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Facts
The assessee, a textile manufacturer, declared an income of Rs. 59,66,530/-. Their case was selected for scrutiny, and an addition of Rs. 19,03,396/- was made on account of sales treated as unexplained cash credit, based on information from an investigation wing and a statement from a partner of a firm that facilitated cash to cheque conversions.
Held
The Tribunal held that the addition made by the AO u/s 68 was not called for. The assessee had provided evidence of sales, and the impugned amount was already included in the total sales, meaning a further addition would amount to double taxation. The assessee's sales documentation was not doubted by the AO.
Key Issues
Whether the addition made u/s 68 for sales treated as unexplained cash credit is justified when the amount is already part of total sales and evidence of sales was provided.
Sections Cited
68, 250
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Before: SHRI PAWAN SINGH & SMT.RENU JAUHRI
PER RENU JAUHRI [A.M.] :- This appeal is filed by the assessee against the order of the National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 28.03.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2017-18.
The grounds of appeal
are as under:
1. 1. The Learned CIT(A) has erred in facts as well as law by sustaining the addition made by the Ld. AO u/s 68 of Rs.19,03,396 by treating the entire amount received against Sales as Unexplained Cash Credit merely on the basis of information received from DDIT (Inv), Unit- 6, Kolkata, without considering the detailed submissions, explanations and documents submitted by the Appellant during the course of Assessment Proceedings.
2.The Ld. CIT(A) erred in Law as well as of facts by ignoring the fact that the addition was made by the Ld.AO without providing opportunity of cross examination of third party and also copy of statement of third party on the basis of which assessment order was passed. 3.The Learned CIT(A) has erred in facts as well as law by sustaining the addition made by the Ld. AO u/s 68 of Rs.19,03,396 by treating the entire amount received against Sales as Unexplained Cash Credit ignoring the fact that the said sum of money was already included in the Turnover of the Appellant and has been already offered to tax and sustaining the addition made by Ld.AO has resulted in double taxation of the same amount. 4.The appellant craves leave to add, amend, alter and vary any of the grounds of appeal either before or at the time of hearing of the appeal.”
Brief facts of the case are that the assessee is a private limited company engaged in the manufacturing of textiles. Return declaring income of Rs. 59,66,530/- for AY 2017-18 was filed on 28.10.2017. The case was selected for scrutiny through CASS and notice was issued seeking various details including evidence to prove the genuineness the transactions with M/s. Hariram Jagdish Prasad (Rs.19,03,396/-). It was initially replied by the assessee that no transaction had been carried out with M/s. Hariram Jagdish Prasad (Partner Shri. Gopal Maroo). Thereafter, Ld. AO obtained a copy of the bank statement of the assessee’s account with Kotak Mahindra Bank and that of M/s Hariram Jagdish Prasad with RBL Bank wherein several entries were found evidencing payments by cheque to the assessee. The assessee, on being confronted with these details, submitted that they sourced the sales orders through commission agents and the sale orders against which Rs. 19,03,396/- were received had been routed through a single agent viz. R.K. Textile Agency who was also responsible for ensuring payments from the parties. In support of its contention, the assessee filed a confirmation/affidavit from Shri. Gajanand Bahety Prop. of M/s. R.K. Textile Agencies. Further, the details of impugned sales of Rs. 19,03,396/- made to different parties have also been filed.
However, Ld. AO made the addition of these sales u/s. 68 on the basis of the statement of Shri. Gopal Maroo, partner of M/s. Hariram Jagdish Prasad, recorded by the investigation wing, wherein he had admitted that the firm was engaged in the business of facilitating conversion of cash into cheque/demand draft and vice versa on commission basis. Thus the Ld. AO, held these cheques received towards payments received for sales amounting to Rs. 19,03,396/- as bogus and added the same u/s. 68 of the Act.
Aggrieved with Ld. AO’s order, the assessee preferred an appeal before Ld. CIT(A). However, Ld. CIT(A) confirmed the action of Ld. AO and dismissed the assessee’s appeal. The assessee has now filed an appeal before the Tribunal.
Before us, Ld. AR has made detailed submissions and has contended that during the course of assessment proceedings the assessee had submitted copies of sales bills, delivery challans, bank statements etc. with respect to the impugned sales which had been made to various parties through the agent, M/s. R.K. Textile Agency. He further submitted that the assessee has shown a substantial turnover of Rs. 59,94,42,077/-, the impugned amount is merely 0.32% of the total turnover. In view of the large volume of transactions, the assessee availed the services of commission agents to ensure collection of payment from the parties. Vide written submissions, the assessee has explained as under:
“3.1 During the course of Assessment proceedings, the Appellant submitted the copy of Audited Financials, Tax Audit Report, party wise details of purchases along with PAN and address of the parties, Quantitative details of Stock. Further, with respect to the Credit Transactions in question, the Appellant submitted the details of Parties to whom sales were made against which the said payments were received along with the copies of Sales Bills and Delivery challans as stated in Table A above. To avoid repetition, the same is not reproduced here. It is pertinent to note that the Ld.AO has no where in his Assessment Order questioned the genuineness of Sales made by the Appellant nor he has stated anything with respect to non-acceptance of duly Audited Books of Accounts submitted to him during the course of assessment proceedings.”
In the light of above facts, Ld. AR has argued that since the impugned amount has already been reflected in the books of account, as part of total sales, therefore, making an addition again u/s. 68 of the Act would tantamount to double taxation. Reliance has also been placed on several judicial pronouncements in support of his arguments by Ld. AR. Specifically he relied on the decision of Hon’ble Apex Court in CIT vs Odeon Builder (P)
Ltd. [2019] 110 taxmann.com 64 (SC), wherein it has been held as under:
“Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted.”
Further, the case of ACIT vs Hirapanna Jewellery in the coordinate bench at Vishakhapatnam held that if a sum is found credited in the books of accounts and the assessee had explained the source as sales and produced sale bills, addition could not be made u/s. 68 without disproving the sales with tangible evidence.
5.2. On the other hand, Ld. DR has vehemently argued that on the basis of creditable information received from the investigation wing, the assessees was issued notice by the Ld. AO to establish the genuineness of the transactions of Rs. 19,03,396/- with M/s. Hariram Jagdish Prasad, who had been found to be in the business of issuing cheques/drafts in lieu of cash & other way round on commission basis. Thus, Ld. AO was justified in holding the transactions to the extent of 19,03,396/- as bogus sales in view of the discrepancies pointed out in the assessment order.
We have heard the rival submissions and perused the material on record. The assessee has furnished evidence supporting sale of goods to the extent of Rs. 19,03,396/- to 6 parties. However, the payment were received by cheques issued by M/s. Hariram Jagdish Prasad, with whom assessee had no direct business transaction. On the other hand, it is also a fact that this amount has been included in the total sales and thus forms part A the income of assessee. We are, therefore, of the considered opinion that another addition of Rs. 19,03,396/- u/s. 68 would amount to taxing the same amount twice.
Moreover, the assessee has furnished requisite documentary evidences such as invoices and delivery challans showing sales of goods to different parties through the broker M/s. R.K. Textile Agency, which have not been doubted by the Ld. AO. Under these facts and circumstances, we are of the view that addition of Rs. 19,03,396/- was not called for u/s. 68 of the Act. We therefore, direct the Ld. AO to delete the impugned addition.
In the result, the assessee’s appeal is allowed.
Order Pronounced in Open Court on 06.10.2025