2024 (12) TMI 1335 - AT - Income Tax

Unverifiable purchases u/s. 69C - Addition @ 0.25% on cash sales - HELD THAT - Admittedly, the assessee has explained the source of purchases of all the purchases are recorded in the books of accounts and has produced all the bills and vouchers, import bills, bill of entry, airline bills and custom documents etc. All purchases have been made through account payee cheque/RTGS. Assessee has recorded complete sales in the books of account and AO could not point out any defect in the books of account or even there is no finding in the Assessment Order about any deficiency in the books of account. AO has not at all invoked the provision of section 145 for rejection of books of account of the assessee. We are of the view that addition made by the AO is just based on assumptions and has ignored the facts of the case. Interesting point is that once the purchases are accepted as genuine and its sales cannot be taken as bogus until and unless books of account are rejected or found to be defective. One interesting fact is that even enforcement directorate has enquired into the issue and find no adverse circumstances or facts in this case against the assessee. Hence, we find no infirmity in the order of the CIT(A) the deleting of cash sales made by the AO u/s. 69C. Estimating the profit / commission on alleged cash sales @ 0.25% - CIT(A) has simply tried to balance the view expressed by him but there is no basis for such estimation because the assessee has already disclosed profit, which is part of the accounts of the assessee on cash sales recorded in the books of account. Hence, we delete this addition and allow assessee s appeal on this issue. As regards to the assessee s appeal, this issue of assessee s appeal is allowed and revenue s appeal is dismissed. Addition u/s 68 - HELD THAT - We noticed that now the assessee for the first time before us filed bank statement of Pankaj Kapur from where this amount was advanced. Since, this document was produced before us for the first time, we admit this document and remand this issue back to the file of AO. AO will examine these cash credit of Sh. Pankaj Kapur in terms of section 68 of the Act and, thereafter, will decided this issue. This issue of assessee s appeal is set aside and allowed for statistical purposes.

Summary

Issues Involved:

1. Deletion of addition under Section 69C related to unverifiable purchases.
2. Estimation of commission/profit on alleged cash sales.
3. Addition of unexplained cash deposits under Section 68.
4. Addition of unexplained cash credits under Section 68 for unsecured loans.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 69C Related to Unverifiable Purchases:

The primary issue in these appeals was the deletion of the addition made by the Assessing Officer (AO) under Section 69C of the Income Tax Act, 1961, concerning unverifiable purchases. The AO had added the entire amount of cash sales as unexplained expenditure, alleging that the cash sales were unverifiable. The CIT(A) deleted this addition, noting that the assessee had consistently recorded all purchases in the books of accounts, supported by valid documents, and maintained a day-to-day stock register. The CIT(A) observed that the AO had accepted similar transactions in previous years without objection and had not rejected the books of accounts. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's addition was based on assumptions without rejecting the books of accounts or finding any defects therein.

2. Estimation of Commission/Profit on Alleged Cash Sales:

The CIT(A) had estimated an additional income of 0.25% on total cash sales, suggesting that the appellant might have been compensated by customers in the form of a commission over and above the transaction value. The Tribunal found no basis for this estimation, as the assessee had already disclosed profits in the accounts. Consequently, the Tribunal deleted the addition of estimated commission, allowing the assessee's appeal on this issue.

3. Addition of Unexplained Cash Deposits under Section 68:

The AO had added an excess cash deposit of Rs. 58,09,830/- under Section 68, as the assessee could not satisfactorily explain the source of this excess deposit beyond the recorded cash sales. The CIT(A) deleted this addition, but the Tribunal found that the assessee failed to provide a plausible explanation for the differential cash deposit. Therefore, the Tribunal allowed the revenue's appeal on this issue, requiring further verification of the source of the excess cash deposit.

4. Addition of Unexplained Cash Credits under Section 68 for Unsecured Loans:

The AO had added amounts received as unsecured loans from individuals under Section 68, citing a lack of evidence for the creditworthiness and genuineness of the transactions. The CIT(A) upheld these additions, noting the assessee's failure to prove the creditworthiness of the lenders and the genuineness of the transactions. The Tribunal remanded these issues back to the AO for re-examination, as the assessee presented new evidence (bank statements) for the first time before the Tribunal. The AO was directed to verify the cash credits in terms of Section 68 and make a decision accordingly.

Conclusion:

The Tribunal's judgment involved a detailed examination of the issues related to unverifiable purchases, estimation of commission, unexplained cash deposits, and unsecured loans. It upheld the deletion of additions under Section 69C, dismissed the estimation of commission, allowed the revenue's appeal on unexplained cash deposits, and remanded the issue of unsecured loans for further verification. The judgment reflects the Tribunal's emphasis on the proper examination of evidence and adherence to procedural requirements in tax assessments.