, a separate bank account was opened in 2016 and closed in 2017 and hence it is suspicious. e) The Ld. AO compared sales of earlier and subsequent years and found that only in the year of demonetization, impugned year, huge sales are there and hence prima facie, it creates a doubt. f) The appellant filed VAT with a delay of 1 month to 5 months period and suspected that the appellant filed delayed VAT returns only to incorporate all the above abnormal sales. The Ld. AO concluded that the source of the cash deposit was not sales, but introduction of unaccounted money.
3 Girish Nanddas Agrawal 4. The arguments of Ld. AR of the appellant are summarized as follows :- a) The appellant filed Return of Income admitting income under section 44AD, presumptive tax where he need not maintain books. Under this section, the Ld. AO cannot make addition under section 68 and relied on catena of decisions. b) All the purchases and sales are recorded in books of account. c) The Ld. AO issued notice under section 133(6) of the I.T. Act calling for information about purchases who deposed that they sold goods to the appellant. d) The Ld. AO cannot invoke section 115BBE of the Act because the section is applicable for A.Y. 2018-19 and hence retrospective application is not valid. For this proposition, several cases-law were relied on. e) The appellant produced purchases and sales register, stock records, sale and purchase bills before Ld. AO for verification and no adverse inference was drawn. f) No addition was made on account of bogus purchases and hence sales should be treated as genuine. g) The Ld. CIT(A) was convinced about all the evidences and gave relief and the same should be affirmed in ITAT too.
Heard both sides. a) There is sufficient force in the submissions of Ld. AR of the appellant with the documentary evidence and reliance placed on several cases- law in similar circumstances where the Coordinate Benches of the Income Tax Appellate Tribunals gave relief to the appellant and concluded that when the sales are recorded in the regular books of account and when the cash was deposited in the bank account, the same cannot be treated as unexplained cash credit. b) The Ld. AO issued notices under section 133(6) and the sellers of jewellery confirmed the sale to appellant.
4 Girish Nanddas Agrawal c) The sales are reflected in VAT returns filed by appellant with Sales Tax Department even though with a delay of 1 to 5 months. d) No doubt, there are several suspicious features like abnormal increase in purchases and sales during this year, VAT returns filed with delay, some goods are returned with delay to sellers etc. But, the law goes with evidences only. The purchases were proved to be genuine by appellant and the Department does not have any evidence to say that the sales are not genuine and unaccounted money of appellant was deposited in the bank account. Even though the Ld. AO did lot of good work like issuing notices under section 133(6) of the Act, raised suspicion/doubt that the sale proceeds are not genuine but actually cash deposited represents its unaccounted money by comparing the purchases and sales of previous and subsequent years. But yes, these issues raised by Ld. AO are only pointers towards unaccounted income but not conclusive evidence to show that the same can be added under section 68 of the Act especially in view of documentary evidences produced by the appellant with respect to purchase and sale invoices. Suffice to say that the law requires evidence and the courts cannot go beyond the evidences produced, unless they are proved to be not genuine. As there is no evidence with the Revenue that the amount deposited in bank is unaccounted money, section 68 of the Act cannot be invoked and hence the order of Ld. CIT(A) is upheld.
The appeal of the Revenue is dismissed.
Order pronounced in the open Court on 26/08/2025.