cash sale

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Kamal Jhawar (Querist)

06 November 2009 Dear Sir,
The AO intends to treat total cash sale as bogus and wants to add it under sec 68 as unexplained cash. We have already shown it as income in our books and have produced sales tax returns for the same. The sales are for AY 07-08 and the purchasers were not found by the AO item being iron & steel. Now he intends to disallow sale and add back the same u/s 68 and also to increase the stock by that value. The stock details show the actual movement of the stock but as the unit is a trading unit and not registered under excise, the records are not accepted as genuine by the AO. AO has also verified the stock statement from the Bank which has given CC limit tothe assessee and has foung it to be in agreement with the books. He still wants to add double the amount of cash sale, once as stock and other as unexplained cash.
What remedy is available to the assessee??
Please provide reference of case laws if any.

chetan soni

chetan soni (Expert)

06 November 2009 AO needs to prove the disallowance of cash. As you said stock statement with bank shows the same stock as per books of accounts. Now we can't trace the buyers for cash sales.
You have offered the same for income tax & also for sales tax, there is no loss to revenue.

You can go to CIT appeals for the same, just on the grounds that AO wants this to be treat the cash sale as unexplained cash receipt does give the right to additions to income.

Kamal Jhawar

Kamal Jhawar (Querist)

06 November 2009 Thanks for the prompt reply sir.
Do we have any case law for reference in similar scenario.

Ram Avtar Singh

Ram Avtar Singh (Expert)

06 November 2009 AO is wrong if you have issued sale bill as per rule there is no fault from your side. politly talk to A.O. he will convence next time. due to domestic problems some time officers are upset. try to next time. best of luck.

Kamal Jhawar

Kamal Jhawar (Querist)

26 December 2009 Dear Sirs,
The Ao has treated the cash sales as bogus and added the same under sec 68 & 69A and has also initiated penalty preceedings u/s 271 (1) (c).
We intend to appeal to cit against the said order. Are there any case laws which we can refer to??

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