2024 (9) TMI 265 - AT - Income Tax

Unexplained cash deposits in bank account - assessee submitted before the AO that assessee company was entered into an agreement of sale of property measuring 5 Acre, and against the said agreement assessee firm received amount in advance during the year under consideration and deposited the same in its bank account - HELD THAT - Admittedly, the disputed transaction of cash deposit was duly disclosed in the Audited books of Accounts as per Balance Sheet from the sale of land which clearly established the fact that it is a genuine transaction disclosed in books of accounts much before the search u/s 132 - AO or the Ld. CIT(DR) has failed to controvert the contention of the defendant assessee despite the department was granted opportunity by way of remand report during the appellate proceedings before the CIT(A) and in the present proceedings by the Tribunal. From the record, it is evident that Sh. Gurmeet Singh, in his statement has categorically admitted and explained that the disputed cash was deposited in the bank account of the assessee by the employee of M/S Bhagwati Lacto Vegetarian Exports Pvt. Ltd. on account of sale of land situated at Village Ballo Majra by the assessee company to M/S Bhagwati Lacto Vegetarian Exports and that there was no physical cash transaction since it was not possible to count huge cash in such short time as mentioned in the letter. In the remand proceeding, further the bank manager stated that no cash was transaction was involved, for the reason that the bank accounts of both the firm/company were in the same bank branch, so there was no need of actual movement of cash, since the funds were to be actually transferred from one bank account to another within the same branch, without the actual involvement of cash. Thus, it can be logically concluded from the statement of Sh. Sudhanshu Kumar, i.e. Branch Manager, that the certificate given by bank with respect to timing of cash deposit and cash withdrawal is factually incorrect as it is not possible to count huge cash in such time of few minutes. In the present case, the AO has made addition purely on presumption and guess basis. Decided in favour of assessee. Disallowance of interest paid on CC account - major part of funds remained invested in the immovable properties (as investment but disclosed under the head debtors) and share of other companies and not in the productive assets related to assessee s business - HELD THAT - In the present case, the funds remained invested in the immovable properties and share of other companies i.e. in the business of the assessee meaning thereby that the discloser of the said funds as investment under the head debtors will not debar the appellant from the claim of interest expenses on the same as the investment was in the productive assets related to assessee s business. Following the Coordinate Bench decision in the assessee s own case on similar facts 2023 (11) TMI 1284 - ITAT AMRITSAR the addition made by the AO is liable to be deleted. Assessee appeal allowed. Unaccounted sales receipts - HELD THAT - CIT has allowed benefit of voluntary disclosure made by the assessee during search proceedings but he has ignored to consider the amount of sale receipts found as per Annexure A- 2, although on the same sale receipts, addition of gross profit has already been confirmed by the Ld. CIT(A) appeal. The observation of the ld. CIT(A) is self-contradictory as firstly, he has confirmed the Profit percentage on the trade/sale receipts Rs. 3,45,98,421 and secondly, he is disputing the same receipts as unexplained loan and interest entire which is illogically concluded against the principles of accounting and against the interest of justice. Thus, in our view, the funds available were explained by the appellant in the manner that Rs. 3,00,00,000/- was discloser made at the time of the search and Rs. 3,45,98,421 being sale receipts as per annexure A- 2, duly declared in the audited balance sheet where specific percentage profit has been applied and accepted by the AO and the Ld. CIT(A) as well. In view of that matter, we are of the considered view that the finding of the Ld. CIT(A) in confirming separate addition-is infirm and perverse to the facts on record as the entire sale receipts stands explained. Thus, the ground 4 of the appeal is allowed.

Issues Involved:
1. Source of disputed cash deposit of Rs. 32.80 Cr.
2. Disallowance of interest paid on CC account amounting to Rs. 60,20,750/-.
3. Addition of Rs. 1,76,57,729/- based on presumption without considering facts.
4. Addition of Rs. 13,25,119/- on account of income earned from unaccounted sales.

Issue-Wise Detailed Analysis:

1. Source of Disputed Cash Deposit of Rs. 32.80 Cr.:
The department challenged the genuineness of the unregistered sale agreement dated 30.03.2015, which was submitted by the assessee during the assessment proceedings but not found during the search proceedings. The AO added Rs. 32.80 Cr. to the income of the assessee, suspecting the source of cash deposits. The assessee argued that the cash was received as an advance for the sale of land to M/S Bhagwati Lacto Vegetarian Exports Pvt. Ltd. and deposited in the bank account. The CIT(A) deleted the addition, noting that both bank accounts were in the same branch, and there was no need for physical cash movement. The bank manager confirmed that due to heavy rush, entries were posted as per convenience, and no physical cash movement was involved. The Tribunal upheld the CIT(A)'s decision, finding no merit in the department's grounds, and confirmed that the source of cash deposit was explained.

2. Disallowance of Interest Paid on CC Account Amounting to Rs. 60,20,750/-:
The AO disallowed the interest expense, observing that funds were invested in immovable properties and shares, not in productive assets related to the assessee's business. The CIT(A) confirmed the disallowance. The assessee argued that similar addition was deleted by the ITAT in the previous year, asserting that the funds were used for business purposes. The Tribunal, following its earlier decision, held that the funds were invested in the business, and the disallowance was unjustified. The addition of Rs. 60,20,750/- was deleted.

3. Addition of Rs. 1,76,57,729/- Based on Presumption Without Considering Facts:
The AO added Rs. 1,76,57,729/- based on annexure A-I, containing details of loans and interest. The CIT(A) confirmed the addition, interpreting the entries as loans rather than unaccounted sales. The assessee argued that the entries represented unaccounted business turnover, and the CIT(A) accepted the profit percentage on the same receipts. The Tribunal found the CIT(A)'s decision self-contradictory, as it confirmed profit on sales receipts while treating them as loans. The Tribunal held that the sale receipts were explained, and the addition was unjustified. The addition of Rs. 1,76,57,729/- was deleted.

4. Addition of Rs. 13,25,119/- on Account of Income Earned from Unaccounted Sales:
The CIT(A) deleted the addition of Rs. 13,25,119/- on account of income earned from unaccounted sales, as it was linked to the disputed cash deposit of Rs. 32.80 Cr. The Tribunal upheld the CIT(A)'s decision, finding no merit in the department's grounds.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's appeal, providing relief in quantum and rendering legal issues academic. The Tribunal upheld the CIT(A)'s decisions on all issues, confirming the deletion of additions and disallowances made by the AO.

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