INCOME TAX OFFICER, DELHI vs. HIMANSHU GOEL, MAYUR VIHAR DELHI

PER VIMAL KUMAR, JUDICIAL MEMBER:

1.Whether on the facts and circumstances of the case, the Ld.CIT(A) is correct in deleting the addition of Rs.68,41,000/- on the ground that the addition would amount to double taxation that these cash deposit were from genuine sales recorded in the books of accounts whereas the AO in the assessment order had clearly brought out the fact the source of cash deposit was unexplained."

2. Whether on the facts and circumstances of the case, the Ld. CIT(A) is correct in deleting the addition of Rs.51,58,301/- made by AO as unexplained creditors u/s 69A of the Income Tax Act 1961, ignoring the facts that the identity, genuineness and creditworthiness of the creditors could not get verified. -

3. That the grounds of appeal are without prejudice to each other.

5. Learned Departmental Representative submitted that Ld. CIT(A) erred in deleting addition of Rs.68,41,000/- on the ground that it would amount to double taxation that the cash deposits were from the genuine sales recorded in books of accounts whereas Ld. AO had brought out the facts that the source of cash deposits were unexplained. Ld. CIT(A) erred in deleting addition of Rs.51,58,301/- made by the Ld. AO as unexplained creditors under Section 69A of the Act accompanying the fact that the identity, genuineness and creditworthiness of the creditors could not be verified.

6. Learned Authorized Representative for the assessee submitted that the assessee had proved cash deposits from genuineness sales recorded in the books of accounts which were not rejected.

For the amount of Rs.68,41,000/- deposited in the City Union Bank business account, the appellant claimed these funds originated from genuine cash sales of jewelry, which were already recorded in the Profit and Loss account and declared as income. The appellant's argument against double taxation is compelling. The ACIT vs. Haripanna Jewellers & Anr. (Supra) case provides a direct and strong precedent, explicitly holding that cash generated from sales of goods, properly recorded in the books and offered for taxation, cannot be treated as unexplained cash credits u/s 68 (and by extension, unexplained money u/s 69A) as this would result in double taxation. The Tribunal in Haripanna Jewellers emphasized that if the assessee's books, sales, purchases, and stock are accepted and found to be without defects, the AO cannot make such an addition. The AO's claim in the assessment order that the assessee "failed to furnish any detail/document/explanation" appears to contradict the detailed explanations and judicial support provided in the appellant's submissions. The appellant demonstrated that these cash deposits were indeed from genuine sales recorded in the books of account, and the books were not rejected by the AO, then this addition would amount to double taxation and therefore not sustainable and hence the addition of Rs.68,41,000/- is deleted. For the amount of Rs.2,48,000/- deposited in the UCO Bank savings account, the appellant explained this as petty household savings and accumulated old demonetized currency. This explanation is directly supported by CBDT Circular No. 03/2017 dated 21.02.2017, which explicitly states that no further clarification or verification is required for an individual when the deposited amount during the demonetization period is up to Rs.2,50,000/-. The appellant's deposit falls squarely within this threshold. Furthermore, judicial pronouncements in Aroshi Jain vs. ACIT (Supra) and Neeru Jain vs. ITO (Supra) consistently support the appellant's position for small cash deposits, directing the deletion of similar additions based on the CBDT Circular. Given the clear mandate of the CBDT Circular and the consistent judicial precedents, the addition of Rs.2,48,000/- related to the UCO Bank savings account is not sustainable and hence deleted. Accordingly, Original Ground No. 2 is allowed. D. Analysis of Unexplained Sundry Creditors (Rs.51,58,301/-) (Original Ground No. 3) The AO added Rs.51,58,301/- as unexplained sundry creditors due to non-service of notices or non-reply from creditors. The appellant, however, has consistently argued that these are genuine trading liabilities arising from purchases, duly recorded in the books, and has claimed to provide supporting evidence such as confirmations, invoices, payment proofs, and a stock register. A critical point of contention is the AO's reliance solely on the non-response to Section 133(6) notices. Judicial pronouncements, such as CIT vs. Nikunj Eximp Enterprises Private Limited (Supra), clearly state that if an assessee furnishes purchase bills, corresponding sales evidence, and account confirmations, the transaction cannot be deemed bogus merely due to the non-appearance of suppliers before the AO. Similarly, ITO vs. Standard Leather Pvt. Ltd. (Supra) found it a wrong interpretation of law to add sundry creditors merely due to non-service of notice u/s 133(6) without disallowing corresponding purchases. The principle from Lycos India Limited vs. ITO (Supra) further emphasizes that doubting current liabilities while accepting purchases, raw material consumption, and sales is inconsistent, as purchases are a prerequisite for manufacturing and sales. Once the appellant provides a plausible explanation and supporting evidence, the burden shifts to the AO to disprove the genuineness of the creditors with concrete, contrary evidence, rather than merely relying on procedural non- compliance from third parties. The AO's order does not provide such evidence to show that the liabilities ceased to exist or that the purchases themselves were bogus. Furthermore, the appellant's contention regarding opening balances of sundry creditors is strongly supported by a line of judicial precedents. Cases like Ivan Singh vs. ACIT (Supra), CIT vs. Prameshwar Bohra (Supra), CIT vs. Usha Stud Agricultural Farms Limited (Supra), and Rita Stephen Pinto vs. ITO (Supra) consistently hold that sums credited in books in an earlier financial year and carried forward cannot be brought to tax as income u/s 68 or 69A in a subsequent assessment year. If a significant portion of the added sundry creditors represents opening balances, then the AO's addition, to that extent, would be legally unsustainable. The AO's approach of accepting the appellant's books of account and trading results while simultaneously doubting the sundry creditors, which are intrinsically linked to purchases and sales, creates a logical inconsistency. If purchases are genuine and recorded, the corresponding credit liabilities should also be accepted unless specifically disproven with evidence of cessation of liability or the bogus nature of the purchases. Therefore, the addition of Rs.51,58,301/- is not sustainable and hence deleted. Accordingly, Original Ground No. 3 is allowed”.

are rejected.