2024 (9) TMI 1449 - AT - Income Tax

Addition u/s 68 - Admissibility of additional evidence under Rule 46A - CIT(A) deleted addition admitting additional evidences - as argued AO making the addition of the whole of the sum deposited into the bank account stating that on the one hand AO ask the assessee to reconcile the sale with mandi tax and pin point the difference in sale and on the other hand make the addition of the whole cash deposited into the bank account as unexplained - assessee he is aged 64 years and is assessed to tax for last more than 40 years. Since inception he is engaged in the business of Aadatia (आडतिया) of agriculture products - CIT(A) deleted addition As argued CIT(A) has admitted and considered the additional evidence without giving adequate opportunity to the AO in the remand proceeding - HELD THAT - While concluding assessment proceedings, AO eventually considered all the documentary evidence furnished and made addition by invoking the provisions of section 68 as against 69A as was originally proposed. In support of the above submission, copies of acknowledgements of submission made before ld. AO, whereby cash books of all the three proprietary concerns were submitted is placed on record. AO though the ld. DR did not controvert this aspect of the matter and therefore, based on the material placed on record it is very much clear that no additional evidence was furnished by assessee during appellate proceedings before ld. CIT(A). Based on these observations ground no. 1 2 raised by the revenue has no leg to stand and thereby the same are dismissed. Addition u/s 68 on account of Cash deposited by assessee in bank account - CIT(A) has deleted that addition by observating that the assessee submitted cash books of all the three proprietorship concerns, all the bank statements, Ledger account of all the expenses claimed in all the three proprietorship concerns, Ledger account of farmers with supporting evidences - The assessee is one of the license holder of the mandi samiti (owned and controlled by the State Government) as per which he became entitled to get one shop area in the above stated type of mandi premises from where he carried out his Adat activity as per the rules and regulations formed by the State Government and implemented through the Government Officers in the relevant Mandi Samiti by observing the prescribed practice that as and when a vehicle carrying the agriculture produce enters into the premises of the mandi samiti, the same measured in terms of weight and nature of goods and thereafter prescribed gate pass is issued by the mandi samiti which contains the details of the produce brought into along with the details of the sender / person who brings the produce and the details of Adatia to whom such produce is being assigned for sale by auction. With this, the produce is brought to the shop of such adatia where such produce is unloaded from the vehicle and after making entry of such goods into the register authenticated by the Mandi Samiti, the same is sold through open auction process, where the prospective bidders bid for the produce are gathered and the successful bidder after making the payment as per the conditions between the broker (Adatia like the assessee) and the customer, take delivery of the goods (produce). AO has alleged that assessee might have engaged in the trading business which as not disclosed and the cash deposit in the bank account of his commission agency firm belonged to such undisclosed trading activity and accordingly treated the said cash deposit as unexplained cash credit and made the addition of entire cash deposited into bank u/s 68 of the Income Tax Act. While alleging so the ld. AO has failed to appreciate the fact that the bank accounts under which the said cash was deposited belonged to and pertaining the transactions carried out by the proprietorship firms of the assessee namely M/s Kanhaiya Lal Nenu Mal and M/s Prashant Kumar Lakhmi Chand where the consignment sale of more than 17.00 crores were carried out and part of the same was received in cash and duly recorded in the books of accounts maintained. The entire cash was deposited in the bank accounts regularly maintained by the assessee therefore under no circumstances such deposit could be held unexplained. Even otherwise the addition of cash deposits of Rs. 8,60,03,806/- made u/s 68 by treating the same as unexplained cannot be made as the assessee has submitted the cash book all the three concerns and the cash so deposited into the bank account is duly reflected in the books of account. The assessee has explained the source of this cash deposit. We also note that the ld. AO of the assessment order has reproduced the details of amount received by the assessee in cash and through recovery of credits (as furnished by assessee) AO pointed out Bilty issued by transporter for consignment of agriculture produce, which was in the name of assessee (though there was no invoice issued in the name of assessee) and a details submission on the same has already been made. Firstly, Bilty is always issued in the name of recipient and assessee, being registered Adatiya in Mandi Samiti was authorized to receive goods for sale. Ld.AO could have verified this fact from the record of Mandi Samiti, which has not been done It is thus submitted that addition made by ld.AO amounts to double addition which is against the principle of taxation. It is further submitted that ld. AO grossly erred in not appreciating the fact that only Real Income can be taxed and moreover in the case of assessee, ld. AO miserably failed to understand the facts that in the business of Adatia only commission income can be taxed. AO has neither rebutted the submission of the assessee that cash deposits represent sale consideration received by assessee on behalf of farmers nor brought any material on record by making any independent enquiry that assessee has indulged into the trading activity which was not disclosed and the cash deposited in the bank account is over and above the cash receipts from his regular ADAT business. Thus, once accepting commission income, receipt of money their behalf is incidental. In fact, ld.AO is vested with power to make direct enquiries and if he had any doubts, notices could have been issued Mandi Samiti to cross verify the Sales or to bankers to confirm that payments were made to farmers and subsequent deposits were on account of their sale consideration. Based on these discussion so recorded and ongoing through the detailed order of the ld. CIT(A) we see no infirmity in the finding of the ld. CIT(A) while deleting the addition in the hands of the assessee. Disallowance made by ld.AO being 25% of expenses on ad hoc basis - CIT(A) deleted addition - We note that during the course of assessment proceedings, ld. AO had issued notices u/s 133(6) to the persons to whom salary has been paid but they remained un-complied and only one of them has reverted that he was in employment somewhere else however, has not submitted anything else like Salary Certificate etc. and has further informed that he was in employment with the assessee prior to this year and after this year also which rather proves that he was under employment with the assessee in the year under consideration. Also, the persons to whom salary is being paid are not techno friendly and is not having legal counsels to look after their respective income tax login along with their mails and rather they are simple accountant, salesmen, loaders etc. which are earning their livelihood from the employment. Further the fact that they have provided services was neither doubted nor can be denied looking to the volume of business carried out by the assessee where the total consignment sale of more than 17.00 crores was taken place in the entire year which could not be possible without the help of manpower. Further except the salary expenses, no doubts were raised on the other expenses claimed by the assessee thus disallowance has been made without pointing out any specific defect in the records which were completely placed on record by the assessee vide letter dated 22.02.2022 In view of the above, we note that ld. CIT(A) has decided the appeal after considering all the documentary evidence furnished by the assessee and evidence adduced which are not disputed. Assessee has placed on record all the details which are necessary to prove the claim of salary expenses - This factual detail has not been controverted. Therefore, we see no infirmity on the facts of the case while ordering to delete the lumpsum addition of 25% out of the expenses so claimed by the ld. CIT(A). Appeal of the revenue stands dismissed.

