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Facts
The assessee, engaged in purchase and sale of new and old cars, had deposited a large sum of cash in SBN notes. The AO noticed this and also scrutinized sales of old cars, adding a significant amount to the assessee's income under Section 68 of the Act.
Held
The Tribunal held that the AO erred in treating the sale proceeds of old cars as unexplained cash credit. Since the sales were accepted and the vehicles' identities were established with RTO registration, the addition under Section 68 was uncalled for.
Key Issues
Whether sale proceeds of old cars, where vehicles were exchanged for new ones and differences paid in cash, can be treated as unexplained cash credit under Section 68 of the Income Tax Act.
Sections Cited
68
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, HON’BLE & SHRI NARENDRA KUMAR BILLAIYA, HON’BLE
O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order dated 03/11/2023 by NFAC, Delhi [hereinafter ‘the ld. CIT(A)’], pertaining to AY 2017-18.
The solitary grievance of the assessee is that the ld. CIT(A) erred in confirming the addition of Rs.15,01,57,610/- on account of sale of old cars and also treating the same as unexplained cash credit u/s 68 of the Act. 3. Having heard the rival submissions, we have carefully perused the orders of the authorities below. Briefly stated, the facts of the case are that the assessee is a partner in M/s. Monarch Plastics and is also engaged in the purchase and sales of new as well as old cars. While scrutinising the return of income, the AO noticed that the assessee has cash of Rs. 3,53,23,000/- in SBN notes which were deposited in the bank 2 account of the assessee. The assessee was asked to furnish details of total sales, cash sales for last two years. The assessee furnished requisite details which are exhibited at pages 17 to 20 of the assessment order. The assessee also furnished the names of the customers to whom old cars were sold. The assessee explained that it has closed down its business in FY 2017-18 for which no details were furnished. On perusal of the details, the AO sought clarification from the assessee with regard to the true value cars relating to sale of old cars. The assessee was asked to furnish the names of those customers against whom no PAN, address, details are made available and was further showcaused why the sales should not be added to its income. In its reply, the assessee stated that all the vehicles sold by it were purchases under the exchange scheme and the payment of the same were effected by giving credit to the customers in the sale prices of the new vehicles. It was explained that the vehicles were physically received by it along with the ownership documents and while selling the same, ownership documents have been handed over to the buyers along with the vehicles and, therefore, there is change of hands and physical movement of goods. 3.1. The contention of the assessee did not find favour with the AO who was of the opinion that the amount of cash received from customers for which no details such as PAN, address, Aadhaar card or any such vital documents which proves the identity of the buyers, are submitted and went to add the income of the assessee u/s 68 of the Act and made the impugned addition. 3.2. Assessee carried the matter before the ld. CIT(A) but without any success.