2023 (12) TMI 867 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - unexplained cash sales proceeds/receipts received from the customers - addition based on the statement u/sec 131 - CIT(A) deleted addition - HELD THAT - The assessee has submitted the details of cash sales/receipts and party wise details of sales above and below Rs. 2 lakhs was submitted. Further the Ld.AR demonstrated the sample Tax Invoice below Rs. 2 lakhs in the demonetization period and the invoice contains, name and address etc and the Ld.AR referred to the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs. 21.10 crs for the F.Y 2015-16 and for F.Y 2016-17 it was maintained at Rs. 17.69crs as per the audited financial statements, further the cash sales are part of the stocks maintained by the assessee which is not disputed. Since the cash sales proceeds/receipts received from the customers are reflected in the Audited Profit Loss account as income/ receipts and again if the cash deposits are added under section 68 of the Act, it will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. AO has not pointed out any specific adversity but made a generalize additions covering the demonization period, cash deposits and RTGS credits without considering the factual aspects and primary evidences. A.O has failed to make further enquiries on the information filed and the assessee has discharged the initial burden placed by submitting the information and details. AO has not disputed on the quantity of stocks maintained in the register, and stock valuation in the Audited financial statements and also the turnover reflected by way of cash sales and bank credits. The assessing officer has accepted the sales and corresponding nexus with the purchases and closing stock of goods. We find the CIT(A) has dealt on the facts, provisions of law, submissions and judicial decisions and has passed a conclusive and reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) on the disputed issues and uphold the same and dismiss the grounds of appeal of the revenue. Estimation of profit on the sale value/ receipts - CIT(A) has granted relief to the assessee on the alleged additions made by the A.O, but estimated the profit element on sales/receipts - We find the books of accounts are Audited and the assessee has disclosed the sales under the heading revenue from operations in the Profit Loss account, whereas the A,O has not accepted certain sales value transactions and rejected the books of accounts u/s 145(3) of the Act. Whereas the CIT(A) having deleted the additions considering the submissions, provisions and evidences produced in support of cash sales deposits in the bank accounts, which are based on the invoices and stocks maintained and is not disputed. But the CIT(A) having granted the relief to the assessee on the sales which are already offered and credited to the Profit Loss account and the profit embedded is part of sale value. Again estimating the profit element @1.35% on the sale values is subjected to double taxation, which is not acceptable/permissible in law. We considering the facts, circumstances and material evidences substantiating the sale values are of the view that the estimation of income @1.35% on the sales value is not warranted. Accordingly, we direct AO to delete the addition of impugned estimation of income on percentage basis on sales values and allow the grounds of appeal filed by the assessee.

Issues Involved:
1. Addition of Rs. 2 Crores as unexplained cash credit under Section 68.
2. Addition of Rs. 79 Lakhs as unexplained cash credit under Section 68.
3. Addition of Rs. 5 Lakhs as unexplained expenditure under Section 69C.
4. Addition of Rs. 5.55 Crores as unexplained cash deposits.
5. Addition of Rs. 3.27 Crores as unexplained cash credit under Section 68.
6. Rejection of books of accounts under Section 145(3).

Summary of Judgment:

1. Addition of Rs. 2 Crores as Unexplained Cash Credit:
The AO added Rs. 2 Crores as unexplained cash credit under Section 68, questioning the genuineness of the sale of gold to M/s. Dyaneshwari Multi State Cooperative Credit Society Ltd. The CIT(A) found that the assessee provided sufficient evidence, including sale invoices, PAN card, ledger accounts, and bank statements. The CIT(A) concluded that the only addition warranted was the net profit difference of Rs. 2,70,000/- on the sale, directing the deletion of the remaining Rs. 1.97 Crores.

2. Addition of Rs. 79 Lakhs as Unexplained Cash Credit:
The AO added Rs. 79 Lakhs based on the statement of Mr. Ashit Doshi, alleging bogus sales. The CIT(A) noted the assessee's contention that the sales were genuine and supported by documentary evidence. The CIT(A) ruled that only Rs. 1,06,650/- should be added as net profit difference, directing the deletion of Rs. 77,93,350/-.

3. Addition of Rs. 5 Lakhs as Unexplained Expenditure:
The AO made an ad-hoc addition of Rs. 5 Lakhs under Section 69C, alleging commission paid for obtaining bogus bills. The CIT(A) found no evidence to support the AO's claim and deleted the addition.

4. Addition of Rs. 5.55 Crores as Unexplained Cash Deposits:
The AO added Rs. 5.55 Crores as unexplained cash deposits during the demonetization period. The CIT(A) observed that the assessee provided detailed explanations, including the festive season sales and the maintenance of stock and cash books. The CIT(A) deleted the addition, noting that the AO did not find any discrepancies in the cash book and stock records.

5. Addition of Rs. 3.27 Crores as Unexplained Cash Credit:
The AO added Rs. 3.27 Crores, questioning the genuineness of sales to various parties. The CIT(A) found that the assessee provided sufficient documentary evidence and noted the AO's reliance on irrelevant considerations. The CIT(A) concluded that only Rs. 4,42,503/- should be added as net profit difference, directing the deletion of Rs. 3,23,35,478/-.

6. Rejection of Books of Accounts:
The CIT(A) found that the AO did not point out any specific defects in the books of accounts and rejected them based on assumptions. The CIT(A) allowed the additional ground of appeal, holding that the rejection of books was not justified.

Appeal by Assessee:
The assessee appealed against the CIT(A)'s decision to sustain an aggregate addition of Rs. 8,19,153/- as net profit difference on sales. The Tribunal found that the CIT(A)'s estimation of profit on sales already disclosed in the profit and loss account resulted in double taxation. The Tribunal directed the deletion of the estimated profit addition, allowing the assessee's appeal.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, directing the deletion of the additions made by the AO and sustaining the CIT(A)'s findings.

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