Merely because sales were declared for only one month, same cannot be treated as bogus

Merely because assessee had declared sales for only one month, the same cannot be treated as bogus on the basis of suspicion.

In a recent judgment, ITAT Agra has held that merely because the assessee had declared sales for only one month during the year, the same cannot be treated as bogus on the basis of suspicion.

ABCAUS Case Law Citation:
5056 (2026) (02) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) NFAC in confirming addition made by the Assessing Officer (AO) towards unexplained cash credit u/s 68 of the Income Tax Act, 1961 (the Act).

The case of the assessee was selected for scrutiny. Accordingly, notice u/s 143(2) and 142(1) were issued and served on the assessee. The assessee as claimed, was engaged as a scrap dealer in trading of copper/brass scrap and electronic/mechanical scrap material etc. under a proprietary concern.

The assessee also filed copy of trading and profit and loss account for the year under consideration wherein the assessee had declared sales with net profit.

During the assessment proceedings, it was observed that the assessee had made cash deposit in the bank account. After considering the submissions of the assessee for assessment year under consideration and previous assessment year, the Assessing Officer observed from the cash book that all the sales invoices from No. 1 to 100 were made for only October month during the whole year. it was noticed that before was no sales up September either in cash or otherwise and even no sales after October.

Therefore, the Assessing Officer came to the conclusion that the assessee had recorded bogus sales in order to deposit the undisclosed cash after declaration of demonetization on 08.11.2016.

Accordingly, the AO made an addition as unexplained cash credit u/s 68 of the Act with the observations that sales declared by the assessee were bogus in nature.

Before the Tribunal assessee submitted that he was in the business of scrap trading, he had declared the sales in the financial statement relevant sales and also declared the income u/s 44AD of the Act and paid the relevant presumptive taxes.

He submitted that the same sales were being questioned by the Assessing Officer rejecting the submissions of the assessee. The assessee submitted that the assessee was in business of scrap, the sales were declared not specific to any of the month wherever there was possibility purchase of scrap. He purchases the same and sells the same.

It was shown that sales for one preceding Financial Year he had made both cash purchase and sales and Similarly, in preceding Financial. In the year under consideration, he submitted that the assessee has purchased and sold during October 2016. He further submitted that there is no fix pattern in scrap sales business.

The Tribunal noted that assessee was regularly doing business of scrap sales and declared the income u/s 44AD of the Act. The assessee had shown last 3 years sales chart to submit that he was regularly doing business and filing the return of income declaring income u/s 44AD of the Act.

The Tribunal noted that considering the peculiar nature of the business carried on by the assessee, there was no particular pattern of sales by observing from the sales declared in the previous A.Ys. Just because the assessee has declared sales during the month of October, 2016, the AO proceeded to consider the same as bogus sales. Since, the assessee has declared income u/s 44AD of the Act.

The Tribunal noted that there was no requirement for the assessee to maintain any books of accounts. Since, the assessee was regularly declaring the income u/s 44AD of the Act. Merely because, the assessee had traded during this year only on Oct, 2016, the same cannot be rejected on the basis of suspicion.

Accordingly, the Tribunal allowed the grounds raised by the assessee.

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