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2025 (7) TMI 47 - AT - Income TaxAddition made u/s 68 r.w.s. 115BBE - proceeds from cash sales of metal scrap - as submitted Amount of sales generated from metal scarp already offered under sales figures in the audited books of account - HELD THAT - When the amount is already included under the sales figure the same cannot be taxed again. Books of account duly audited and the same has not been rejected. It is a trite law that when the amount is included in the sales and the Assessing Officer thinks otherwise then he is required to reject the books of accounts. Once the turnover declared by the assessee is accepted by the Revenue there can be no further additions. In this case admittedly the books of accounts are not rejected Addition can be made only when the books of account of the assessee are rejected. We note that in the case of ACIT v/s. Hirapanna Jewellers 2021 (5) TMI 447 - ITAT VISAKHAPATNAM held that the assessee was maintaining complete stock tally the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds therefore the addition made by the AO and sustained by the Ld. CIT(A) was no justified. It is noted that the relevant documents to substantiate the cash sales has been provided by the assessee and no discrepancy or defects has been pointed out in the same. The assessee has already provided various documents to substantiate the cash sales recorded by it which is not disputed. It is a trite law that unless some defects are pointed by the AO in the documents submitted the same needs to be accepted. In this case from the perusal of the reassessment order/ CIT(A) order it shall be clear that the same does not contain even a whisper that the document submitted by the Appellant was not genuine/ were defective. Even during the course of the remand proceedings in the remand report the Ld. AO has not pointed out any discrepancy in the various documents submitted by the assessee to substantiate its cash sales. The figures accepted under VAT/GST assessment. The same very figure of sales has been duly depicted in the VAT returns which is duly accepted and assessment in this regard has already been made by the sales tax authorities. Hence there cannot be two different treatments in regard to the same amount. The addition has been made and thereafter sustained only on surmises and conjectures. No adverse material/no independent enquiry made - The addition has been made only on the basis of surmises and conjectures. In this case there is no adverse report/ material/document etc. to suggest that the appellant has taken some kind of accommodation entry or has routed its own money. No independent inquiry has been made by the lower authorities. It is a trite law that in case the explanation cited by the assessee is not considered as tenable then the AO should specifically bring some material to refute the same. In this case there is none. Thus addition in dispute deserve to be deleted. Assessment u/s. 115BBE in view of SMILE Microfinance Ltd. 2024 (11) TMI 1444 - MADRAS HIGH COURT has already settled the issue against the department that the law applies to the transaction on or after 01.04.2017 only.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Legitimacy of Cash Deposits as Proceeds of Cash Sales and Applicability of Section 68 and Section 115BBE Relevant legal framework and precedents: Section 68 of the Income Tax Act pertains to unexplained cash credits, allowing the AO to treat such credits as income if the assessee fails to satisfactorily explain the nature and source of the cash. Section 115BBE imposes a special rate of tax on unexplained cash credits. The legal principle is that if the assessee satisfactorily explains the source and genuineness of the cash credits, no addition can be made. Furthermore, it is established law that if the books of account are accepted and turnover declared is not disputed, additions cannot be made on the same amount without rejecting the books. Court's interpretation and reasoning: The AO made additions on the ground that the cash deposits during demonetization were unexplained, as the assessee failed to produce adequate supporting documents such as cash book, stock register, and verifiable details of parties to whom scrap was sold. The AO also noted the absence of prior history of such cash sales and the unverifiable nature of the list of parties. However, the Tribunal noted that the amount deposited was already reflected in the audited books of account under sales and was included in the declared turnover. The books of account were not rejected by the AO. The Tribunal emphasized the settled legal position that once books are accepted and turnover is declared, the same amount cannot be subjected to addition under section 68 without rejecting the books. Key evidence and findings: The assessee had submitted cash book, cash sale invoices, VAT returns, stock register, and sales register before the CIT(A) and the Tribunal. The VAT returns and sales tax assessments had accepted the sales figures. The AO did not point out any defect or forgery in the documents submitted. The remand report from the AO also did not highlight any discrepancy in the documents. Application of law to facts: The Tribunal held that since the cash deposits were already offered as sales income in the books and accepted by the tax authorities, the addition under section 68 was not justified. The absence of rejection of books of account meant the AO could not make additions on surmises and conjectures. The Tribunal relied on precedents where similar facts led to deletion of additions, emphasizing that mere suspicion or unverifiable lists without tangible evidence cannot sustain additions. Treatment of competing arguments: The AO and CIT(A) relied on the lack of documentary evidence and unverifiable parties to justify additions. The assessee argued that the documents were filed but not considered due to procedural issues with the faceless assessment portal and that the sales were genuine and reflected in audited accounts and VAT returns. The Tribunal accepted the assessee's submissions and found no adverse material against the genuineness of the sales. Conclusions: The addition of Rs. 1.22 crore under section 68 read with section 115BBE was not sustainable as the amount was already included in declared sales, books of account were not rejected, and no adverse material was brought on record to discredit the documents submitted by the assessee. Issue 2: Applicability of Section 115BBE for the Assessment Year 2017-18 Relevant legal framework and precedents: Section 115BBE imposes a special tax rate on unexplained cash credits, unexplained investments, and unexplained money or bullion held by the assessee. The applicability of this provision to transactions prior to 1.4.2017 has been a subject of judicial scrutiny. Court's interpretation and reasoning: The Tribunal referred to a recent ruling by the Madras High Court which clarified that section 115BBE applies only to transactions on or after 1.4.2017. Since the demonetization period and the relevant cash deposits pertained to the assessment year 2017-18, the applicability of section 115BBE was considered in light of this ruling. Key evidence and findings: The Madras High Court's decision in the cited case settled the issue against the department's claim of applicability of section 115BBE to transactions prior to 1.4.2017. Application of law to facts: The Tribunal held that the special provisions of section 115BBE could not be invoked against the assessee for the cash deposits in question, as the transactions predated the effective applicability of the section. Treatment of competing arguments: The department relied on section 115BBE to justify the addition and levy of special tax. The assessee contested the applicability based on judicial precedent. The Tribunal accepted the assessee's contention. Conclusions: Section 115BBE was not applicable to the cash deposits made during the demonetization period for the assessment year 2017-18, and thus, the addition under this section was not sustainable. 3. SIGNIFICANT HOLDINGS The Tribunal made the following crucial legal determinations: "It is a trite law that when the amount is already included under the sales figure the same cannot be taxed again. Books of account duly audited and the same has not been rejected. It is a trite law that when the amount is included in the sales and the Assessing Officer thinks otherwise, then he is required to reject the books of accounts. Once the turnover declared by the assessee is accepted by the Revenue, there can be no further additions." "The addition has been made and thereafter sustained only on surmises and conjectures. No adverse material/no independent enquiry made." "The figures accepted under VAT/GST assessment. The same very figure of sales has been duly depicted in the VAT returns, which is duly accepted and assessment in this regard has already been made by the sales tax authorities. Hence, there cannot be two different treatments in regard to the same amount." "In view of Hon'ble Madras High Court in SMILE Microfinance Ltd. vs. ACIT ... has already settled the issue against the department that the law applies to the transaction on or after 01.04.2017 only." Core principles established include:
Final determinations:
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