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Income Tax Appellate Tribunal, GAUHATI BENCH
Before: SHRI RAJPAL YADAV & SHRI GIRISH AGRAWAL
O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: Appeal filed by the assessee is against the order of Ld. CIT(A), Guwahati-2, Guwahati dated 30.10.2019 against the assessment order of ITO, ward-4(3), Guwahati u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 26.12.2018 for AY 2016-17.
Assessee has raised the following grounds of appeal:
“1. For that on the facts and the circumstances of the case as well as on the points of law the Assessing Officer erred in adding the a sum of Rs.5,86,500/- as unexplained cash credit without considering the fact that these were day to day business transactions and not the cash credit. 2. For that on the facts and the circumstances of the case as well as on the points of law the Assessing Officer erred in making addition of Rs. 29,39,292/- being cash sales as unexplained cash credit merely because of mismatch with VAT returns in A.Y 2016-17, although copies of bills, cash book, ledgers have been verified by the A.O.”
At the outset, we note that there has been no representation by the assessee as noted from the order sheet entries including various dates of hearing. We also note that notices sent for date of hearings have not been returned unserved from the assessee. The Bench Clerk has also made effort to contact the assessee through the Mobile phone no. so that his case may be represented effectively. Despite listing of this matter on several occasions, we find it proper to take it up for adjudication ex parte qua the assessee since the appeal is of the year 2020 by considering the material available on record and with the able assistance of the Ld. Sr. DR.
Brief facts of the case as culled out from records are that assessee filed his return of income on 21.03.2017, reporting total income of Rs.2,37,340/-. Case of the assessee was selected for limited scrutiny for the following reasons: “(i) Large increase in Sundry Creditors with respect to Turnover as compared to preceding year (Sundry Creditors in Balance Sheet and Turnover in P&L Account of ITR), (ii) Large increase in Sundry Creditors and reduction in business income as compared to preceding year (Sundry Creditors in Balance Sheet and Business Income in Part B-TI of ITR),(iii) Low Closing stock shown in P&L a/c as compared to preceding year and Return of Income filed after 07.11.2016 & cash deposit reported in SFT14.”
In the course of assessment, ld. AO enquired on the above stated reasons. In response, assessee furnished copies of audit report of his proprietary concern M/s. North East Agencies. He also furnished copies of bank statement, VAT return, Form 26AS, sales register. Assessee also made submissions by furnishing copy of his personal balance sheet and P&L Account.
5.1 In respect of sundry creditors, assessee was asked to provide confirmation of account from whom assessee has shown receipt of cash during the year as there was no mention of trade advance either in the ledger account or in the cash book. Ld. AO issued notice u/s. 133(6) to the following four creditors, details of which are tabulated as under:
Sl. Name and address of the Amount of Remarks No. creditor credit (i) M/s. Joymati Enterprises, Rs.2,65,000/- Ledger shows cash Nagaon receipt during the previous year (ii) M/s. Kamla Enterprises, Rs. 66,500/- Ledger shows cash Pathshala receipt during the previous year (iii) M/s. Maa Hardware Rs.1,05,000/- Ledger shows cash Stores, Dhemaji receipt during the previous year (iv) M/s. S.P. Industries, Rs.1,50,000/- Ledger shows cash Athgaon, Guwahati receipt during the previous year Total Rs.5,86,500/- 5.2. Ld. AO noted that the sundry creditors at Sl. No. (i), (ii) and (iii) in the above table replied that they did not have any transaction with the assessee or his proprietary concern. He also noted that one of the creditors’ replied that he does not even know the name of the assessee or his firm. These creditors submitted copies of their income-tax returns and balance sheet to demonstrate that name of the assessee or his proprietary concern did not appear in the list of their sundry debtors. For the fourth creditor at Sl. No. (iv) in the above table, there was no response received by the Ld. AO. Considering these facts, Ld. AO made the addition of Rs.5,86,000/- as unexplained cash credit since they have denied the transaction with the assessee and the amount has been shown as receipt in cash.
