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Facts
The assessee, a pharmaceutical product trader, was subjected to assessment for AY 2017-18 following demonetization, with the AO questioning cash deposits of Rs.1.98 Crore (out of Rs.11.69 Crore initially, restricted via rectification). The assessee contended these deposits arose from cash sales and debtors' collections, attributed to acquiring new distribution rights for ITC products which led to a substantial increase in turnover. The CIT(A) had upheld the addition.
Held
The Tribunal held that the cash deposits were properly accounted for in the assessee's cash book, and the books of account were not rejected or found defective. Since the cash was generated from business activities and the assessee had no other income source, adding the amount again would constitute impermissible double taxation. Consequently, the addition of Rs.1.98 Crore as unexplained money was deleted, and the AO was directed to re-compute the income.
Key Issues
Whether cash deposits made during demonetization, accounted for in the assessee's books as business receipts from cash sales and debtor collections, could be treated as unexplained cash credits under Section 68.
Sections Cited
143(3), 154, 68, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: HON’BLE SHRI ABY T. VARKEY, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
सुनवाई की तारीख/Date of Hearing : 31-01-2025 घोषणा की तारीख /Date of Pronouncement : 06-02-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by Assessee for Assessment Year (AY) 2017-18 arises out of the order of learned Commissioner of Income Tax, National Faceless Appeal Centre, Delhi [CIT(A)] dated 11-09-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 18-12-2019. The sole grievance of the assessee is confirmation of addition of Rs.198.16 Lacs.
The Ld. AR advanced arguments and drew attention to the submission made during lower authorities. Reliance has been placed on various judicial decisions, the copies of which have been placed on record. The Ld. Sr. DR has supported the orders of lower authorities. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Proceedings before lower authorities 3.1 The assessee being resident individual is stated to be engaged in trading of pharmaceutical products. The assessee admitted income of Rs.104.27 Lacs which was scrutinized to ascertain the source of cash deposit of Rs.11.69 Crores as made by the assessee in its bank account during demonetization period. The assessee claimed that the deposits were source out of debtors’ collection and cash sales. However, Ld. AO noted that the sales were more than 3 times in this year in comparison to earlier year. The assessee explained that this was due to the fact that it took distributorship of ITC products during September, 2016. However, in the absence of any satisfactory explanation as forthcoming from the assessee, the aforesaid deposits were added u/s 68 r.w.s. 115BBE of the act and the assessment was framed. 3.2 Subsequently, pursuant to the rectification application u/s 154, the assessment order was rectified on 29-04-2022. The Ld. AO noted that out of total cash deposits, only deposits of Rs.198.16 Lacs were in specified bank notes (SBN) which were deposited during demonetization period. Accordingly, the impugned addition was restricted to the extent of Rs.198.16 Lacs.
3.3 During appellate proceedings, the assessee’s submissions were subjected to remand proceedings wherein the assessee furnished financial statements, confirmation of accounts, letters from ITC, VAT assessment order and various other documents to contend that these receipts were business receipts and duly accounted for in the books of accounts. However, Ld. AO still rejected the claim of the assessee and Ld. CIT(A) upheld the addition against which the assessee is in further appeal before us. Our findings and Adjudication 4. From the case records, it emerges that the assessee is engaged in selling pharmaceutical products. It has acquired distribution rights for ITC products during September, 2016 which explain substantial increase in sales in this year. The business model of the assessee entails substantial sales in cash which are deposited in the bank accounts from time to time. Nevertheless, the payment for supplies are made by the assessee through banking channels. The assessee has explained that the impugned cash was sourced from debtors’ realization and cash sales during the year. In support, the assessee furnished sale register, purchase register, bank statements, stock register, copies of ledgers of sundry debtors, VAT returns and Audit Report etc. The assessee also furnished month-wise cash sales and cash deposits from 01-04-2015 to 08-11-2016 as well as for the corresponding period of earlier year. The details of cash sales and collection from debtors were also filed. The summary of sales was has furnished for this year as well as for subsequent years. The confirmation from few debtors was also furnished. The copies of all these documents have been placed before us in the paper-book. The perusal of the financial statements would show that the assessee has reflected turnover of Rs.69.43 Crores. The assessee has admitted business income of Rs.97.39 Lacs. Undisputedly, the cash deposits are duly accounted for in the cash book. The books of accounts have not been rejected and no defect has been found in the documents as furnished by the assessee. The fact would remain that the cash has been generated out of business activities only since the assessee do not have any other source of income. Such cash collections form part of books of account of the assessee and adding the same again would amount to double taxation which is impermissible. Pertinently, no defect has been pointed out in the books of accounts. The assessee has furnished cash book which would show that the aforesaid deposits have been sourced out of business receipts only. It could also be seen that the deposits so made by the assessee has been remitted to the suppliers only.
Considering all the above stated facts and circumstances of the case, we would hold that the impugned deposits could not be held to be unexplained money of the assessee. Accordingly, the impugned addition is liable to be deleted. We order so. The Ld. AO is directed to re- compute the income of the assessee. No other ground has been urged in the appeal.
The appeal stand allowed in terms of our above order. The connected stay application stand dismissed as infructuous. Order pronounced on 6th February, 2025