INCOME TAX OFFICER, WARD-2(3), ABOHAR, INCOME TAX OFFICE, ABOHAR vs. RAJ KUMAR, ABOHAR

This appeal is filed by the revenue against the order of the ld. CIT (A) NFAC,

Assessment Year: 2018-19 2. Condonation of Delay: It is pointed out by the registry that this appeal is filed by the revenue belatedly by 45 (forty five days ) , and the AO has filed an application explaining the delay on account of departmental software issues resulting in delayed updating of the first appellate order , which has consequently resulted in delayed approval of filing second appeal by the Ld. PCIT – 1, Amritsar, vide letter dated 14/11/2024, and thereafter, this appeal is filed on 18th November, 2024, belated by 45 days. In absence of any willful default the AO prayed for condonation of the delay and for admission of the appeal to be heard on merits.

“1. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 85,60,85,879 made under Section 69A r.w.s. 115BBE for unexplained bank deposits. The Ld. CIT(A) has erred in not appreciating the facts mentioned in the assessment order dated 08.04.2021 that the addition of Rs. 85,60,85,879/- (on a/c of cash and non-cash deposits) included the amount of unexplained cash deposits also. The Ld. CIT(A) has erred in not appreciating the facts mentioned in the assessment order dated 08.04.2021 that the total cash deposits (105.55 crore) significantly exceeded the declared turnover of ₹103.04 crore, even if the whole turnover is taken as cash sales. The Ld. CIT(A) has erred in not appreciating the facts mentioned in the assessment order dated 08.04.2021 that the AO while

Assessment Year: 2018-19 arriving at the amount of Rs. 85,60,85,879/- has already deducted the amount of sundry debtors as on 31.03.2017 at Rs. 8,87,35,375.27 from the total amount of deposits, considering that all the sundry debtors have been recovered during the year. The Ld. CIT(A) has erred in allowing benefit of Rs. 32.66 crore on account of recovery of short-term advances from other liquor vendors out of the amount of Rs. 85,60,85,879/- in absence of the identity and creditworthiness of the entities involved.

3. The Ld. CIT(A) has erred in giving benefit of credit notes in explanation for difference in purchases and in not appreciating the facts mentioned in the assessment order dated 08.04.2021 that the assessee has not furnished any stock register or quantitative and qualitative details of items purchased or sold. Therefore, the addition ₹36,60,630 on account of suppression of gross profit on a/c of suppression of purchases (Section 69A r.w.s. 115BBE) was rightly made to the returned income of the assessee. Therefore, the Ld. CIT(A) has erred in deleting the addition of ₹36,60,630 u/s 69A r.w.s. 115BBE.

4. The Ld. CIT(A) has erred in not appreciating the facts mentioned in the assessment order dated 08.04.2021 that the assessee has not furnished confirmatory letters from the creditors and the related ledger extracts have not been furnished by the assessee.

Assessment Year: 2018-19 The onus lies on the assessee to prove genuineness and creditworthiness of these transactions, which the assessee failed to do. Therefore, the addition Rs. 2,41,62,056/- on account of Unexplained Sundry Creditors (Section 68 r.w.s. 115BBE) was rightly made to the returned income of the assessee. Therefore, the Ld. CIT(A) has erred in deleting the addition of Rs. 2,41,62,056/- u/s 68 r.w.s. 115BBE on account of Unexplained Sundry Creditors.

5. The Appellant craves leave to add, amend, alter, vary any or all the above grounds of appeal.

6. It is prayed that the order passed by the Ld. CIT(A) may be set aside and that of the AO may be restored.”

“9. After verification of the details furnished on random test-check basis, the assessment is completed as under:

Assessment Year: 2018-19 Total income as per Return of Income 73,95,410 Add: 1. Cash deposits u/s 69A 85,60,85,879 Add: 2. Unexplained unsecured loan u/s 12,50,32,999 68 Add: 3. Undisclosed income u/s 69A 36.60,630 Add: 4. Unexplained sundry creditors u/s 68 2,41,62,056 100,89,41,564 TOTAL INCOME ASSESSED 101,63,36.974

