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Facts
The Revenue appealed against the deletion of an addition of Rs. 5,49,49,095/- made by the AO under Section 68 of the Income Tax Act, 1961, concerning alleged unexplained cash credit. The addition was based on a discrepancy found between the assessee's sales figures and the figures provided by the buyer (Energy Efficiency Services Limited).
Held
The Tribunal held that the CIT(A) was correct in deleting the addition. It reasoned that sales already recorded in the books of account cannot be added again under Section 68, as this would amount to double taxation. Furthermore, recorded sales are not the same as unexplained cash credits.
Key Issues
Whether the addition made by the AO under Section 68 for alleged unexplained cash credit is justified when the amount pertains to sales already recorded in the books of account and accepted by the AO?
Sections Cited
68, 143(3), 133(6)
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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: Sh. Satbeer Singh Godara & Sh. Manish Agarwal
Asstt. Year : 2018-19 Income Tax Officer, Vs Florida Electrical Industries Ltd., Ward-9(1), B-147, Mayapuri, Industrial Area- New Delhi-110002 1, New Delhi-110064 (APPELLANT) (RESPONDENT) PAN No. AAACF0359C Assessee by : Sh. Prempal Sharma, CA Revenue by : Sh. Rajesh Kumar Dhanesta, Sr. DR Date of Hearing: 23.04.2025 Date of Pronouncement: 23.05.2025 ORDER
Per Satbeer Singh Godara, Judicial Member:
This Revenue’s appeal for Assessment Year 2018-19, arises against the CIT(A)/NFAC, Delhi’s DIN & order No. ITBA/NFAC/S/250/2023-24/1060913260(1) dated 14.02.2024, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties at length. Case file perused.
The Revenue’s appeal raises the following substantive grounds:
“1. The Ld. CIT(A) erred in law in deleting addition Rs. 5,49,49,095/- made by AO under section 68 of the I. T. Act? 2. The Ld. CIT(A) erred in not considering that the sales shown by the assesses in its books is of Rs. 67,81,23,152/- and the sale figure confirmed by the sale party is Rs.
Florida Electrical Industries Ltd. 62,31,74,057/- thereby there is a difference of Rs. 5,49,49,095/-? 3. The Ld. CIT(A) erred in not considering the fact that the sale figure of the assessee is overcast by Rs. 5,49,49,095/-? 4. The Ld. CIT(A) erred in law considering the fact that during the assessment proceedings, the assessee failed to offer any explanation behind such excess sale booked in its accounts?”
Both the learned representatives next invites our attention to the CIT(A)/NFAC’s lower appellate discussion deleting the impugned section 68 unexplained cash credit addition of Rs.5,49,49,095/- made by the Assessing Officer in his regular assessment dated 14.04.202, reading as under:
“5. I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order. The contentions/submissions of the appellant are being discussed and decided as under: Ground No. 1, 2 & 4 These grounds of appeal are general in nature and do not require separate adjudication. Ground No.
3. This is the only effective ground in the appeal. This ground of appeal relates to addition of Rs. 5,49,49,095/- on account of unexplained cash credit under section 68 the Income Tax Act, 1961. During the assessment proceedings, the AO issued notice under section 133(6) to Energy Efficiency Services Limited. The AO found that the figures of purchases given by Energy Efficiency Services Limited were less than the sales shown by the assessee. The AO concluded that cell figure of the assessee is overcast by rupees 5,49,49,095/- as per confirmation received from Energy Efficiency Services Limited. This amount was added under section 68 of the IT Act. Before me, the assessee submitted detail submissions with respect to reconciliation of the figures.