Summary

Issues Involved:
1. Admissibility of additional evidence under Rule 46A.
2. Deletion of addition made under Section 68 of the Income Tax Act, 1961.
3. Deletion of disallowance of 25% of expenses incurred in cash.

Issue-wise Detailed Analysis:

1. Admissibility of Additional Evidence under Rule 46A:
The Revenue contended that the CIT(A) erred in admitting additional evidence under Rule 46A without giving adequate opportunity to the Assessing Officer (AO). However, the CIT(A) clarified that no additional evidence was filed by the appellant during the appellate proceedings. The assessee had submitted all relevant documents, including cash books of all three proprietorship concerns, during the assessment proceedings. The AO had acknowledged these submissions in the assessment order. Therefore, the Tribunal found no merit in the Revenue's argument and dismissed the related grounds.

2. Deletion of Addition Made Under Section 68 of the Income Tax Act, 1961:
The AO made an addition of Rs. 8,60,03,806/- under Section 68, alleging unexplained cash deposits in the assessee's bank accounts. The CIT(A) deleted this addition, noting that the assessee had provided comprehensive evidence, including cash books, bank statements, and details of transactions with farmers. The CIT(A) observed that the AO had accepted the commission income declared by the assessee, which implied acceptance of the consignment sales on behalf of farmers. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO had not brought any contrary material on record to disprove the assessee's explanation. The Tribunal noted that the AO's approach of treating the entire cash deposit as unexplained was inconsistent with the accepted commission income and the detailed evidence provided by the assessee.

3. Deletion of Disallowance of 25% of Expenses Incurred in Cash:
The AO disallowed 25% of the expenses incurred in cash, amounting to Rs. 12,63,307/-, citing a lack of supporting evidence. The CIT(A) deleted this disallowance, pointing out that the AO had relied on the same set of books for making the disallowance after rejecting them under Section 145(3) of the Act. The Tribunal agreed with the CIT(A), noting that the assessee had provided detailed ledgers and supporting documents for the expenses claimed. The Tribunal found the AO's disallowance to be arbitrary and without specific defects pointed out in the records.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s order in its entirety. The Tribunal found that the CIT(A) had correctly evaluated the evidence and provided a reasoned decision, which was not effectively countered by the Revenue.