2022 (5) TMI 91 - AT - Income Tax

Addition on account of Excess Stock - suppression of the stock of bullion - argued Revised stock tally wherein all the quantity of Sale as per Bills and Stock match - HELD THAT - Considering the two fold contentions of the ld. A.R we find substantial force in the same viz (i). that the CIT(Appeal) by taking recourse to a self-contradictory approach had wrongly refused to consider the assessee s revised stock statement; and (ii). that the A.O had erred in not considering the net weight (i.e weight of 99.50% purity gold as mentioned in the invoices) of the aforementioned two sale transactions in question viz. (a) Invoice No. V4 dated 29.03.2013 of 560.560 grams (gross weight) i.e 95% purity which on conversion into 99.50% purity was reduced to 532.5 grams (net weight); and (b). Invoice No. V5 dated 30.03.2013 of 909.560 grams (gross weight) i.e. 88% purity which on conversion into 99.59% purity was reduced to 800.4 grams (net weight). We herein vacate the addition made by the Assessing Officer towards the alleged suppression of the stock of bullion. Accordingly we set-aside the order of the CIT(Appeal) to the extent he had upheld the addition made by the A.O. The Ground of appeal No. 1 is allowed in terms of our aforesaid observations. Unexplained cash deposit in the assessee s bank account - unexplained money Addition u/s 69A - HELD THAT - Department in exercise of its powers u/s. 226(3) of the Act may call upon a banker to pay the money held in the account of the assessee towards discharge of the latter arrears due towards the department. In sum and substance the aforesaid statutory provision i.e. Section 226(3) of the Act clearly recognizes the amount lying in the bank account of the assessee as money . In the backdrop of the aforesaid position of law we are of the considered view that a meaning of the term money different to that as provided in sub-section (3) of Section 226 of the Act would neither be permissible nor justified. We thus in terms of our aforesaid observations are unable to concur with the claim of the ld. AR that as the amount lying in the assessee s saving bank account with State Bank of Patiala Branch Kanak mandi Hoshiarpur would not fall within the meaning of money therefore the CIT(Appeals) had wrongly triggered the provisions of section 69A of the Act and subjected to the same to tax. Accordingly finding no infirmity in the view taken by the CIT(A) that the unexplained cash deposits in the assessee s bank account was liable to be brought to tax under Sec. 69A of the Act we uphold the same. The Ground of appeal No. 2 raised by the assessee is dismissed.

Summary

Issues Involved:
1. Addition on account of excess stock.
2. Addition on account of unexplained cash credit under Section 68 of the Income Tax Act, 1961.

Detailed Analysis:

1. Addition on Account of Excess Stock:
The assessee, engaged in the bullion trade, filed a return declaring an income of Rs. 4,02,710/-. During scrutiny, the Assessing Officer (A.O) observed discrepancies in the stock statement provided by the assessee. The A.O noted unrecorded sales transactions amounting to 1451.240 grams of bullion, which were not reflected in the original stock statement. Consequently, the A.O added Rs. 44,45,306/- to the returned income for these unrecorded sales and further added Rs. 39,10,932/- for suppression of 1330.29 grams of closing stock.

The Commissioner of Income Tax (Appeals) [CIT(A)] vacated the addition of Rs. 44,45,306/- after considering a revised stock statement filed by the assessee but upheld the addition of Rs. 39,10,932/- for suppression of closing stock. The ITAT observed that the CIT(A) had inconsistently accepted the revised stock statement to vacate one addition but ignored it for the other. The ITAT found that the A.O had failed to provide evidence against the revised stock statement and noted that the A.O had arbitrarily rejected it without pointing out specific discrepancies. The ITAT thus vacated the addition of Rs. 39,10,932/- and allowed Ground No. 1 of the appeal.

2. Addition on Account of Unexplained Cash Credit under Section 68:
The A.O added Rs. 6,00,000/- as unexplained cash credit, which was deposited in the assessee's bank account. The CIT(A) sustained this addition under Section 69A of the Income Tax Act, which deals with unexplained money. The assessee argued that the amount was from common funds with his son and that cash deposits in a bank should not be considered as money under Section 69A.

The ITAT rejected the assessee's explanation regarding the source of funds and upheld the CIT(A)'s application of Section 69A. The ITAT referred to various judicial precedents and concluded that cash deposits in a bank account do not lose their character as money. The ITAT found no merit in the assessee's argument that Section 69A should not apply to bank deposits and dismissed Ground No. 2 of the appeal.

General Grounds:
The Grounds of appeal no(s). 3 & 4 were dismissed as not pressed.

Conclusion:
The appeal was partly allowed. The ITAT vacated the addition of Rs. 39,10,932/- related to the alleged suppression of closing stock but upheld the addition of Rs. 6,00,000/- under Section 69A for unexplained cash deposits. The order was pronounced in the open court on 21.03.2022.