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Facts
The assessee, Tuff Tubes (Orissa) Pvt. Ltd., is in appeal against the order of the Ld. CIT(A) for AY 2015-16. The appeal pertains to additions made by the Assessing Officer concerning cash withdrawals from the bank, cash deposits in the bank, and alleged suppressed turnover. The assessee argued that cash withdrawals are not expenses, cash deposits are from withdrawals, and the turnover suppression was based on erroneous estimation.
Held
The Tribunal held that cash withdrawals from the bank cannot be treated as expenses, and thus Section 40A(3) is not applicable. Similarly, cash deposits from the cash book and bank withdrawals were also deemed acceptable. Regarding suppressed turnover, the Tribunal found that the Assessing Officer's estimation was based on erroneous calculations and lacked evidence, especially since the Excise audit did not find any such suppression.
Key Issues
Whether the addition on account of cash withdrawals and deposits is sustainable? Whether the addition for suppressed turnover is justified based on the estimation by the Assessing Officer?
Sections Cited
40A(3), 69A
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Income Tax Appellate Tribunal, “CUTTACK” BENCH, CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
The captioned appeal by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeal), NFAC, Delhi [hereinafter referred to as “the Ld. CIT(A)”] vide order no. ITBA/NFAC/S/250/2024- 25/1070380248(1) dated 14.11.2024 passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2015-16.
It was submitted by the Ld. AR that there are three issues in the appeal. The first one being the addition made by the Assessing Officer by invoking the provisions of section 40A(3) of the Act in respect of the cash withdrawal from the bank account. It was submitted that this was not expenses but this was withdrawal from bank account and the provisions of section 40A(3) would not attract. It was further submitted that the second addition was in respect of the cash deposit in the same bank account made u/s. 69A of the Act. It was a submission that these cash deposits are out of withdrawal of the cash from the bank account and as the cash deposit was out of cash withdrawal and shown in the cash book of the assessee, no addition is called for. The third addition made by the Assessing Officer was on account of suppression of turnover. It was a submission that the assessee has disclosed a turnover of Rs.5,10,43,291/-. The Assessing Officer had divided the sales with the quantity of material used and the scrap along with the same and had arrived at a suppressed turnover of Rs.9,58,52,928/-. It was the submission that the Assessing Officer treated the difference of Rs.4,48,09,634/- as the suppressed turnover of the assessee. The Ld. AR drew our attention to pages 96 to 104 of the paper book which is the audit report done by the Central Excise & Service Tax Department in the case of the assessee which reads as follows:
Tuff Tubes (Orissa) P. Ltd. AY 2015-16 4. It was the submission that no variation in the stock or the turnover had been found by the audit party of the Central Excise & Service Tax Department. It was the submission that it was by pure jugglery of figures and estimation that the Assessing Officer has determined alleged suppressed turnover which is not supported by any evidence.
In reply, the Ld. CIT, DR vehemently supported the orders of the lower authorities. It was the submission that the Assessing Officer has taken the figures as provided by the assessee. It was the submission that the sample copies of the bills in regard to the finished products was also submitted by the assessee.
We have considered the rival submissions. Coming to the issue of cash withdrawal from the bank. Admittedly, the cash withdrawals from the bank are also recorded in the books of account of the assessee. In any case cash withdrawals from the bank account cannot be treated as the expenses. The provisions of section 40A(3) cannot be applied in the case of Cash withdrawals. Consequently, the addition made by invoking the provisions of section 40A(3) stands deleted. Coming to the issue of cash deposit in the same bank account. It is noticed that the deposits in the bank account are from the cash book of the assessee and also from the bank substantially with the cash withdrawals which have been treated as disallowable u/s. 40A(3). Since it is noticed that both the cash withdrawals and the cash deposit in the bank account are also from the cash book maintained by the assessee the disallowance as made by the Assessing Officer and as confirmed by the Ld. CIT(A) stands deleted.
In regard to the issue of suppressed turnover, it is noticed that the Excise Department has conducted an audit on the assessee between 23.11.2016 and 24.11.2016. There is no allegation of suppression of turnover or sale of any products of the assessee without payment of the Tuff Tubes (Orissa) P. Ltd. AY 2015-16 due excise duty. A perusal of the order of the Assessing Officer shows that the Assessing Officer has calculated the alleged suppressed turnover by doing calculation with sample copies of bills regarding the sales of the finished products. The assessee is admittedly in the business of manufacturing of plastic pipes. The Assessing Officer has applied a standard figure of Rs. 100 to frame the assessment of the products of the assessee, which is erroneous. The Assessing Officer in the assessment order also admits that the assessee has sold the products ranging from Rs.125.88 to Rs.578.26 excluding duties and cess. Even after not depending in this figure, the Assessing Officer has adopted a rate of Rs. 100/- to arrive at the alleged suppressed turnover. As there is no suppression of turnover found even by the Excise audit nor on account of any variation in the stock book, the estimation of the suppressed turnover as done by the Assessing Officer by arithmetic jugglery stands deleted.