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2016 (3) TMI 585 - AT - Income TaxAddition u/s. 68 as unexplained credit - assessee filed reconciliation statement - Held that - This is verified from assessee s Paper Book page 163 being the Debtor A/c of assessee in RSIC, where, on 31st August 2005, the said entry has been reflected as AHW Steel Limited CRS . The Creditor A/c ledger as referred to herein above also confirm the same. Next amount of ₹ 2,88,574/- and ₹ 2,93,150/- is with regard to two sale bills as issued by RSIC as per detail mentioned in the reconciliation statement, but were not entered by them in their ledger of assessee. The bills are at assessee s Paper Book page 90 & 91. The assessee had shown it as their purchase and had recorded it in their books of account accordingly. Next amount is with regard to the amount of excess debited by assessee in their books in the Ledger A/c of RSIC for a sum of ₹ 27,91,751/- . Ld. Counsel for the assessee referred to assessee s Paper Book page 86 being the credit Ledger A/c of RSIC in the books of assessee, and assessee s Paper Book page 180 being the Debit A/c of assessee in RSIC. Two sale bills on 28th March 2006 of ₹ 28,60,000/- each was wrongly entered by assessee in their Ledger as ₹ 2,86,000/- and ₹ 28,60,000/- which was subsequently rectified by the parties in the next year. With regard to the entries where RSIC has shown as sales by them totaling to ₹ 1,54,78,255/- and the assessee has categorically denied that they have not received any such materials under the bill nos. and the quantity and amount as mentioned in the reconciliation as alleged by the party. We find that no opportunity of cross-examination was provided to the assessee. It was only on the statement of the Chief Finance Controller, the AO relied upon his statement and made addition of ₹ 2l.88 crores. Ld. Counsel for the assessee referred to Short Notes on Grounds of Appeal. According to him, the AO should have asked RSIC to produce the bills and the evidence of delivery of the material i.e. Road Challan and accepted Challan copy by assessee of the materials. No enquiry whatsoever was made by the AO. It was simply on the statement of Sri Navin Gupta, the CFO of RSIC was relied upon by him and addition was made. Next amount of ₹ 2,88,60,143/- is with regard to the sale bill, as reflected as on 31st March 2005, in the Debtor A/c of assessee, in the books of RSIC as sale bill. But, once again, no such purchases have been made by assessee and no verification with regard to the sale bill of RSIC and/or Road Challan and/or Delivery Evidence was verified by the AO. From the Ledger A/c which is at assessee s Paper Book at page 160, RSIC is showing the sum as on 31st March 2005. This amount in any case is of the earlier year and not of the year under consideration. From the Ledger A/c in the books of assessee of RSIC which is at assessee s Paper Book page 66, there is no opening balance and the first entry of purchase was made on 27th April 2005. Next amount of ₹ 8,088/- is with regard to the purchase bill less credited by assessee in their books. Reference was made to Paper Book page 180, where, on 16th March 2006, the entry in the RSIC in the debit ledger account of assessee, amount shown as ₹ 2,08,388/- , whereas assessee in their books have made an entry of ₹ 2,00,300/- that s the difference amount comes to ₹ 8,088/-. The last entry is with regard to the purchase bill wrongly entered by assessee in the account of Ram Swarup Bars & Roes instead of RSIC amounting to ₹ 4,36,436/-. The copy of the bill has been filed at assessee s Paper Book at Page 88 being the bill issued by RSIC. From these reconciliations and the explanations and also the explanations and clarifications submitted in the Short Notes on Grounds of Appeal, we find that the reconciliation is supported by evidence which are on record, and there is no difference in the balance in the books of account of assessee that of RSIC, and hence, the difference of the addition as made by the AO of ₹ 21.88 crores is rightly deleted by CIT(A) and hence we confirm the same. - Decided in favour of assessee
Issues Involved:
1. Deletion of addition made by AO on account of unexplained credit under Section 68 of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Deletion of Addition Made by AO on Account of Unexplained Credit Under Section 68 of the Income-tax Act, 1961: The primary issue in this appeal is the deletion by the CIT(A) of the addition of Rs. 21,87,82,482/- made by the AO under Section 68 of the Income-tax Act, 1961, as unexplained credit. The revenue raised concerns that the assessee company failed to reconcile differences in transactions with M/s. Ram Swarup Industrial Corporation (RSIC) and did not provide supporting evidence for the reconciliation. Facts and Arguments: - During the assessment proceedings, the AO noticed a significant discrepancy in the balance sheet of the assessee and the ledger account submitted by RSIC. The creditor RSIC showed a credit balance of Rs. 22,96,80,435/- as on 31.03.2006, while the assessee showed Rs. 1,08,97,953/-, leading to a difference of Rs. 21,87,82,482/-. - The AO added this difference under Section 68 of the Act. The assessee disputed the accounts submitted by RSIC and provided a reconciliation statement, which the AO did not accept. - The CIT(A) deleted the addition, noting that the AO did not allow the assessee to cross-examine the CFO of RSIC, Shri Navin Gupta, and that the AO did not find any evidence of other bank accounts maintained by the assessee. - The CIT(A) observed that the reversal of Rs. 14 crore was a unilateral act by RSIC and that the AO did not provide an opportunity for cross-examination. The CIT(A) found that the remaining balance of Rs. 7,87,82,482/- was added by the AO based on conjectures and surmises without any evidence. Tribunal's Findings: - The Tribunal reviewed the reconciliation statement and supporting documents provided by the assessee, including an affidavit stating that no such payment of Rs. 14 crore was made to RSIC. - The Tribunal noted that the AO relied on the statement of RSIC's CFO without providing the assessee an opportunity for cross-examination. - The Tribunal found that the reconciliation was supported by evidence, and there was no difference in the balances in the books of the assessee and RSIC. - The Tribunal confirmed the CIT(A)'s decision to delete the addition of Rs. 21.88 crores, as the reconciliation was adequately supported by the evidence on record. Conclusion: The Tribunal upheld the CIT(A)'s order, concluding that the addition made by the AO under Section 68 was not justified due to lack of evidence and procedural lapses, such as not allowing cross-examination of the CFO of RSIC. The appeal by the revenue was dismissed. Order Pronouncement: The order was pronounced in the open court on 03.02.2016.
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