“3.6. The Assessing Officer found that the addition to unsecured loan during the year is Rs 3.99.33.999/- Rs.7,66,30,494/- as on 31.03.2018 (-) Rs.3.66,96,495/- as on 01.04.2017] The Assessing Officer also found from the Tax Audit Report that loans squared up during the year was for Rs. 10,96,07,999/-. The Assessing Officer further found that from the Tax Audit Report, the amount outstanding as unsecured loan at any time during the Previous Year was approximately Rs. 12,00,00,000/- The Assessing Officer found that sundry debtors at the beginning of the year was Rs.8,87,35,375/ The Assessing Officer stated that giving such benefits of increase in the sundry creditor, repayment of sundry creditors, average unsecured loan during the year and the receipts from sundry debtors outstanding at the beginning of the year would be a total of Rs.35,82,77,373/- adding up of this value with the turnover still keeps a gap of Rs.54,09,12. 180/- from the total deposits in bank account. Therefore, he denied to accept the explanation put forward by the assessee and by allowing credit of the turnover, the increase in sundry loan creditors and amount receivable from outstanding sundry debtors he worked out the figure of Rs.85,60,85,879/-as excess credit in the bank account and made addition of such amount u/s.69A

3.7. I find that there is an inherent mistake crept in such calculation by the Assessing Officer. During the appeal stage, the assessee submitted complete details of bank transfer entries from one account to another during the year for a sum of Rs. 46,96,29,695/- The assessee explained that its operations are spread over two districts of the State of Punjab and he had to maintain bank account near to the selling point so that the cash sales can immediately be deposited in such bank account. Whereas his main bank account is one cash credit account where for the over drawn amounts it has to pay interest substantially. Its purchases are made from the CC account and therefore whenever, there are substantial deposits in the bank account nearby the selling point, it is transferred to the cash credit account so that the burden of interest is lessened. The Assessing Officer completely ignored this aspect. Secondly, it has stated that it has advanced money to other fellow entities engaged in similar trade whenever he had certain balances to tide out such fellow traders in distress.

He has given complete details of the parties to whom such advances were made and from whom Rs.32,66,57,784/- was recovered as refund of the short-term advances. I am satisfied with such submission that these sums were paid as advance and received back within a very short term. The Assessing Officer had not considered this issue at all. Thirdly, I find that it has submitted complete details of sales month-wise and it is found that out of a or sale of Rs 103.04.31.4277- the amount received in cash was for Rs 34,65,05 182-Fourthly, the assessee had submitted the details of unsecured loans and from such list in is seen that the total of fresh loan received Rs. 13,82,32,999/- and finally it has submitted details of various tax refunds and excise security refund credited in the bank account for Rs 166,56,340/-.

3.8 The assessee submitted complete details of the above types of accounts during the appellate stage and the Assessing Officer in the Remand report dated 22.07.2024, confirmed that all such details were already available with him during the assessment stage Considering the submissions made by the assessee before the Assessing Officer, which is examined at the appellate stage, I am of the considered view that the deposits made by the assessee in his bank account either by cash deposit or by deposit through other means completely justify the total deposit of Rs. 201,51,86,6817- in the bank account of the assessee and therefore the addition of Rs. 85.60.85.879/- is found to be completely unjustified. Therefore, the Assessing Officer is directed to delete the addition of Rs 85,60,85,879 as made u/s.69A of the Act and the grounds taken on this issue by the assessee is allowed.”

(ii) Addition on Unsecured Loans: 12.50 crores:

