Case Law Details
K N R Roofing Pvt. Ltd. Vs ACIT (ITAT Bangalore)
The assessee is a company engaged in the business of manufacturing and trading of roofing sheets, roofing accessories and turbo ventilators. For the AY 2015-16, the assessee filed a return of income declaring a loss of Rs.30,58,063. In the course of assessment proceedings u/s. 143(3) of the Income-Tax Act, 1961 [“the Act”], the AO noticed that there were creditors in the balance sheet and these creditors represented purchases on credit by the Assessee to the tune of Rs.28,37,588. Under Section 68 of the Act, any sum credited in the books of taxpayer in any financial year shall be treated as shall be treated as income of taxpayer during such financial year if the taxpayer offers no explanation about the nature and source of such credit; or Explanation offered by taxpayer about the nature and source of such credit is not satisfactory in the opinion of assessing officer. Such credit is referred to as unexplained cash credit.
ITAT have considered the rival submissions. ITAT are of the view that u/s. 68 of the Act, it is only the credit entry appearing in the books of account of an assessee for the relevant previous year, that can be treated as unexplained cash credit in the absence of proper explanation by the assessee. Therefore, the opening balances cannot be added u/s. 68 of the Act.
The additional evidence sought to be filed by the Assessee before CIT(A) was to prove its case that opening balances cannot be added and also to explain the correct quantum of credit purchases during the relevant previous year.
Though the assessee did not file ledger accounts to prove the quantum of opening balance appearing in the various creditors account, the same ought to have been looked into by the CIT(Appeals), in exercise of powers under Rule 46A(4) of the Rules. It is always open to the CIT(Appeals) to confront the material in the form of additional evidence to the AO and then take a decision on the stand taken by the assessee before the CIT(Appeals). ITAT are also of the view that the closure of business of assessee in June, 2015 was a sufficient cause for non-production of evidence before the AO and therefore the CIT(Appeals) ought to have admitted additional evidence in terms of Rule 46A(1)(c) of the Rules. The same reason would hold good for the assessee’s claim with regard to discrepancies in the closing balance of sundry creditors as shown by the assessee in the books of account. ITAT are therefore of the view that the additional evidence sought to be filed by the assessee ought to have been admitted for adjudication by the CIT(Appeals). ITAT therefore set aside the order of CIT(Appeals) and remand the issue to the AO for fresh consideration with regard to the issue of addition u/s. 68 of the Act. The AO will consider the additional evidence filed by the assessee before the CIT(Appeals) and after giving opportunity of being heard to the assessee, decide the addition u/s. 68 of the Act afresh in accordance with the law.
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