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Facts
The assessee, a private limited company engaged in manufacturing tobacco and power generation, declared a loss for AY 2017-18. The Assessing Officer (AO) treated cash sales and deposits as unexplained income, making additions under Section 68 read with Section 115BBE of the Income-tax Act.
Held
The Tribunal held that the additions made by the AO were a double addition as the cash sales and deposits were already offered for taxation by the assessee and were supported by contemporaneous documentation. The Tribunal also noted that the AO had not rejected the assessee's books of account.
Key Issues
Whether the additions made by the AO on account of cash sales and deposits amounted to double addition and whether the assessee had adequately proved the source of these amounts.
Sections Cited
143(3), 250, 68, 115BBE
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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI SUDHIR KUMAR
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2017-18, arises out of the order of the Commissioner of Income Tax (Appeals)-30, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 10364/2019- 20 dated 04.01.2024 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 30.12.2019 by the Assessing Officer, ACIT, Central Circle-30, New Delhi (hereinafter referred to as „ld. AO‟).
The assessee has raised the following grounds of appeal before us:-
“1. That On the facts and circumstances of the case, the order passed by the Ld. CIT(A) under section 250 of the Act is bad both in the eyes of law and on facts.
2. That on the facts and circumstances of the case, the learned Ld. CIT (A) has erred, both on facts and in law, in sustaining the addition of Rs. 39,30,000/- considering the sale proceeds in cash as undisclosed income despite the fact that the assessee has already declared the same as sales in the Profit and loss account and has discharged the onus cast upon it under section 68 of the Income-tax Act.
3. That on the facts and circumstances of the case, the learned Ld. CIT (A) has erred, both on facts and in law, in sustaining the addition of Rs. 1,22,00,000/- considering the sale proceeds in from M/S Radhevalabh Exports as undisclosed income despite the fact that the assessee has already declared the same as sales in the Profit and loss account and has discharged the onus cast upon it under section 68 of the Income-tax Act.
4. That the Ld. CIT(A) has erred on facts and in law in not appreciating that the action of Ld. AO in invoking of provisions of section 115BBE of the Act is against the provisions of Law.
5. On the facts and in the circumstances of the case Ld. CIT (A) has erred both on facts and in law, in sustaining the action of AO violating the principle of natural justice by not providing opportunity for cross- examination.
6. On the facts and in the circumstances of the case Ld. CIT (A) has erred both on facts and in law, in sustaining the action of AO violating the principle of natural justice contemporary jurisprudence. and 7. That the Appellant craves leaves to add/ alter any/ all grounds of appeal before or at the time of hearing of the Appeal.”
We have heard the rival submissions and perused the materials available on record. The Assessee is a private limited company engaged in the business of manufacture of tobacco commonly known as “Khaini” and generation of power through windmill. The Assessee company filed its return of income on 29-11-2017 for the assessment year 2017-18 declaring loss of Rs. 35,02,551/-. The Assessee company made cash sales in the business and deposited the same in its bank account. The Learned Page | 2 AO sought to treat the cash sales as unexplained cash credit, despite the fact that Assessee has provided all the relevant documents to rebut the allegations of the Learned AO and without considering that the said sales had already been offered by the Assessee for taxation by including the cash sales in the total sales. The Assessee has received a sum of Rs. 1,22,00,000/- from M/s Radhavallabh Exports and M/s Mangalamuy Distributors P Ltd as sale proceeds of the business. The Learned AO on the basis of letter/ information received from DDIT (Investigation)-3(1) had come to the conclusion that the said receipt is an unexplained credit. This sum was sought to be added as unexplained cash credit under Section 68 read with Section 115BBE of the Act while completing the assessment. Further, there were cash deposits made by the Assessee for which explanation given by the Assessee was not found satisfactory by the Learned AO and accordingly a sum of Rs. 39,30,000 was added as unexplained cash credit under Section 68 read with Section 115BBE of the Act while completing the assessment.
