UMABAYI GAMANAGATTI THROUGH LEGAL HEIR ANIL GAMANAGATTI,VIJAYAPUR vs. INCOME TAX OFFICER, WARD-1 & TPS, BIJAPUR

The facts of the case are that the Assessee is engaged in the business of trading petrol and diesel. She filed her return of income on 28.10.2017 declaring total income of Rs. 14,09,870/-. The return was selected for complete scrutiny to verify cash deposits made during the demonetization period andnotice under section 143(2) of the Act was issued on 24.09.2018. During theassessment proceedings, it was noted that the Assessee had declared net profit of Rs. 15,14,998/- on gross turnover of Rs. 14,29,68,007/-, reflecting a net profit rate of 1.06%. The Assessee’s books of account were also audited. As per the bank statements, between 09.11.2016 and 31.12.2016, the Assessee deposited cash of Rs. 98,04,000/- and Rs. 17,05,000/- in accounts maintained with Bank of India and State Bank of India, respectively. The Ld.Assessing Officer issued notices under section 133(6) to the banks and obtaineddetails of the cash deposits. When asked to explain their source, the Assessee submitted that the deposits were made out of the closing cash balance recorded in her books and sales proceeds. She further stated that she had a cash balance of Rs. 28,17,772/- as on 08.11.2016 and sales proceeds of Rs. 1,03,28,919/- during the demonetization period, against which cash of Rs. 1,16,19,500/-was deposited in the State Bank of India and Bank of India accounts. Accordingly, the Assessee contended that there was no infirmity in the cash deposited in the bank accounts. 4. The Ld.Assessing Officer rejected the Assessee’s claim of having an opening cash balance of Rs. 28,17,772/- and added the said amount to her total income. 5. The Ld. Assessing Officer further verified the Assessee’s VAT returns and noted a difference between the sales recorded in the books of account at Rs. 14,29,68,007/- and the sales reported in the VAT return at Rs. 14,42,96,368/-. The resulting difference of Rs. 13,28,361/- was added to the Assessee’s income. 6. Consequently, the assessment order was passed, determining the Assessee’s total income at Rs. 69,18,390/-. Aggrieved by the said order, the Assessee

Aggrieved by the appellate order, the Assessee is in appeal before us.

Since the first ground of appeal is general in nature and no specific arguments were advanced, the same is dismissed.

Regarding the second ground of appeal, relating to the confirmation of addition of Rs. 4,50,000/- by the Ld. CIT(A), the Assessee submitted that the amount represented recoveries from sundry debtors duly recorded in the books of account. It was contended that the provisions of section 68 of the Income Tax Act, 1961 were not attracted, as the Assesseehad explained the nature and source of the cash deposits. The Assessee further submitted that certain earlier errors in the books of account had been explained before the Ld. CIT(A), as recorded at page 27 of the appellate order. The Ld.Authorized Representative referred to paragraph 5.5 of the Ld. CIT(A)’s order and submitted that, although the Ld. Assessing Officer accepted the explanation in the remand report, the Assessee’s rejoinder was not considered by the Ld. CIT(A). Accordingly, it was argued that the addition of Rs. 4,50,000/-, made by the Ld. Assessing Officer and confirmed by the Ld. CIT(A), was unsustainable.

The Ld. Departmental Representative substantiated and supported the orders of the Ld. lower authorities.

We have carefully considered the rival contentions. The Ld. Assessing Officer made an addition of Rs. 28,17,000/- on account of cash deposits, whereas the Assesseeclaimed that the amount represented the opening cash balance available as on 09.11.2016. A remand report was called for from the Ld. Assessing Officer, and the Assessee also filed a rejoinder. The addition of Rs. 4,50,000/- was sustained on the ground that the Assessee failed to furnish confirmations from the creditors who were stated to have deposited cash with her. Although the Assessee produced account copies of all three parties, along with sample bills issued, the addition was confirmed for want of confirmations from those parties.

We find that the Assessee has stated, and the Revenue has accepted, that goods were sold to these parties and their ledger accounts were furnished. Therefore, merely because confirmations from those parties were not produced, the addition could not have been made in the hands of the Assessee. The sole basis for the addition was the non-furnishing of confirmations from the sundry creditors. Once the sales were duly recorded in the profit and loss account and the sale consideration was received in cash, the Assessee was not required to produce confirmations from every party in the absence of any contrary evidence. Accordingly, we direct the Ld. Assessing Officer to delete the addition of Rs. 4,50,000/-. Ground No. 2 of the Assessee’s appeal is allowed.

Ground No. 3 of the Assessee’s appeal concerns the addition of Rs. 6,11,683/- confirmed by Ld. CIT(A). The Ld.Authorized Representative submitted that this issue is identical to the one raised in Ground No. 2.

The Ld. Departmental Representative vehemently supported the order of the Ld. lower authorities.

On careful consideration of the facts, we find that the Ld. Assessing Officer made the addition to business income on account of cash deposits as well as the

In the result Appeal filed by the Assessee is allowed.