“4.1 In the next issue for which grounds were taken by the assessee is for an addition of Rs. 12,50,32,999/- on account of repayment of loans by the assessee. It is found that the assessee has submitted the complete details of sundry loan creditors during the year. As already mentioned in the foregoing paragraphs that the assessee had taken fresh loan of Rs 13,82,32,999/-, the assessee has shown 15 individuals from whom loans were taken by the assessee. Out of such 15 individuals in case of 5 parties no fresh loan was taken. Fresh loan was taken from 10 parties amounting to Rs.13,82,32,999/- Repayment was made during the year for a total sum of Rs 9,82,99,000/- made to four parties. Such repayment is less than the Assessment Year: 2018-19 fresh loans taken by the assessee and all transactions are dully reflected in the bank statement of the assessee. Therefore, I do not find logic in the conclusion drawn by the Assessing Officer that the repayment made by the assessee for sundry loan creditors do not have a proper explained source. Moreover, I find that the total repayment mentioned by the Assessing Officer for Rs. 12,50,32,999/- is also not matching with the summary submitted by the assessee during the appeal stage. The assessee's statement completely matches with the sum reflected in Tax Audit Report at Column 31C which was Rs.9,82,99,000-Therefore, I am of considered opinion that the Assessing Officer was not correct in holding that the assessee had repaid loans to the tune of Rs 12.50.32.999/- and holding such repayment without explained source. Under the circumstances, I direct the Assessing Officer to delete the addition of Rs 12,50,32,999/- added by him as unexplained unsecured loans and the grounds taken by the assessee in this regard are allowed.”

(iii) Addition on A/c of Undisclosed Sales: 36.60 Lakhs:

“5.1 The third issue taken by the assessee in the appeal is against addition of Rs.36,60,630/- on account of undisclosed sale made on undisclosed purchase The Assessing Officer found that from the Form 26AS, the total credit of TCS claimed by be assessee is for Rs.61.46,824/- corresponding to the purchase of Rs 61,28.93,440, In the return of income, the assessee disclosed purchase made by him for a sum of Rs 59,84.56.305/- and therefore the Assessing Officer was of the view that the assessee had suppressed purchases to the tune of Rs. 1,44,37,144/- He estimated the corresponding sale for Rs.2,48.58.100/- and calculated further that the sundry debtors disclosed by the assessee for a sum of Rs.9,33,18.030/- to be a diversion of undisclosed sale as he doubted that in case of liquor sale there cannot be any sundry debtors. Therefore, he calculated the total undisclosed sale as the sum calculated by him out of undisclosed purchase for a sum of Rs 2.48,58,100 plus the sundry debtors disclosed by the assessee for a sum of Rs. 9.33,18,030/- making the total of the unaccounted cash sale for Rs. 11,00,76,130 Taking the disclosed GP of 3.1% in respect of the declared sales of Rs. 103.04,31,427, the Assessing Officer finally calculated a sum of Rs 36,60,630/- as unaccounted Gross Profit of the assessee being 3.1% of Rs 11,80,76,130/- The assessee

Assessment Year: 2018-19 challenged such decision First of all, it stated that it has already submitted the month wise total of sale of Rs. 103.04,31,427/- and disclosed sundry debtors for Rs.8,39,26,245/- Secondly, it stated that it had received Credit Notes worth Rs. 1,44,37,144/- from five of its suppliers. During the appeal stage, the assessee submitted the details of such Credit Notes. Therefore, firstly, it claimed that the disclosed sundry debtors are out of the disclosed turnover of Rs. 103,04,31,427/- and there was a Credit Note given by the suppliers for Rs.1,44,37,144 The assessee further submitted that the purchase value disclosed in the final account are Net of such Credit Note and therefore there was no mistake in the disclosure made by the assessee in the account.

5.2 I have perused the submission of the assessee and I find the logic put forward by the Assessing Officer to be very weak when he considered the sundry debtors disclosed by the assessee as part of undisclosed sale. Moreover, from the submitted documents, I find that the assessee had disclosed its purchase value in the final account correctly taking due note of the credit notes received by him from the suppliers. Therefore, I direct the Assessing Officer to delete the addition of Rs. 36,60,630/-, which is an estimated GP of over undisclosed sales by the Assessing Officer. The grounds taken by the assessee in this regard are allowed.”

