Cash Deposits From Recorded Sales Cannot Be Taxed Again As Unexplained: ITAT Mumbai

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) on 7 May observed that once sales are recorded in the books of account and offered as business turnover, the same amount cannot again be taxed as unexplained cash credit under Section 68 of the Income Tax Act.

Judicial Member Amit Shukla and Accountant Member Makarand Vasant Mahadeokar were hearing an appeal filed by Raju Samsurat Yadav, an electronics trader operating through proprietary concerns SKS Enterprises and Omega Marketing. The Tribunal observed:

“Once sales are duly recorded in the books of account and corresponding receipts are offered as part of business turnover, the same amount cannot again be brought to tax separately as unexplained cash credit.”

Yadav had declared income of Rs. 4.11 lakh. The case was selected for scrutiny to examine cash deposits made during the demonetisation period. The Assessing Officer found that Rs. 57.25 lakh had been deposited in various bank accounts and treated the amount as unexplained cash credit under Section 68 read with Section 115BBE, which provides for higher tax on unexplained income.

According to Yadav, the deposits represented cash sales generated in the ordinary course of business. He submitted that total turnover during the year was Rs. 23.75 crore, including cash sales of Rs. 6.29 crore, and that the cash sales had already been disclosed in the books and offered to tax. He also argued that taxing the deposits separately would amount to double taxation.

Before the Tribunal, Yadav relied on screenshots of the e-proceeding portal to show that tax audit reports, bank statements and supporting documents had been uploaded during assessment proceedings.

The Tribunal noted that the Assessing Officer had not verified the books of account, turnover details or bank statements, and that the addition appeared to have been made mainly due to alleged non-compliance.

Accordingly, the ITAT restored the matter to the Assessing Officer for fresh adjudication after proper verification of the records.