2017 (12) TMI 116 - AT - Income Tax

Transactions through Credit cards - unexplained purchases - Held that - The details of the purchased items shows that these were the purchases for the requirement of the assessee or family members. These were the personal expenditure met out by the assessee through his credit cards. The items purchased are sarees, jewellery, handicrafts and payment to petrol pumps. Items purchases suggest that the assessee had purchased various items for him or family members. The claim of the assessee that he was returning the goods back to the seller at the 3% discount to generate cash for payment of credit card dues on account of financial crisis, is completely unsustainable. This statement is not supported by any documentary or oral evidence. It is a completely bald assertion which has no legs to stand. The other pleading of the assessee that purchases by credit cards should be taken as turnover and the GP should be estimated on this turnover is also completely baseless, as this contention of the assessee is also completely unsustainable and without any supporting document or oral evidence. Such recitals not supported by any evidence are unsustainable in law and facts. The last plea of the ld AR that the Assessing Officer has added both the cash deposited in the payment of credit cards account and also the purchases made through these credit cards it is of the view that the assessee had purchased the goods through credit cards and payment was made by unaccounted cash. The source of cash is not explained. The repayments have been made by depositing unaccounted cash of these purchases. The source of these purchases is unexplained. For working out the quantum of disallowance, the matter is restored back to the file of ld. CIT(A). - Appeal of the assessee is partly allowed for statistical purposes

Summary

Issues Involved:
1. Sustaining the addition of ?34,28,313/- related to debit and credit entries in credit cards used by the assessee.

Issue-wise Detailed Analysis:

1. Sustaining the Addition of ?34,28,313/-:

The primary issue in this appeal is the addition of ?34,28,313/- related to credit card transactions. The assessee, engaged in the trading of gift items, used credit cards for various purchases and claimed that these were resold at a 3% discount to the same parties. The CIT(A) confirmed the addition, noting that the assessee failed to provide any evidence, such as confirmations from suppliers, to support the claim of resale at a discount. The credit card statements showed purchases of jewellery, handicrafts, sarees, fuels, and payments for travel, among others.

The CIT(A) observed that the total withdrawals and cash deposits amounted to ?18,20,260.60 and ?16,43,763.60 respectively, but the assessee could not substantiate the claim of revolving credits through four cards or the scheme of a 3% discount. The assessee did not file ledger accounts or other supporting documents. The CIT(A) compiled detailed transaction data from the credit card statements, showing various purchases and cash deposits.

The CIT(A) concluded that the assessee's contention of reselling the purchased items at a discount to generate cash was not credible due to the lack of evidence. The purchases included personal items like jewellery, sarees, and fuel, which suggested personal expenditure rather than business transactions. The claim of reselling at a discount was deemed unsustainable without documentary or oral evidence.

During the hearing, the assessee's representative reiterated the claim of purchasing goods through credit cards and returning them at a discount to generate cash. However, he admitted that there was no documentary evidence to support these transactions. The tribunal found that the items purchased were for personal use, and the claim of returning goods at a discount was unsupported and unsustainable.

The tribunal also addressed the assessee's plea that the credit card purchases should be considered as turnover and gross profit (GP) should be estimated on this turnover. This contention was dismissed as baseless and unsupported by evidence. The final plea was regarding the addition of both cash deposits and purchases made through credit cards. The tribunal noted that the purchases were made through unaccounted cash, and the source of cash was unexplained. Therefore, the matter was restored to the file of the CIT(A) for working out the quantum of disallowance.

Conclusion:

The appeal was partly allowed for statistical purposes, with the tribunal restoring the matter to the CIT(A) to determine the quantum of disallowance. The order was pronounced in the open court on 28/11/2017.