Harishkumar Khushalray Bhatt Vs ITO (ITAT Ahmedabad)
Conclusion: Addition of Rs.32,61,500/- under section 69A and Rs.3,24,382/- under section 68 should be restored to the file of the Assessing Officer for de novo adjudication as it were made without proper verification of evidence and without granting adequate opportunity to the asseessee.
Held: Assessee was engaged in the business of trading in plastic pipes under the proprietorship concern Hima Sales Corporation. He had filed his return of income on declaring a total income of ₹11,57,940. The case was selected for scrutiny under CASS to verify large cash deposits made during the demonetization period. Despite multiple notices issued under sections 143(2) and 142(1), assessee failed to submit complete details. Only a self-generated cash book was submitted, without supporting ledgers or sale bills. Due to continued non-compliance, AO completed the assessment under section 144. AO found that assessee had deposited ₹32,61,500 in two Canara Bank accounts, which was claimed to be from cash sales. However, a mismatch of ₹1,36,517 between the cash book and audited financials led the AO to reject the explanation and treat the deposits as unexplained money under section 69A. Alternatively, AO noted the deposits could also be taxed under section 68 as unexplained credits. AO also noted that the declared net profit of ₹8,59,823 on a turnover of ₹5.58 crore resulted in a net profit ratio of only 1.54%. In the absence of reliable records, AO estimated income by applying a 25% net profit rate and made an addition of ₹1,28,15,473. Further, a deduction of ₹5,00,000 under section 80G was disallowed as no supporting donation receipt or approval certificate was furnished. Additionally, AO added ₹18,10,543 under section 68 towards unexplained unsecured loans due to lack of confirmation, PAN, and other supporting documents. Aggrieved, assessee filed an appeal before CIT(A). CIT(A) confirmed the addition of ₹32,61,500 under section 69A, citing unreliable explanation. However, the estimated profit addition was significantly reduced, with CIT(A) applying past profit history and restricting the addition to ₹66,502. The disallowance under section 80G was deleted upon production of a donation receipt and approval of the donee institution. Regarding the unsecured loans, partial relief was granted, and only ₹3,24,382 was sustained as unexplained. The key issues were the addition of ₹32.61 lakh for cash deposits under section 69A and ₹3.24 lakh for unsecured loans under section 68. On appeal before Tribunal. Assessee claimed that cash sales were recorded and backed by VAT invoices, and that AO had misread e cash balance figures. Audited financials, VAT returns, and confirmations were placed on record, which AO had not examined. It was held that CIT(A) also failed to call for a remand report despite receiving these documents. ITAT found that these issues required proper verification and that the assessment had been completed without giving full opportunity to the assessee. It restored the matter to AO for fresh examination of the records and documents and directed that a reasoned order be passed after giving assessee a fair chance to explain the cash deposits and loans. No opinion was expressed on the merits of the case and directed the AO to pass a reasoned order in accordance with law.
