2025 (1) TMI 1275 - AT - Income Tax

Unexplained cash deposits in the bank account - cash sales of the Assessee for the year under consideration were higher than that of earlier assessment year - Assessee explained that the cash deposits were out of sale proceeds of the Assessee - HELD THAT -Assessee has explained that the Assessee during the year was a trader of artificial goods and flowers. That during the year the Assessee decided to stop its business. Assessee therefore sold its opening stock at discounted rates resulting into higher sales during the year under consideration as compared to the earlier years. Assessee has further submitted that there is no rebuttal to the fact on the file that the Assessee was having opening stock out of which the said sales were made. That the Sales tax / VAT Return were also filed by the Assessee. No justification on the part of the lower authorities in treating the deposits made by the Assessee out of the sales of the opening stock as income from undisclosed sales. Decided in favour of assessee.

Summary

In the case before the ITAT Chandigarh, the Assessee, represented by Shri Ashwani Kumar, CA, appealed against the order of the CIT(A) which confirmed an addition of Rs. 32 lacs to the Assessee's income, treating cash deposits as income from undisclosed sources. The Assessing Officer had initially made this addition, doubting the Assessee's explanation that the amount was from the sale proceeds of the Assessee's business, which involved trading artificial goods and flowers. The Assessee claimed that higher sales resulted from selling opening stock at discounted rates due to the decision to cease business operations.The Tribunal, presided over by Shri Sanjay Garg, Judicial Member, found merit in the Assessee's explanation, noting that the Assessee's sales tax/VAT returns supported the claim of sales from opening stock. The Revenue, represented by Dr. Ranjeet Kaur, Sr.DR, did not effectively counter the Assessee's claim regarding the opening stock. Consequently, the Tribunal concluded that the addition made by the Assessing Officer was unjustified and directed its deletion. The Assessee's appeal was allowed, with the order pronounced on 03.12.2024.