PCIT v. Akshit Kumar -[2021] 124 taxmann.com 123 (Delhi)

Assessee was engaged in the business of textiles. All sales undertaken by assessee were in cash only.

Noting such peculiarities, Revenue decided for spot verification at the place from where assessee purportedly carried on the business.

Assessing Officer (AO) conducted on the spot physical verification of the business premises of assessee for ascertaining the existence of the business.

AO concluded that premises where assessee purportedly conducted his business had been abandoned for several years and there was no built-up area in its vicinity.

Accordingly, AO held that it was a case of money laundering and a false impression had been created that the entire cash deposits in the bank account of assessee were purported sale proceeds.

 AO also held that the entire cash deposits found in the bank account of assessee were, in fact, unexplained income and not sale proceeds.

Accordingly, AO made an addition on account of unexplained credits while completing the assessment under section 143(3).

On appeal, Delhi High Court held that the enquiry under Section 133B was conducted after the closure of the business.

 In the earlier years, the entire books of account had been scrutinised and assessee’s income had been accepted.

It means that the entire opening stock, sales and closing stock made during the year stood accepted.

The audited balance-sheet of the current year reflected an opening stock that stood accepted by the Department either under the scrutiny proceedings or by not selecting the return for scrutiny or by not taking any action to disturb such returned income.

Thus, the opening stock which stood accepted in the earlier years had to be taken as actual stock available with assessee.

Thus, the sales made by assessee out of its opening stock were not to be treated as unexplained income, to be taxed as income from other sources.