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2023 (7) TMI 1280 - ITAT SURATUnexplained cash credit u/s 68 - reliance on the report of Inspector that parties are not available at the address provided by assessee - Rejection of books of accounts - HELD THAT:- AO has not referred the contents of reply and conveniently overlooked and simply rejected such contention. AO straightway proceeded to make the addition u/s 68 by making reliance on the report of Inspector that parties are not available at the address provided by assessee. It is settled position that for making addition u/s 68, maintenance of books of account is compulsory and any sum found to be credited and the name of creditors which remained outstanding is treated as cash credit. Assessee right from the beginning has a clear stand that he made sales to the impugned debtors in A.Y. 2015-16 and the amount was reflected in sundry creditors in the audited balance sheet as on 31/03/2015 so the books of account of current year cannot be rejected when books of account of preceding year was duly audited and debtors were appearing in the audited financial statement. Sales made during the earlier year were supported by bills and challans. We find merit in the contention of assessee that in the course of assessment proceedings, the assessee filed sales register for financial year 2014-15, copies of bills and ledger accounts of the parties. Assessee also filed cash book of current year where sale proceeds were received from debtors and creditors. No defects were found by AO in such cash book. AO made addition u/s 68, which is not justifiable as the impugned amount was brought to tax twice, firstly on account of sales and secondly by treating it as unexplained. We find merit in the alternative plea of the ld AR for the assessee that if the receipts from the debtors are not accepted as genuine, the deduction should be given for trading loss as in case of such hypothesis amount of cash on hand added by Assessing Officer is not existent and therefore, deduction of trading loss/bad debts is required to be given against deemed income. Thus, in view of the afforesaid factual and legal position, the grounds of appeal raised by the assessee are allowed.
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