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2025 (5) TMI 816 - AT - Income TaxAdditions made u/s 68 - onus to prove - substantial cash deposits in SBN during the demonetization period and nature of these credits falls under unexplained cash credit - cash receipts were entered in the books of assessee w.e.f 01.11.2015 to 08.11.2016 and the said parties had earlier not made any cash payments and the transactions have been through banking channel - HELD THAT - Assessee has successfully rebutted the concern / doubts raised by the AO by placing and proving on record all the relevant documentary evidences thereby discharging its onus. Therefore in such a scenario onus shifted upon the AO to rebut the same. Assessee has duly explained that these are not cash sales. However the assessee has received the cash in payment of credit sales from the identified parties. The details of month wise cash sale and cash deposit for the F.Y. 2016-17 were also submitted. The assessee has also submitted the explanation of cash deposits and confirmations of each and every party on 06/12/2019 and in this regard documents are placed. Assessee had also submitted the name address PAN ledger account of confirmations of all the parties who had made cash payments to the assessee. Even the parties had responded to the notices u/s 133(6) of the Act and confirmed making cash payments to the assessee. As noticed that Assessee is maintaining sale register cash book purchase register and stock register. The accounts of the assessee are audited. The Tax Audit report was furnished which shows the quantity details of stock and the Ld.AO was satisfied and had not rejected the books of accounts and not even doubted the veracity of cash book sale register purchase register and the stock register. Apart no discrepancy was pointed out by the AO between the book stock and actual stock. Even the sales have already been accepted by VAT department and thus in our view once the assessee has offered cash sales for taxation then the addition of cash deposits u/s 68 of the Act would lead to double taxation. Since there is no evidence with the AO to substantiate that cash deposit is not out of opening cash balance therefore the entire addition made by AO was based upon conjectures and surmises. Thus we found that the theory of human probabilities is not applicable to the facts of the present case. No new evidences or documents have been placed on record by the revenue to controvert or rebut the findings of Ld. CIT(A) therefore we see no reasons to interfere in to or to deviate from the lawful findings so recorded by the Ld. CIT(A). Therefore the grounds of appeal raised by the revenue stands dismissed.
The core legal issue considered in this appeal is whether the additions made under Section 68 of the Income Tax Act, 1961, relating to unexplained cash credits in the assessee's books during the demonetization period, were justified. Specifically, the Tribunal examined the validity of the cash deposits made in Specified Bank Notes (SBN), the genuineness and creditworthiness of these cash receipts, and the applicability of the test of human probability as laid down in relevant Supreme Court precedents.
The revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)] which deleted the additions made by the Assessing Officer (AO) under Section 68. The AO had treated the cash deposits as unexplained credits on the ground that these deposits were made during the demonetization period, parties from whom cash was received had not made cash payments earlier, and the entries were allegedly backdated. The revenue relied heavily on the Supreme Court decisions in CIT vs. Durga Prasad More and Sumati Dayal vs. CIT, which emphasize the application of the human probability test to assess the genuineness of entries in books of accounts. The assessee, a listed company engaged in manufacturing mineral additives and nutritional products, had disclosed substantial turnover and submitted comprehensive evidence supporting the genuineness of cash receipts. This included audited accounts, tax audit reports, month-wise details of sales and cash deposits, details of clients making cash payments (including PAN, address, and ledger confirmations), and confirmations from clients responding to notices under Section 133(6). The assessee contended that the cash receipts were payments against credit sales and not cash sales per se, and that the books of accounts were maintained regularly and audited without objection from the AO. In its detailed analysis, the Tribunal noted the following: Legal Framework and Precedents: Section 68 of the Income Tax Act deals with unexplained cash credits, placing the initial onus on the assessee to explain the nature and source of such credits. If the assessee discharges this onus satisfactorily, the burden shifts to the revenue to disprove the explanation. The Supreme Court decisions in Durga Prasad More and Sumati Dayal provide the test of human probability, which requires the court to examine whether the transaction is logically and reasonably probable. Court's Interpretation and Reasoning: The Tribunal found that the assessee had discharged the initial onus by furnishing detailed documentary evidence, including confirmations from clients and maintenance of regular books of accounts. The AO failed to rebut this evidence or demonstrate any discrepancy in the books or stock records. The Tribunal observed that the AO's additions were based on conjectures and surmises without concrete evidence. It emphasized that the books of accounts were not rejected, and the sales were accepted by the VAT department, thus negating the possibility of double taxation by adding the cash deposits again under Section 68. Application of Law to Facts: The Tribunal applied the legal principles from the cited precedents and found that the theory of human probability was not applicable in the present facts since the assessee's books were audited and accepted, and there was sufficient cash balance supporting the deposits. The Tribunal relied on various judgments where additions under Section 68 were deleted where the assessee had offered reasonable explanation and the books of accounts were not doubted, including decisions from the Chennai Tribunal and Jaipur Tribunal, as well as High Court rulings. Treatment of Competing Arguments: The Tribunal considered the revenue's argument that the cash receipts were suspicious due to timing and lack of prior cash payments by the parties. However, it found these arguments insufficient in the face of documentary evidence and client confirmations. The Tribunal also distinguished the cited Supreme Court precedents on the ground that those cases involved situations where books of accounts were not maintained or were doubtful, unlike the present case. Conclusions: The Tribunal concluded that the additions under Section 68 were unjustified. The assessee had satisfactorily explained the source and genuineness of the cash credits, and the AO failed to rebut the evidence. The Tribunal held that the theory of human probability does not apply where books are maintained and accepted, and no evidence was brought forward to show that the cash deposits represented undisclosed income. Consequently, the Tribunal dismissed the revenue's appeal. Significant holdings include the following verbatim excerpts and principles: "The assessee has successfully rebutted the concern / doubts raised by the AO by placing and proving on record all the relevant documentary evidences thereby discharging its onus. Therefore in such a scenario, onus shifted upon the AO to rebut the same." "Since there is no evidence with the AO to substantiate that cash deposit is not out of opening cash balance therefore the entire addition made by AO was based upon conjectures and surmises." "The theory of human probabilities is not applicable to the facts of the present case. No new evidences or documents have been placed on record by the revenue to controvert or rebut the findings of Ld. CIT(A), therefore we see no reasons to interfere in to or to deviate from the lawful findings so recorded by the Ld. CIT(A)." Core principles established include:
Final determination on the issue was that the additions under Section 68 were rightly deleted by the CIT(A), and the Tribunal upheld this order, dismissing the revenue's appeal.
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