RAMKISHAN DONGRUNAIK CHAVAN ,KALABURAGI vs. INCOME TAX OFFICER, WARD-1 & TPS,, GULBARGA

In this appeal, the assessee has raised the following grounds: -

The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on both issues and upheld the additions made by the AO under section 68 of the Act. Being aggrieved, the assessee is in appeal before us. 3

During the hearing, the learned Authorised Representative (“learned AR”) submitted that there is no such negative cash balance as per the revised cash book submitted by the assessee during the assessment proceedings. The learned AR submitted that since the books of account are maintained in the computerised Tally accounting system, the initial cash book provided by the accountant was from an earlier version of Tally, which was incomplete and not subjected to audit. The learned AR submitted that, upon realising various errors in the earlier cash book, the assessee filed the correct cash book during the assessment proceedings. It was also submitted that the assessee's books of account are audited and the closing figure cannot be changed. The learned AR submitted that the sales declared in the accounts match with the return of income and GST return filed by the assessee, which fact can be verified. The learned AR further submitted that, given an opportunity, the assessee will reconcile all the discrepancies noted in the assessment order. As regards the cash deposits of INR 11,01,395, the learned AR submitted that the said cash deposits were from cash withdrawals from the assessee's petrol bunk business. The learned AR, by referring to the bank account statement of the assessee maintained with State Bank of India forming part of the paper book from pages 18-25, submitted that time and again the assessee transferred the money from its bank account to the petrol bunk business, which was subsequently withdrawn from the petrol bunk business and deposited in cash in the assessee’s bank account. In support of this contention, the learned AR also referred to the ledger account of the assessee in the books of the petrol bunk business, which is placed in the paper book at page 26.

On the other hand, the learned Departmental Representative (“learned DR”), by vehemently relying upon the order passed by the lower authorities, submitted that the assessee, by way of revised cash book, made various changes and increased its sales. The learned DR submitted that the AO noted various instances, due to which the revised cash book was found unreliable and thus was not accepted. As regards the cash deposits in the bank account of the assessee, the learned DR submitted that this issue may be restored to the file of the AO for necessary verification.

We have considered the submissions of both sides and perused the material available on record. In the present case, it is evident that before the AO, the assessee filed a revised cash book in response to the query regarding the negative peak cash balance in the cash book. However, the AO rejected the revised cash book and made the impugned addition on the basis that, in the revised cash book, the assessee made various changes and increased its sales to adjust the negative cash balance. On the other hand, as per the assessee, the earlier version of the cash book was incomplete, and the same was submitted by its accountant mistakenly. During the hearing before us, it was submitted that the books of accounts of the assessee are now audited and therefore the sales figure cannot be altered. It was further submitted that the revised cash book contains the correct entries, and the same can be verified with the audited accounts of the assessee.

Accordingly, having considered the submissions of both sides and perused the material available on record, we deem it appropriate to restore this issue to the file of the AO for de novo adjudication with a direction to the assessee to reconcile the inconsistencies noted during the assessment proceedings in the revised cash book and furnish necessary explanation regarding the same. As the matter has been restored to the file of the AO for consideration afresh, we direct the assessee to fully cooperate in the assessment proceedings and furnish any other details or explanation as may be sought by the AO regarding the entries in the revised cash book.

Insofar as the issue of cash deposits amounting to INR 11,01,395 in the bank account of the assessee, it is pertinent to note that the details relied upon during the hearing before us, regarding this issue, were not examined by any of the lower authorities. Therefore, considering the submissions of both sides, we deem it appropriate to restore this issue also to the file of the AO for de novo adjudication with a direction to the assessee to explain and substantiate its claim of deposit of money through banking channel in the petrol bunk business and transfer of cash from the petrol bunk business and deposit of the said cash in the assessee’s bank account.

Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. With the above directions, the impugned order in respect of both additions is set 6 aside, and the grounds raised by the assessee are allowed for statistical purposes.

In the result, the appeal by the assessee is allowed for statistical purposes.