AO failed to Produce Evidence for Cash Sales: ITAT deletes Addition

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By Fathima Karama A.M – On March 9, 2023 1:15 pm – 2 mins read

Evidence - Cash Sales - ITAT - taxscan

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT ) has deleted the addition as the assessing officer (AO) has failed to produce the evidence for cash sales. 

The assessee S.J. Studio & Entertainment Ltd., was engaged in providing facilities of a studio for production of television serial and commercial film. a survey was conducted at the premises of the assessee, wherein books of accounts were found to be maintained on the computer and a profit and loss account based on the books of accounts.

When the director of the assessee company was asked to pay advance tax on said profit, he submitted that this profit figure was on higher side as depreciation, interest etc. expenses were not debited to the profit and loss account. he submitted that in case of regular sales Bill No. in the name of XYZ were shown.

 He further submitted that XYZ was a fictitious, non-existent entity and said entries were made for the purpose of showing increase in turnover for presenting to the bank for the purpose of availing loan for expansion of the studio. AO made an addition. 

Rakesh Singh, on behalf of the assessee submitted that it was not actual sales and but only a fictitious entry for the purpose of showing higher turnover for availing loan from banks and   the name of the said fictitious party was XYZ Private Limited. He further submitted that there was no such company in the name of record of registrar of companies.

Ujjwal Kumar Chavhan, appeared on behalf of the revenue.

The Division Bench of OM Prakash Kant (Accountant Member) and Sandeep Singh Karhail (Judicial Member) allowed the appeal observing that the assessee himself had submitted that those sales were fictitious sales, and the onus was up on the Assessing Officer to establish whether it was cash sales. The income tax authorities had not produced evidence suggesting cash sales by the assessee.

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S.J. Studio & Entertainment Ltd. vs ACIT

Counsel for Appellant:   Mr. Rakesh Singh

Counsel for Respondent:   Dr. Ujjwal Kumar Chavhan


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Books of AccountsCash SalesEvidenceITATITAT Mumbai

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