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Facts
The assessee, running a petrol pump, deposited a significant amount in demonetized currency. The AO added this amount as unexplained cash credit, citing that the petrol pump was not a public sector oil company authorized to accept such currency. The First Appellate Authority sustained the addition.
Held
The Tribunal held that since the cash deposits were explained as sale proceeds from cash sales, and these sales were recorded in the books of accounts which were not rejected by the AO or the VAT department, the addition made under Section 68 was not sustainable. The source of the cash deposit was clearly explained.
Key Issues
Whether cash deposits explained as sale proceeds from recorded sales can be treated as unexplained cash credit, and whether the provisions of Section 68 are applicable in such cases.
Sections Cited
68, 115BBE, 143(3)
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Income Tax Appellate Tribunal, DELHI BENCH “SMC’’ : NEW DELHI
Before: SHRI MAHAVIR SINGH, HON’BLE
ORDER This appeal by the assessee is emanating from the order of the NFAC, Delhi in Appeal No. ITBA/NFAC/S/250/2024-25/1073567557(1) dated 21.02.2025.
At the threshold, it is noted that there is a delay of 125 days in filing the appeal before the Tribunal. For this purpose, the assessee has filed the application for condonation of delay due to the fact that Accountant Sh. Jogender Kumar of the applicant had inadvertently omitted to notice the uploading of the aforesaid order on the income tax portal and in support of this contention, an affidavit of the said Accountant. Ld. DR did not controvert the aforesaid proposition. After hearing both the sides and perusing the records, I am of the view that reasonable reasons has been attributed to the assessee in filing the belated appeal before the tribunal, hence, the same is hereby condoned and proceed further.
Brief facts of the case are that assessee is running petrol pump in the name and style of M/s RS Chuadhary Filing Station at Village Kansala, Distt.
Rohtak. During the year under consideration the assessee filed his return of income on 09.08.2018 declaring income of Rs. 2,91,080/-. The case was selected for scrutiny through CASS under complete scrutiny criteria. In the course of the assessment proceedings, the assessee has deposited Rs. 49,58,500/- in his bank accounts in SBN notes during the demonetization period. AO observed that the appellant had closing cash in hand as on 08.11.2016 Rs. 15,27,771/-. Balance cash deposit of Rs. 34,30,729/- in specified notes was due to sale proceeds of petrol pump of Esssar Company. AO found that only public sector Oil Marketing Companies were authorized by Government of India to accept the demonetized currency. Since Essar company is not the public sector oil company, AO made the addition of Rs. 34,30,729/- as unexplained cash credit u/s. 68 of the Act by passing order u/s. 143(3) of the Act. However, in appeal, Ld. First Appellate Authority sustained the addition. Against the above, assessee appealed before the Tribunal.
Heard both the parties and perused the records.
At the time of hearing, Ld. AR has submitted that Ld. CIT(A) erred in upholding an addition made of Rs. 34,30,729/- representing alleged unexplained cash deposits in the bank account of the assessee during the period of demonetization and brought to tax under section 68 of the Act read with section 115BBE of the Act. It was further submitted that the Ld. CIT(A) failed to appreciate that the AO having accepted the cash sales and taxed income thereon could not by any stretch of imagination either legally or logically hold that cash deposited is unexplained and taxable as income of the assessee u/s. 68 of the Act. It was further submitted that Ld. CIT(A) failed to appreciate that once the sale are duly recorded in the books of accounts and have been made out of stock available in the books of accounts then both logically and legally, such sales could not be separately assessed to tax as bogus sales and unexplained cash credit u/s. 68 of the Act. It was further submitted that Ld. CIT(A) has failed to appreciate that once the purchase declared in the books of accounts were duly accepted then no 2 | P a g e subjective assumption and presumption could be made a basis to assume, allege and conclude that sales made out of such purchases were unexplained money under section 68 of the Act. I note that during the proceedings before the lower authorities, the assessee attached the cash book, wherein AO could not even pointed out a single defect in the books of accounts and the books of account were also never rejected by the AO. The sales figures were accepted by the AO as well as by the VAT department. In view of the aforesaid factual matrix, in my considered opinion, since the source of cash deposit being generated from cash sales has been clearly explained, therefore addition in dispute is not sustainable in the eyes of law and deserve to be deleted, for which Ld. DR has no serious objection. I hold and direct accordingly.