Income Already Offered For Taxation Can't Be Taxed Again As Unexplained Cash Credit: Ahmedabad ITAT Deletes Double Taxation By ITO

As per Section 68 of Income tax Act, where any sum is found credited in the book of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year

The Division Bench of Suchitra Kamble (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) held that “the AO did not reject the books of accounts or question the quantitative details of the stock. The AO has also not placed any conclusive evidence on record to prove that the credits in assessee's bank account are accommodation entries”. (Para 9)

Facts of the case:

The assessee-company, engaged in the business of trading in gold & jewellery, filed its return declaring total income of Rs.19,75,190/-, and the assessment was completed. Later, the case was reopened based on the information received from the Investigation Wing in which it was observed that the high value transactions were credited through RTGS/Clearing/cash/transfer from various accounts and immediately withdrawn by way of cash/multiple transfers. Accordingly, the bank statements were called for and statements of Anil Kumar Jain and Pravin Kumar Jain were recorded u/s.131, who admitted that they were carrying of business of cheque entries. When the AO asked the assessee for two credit entries of Rs.1,11,79,000/- and Rs.80,50,000/-, the assessee replied that the amounts are credited to Sales account and debited to bank account for the sales and hence no party account has appeared in their books. The AO however treated the amount of Rs.1,92,29,000/- as unexplained cash credit and added it to the total income of assessee.

Observations of the Tribunal:

The Bench noted that the amounts credited to the sales account cannot be treated as unexplained cash credits u/s 68, once they are already included in the total sales declared by assessee and properly taxed.

Relying on the decision of Gujarat High Court in case of Vishal Export Overseas (Tax Appeal No. 2471 of 2009), the Bench reiterated that income already offered for taxation cannot be taxed again as unexplained cash credit, as it would amount to double taxation.

The Bench observed that the AO has not placed any conclusive evidence on record to prove that the credits in assessee's bank account are accommodation entries.

Thus, the Bench clarified that addition of Rs.1,92,29,000/- as unexplained cash credit cannot be sustained in the hands of assessee without any evidence.

The assessee has provided sufficient documentary evidence, including sales invoices, sales register, item register showing quantitative details, and the bank book, to substantiate the transactions, added the Bench.

The Bench also added that the statements of individuals during cross examination cannot be relied upon for making addition as it violates the principles of natural justice.

Therefore, the ITAT concluded that addition of Rs.1,92,29,000/- as unexplained cash credit u/s 68 is unwarranted and hence, allowed assessee's appeal.

Counsel for Assessee/ Appellant: S.N. Soparkar and Parin Shah

Counsel for Revenue/ Respondent: Alpesh Parmar

Case Title: L.K.S. Bullion (Import and Export) Pvt.Ltd. verses The Income Tax Officer

Case Number: ITA No. 382/Ahd/2022

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