2023 (9) TMI 1113 - AT - Income Tax

Additions towards Inflated purchases - mistakes regarding the quantity of purchase of HSD MS - short quantity shown in the ledger maintained by the IOCL by comparing the same with invoices of the purchase as well as the payment made by the assessee as reflected in the bank account statement - CIT(A) deleted the additions - HELD THAT - The additional evidence produced by the assessee in the shape of invoices issued by the IOCL as well as bank account statements are independent record maintained by the bank and IOCL which cannot be manipulated by the individual assessee. Therefore, scope of any manipulation is completely ruled out in respect of these evidences produced by the assessee before the CIT(A). AO ought to have verified correctness of the details but he opted not to do so and raised the objection against the admission of the additional evidence. Once the additional evidence is not prepared by the assessee and the scope of any manipulation on the part of the assessee is ruled out then we do not find any reason for not admitting the additional evidence produced by the assessee. As noted from the monthly details of purchase made by the assessee as well as the payments as reflected in the bank account statement of the assessee that the quantity of the purchase and corresponding payments are duly matched without any discrepancy whereas in the ledger account maintained by the IOCL the factual mistakes are apparent regarding the quantity of purchases as shown only 6 kl instead of 12 kl and in some cases it is shown only 3 kl or 9kl. Therefore, these quantities as shown in the IOCL statement are not even matching with the value shown in the same documents. Comparative chart as reproduced by the CIT(A) clearly manifest these factual mistake in the IOCL statement regarding the quantity of purchase and hence, the assessment order is entirely based on incorrect facts without verifying the correct details and the facts from the supporting documents being the invoices issued by the IOCL and corresponding purchase consideration paid by the assessee. Accordingly in the facts and circumstances of the case as discussed above we do not find any error or illegality in the impugned order of the Ld. CIT(A), same is upheld. Appeal of the revenue is dismissed.

Summary

Issues Involved:
1. Deletion of addition made under Section 68 of the IT Act, 1961 on account of unexplained cash credit.
2. Admission of additional evidences by the CIT(A).
3. Justification for admitting additional evidences ignoring Rule 46A of the IT Rules.

Summary:

Issue 1: Deletion of Addition under Section 68
The Revenue challenged the deletion of an addition amounting to Rs. 1,37,25,000/- made under Section 68 of the IT Act, 1961, on account of unexplained cash credit. The assessee, engaged in trading petrol, diesel, and lubricant oil, had deposited large sums of cash in bank accounts during the demonetization period. The AO found discrepancies in the opening and closing stock of various months as per the ledger account maintained by IOCL and treated the entire cash deposit as unexplained cash credit. The CIT(A) deleted the addition, explaining that the discrepancies were due to factual mistakes in the IOCL ledger and that the purchases were genuine, supported by invoices and bank statements.

Issue 2: Admission of Additional Evidences
The CIT(A) admitted additional evidence in the form of purchase invoices and bank statements. The AO objected to this on the grounds that the assessee did not produce these documents during the assessment proceedings despite sufficient opportunities. The CIT(A) found that the additional evidence was necessary to address factual errors in the IOCL ledger and that the purchases were genuine, thus justifying the deletion of the addition.

Issue 3: Justification for Ignoring Rule 46A
The AO argued that the CIT(A) ignored Rule 46A of the IT Rules by admitting additional evidence without proper justification. The CIT(A) countered that the discrepancies in the IOCL ledger were significant and required additional evidence to reconcile. The Tribunal upheld the CIT(A)'s decision, noting that the additional evidence was independent and not subject to manipulation by the assessee, and that the AO failed to verify the correctness of the details during the remand proceedings.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of Rs. 1,37,25,000/- under Section 68, and justified the admission of additional evidence to correct factual discrepancies in the IOCL ledger. The Tribunal found no error or illegality in the CIT(A)'s order.