This article explores the complex tax appeal of JSM Proteins Pvt. Ltd. for the assessment year 2013-14, where significant additions were made to their taxable income due to unexplained cash deposits.
The case centers around the addition of approximately Rs. 4.8 crores to the income of JSM Proteins Pvt. Ltd. by the tax authorities, which was challenged up to the Income Tax Appellate Tribunal (ITAT). The primary contention was the legitimacy of cash deposits made in the company’s bank accounts, attributed to business sales.
During the fiscal year, JSM Proteins reported substantial cash deposits. The Assessing Officer (AO) challenged these deposits, failing to be convinced by the company’s explanation that these were proceeds from sales. Notably, about 5.14% of the company’s sales were in cash, a fact that the AO found insufficiently substantiated due to inadequate documentation.
The AO added Rs. 4,79,51,218 to the company’s income, considering it unexplained under section 68 of the Income Tax Act. This decision was upheld initially but later contested at the CIT(A), where it was eventually overturned. The CIT(A) found that the company had maintained adequate records and that the cash sales percentage was consistent with the company’s business practices.
The ITAT agreed with the CIT(A), noting that the company had provided comprehensive documentation including audited financial statements and detailed bank statements. It held that the sales were adequately recorded and that the cash deposits were justifiably part of the business operations, thus not warranting addition under section 68.
The decision underscores the importance of maintaining detailed financial records and demonstrates the challenges businesses may face with large cash transactions. For JSM Proteins, the tribunal’s decision affirmed their accounting practices and provided relief from the substantial tax addition initially imposed.
Analysis of JSM Proteins Pvt. Ltd. Tax Dispute on Cash Deposits for AY 2013-14
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