If Purchases Are Treated As Genuine And Stock Is Also Accepted, Then Treating Sales As Bogus Is Not Logical: New Delhi ITAT
Pankaj Bajpai
12 March 2024 10:15 AM GMT
The New Delhi ITAT ruled that once AO has accepted the sales made in cash, then source of cash deposits ought to have been treated as explained, and no addition is permitted u/s 68 of the Income tax Act.A Single Bench of Kul Bharat (Judicial Member) observed that “the AO has not commented on purchases. Undisputedly manufacturing and trading activity would be based on sale and purchase. If...
The New Delhi ITAT ruled that once AO has accepted the sales made in cash, then source of cash deposits ought to have been treated as explained, and no addition is permitted u/s 68 of the Income tax Act.
A Single Bench of Kul Bharat (Judicial Member) observed that “the AO has not commented on purchases. Undisputedly manufacturing and trading activity would be based on sale and purchase. If the purchases are treated as genuine and stock is also accepted then treating the sales as bogus is not logical”. (Para 8)
As per the brief facts of the case, the assessee, engaged in the business manufacturing and trading of Guar, Guar dall, Guar Churi, Rui, Sarson & Sarson Oil, filed its return declaring total income of INR 98,041/-. The case of the assessee was taken up for scrutiny assessment based on cash deposited in the bank account during the demonetization period. Finding the reply of assessee not acceptable, the AO proceeded to make addition of INR 39,27,414/-.
The Bench found that the AO did not accept the source of cash deposited in the month of October to November, 2016 on the basis that there was no historical basis for such deposits, when admittedly, the accounts of the assessee have been accepted by the lower authorities.
The Bench concluded that once the assessee has recorded the sales in its books and there is no adverse finding qua stock and purchases are made, then invoking the provision of section 68 of the Act, would not be justified.
Hence, the ITAT allowed the assessee's appeal holding that the I-T authorities have committed error in making addition without bringing any adverse material in respect of purchases and stock of assessee.
Counsel for Appellant/ Assessee: Gautam Jain, Lalit Mohan & Parth Singhal
Counsel for Respondent/ Revenue: Om Prakash
Case Title: Bharat Agro Industries verses DCIT
Case Number: ITA No.3934/Del/2023