We find that the Assessee had made total cash deposits in the bank account in the sum of Rs. 48,00,000/- during the year. The Assessee explained the source for the said cash deposits to emanate out of cash sales made during the year. The Assessee submitted the following documents in support of its contentions:- a) Complete details of cash transactions b) Details of cash sales and total sales month-wise and day-wise for the financial years 2015-16 and 2016-17 c) Details of cash sales stock details month-wise and day-wise for the financial years 2015-16 and 2016-17 d) Cash book details day-wise and month-wise for the financial years 2015-16 and 2016-17 e) Copy of revised VAT returns duly enclosing the reason that certain purchase bills could not be entered while filing the VAT return, so the return was revised later on and also clarifying that the VAT returns were not revised for any cash transactions. The Assessee also gave explanation with details as to which are the purchase bills were not entered while filing the VAT return and furnished those purchase bill copies also along with the written letter dated 9-12-2019 before the Learned AO. f) Copy of Excise returns. It is pertinent to note that the products of the Assessee are excisable.
The Assessee submitted the following documents in support of cash sale proceeds received from M/s Radhavallabh Exports and M/s Mangalamuy Distributors P Ltd:- a) Name and address of the parties b) PAN and TIN of the parties c) Copy of sale invoices d) Details of C Form issued by the parties e) Copy of bank statements of the Assessee evidencing the receipt of sale proceeds f) Copy of stock registers g) Copy of sales registers It was submitted that there cannot be any tenable comparison of the cash deposits for the financial year 2015-16 with that made in financial year 2016-17 and the said comparison is completely extraneous and superfluous. It was also submitted that the books of accounts submitted by the Assessee were not rejected by the Learned AO pointing out any defects thereon. It was also submitted that disbelieving the cash deposits to have emanated out of cash sales and making separate addition thereon and disbelieving the cash sales received from M/s Radhavallabh Exports and M/s Mangalamuy Distributors P Ltd and making separate addition thereon would amount to double addition as both the sales have been duly reflected by the Assessee as part of total sales in the income tax return and profits declared accordingly. The Learned AO merely observed that the Assessee had taken accommodation entry on the basis that there was some alleged link of one Mr Dipanshu Gupta with M/s Radhavallabh Exports. It was submitted that the statement of Mr Dipanshu Gupta which was heavily relied upon by the Learned AO was never confronted to the Assessee despite asking for the same. It was submitted that no independent enquiry was carried out by the Learned AO with regard to the sale transactions carried out by the Assessee herein with the aforesaid parties. However, these contentions of the Assessee were not appreciated by both the lower authorities.
It is not in dispute that the Assessee had indeed shown cash sales and is part of the total turnover disclosed by it in the return of income and in the audited profit and loss account. The following points are undisputed and indisputable: –
a. The Assessee had shown cash sales for the whole year and the same is part of total sales disclosed by the Assessee in the sum of ₹101.81 crores in the profit and loss account. b The purchase made by the assessee has not been doubted by the revenue. c. The total sales made by the assessee (both cash as well as credit sales) has not been doubted by the revenue. d. The Assessee had sufficient stocks to effect the said cash sales and generate cash as an independent source to prove the cash deposits. e. To the extent of sales made by the Assessee, corresponding reduction in stock had been duly made. f . Sales made by the Assessee, both cash as well as credit had been duly subjected to VAT and the VAT authorities had accepted the turnover declared by the Assessee. g. The Assessee has furnished month-wise, purchase and sales, both cash as well as credit for the year under consideration as well as for the immediately preceding year. h. The Assessee has furnished the complete cashbook, showing the month wise movement before the Learned AO. i. There is no negative cash balance on any day that has been alleged by the Learned AO.
Further we find that the Learned AO had accepted the return of income by the Assessee, which included these cash sales also. Hence, separately, making an addition on account of cash deposits in the sum of ₹39,30,000/- and adding cash sales from M/s Radhavallabh Exports and M/s Mangalamuy Distributors P Ltd to the tune of Rs 1,22,00,000/- would only result in double addition. Hence, the additions made on both the accounts (ie. Cash deposits and cash sales) deserve to be deleted on that count itself. Further, we hold that the Assessee had indeed proved the source of cash deposits by clearly establishing that the source emanated from the books of account and the cashbook regularly maintained. None of the books of account have been rejected by the Learned AO. The sales declared by the Assessee are duly supported by all contemporaneous documentation. In these facts and circumstances, there is no case made out by the revenue for making an addition on those accounts separately. Accordingly, the additions made are hereby directed to be deleted. Accordingly grounds raised by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 08/12/2025.