2023 (8) TMI 501 - AT - Income Tax

Addition u/s 68 - cash sales made to two parties - as argued assessee was not given effective opportunity to explain and provide the necessary confirmation from the parties - HELD THAT - AO has noted the cash deposited by the assessee. However, the AO has not given any finding regarding the purchases in the assessment order the AO noted that on inquiry it was found that these firms are closed. The explanation of the assessee is that it had made cash sales to these two parties. AO should have given finding in respect of purchases made by the assessee for the items which were claimed to have been sold to these entities. Further, it is contention of the assessee that those parties might have claimed set off of the TCS in their respective returns of income. Hence, the impugned order is set aside. The assessment is restored to the file of AO to verify the correctness of the claim of the assessee that it had made sales in cash to these parties and what is the status of their assessment by the AO. Ground raised is this appeal is allowed for statistical purposes.

Summary

Issues:
The judgment involves the addition of Rs. 46,39,000 made by the Assistant Commissioner of Income-tax under section 68 of the Income tax Act, 1961 for the assessment year 2017-18.

Summary:

Ground of Appeal:
The appeal challenges the addition of Rs. 46,39,000 made by the Assistant Commissioner of Income-tax under section 68 of the Income tax Act, 1961 for the assessment year 2017-18.

Facts:
The case involved the filing of a return declaring income of Rs. 3,50,350, selected for scrutiny assessment, and an addition of Rs. 46,39,000 in cash sales made to Fashion King Garments Ltd. and Ganesh Enterprises. The Commissioner of Income-tax (Appeals) upheld the addition, leading to the current appeal.

Arguments:
The counsel for the assessee argued that the authorities were unjustified in sustaining the additions, emphasizing that the assessee was not given a fair opportunity to explain and provide necessary confirmations from the parties involved. The counsel highlighted that the parties had confirmed their accounts and that TCS provisions were applicable to the sales made by the assessee.

Decision:
After considering the contentions, the Judicial Member noted that the AO did not provide findings regarding the purchases in the assessment order and that the firms in question were reported as closed. The Member directed the AO to verify the correctness of the claim that the assessee made cash sales to the mentioned parties and to assess the status of their assessments. The impugned order was set aside, and the assessment was restored to the AO for further examination. The appeal was allowed for statistical purposes.

Conclusion:
The appeal was allowed for statistical purposes, and the order was pronounced in open court on 31st July, 2023.