2023 (5) TMI 318 - AT - Income Tax

Unexplained cash credit u/s 68 - Assessee had made large cash deposits in bank accounts - HELD THAT - The books, bills and vouchers, etc., were produced before the AO and were test checked, as noted in the assessment order itself. The books of account are, undisputedly, audited books of account and the Chartered Accountants have certified to have checked the books of account with the support of the bills and vouchers. No defect therein has been pointed out by the Auditors. And not only this, the AO has also admitted that the goods were supplied to the customers, against which, the advances were received, and there was only a small amount of advances which remained outstanding and adjusted at the end of the year. Even the AO himself has not doubted that the Assessee had conducted its business in a regular manner, from day to day, as described by the Assessee. AO has, thus, made the addition in question on the basis of mutually intrinsically contradictory observations made in the assessment order, which observations are not at all sustainable in the eye of law. CIT(A) too has not considered the controversy in its proper perspective in the light of the afore-discussed facts and circumstances. The contradiction in the assessment order is also clear from the fact that whereas on the one hand, the AO observed that the Assessee had no money in hand to make the deposits in its bank accounts and deposits were made out of the advances received from the customers, to the contrary, he states that the entire amount of advances received by the Assessee from its customers were unexplained cash credits. Even the amounts confirmed to have been paid as advances, were not considered as genuine advance receipt of goods. Not even an attempt has been made to establish the source of the money to make the deposits, in the absence of succeeding to refute the receipts of the amounts as trade advances. The Department, thus, has miserably failed to prove that the apparent is not the real, as required by CIT Vs. Daulat Ram Rawatmull 1972 (9) TMI 9 - SUPREME COURT The order under appeal is a result of mere conjectures and surmises - Addition u/s 68 cancelled - Decided in favour of assessee.

Summary

Issues Involved:
1. Confirmation of cash credit of Rs. 46,97,859/- under Section 68 of the Income Tax Act.
2. Condonation of a two-day delay in filing the appeal.

Summary:

Issue 1: Confirmation of Cash Credit under Section 68
The Assessee challenged the confirmation of cash credit amounting to Rs. 46,97,859/- under Section 68 of the Income Tax Act by the CIT(A), Patiala. The Assessee argued that all particulars were disclosed and the cash deposits were from genuine trade advances. The AO found large cash deposits in the Assessee's bank accounts and questioned the identity, genuineness, and creditworthiness of the creditors. The Assessee could only establish the identity of a few creditors and failed to produce adequate supporting documents such as sale bills and receipts. The AO concluded that the transactions were fabricated to manage cash deposits and added the amount as unexplained cash credits. The CIT(A) upheld this decision, observing that the Assessee introduced unaccounted cash in the guise of trade advances, which did not align with regular trade practices.

The Assessee maintained that the deposits were from genuine business transactions and provided ledger accounts and confirmations from some creditors. The AO did not verify these transactions from the parties and dismissed the Assessee's explanations. The Tribunal found that the Assessee's books were audited and no defects were pointed out by the auditors. The AO's own contradictory observations and failure to establish any alternative source of cash led the Tribunal to conclude that the addition was based on conjectures and surmises. Therefore, the Tribunal reversed the CIT(A)'s order and cancelled the addition of Rs. 46,97,859/-.

Issue 2: Condonation of Delay
The Assessee filed an application for condonation of a two-day delay in filing the appeal, attributing it to postal delays. The Tribunal accepted the explanation, finding sufficient cause for the delay, and condoned it.

Conclusion:
The appeal was allowed, and the addition of Rs. 46,97,859/- under Section 68 was cancelled. The delay in filing the appeal was condoned.