5.3. On the other issue relating to explanation on source of deposit of cash of Rs.97,09,267/-, Ld. AO sought explanation from the assessee. Assessee replied by submitting that cash deposits were made out of balance of cash in hand and realisation of sales in cash. In this respect Ld. AO observed that the opening balance of cash in hand as on 31.03.2015 was Rs.21,881/- only. He also observed that there were differences in the VAT returns filed by the assessee for the three months of January, February and March, 2016. Ld. AO also observed that assessee had made substantial cash sales during these three months when compared with other nine months of the year. He thus worked out an average cash sales and sought explanation from the assessee.
5.4. In response, assessee furnished that there were mistakes in filing the VAT returns for the aforesaid three months which were to be rectified while filing annual return of VAT. Based on the submissions made by the assessee, Ld. AO further observed that there was inordinate delay in filing of return and audit report by the assessee, sales invoice submitted by the assessee in support of cash sales are merely internal documents generated from the assessee’s own system without any confirmation from the purported buyers and that there is a sharp decline in the gross profit percentage as well as net profit percentage when compared to the preceding year. Accordingly, he proceeded to complete the assessment by making an addition of Rs.29,39,292/-. Aggrieved, assessee went in appeal before the Ld. CIT(A).
Ld. CIT(A) while dealing with the issue relating to addition made in respect of sundry creditors observed that onus was on the assessee to establish that the creditors were genuine since assessee had claimed these as business credits as advance from customers and not as cash credits. He doubted the receipt of cash by the customers in advance since nothing supplied by the assessee against this receipt of advance from it. Accordingly, this addition was sustained.
6.1. On the other issue relating to deposit of cash, Ld. CIT(A) observed that assessee has deposited the cash in the trading bank account out of the proceeds of sales although not verified have a definite relation with trading entries and are not independent cash credits. He has also noted that there is no discrepancy in the sales as shown in trading account and the books of accounts. Difference of reporting of sales in VAT returns, according to him, is not conclusive that sales shown in VAT returns are final and correct. Despite these observations, Ld. CIT(A) sustained the addition made by the Ld. AO by noting that there is no attempt on the part of the assessee to furnish copies of purported purchase invoice issued to the assessee by the parties or proof of movement of delivery of goods and on the improbable fact as to why the creditors would make payment in cash to the assessee remaining outstanding. He also noted that no aging schedule of the old stock as claimed by the assessee was placed on record. He thus sustained both the additions made by the Ld. AO. Aggrieved, assessee is in appeal before the Tribunal.
We have carefully gone through the orders of the authorities below in terms of the factual position and observations noted above. Before us, assessee has not made any effort or attempt to place on record any supporting and corroborative material to substantiate the claim made by him before the authorities below. It is also evident that sufficient and reasonable opportunities have been granted at all the stages including the Tribunal, to the assessee to substantiate his claim but nothing has come up on record from his side.
7.1. From the submissions made by the assessee and as reproduced in the order of Ld. CIT(A), we note that on the first issue relating to sundry creditors, response of the assessee has been vague in nature by submitting that “we are very surprised to note that these parties have informed you that they did not have any transaction with us or our proprietorship firm during the FY 2015-16. We are also trying to contact M/s. S. P. Industries but the contact no. in our records is not in use and the business address in our records is also not traceable.” There has been no other attempt by the assessee on this issue to substantiate the genuineness of the advance received by him in cash, lying as credit entries in his books of account.
7.2. On the second issue also, we note that the response by the assessee has been general and casual in nature. In his response, assessee has submitted that out of the total opening stock, stock costing approximately Rs. 25 lakhs was very old which was disposed of in the last three months of January, February and March, 2016 at 5 to 10% lower than the costing as the assessee was preparing for closing down his business. To this effect also, there is nothing corroborative which is brought on record.
7.3. Considering the overall factual matrix and observations of the authorities below as already narrated above, we do not find any reason to interfere with the same and uphold the findings given by the authorities below. Accordingly, on both the issues raised by the assessee, the additions so made are confirmed. Grounds taken by the assessee are dismissed.
In the result, appeal of the assessee is dismissed.