2016 (5) TMI 1575 - AT - Income Tax

Unexplained cash credits - absence of any nexus between the corresponding sales and the amounts in question - HELD THAT - On verification of the ledger accounts of M/s. Sahara Minerals and of M/s. V.K. Minerals CIT(Appeals) found that sales made to the said two parties were duly accounted for and offered by the assessee as its income and since the amounts in question treated to be unexplained cash credits by the Assessing Officer were claimed to be received against the said sales the ld. CIT(Appeals) held that such addition under section 68 to the extent of corresponding sales already declared by the assessee as income would result in double addition. As already noted by us this position was accepted even by the Assessing Officer also in the remand report submitted to the ld. CIT(Appeals). The ld. CIT(Appeals) thus allowed a relief to the assessee to the extent of 2, 67, 09, 704/- being the amount already offered as income by the assessee in the form of sales and restricted the addition of 4, 68, 02, 738/- made by the Assessing Officer under section 68 to the extent of 2, 93, 00, 034/-. Having regard to all the facts and circumstances of the case we find no infirmity in the impugned order of the ld. CIT(Appeals) giving this relief to the assessee and upholding his impugned order on this issue we dismiss the appeal filed by the Revenue.

Summary

Issues Involved:
1. Challenge to the CIT(Appeals)'s decision to restrict the addition of unexplained cash credits.
2. Examination of double addition on account of sales and cash credits.
3. Verification of transfer entry claim by the assessee.

Detailed Analysis:

1. Challenge to the CIT(Appeals)'s Decision to Restrict the Addition of Unexplained Cash Credits:

The Revenue appealed against the CIT(Appeals)'s decision to restrict the addition of ?4,68,02,738/- made by the Assessing Officer (AO) on account of unexplained cash credits to ?2,00,93,034/-. The assessee, a mining company, had filed its return of income declaring ?1,40,92,62,755/-. The AO, based on information from the Investigation Wing, found that money was transferred to the assessee's bank account from non-existent concerns, M/s. Lanxess Enterprise and M/s. Topaz Sales Corporation. The assessee claimed the money was received for sales made to M/s. Sahara Minerals and M/s. V.K. Minerals, but the AO found these entities also non-existent and added the entire amount as unexplained cash credits under section 68.

2. Examination of Double Addition on Account of Sales and Cash Credits:

The assessee argued that the amounts received were already accounted for as sales in the profit and loss account, leading to double addition. The CIT(Appeals) agreed, noting that the AO should have reduced the sales from the assessee's income before adding the amounts under section 68. The CIT(Appeals) found that the sales to M/s. Sahara Minerals and M/s. V.K. Minerals were duly accounted for and offered as income by the assessee. The AO, in his remand report, accepted that the corresponding sales were already credited to the profit and loss account and could not be added twice. Thus, the CIT(Appeals) allowed a relief of ?2,67,09,704/- and restricted the addition to ?2,00,93,034/-.

3. Verification of Transfer Entry Claim by the Assessee:

The assessee filed a Cross Objection, claiming that ?1,00,00,523/- credited to the account of M/s. V.K. Minerals was a transfer entry and not a cash credit. The Tribunal noted that this claim required verification and restored the issue to the AO for fresh examination. The AO was directed to verify the claim and decide the matter afresh after giving the assessee an opportunity to be heard.

Conclusion:

The Tribunal dismissed the Revenue's appeal, upholding the CIT(Appeals)'s decision to restrict the addition of unexplained cash credits to ?2,00,93,034/-. The Tribunal allowed the assessee's Cross Objection for statistical purposes, remanding the issue of the transfer entry to the AO for verification. The order was pronounced in the open Court on May 13, 2016.