RAHUL KISHOR KOTECHA,JAMNAGAR vs. INCOME TAX OFFICER, WARD 2 (3), PORBANDAR

The solitary grievance of the assessee, in this appeal is that order passed by Ld. assessing officer and CIT(A) is bad in law as well as in facts, as the addition of Rs.6,26,300/-, was made u/s 69C of Act, on account of unexplained purchase.

Succinctly, the factual panorama of the case is that assessee before us is an Individual. The assessee had filed income tax return (ITR) for the assessment year (A.Y.) 2019-20, declaring total income at Rs.7,25,170/-, on 02.07.2019. The case of the assessee was reopened u/s 148 of the Income Tax Act, 1961 on the basis of High Risk CRIU/VRU information available to assessing officer on Verification module of the Insight Portal. The assessing officer observed from the information available that a search and seizure operation u/s 132 of the Income tax Act, 1961 was carried out on 11.01.2022 in Yamuna Nagar, Haryana in the case of M/s Radha Krishna Ply & Board Industries, Badi Majra, Yamuna Nagar. During the course of search proceedings, various incriminating documentary and digital evidences were seized from the factory premise and from the residence of Sh. Rakesh Khurana, H. No. 454, Sector-17, Jagadhari, Yamuna Nagar (partner in the M/s Radha Krishna Ply & Board Industries, Yamunanagar), including hand written Ledger books having individual/entity wise sale entries of plywood made in cash. Further, the sales which are recorded in the computerized books of the accounts of the firm were found under invoiced. Further, it was admitted in the statement by Sh. Rakesh Khurana that the amounts which have been mentioned as 'cash' and the amount shown as 'Trf' in the ledgers and also the amount received in cash was not recorded/declared in the computerized Books of Accounts of the firm. During the assessment proceedings, statutory notices were issued by the assessing officer. The assessee submitted before the assessing officer that he had purchased goods only once from Radha Krishna Ply & Board Industries vide purchase bill No.646 dated 02.02.2019 for Rs.7,29,188/- and made payment online. The assessee submitted GST Registration Certificate and GSTR 3B filed and computation of total income, trading account, P&L account, balance sheet, capital account, cash book and bank statement in support of its claim. However, on the basis of enquiries made by the investigation wing, the assessing officer observed that the assessee has made cash payment of Rs.6,26,300/- to Radha Krishna Ply & Board Industries (over and above Rs.7,29,188/-) for the purchase of goods during the year under consideration and issued a show cause notice proposing addition of Rs.6,26,300/- on account of cash payment. The assessee submitted reply before the assessing officer, however, the assessing officer, rejected the contention of the assessee and had made addition of Rs.6,26,300/- u/s 69C of the Act.

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT (A), who has confirmed the addition made by the assessing officer, therefore, the assessee is in appeal before this Tribunal.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee submitted that during the assessment proceedings, the assessee submitted all the possible evidences before the assessing officer. The assessee has not made any case payment of Rs.6,26,300/-. The assessee had booked purchases from the same party of Rs.7,29,188/-, showing the payment made for the same through banking channel, and the said payment is corroborated with GST invoices and ledger accounts. Therefore, Ld. Counsel submitted that addition of Rs.6,26,300/- should not be made. On the other hand, Ld. Sr. DR for the revenue relied on the findings of the assessing officer. I note that assessee have newly started the business under the trade name of Krishna Plywood during the year under consideration which was also registered on the GST Portal. During the period of 3 months the assessee had only purchased one time from party, named, M/s Radha Krishna Ply & Board Industries amounting to Rs.7,29,188 (including GST). The supporting documentary evidence such as bank statement reflecting payment ledger accounts financial statements for the period cash book and bank book for the year under consideration was reproduced however none of them was considered while passing the order by assessing officer.

I note that the addition of Rs.6,26,300/-, u/s 69C of Act, as unexplained purchase, has been made solely based on the statements recorded during search conducted in the case of M/s Radha Krishna Ply & Board Industries without thereby conducting any independent inquiry on the same. The assessing officer had never submitted the full statement recorded at the time of search and have merely submitted the extracts of the statement wherein the whole procedure of malpractices is explained based on ledger copies of the random third party. In the statement recorded and the extracts placed on records nowhere was the name of assessee, specifically mentioned or narrated. I further note that addition of Rs.6,26,300/-, was made, u/s 69C of Act, as unexplained purchases, without considering the fact that only one purchase bill was from M/s Radha Krishna Ply & Board Industries and payment against the same was made to the party by banking channel. The assessing officer has alleged that the cash transaction of Rs.6,26,300/-, was undertaken over and above the bank payment which is without any basis and any solid documentary evidence. Further, the cash book was submitted by the assessee and nowhere such transaction with the alleged party were reflected in the cash book and further the assessing officer have not found any cash trails for the same as well. Therefore, I note that since the assessee had already substantiated the transaction stating that purchase transaction with M/s Radha Krishna Ply & Board Industries of Rs.7,29,188/-, was done by producing GST returns and banking channel payments and without disproving these verifiable evidences, the assessing officer was not justified, in making further addition of Rs.6,26,300/-, as alleged cash payment. Therefore, I note that the entire addition is based on presumption surmises and conjectures without bringing any direct evidence on record to establish that the assessee had in fact made cash payments of Rs.6,26,300/-. Based on this factual position, I delete the addition of Rs.6,26,300/-.

In the result, appeal filed by the assessee, is allowed.