(iv) Addition on A/c of Sundry Creditors: 2.41 crores:

“6.2 I have perused the issue and i find that the assessee has disclosed complete of its purchases, which are also duly reflected in the Form 26AS. where the names of the suppliers and the amount of supply made are reflected. The assessee disclosed closing stock of materials purchased for a some of Rs.8,55,65,700/- The assessee submitted details of sundry creditors from whom purchases were made during the year. He stated that the opening sundry creditor value was Rs.5.65,81,669/-. During the year, credit purchases were made for a sum of Rs. 24,85,59,161/-. Payments were made to sundry creditors during the year was for Rs 22.48.22,928/- and the closing creditor value was for Rs.8,16,84,903/-Therefore, he explained how the closing sundry creditors have increased by a value of Rs.2,51,03,234/-, I find the explanation of the assessee as per the details submitted of party-wise opening balance purchases made, payments made and closing balance to be perfectly acceptable and therefore

Assessment Year: 2018-19 I do not find any merit in the treatment of the Assessing Officer by making an addition of Rs.2,41,62,056/- on account of increase in sundry trade creditors of the assessee. It may be reminded that the assessee disclosed total purchase Net of credit for sum of Rs.59,84,56,305/- . Therefore, the Assessing Officer is directed to delete the addition made by him on account of unexplained sundry creditors for a sum of Rs.2.41,62,056/- and the grounds taken by the assessee on this issue are allowed.”

9 (a) The ld. AR of the assessee has filed written submission along with paper book containing 171 pages and has retreated the submission and arguments which are contained in the appellate order and prayed for dismissing the appeal of the revenue.

Assessment Year: 2018-19 advanced to twelve parties ( contained in pb page 144 & 145 ) through bank channel , totaling Rs. 32.66 crores, details of sundry creditors with supporting documents, along with other particulars.

Thus, the total deposits in the 4 accounts maintained by the assessee is Rs 201,51,86,681 whereas the assessee has shown total turnover of Rs 103,04,31,427.93 and closing stock of Rs 8,55,65,700 totaling to Rs 111,59,97,127.93.”

Particulars : Amount in crores:

Actual Cash availability 92.82 Actual Cash Deposited in bank during the year ( pb- page - 44 ) 105.55 Shortfall to be explained (- ) 12.73

“3.4 In Ground No.2, 3, 4, 10, 11, 12 and 13, the issue being an addition of Rs 85.60,85,879/- The facts of the case are as follows-

During the scrutiny assessment, the assessee was asked for submission of details of deposits made in the bank account maintained by him. The assessee submitted that primarily it has four bank accounts, all with Punjab National Bank, where during the Financial Year 2017-18, total cash deposit was for Rs 105,55,22,209/- and deposit other than in cash was for a sum of Rs.95,96,64,472/. The total deposit in the bank accounts taken together were for Rs 201,55,86,681/- The Assessing Officer confronted the assessee with a show cause notice to explain such deposit, where the turnover disclosed by the assessee was for a sum of Rs. 103,04,31,427/- The assessee submitted that the deposit of cash had several components Other than the turnover, which was mostly made in cash and deposited in the bank accounts, the assessee had further accepted unsecured loans during the year for a sum of Rs. 13.82 crores. The assessee also submitted that among the total deposit, a sum of Rs.46.96 crores represented bank transfer from one account of the assessee in a bank to another account of the assessee in another bank.

The fourth component of the credit entries were demand draft worth Rs.5.15 crores, which was cancelled due to certain reasons and credited that in a bank account of the assessee. The fifth component was stated to be recovery of short-term trade advance made by the assessee during the year to entities engaged in similar trade who has approached him for giving short term loans, which were received back during the year as repayment of such loan The amount of such transaction represented Rs 32.06 crores. The last and sixth components of the deposits were various credits of tax refunds and refund of security deposit for a sum of Rs.78,00,000/-“

Assessment Year: 2018-19 cancelled, recovery of short term trade advances (through bank channel), unsecured loans ( through bank ) , refund of security deposits and income tax refunds ( all through bank channel ), to arrive at a conclusion that all taken together , is good enough to cover the total deposits in bank which includes both cash and other than cash.

Assessment Year: 2018-19 20. As such we are of the opinion that the Ld. CIT (A) has deleted the addition on the issue of cash deposit in bank on incomplete verification of facts without critically analyzing the findings in the assessment order and without proper examination of the statement of facts contained in the memo of appeal and evidences contained in the paper book presented by the assessee.

Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 06. 04 .2026