AMIT GUPTA,DELHI vs. ITO WARD - 34(3), NEW DELHI

Per Kul Bharat, Judicial Member:

“1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in imposing penalty u/s 271(1)(c) of the Income Tax Act, 1961 amounting to Rs. 29,97,071/-.

2. That Ld. CIT(A) erred in law and on facts in upholding the penalty levied by Ld. AO is totally unjustified and is liable to be deleted, where the Ld. AO has accepted the sales amounting to Rs. 98,68,470/- and added to the income of the assessee without reducing cost of sales.

2 Amit Gupta 3. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”

3. At the outset, the ld. Counsel for the assessee submitted that the ld. CIT(A) in quantum proceedings has deleted substantial impugned additions. He submitted that out of addition of Rs.98,68,472/-, the ld. CIT(A) sustained the addition of Rs.8,60,649/-. He further submitted that the imposition of penalty by the Assessing Officer on the entire addition is not justified. He submitted that the penalty imposed by the Assessing Officer amounting to Rs.29,97,071/- may be deleted.

“4.2.12 As per the material on record there are cash deposits in the ICICI bank to the tune of Rs. 98,68,470/- and these proceeds were used to make purchases to the tune of Rs. 95,64,760/-. Out of these purchases of Rs. 95,64,760/-, the purchase of Rs. 90,07,821/- have been made through cheques and purchases of Rs. 5,48,900/- have been made through cash. At this stage it is not possible to verify whether payment in cash have been made to the suppliers or not. Further, in this case the primary ground to consider sales as genuine is that the payment have been made through cheque which is verifiable. The payment made in cash cannot be conclusively verified at this stage and therefore cannot be considered as genuine payment for purchases. Therefore the alleged purchases to the tune of Rs. 5,48,900/- made through cash cannot be considered as genuine and are accordingly not allowed. The purchases amounting to Rs.

3 Amit Gupta 90,07,821/- made through the banking channels can only be considered as genuine purchases.

4.2.13 The appellant as per his trading account have mentioned that profit, to the tune of Rs, 3,03,710/- has not been disclosed for the purpose of tax. However no such trading account was furnished and therefore the same cannot be relied upon. Further, the cash purchases to the tune of Rs. 5,48,900/- disallowed above has to be added back to the alleged profit. Therefore the undisclosed profit on out of books sale would be the difference of ‘total sales’ and ‘purchases made through cheque’. No benefit of expenses can be allowed as no evidence for the same is presented. The out of books profit on the undisclosed sales will be Rs. 8,60,649/- (Rs. 98,68,470 - Rs. 90,07,821). Therefore, the addition made by the Assessing Officer amounting to Rs. 98,68,470/- u/s 68 of the Income Tax Act stands modified to Rs. 8,60,649/- of undisclosed profit on undisclosed cash sales and accordingly Ground Nos. 2 & 3 of appeal are partly allowed.”