ITO Vs Parmanand Gupta (ITAT Raipur)
Held that the re-assessment and addition of the duly accounted cash sales of the assessee as unexplained cash credits u/s 68 by the AO without rejection of the books of account of the assessee u/s 145(3) of the Act is unjustified
Facts-
During the course of the re-assessment proceedings, it was observed by the A.O that there were cash deposits amounting to Rs. 5,22,81,663/-. However, as the assessee had failed to substantiate the nature and source of the cash deposits in his bank accounts on the basis of supporting documentary evidence, the A.O after rejecting his explanation held the entire amount of cash deposits of Rs. 5,22,81,663/- as unexplained cash credits u/s.68 of the Act. Accordingly, the A.O vide his order passed u/s.143(3) r.w.s.147, dated 15.03.2016 assessed the income of the assessee at Rs. 5,28,66,726/-.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion-
Held that the re-characterization of the duly accounted cash sales of the assessee as unexplained cash credits u/s 68 by the AO without rejection of the books of account of the assessee u/s 145(3) of the Act is beyond comprehension.
We find that the AO had accepted the claim of the assessee that the cash deposits in his bank accounts were sourced out of the duly accounted cash sale proceeds. Accordingly, addition of the same as unexplained cash credit u/s 68 is unjustified.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal filed by the Revenue is directed against the order passed by the CIT(Appeals), Bilaspur, dated 30.11.2016, which in turn arises from the order passed by the A.O under Sec.143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short ‘the Act’) dated 15.03.2016 for assessment year 2008-09. Also, the assessee is before us as a cross-objector. Before us the Revenue has assailed the impugned order on the following grounds of appeal:
“1. Whether on the facts and circumstance of the case and on the points of the law Ld. CIT(A) was justified in deleting the addition of Rs.5,22,81,663/-made by the AO on account of unexplained cash deposits in the various bank accounts of the assessee ?
2. Whether on the facts and circumstances of the case and on the points of the law Ld. CIT(A) was justified in concluding that addition of Rs. Rs.5.228 Crores was part of turnover of the assessee, as against the finding of the AO that the assessee has failed to provide names and address of the parties who had purchased yarn from him, thereby the assessee not being able to establish the genuineness and authenticity of the transactions of cash deposits in its various bank accounts?
3. Whether on the facts and circumstances of the case and on the points of the law Ld. CIT(A) was justified in concluding that cash deposits in the bank accounts of the assessee represents the sale proceeds from various sundry debtors, as against the findings of the AO that the assessee has failed to establish the genuineness and authenticity of the cash deposits in the bank accounts of the assessee in spite of several opportunities?
4. Whether on the points of law and on facts and circumstances of the case, the Ld. CIT(A) has erred by giving a finding which is contradictory to the evidence on the record, as the Ld. CIT(A) has accepted the submission of the assessee that the alleged unexplained cash deposits in the bank accounts of the assessee are part of the assessee’s turnover, which is factually incorrect, thereby rendering the decision, which is perverse?
5. Whether the Ld. CIT(A) has erred in law by holding the decision in favour of the assessee and against the revenue, though there is no nexus between the conclusion of the fact and primary fact upon which that conclusion is based?
6. Whether the Ld. CIT(A) has erred in law in drawing a conclusion which cannot be drawn by any reasonable person or authority, on the material and facts placed before it?
7. The order of the Ld. CIT(A) is erroneous both in law and on facts.
8. Any other ground that may be adduced at the time of hearing of appeal.”
On the other hand the assessee as a cross-objector has raised the following objections :
“1. The assumption of jurisdiction by the AO u/s.147 is illegal inasmuch as reopening was resorted to without application of mind on the part of the A.O. Re-assessment proceedings are liable to be quashed. Initiation of re-assessment proceedings is illegal inasmuch as the failure on the part of the assessee, as required by the first proviso to sec.147, has not been brought out in the reasons recorded.
2. The cross objector reserves the right to add, amend or alter any of the ground/s of cross objection.”
2. Succinctly stated, the assessee who is engaged in the business of trading of Kosa cloth & yarn and manufacturing of cloth for shirting and sarees under the name and style of M/s. Balaji Handloom, had filed his return of income for the assessment year 2008-09 on 30.09.2018 declaring an income of Rs.4,96,950/-. The return of income filed by the assessee was initially processed as such u/s. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2) of the Act. Original assessment was, thereafter, framed by the A.O vide his order passed u/s. 143(3), dated 18.06.2010 determining the income of the assessee at Rs.5,85,063/-.
3. Subsequently, on the basis of information received from the DDIT (Inv.)-III, Raipur regarding substantial amount of cash deposits in the bank accounts of the assessee that was followed by RTGS/transfers though clearing, the case of the assessee was reopened by the A.O u/s.147 of the Act. During the course of the re-assessment proceedings, it was observed by the A.O that there were cash deposits amounting to Rs. 5,22,81,663/-in the following bank accounts of the assessee:
