2019 (2) TMI 363 - AT - Income Tax

Unexplained cash deposits as against Sale proceeds - income from undisclosed sources u/s.69 - Held that - Only if the assessee was prevented by sufficient cause in making available necessary evidence to the Assessing Officer or the assessment was improperly framed by the Assessing Officer by either not allowing adequate opportunity to the assessee or by not considering the relevant material, then the matter can be restored for a fresh decision. Thus it has to be decided by the appellate authorities in each and every case distinctly as to whether the addition made for non-compliance on the part of the assessee at the assessment stage be sustained or the assessee be allowed a fresh opportunity to make up the deficiency in the second round. However in the interests of natural justice, the undersigned had provided a second opportunity to the appellant to lead evidence in the matter. However he has miserably failed to establish the genuineness of his claim that he had made cash sales in the year under reference - Decided against assessee. Disallowance of commodity loss as speculative loss - Held that - As decided in M/S VARSHA CORPORATION LTD. VERSUS DCIT (OSD) -9 (1) , MUMBAI 2015 (6) TMI 124 - ITAT MUMBAI for the assessment year 2009-10 wherein the Co-ordinate Bench of the Tribunal has held that the loss to be speculative in nature and not business loss. Purchases of scrap as bogus purchases - Held that - If the purchases were bogus then how the assessee had made corresponding sales which have not been disturbed by the AO and therefore stood accepted. However the fact remains that the appellant has not furnished the copies of invoices and complete names/addresses of the suppliers and corroborative evidence for transportation of the material. Accordingly to plug possible leakage of revenue and meet ends of justice, a token disallowance of ₹ 2,50,000/- is sustained. Accordingly direct the AO to restrict the addition to ₹ 2,50,000/- on this account instead of ₹ 40,61,348/- made by him. This ground of appeal is partly allowed.

Issues Involved:

1. Addition of ?49,29,010 as unexplained cash deposits.
2. Addition of ?16,25,942 treating commodity loss as speculation loss.
3. Addition of ?2,50,000 out of disallowance of ?40,61,348 for purchases of scrap.
4. Disallowance of interest of ?17,54,623.
5. Request for just and equitable relief.
6. Cancellation of interest charges under Section 234B.

Issue-wise Detailed Analysis:

1. Addition of ?49,29,010 as Unexplained Cash Deposits:

The assessee claimed that the cash deposits were from cash sales of ?69,02,253. However, the Assessing Officer (AO) added ?49,29,010 as income from undisclosed sources under Section 69 of the Income Tax Act due to the assessee's failure to provide satisfactory evidence. The CIT(A) confirmed the addition, noting the non-cooperation of the assessee and the lack of credible evidence to support the cash sales. The Tribunal upheld the CIT(A)'s decision, emphasizing the assessee's failure to controvert the findings and the lack of cooperation during the assessment proceedings.

2. Addition of ?16,25,942 Treating Commodity Loss as Speculation Loss:

The AO treated the commodity transactions in metals as speculative under Section 43(5) of the Act, as they were settled otherwise than by actual delivery. The CIT(A) confirmed this, referencing the Tribunal's decision in M/s. Varsha Corporation Ltd. Vs. DCIT, which held similar losses as speculative. The Tribunal found no infirmity in the CIT(A)'s order, noting the assessee's lack of interest in pursuing the appeal and the absence of any evidence to counter the CIT(A)'s findings.

3. Addition of ?2,50,000 out of Disallowance of ?40,61,348 for Purchases of Scrap:

The AO disallowed ?40,61,348 due to unexplained purchases, which the CIT(A) reduced to ?2,50,000. The CIT(A) noted that the total purchases were ?54,78,795, and all payments were made through banking channels. However, due to incomplete documentation, a token disallowance of ?2,50,000 was sustained. The Tribunal upheld this decision, finding the CIT(A)'s approach reasonable and justified.

4. Disallowance of Interest of ?17,54,623:

The AO disallowed ?17,54,623 as interest, concluding that funds were not used for business purposes. The CIT(A) did not adjudicate this issue due to the lack of a specific ground of appeal in Form-35. The Tribunal found no merit in the assessee's appeal, noting the consistent non-cooperation and failure to provide necessary details during the assessment proceedings. The order of the CIT(A) was deemed just and proper.

5. Request for Just and Equitable Relief:

The Tribunal did not specifically address this ground, as it was general in nature.

6. Cancellation of Interest Charges under Section 234B:

The Tribunal also did not specifically address this ground, as it was consequential in nature.

Conclusion:

The appeal of the assessee was dismissed in its entirety, with the Tribunal upholding the findings and decisions of the CIT(A) on all grounds. The order was pronounced on 04th February 2019.

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