Addition of sales reversal entry as unexplained expenditure is unjustified

Chotanagpur Petroleum Agency Vs PCIT (ITAT Kolkata)

ITAT Kolkata held that addition of sales reversal entry alleging the same as unexplained expenditure is unjustified and unsustainable in law.

Facts- Case of the assessee was selected for scrutiny through CASS followed by serving of notices u/s 143(2) & 142(1) of the Act and the reason for selection for the scrutiny was cash deposit during demonetization period. The details called for were filed by the assessee and the assessment was completed after making minor disallowances of bonus, gift & presentation charges, motor car expenses and addition was made for income from oil tanker and income assessed at Rs. 13,36,141/-. Prima facie no addition was made on the issue of cash deposit during demonetization period. Subsequently, ld. Pr. CIT called for the assessment records and issued show cause notice u/s 263 of the Act.

Pr. CIT was not satisfied with these submissions and he held the order of ld. AO dated 04.12.2019 as erroneous and prejudicial to the interests of the Revenue and also directed ld. AO to pass a fresh assessment order. Being aggrieved, the present appeal is filed.

Conclusion- Held that it is merely a sales reversal entry and not a case of unexplained expenditure. Complete documentary evidences in support of these transactions have been filed and we are satisfied that it is not a case of unexplained expenditure. Even otherwise all these details of cash sales including the cash book have examined by ld. AO in detail while carrying out the assessment proceedings for the reason for which the case selected for scrutiny i.e. cash deposit during demonetization period, therefore, ld. Pr. CIT erred in referring to other issue which was not required to be dealt by ld. AO and thus, wrongly invoked jurisdiction u/s 263 of the Act.

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