Whether cash sales be treated as cash credit by IT authorities

Last updated: 23 July 2022

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Quick Summary

This judgement concerns whether the Income Tax authorities can treat cash sales as unaccounted income and impose penalties, even if sales tax authorities have accepted these sales. The Income Tax Officer added cash sales to the assessee's income and initiated penalty proceedings, arguing that incomplete customer details on sales bills indicated an attempt to introduce undeclared funds. However, the Tribunal deleted the penalty, following a previous decision on identical facts. The Tribunal held that merely disbelieving an explanation or not having complete customer addresses on cash sales bills is insufficient grounds for penalty, especially when sales are supported by bills, VAT returns, and have been accepted by sales tax authorities.

Court :
Himachal Pradesh High Court

Brief :
Section 271(1)(c) cast responsibility upon the AO to reach the clear finding with respect to levy of penalty under the specific charge and if the AO fails to do so then the penalty cannot be levied as such penalty order shall not be maintainable in the eyes of law. In the given case the Cash Sales by the assessee has been proved and substantiated with proof such as bills, invoices , VAT returns and Sales Tax Assessment Orders. Mere not mentioning address and details of customers on sales bills did not allow AO to consider the Cash Sales as undisclosed income and an arrangement by the assessee to introduced unaccounted money to claim the same U/s. 80IC of the IT Act,1961.

Citation :
PCIT Shimla Vs JMJ Essential Oil Company

Daily Limit Reached