Florida Electrical Industries Ltd. The assessee submitted that total sales to “M/s EESL” was at Rs. 70,83,06,094/-as against Rs. 67,81,23,152/-mentioned by the AO in the assessment order; that the assessee did not overcast the sales as alleged in the assessment order. Out of total Sales of Rs. 70,83,06,094/-, Rs. 51,73,89,947/- has been received from the purchaser "M/s EESL" admitted by the AO himself and rest amount has been received from the party through cheque/credited in the bank account in the succeeding assessment year. Copy of bank account was furnished with the details. I have gone through the submissions and it was seen that the difference arose due to accounting of sales w.r.t. different branches of Energy Efficiency Services Limited and accounting in different years. Except two major entries of Rs10356398/- and Rs. 19777144/- all entries tallies with the a/c reproduced by AO. Even these entries are part of total sells. Therefore no adverse inference can be drawn. The assessee alternatively submitted that the figure of sales was already part of profit and loss account and addition of the same would result in double addition. In the case of Shree Sanand Textiles Industries Ltd. Vs DCIT (ITAT Ahmedabad) (Appeal No. dated 06.01.2020.; hon’ble ITAT held as under: “However, the existence of the parties was not proved by the assessee based on the documentary evidence during the proceedings. Accordingly, the learned CIT (A) treated the amount received from such parties as unexplained cash credit under section 68 of the Act. In this connection we note that the impugned amount has been taxed twice firstly the same was treated as sales and secondly the same was treated as unexplained cash credit under section 68 of the Act. Even if we assume that the action of the learned CIT (A) is correct i.e. the impugned amount is representing the cash credit as provided under section 68 of the Act. Then, the learned CIT (A) was duty-bound to reduce the same from the amount of sales as the same does not represent the sale but unexplained cash credit. As such, the same amount cannot be held taxable twice as per the wish of the learned CIT (A). In our considered view the action of the learned CIT (A) is erroneous to the extent of treating the same as sale proceeds and the unexplained cash credit simultaneously” (emphasis supplied) There is no allegation by the AO that the impugned amount represents the unexplained cash credit over and above the sale proceeds. Considering the above I am of the view that even if the sales are overcast; sales which are already part of books of account cannot be added again u/s 68 due to the following reasons: Sales are already recorded in the books of accounts and the addition of the same amounts to double Florida Electrical Industries Ltd. taxation. Firstly the same was treated as sales and secondly the same was treated as unexplained cash credit under section 68 of the Act. A prejudiced view on sale cannot be drawn when purchases are accepted without any reservation. Section 68 refers to amounts credited in books of account, remained unexplained then the same needs to be added. Recorded sales are not unexplained cash credits. Addition if any can be made only when the sales shown by assessee are less than the purchases shown by the buyer. E.g. : If the sales shown by assessee are Rs. 5 crore and the purchases shown by the buyer are Rs. 7 crore, addition of Rs. 2 crore can be made. However If the sales shown by assessee are Rs. 7 crore and the purchases shown by the buyer are Rs. 5 crore, no addition can be made as assessee is showing higher figure. In view of above discussion the AO is directed to delete the addition of Rs. 5,49,49,095/-. This ground of appeal is treated as allowed.” 4.1 This leaves the Revenue aggrieved.
We have given our thoughtful consideration to the vehement rival submissions reiterating the Revenue’s and the assessee’s respective stand. There is hardly any dispute that the assessee had all along claimed total sales of Rs.70,83,06,094/- to M/s EESL namely Energy Efficiency Services Ltd. out of which only a sum of Rs.5,49,49,095/- has been treated as unexplained. We further wish to reiterate the fact that the assessee’s remaining sales stand accepted as genuine by the learned Assessing Officer.
That being the case, the Revenue vehemently argues that the assessee could not plead and prove the impugned sales of Rs.5,49,49,095/- which made the Assessing Officer to treat the corresponding alleged sales as unexplained cash credits. We are of the considered view that not only the assessee had reconciled all of it’s corresponding sales ledgers and revenue entry from it’s books of account, P&L and the corresponding ledgers but also proved genuineness of it’s entire sales made to M/s EESL as it is evident in the lower appellate discussion. We thus see no merit in the Revenue’s sole substantive ground which is hereby declined in very terms.