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Facts
The Revenue appealed against the deletion of an addition of Rs. 13,61,47,346/- by the CIT(A), which was made on account of a difference in sales as per the sales ledger and the profit and loss account. The AO also added Rs. 5 lacs due to a difference in the credit balance of certain parties.
Held
The Tribunal held that the CIT(A) was justified in deleting the addition related to the difference in sales, as the assessee had reconciled the figures and there was no violation of Rule 46A. Similarly, the addition of Rs. 5 lacs was also deleted as the CIT(A) correctly found that the AO had wrongly treated opening balances as closing balances, and the amounts represented credit purchases.
Key Issues
Whether the CIT(A) was correct in deleting the addition on account of difference in sales, and whether the addition for difference in credit balance of parties was justified.
Sections Cited
143(3), 46A, 68
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI KRINWANT SAHAY
ORDER PER MAHAVIR SINGH, VP: This appeal filed by the Revenue is arising out of order of Ld. Commissioner of Income Tax (Appeals-6), Delhi in Appeal No. 118/14-15 dated 06.09.2017. Assessment was framed by the ITO, Ward 13(1), New Delhi for the assessment year 2011-12 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) vide order dated 27.03.2014.
The first issue in this appeal of Revenue is as regards to the order of the CIT(A) deleting the addition of Rs. 13,61,47,346/- on account of difference in sales registered as per sale ledger and declared in profit and loss account by admitting additional evidence under Rule 46A of the Income Tax Rules, 1962 (hereinafter referred the Rules). For this, the Revenue has raised the Ground No. 1 & 2 by stating that the assessee’s case did not fall in clause (a) to (d) of Rule 46A of the Rules.
We have heard the rival contentions on this issue and gone through the facts and circumstances of the case. We noted that the AO noted the sales at three locations i.e. NCR Vehicles Faridabad amounting to Rs. 43,34,90,261/-; NCR Vehicle MCIE amounting to Rs. 6,44,49,032/- and NCR Vehicle Delhi amounting to Rs. 47,44,86,629/-. He noted that these total sales declared is Rs. 97,24,25,922/- whereas, the total sales as per the trading account includes that the return of income was Rs. 83,62,78,576/-. Accordingly, according to the AO there is difference of excess sales of Rs. 13,61,47,346/-. AO noted that assessee has not reconciled the difference by producing the documentary evidences, therefore, he added the differential amount of Rs. 13,61,47,346/-.
Aggrieved, assessee preferred the appeal before the Ld. CIT(A), and Ld. CIT(A) after considering the submissions of the assessee and the Remand Report of the AO, whereby the CIT(A) referred the documents filed by the assessee, adjudicated the issue by allowing the assessee’s ground by observing in para no. 3.1.3 as under:- “3.1.3 The facts of he case are the submissions of the appellant have been carefully considered. I have examine the records, assessment order 2 and contention of the appellant as submitted in the written submissions and after due consideration observe that addition of Rs. 13,61,47,346/- as alleged difference in figure of sales as per Sales Ledger and P&L account as explained by the appellant in its written submission has been verified from the profit and loss account / balance sheet and to be correct. The difference is on account of:-
Claims/Schemes 1,02,84,421 Labour Receipts 1,97,10,422 Shown as Income in Schedule-8 ‘Other Customer Insurance 34,45,909 Income’ of Audited Financials. Logistics Receipts 43,17,075 Service Tax 24,49,431 Service Tax charged and deposited [As per Service Tax Returns filed] VAT 9,59,40,087 VAT charged by the assessee on sales [As per VAT Returns] Difference 13,61,47,346
Therefore, addition made by the AO on facts is not found to be justified and the same is deleted. Accordingly, appellant is entitled to relief of Rs. 13,61,47,367/-. This ground of appeal is therefore, allowed.”
4. Before us, Ld. Counsel for the assessee stated that the assessee has filed copy of sale invoices, purchase invoices, stock register, VAT returns at the time of assessment and now only reconciliation was filed before the Ld. CIT(A), which is reproduced in the order of the CIT(A) that the accounts which are included in the total sales in ledger account includes claims / schemes, labour 3 receipts, customer insurance, logistic receipts, service tax and VAT amount.
These amounts if excluded, the sale actually deals with the trading account amounting to Rs. 83,62,78,576/-. He stated that there is no violation of Rule 46A of the Rules as assessee has filed only a chart showing items excluded while computing the total sales, which is a part of the documents submitted by the assessee in the shape of audited accounts as well as sale invoices and purchase invoices. Ld. CIT(DR) could not controvert the stated facts nor could find any fault in the same. Further, she could not make any argument on the issue of additional evidences and violation of Rule 46A of the Rules, as there is no new evidence except the chart depicting the relevant receipts not included or excluded from the total sales. In view of the above facts, we are of the view that assessee could reconcile the entire sales and accordingly, there is no difference in sales in case the above stated receipts are excluded from total sale as depicted in the ledger account, hence, we find no infirmity in the order of the Ld. CIT(A) and therefore, affirm the same and accordingly, this issue raised by the Revenue stand dismissed.
The next issue in this appeal of the Revenue is as regards the order of the CIT(A) in deleting the addition of Rs. 5 lacs being difference in credit balance of the parties as shown in the book of accounts added u/s. 68 of the Act by the AO by admitting the additional evidences under Rule 46A of the Rules.
We have heard the rival contentions and gone through the facts and circumstances of the case. We noted that the AO added cash credit of Rs. 5 lacs on account of difference in the balance as per the summary filed by the assessee and as per balance sheet in the case of E-Dupont Loan and Exxon Mobil which is as under:-
Name Balance as per Balance as per Difference Summary Ledger Balance Sheet E-Dupont Loan 8,94,342/- 6,44,342/- 2,50,000/- Exxon Mobil 11,00,000/- 8,50,000/- 2,50,000/- Total 5,00,000/- 6.1 According to the AO, assessee could not reconcile the difference and hence, addition was made by the AO of Rs. 5 lacs being unexplained credit u/s. 68 of the Act. Ld. CIT(A) deleted the addition after considering the submissions of the assessee that the AO has wrongly deemed the value of opening balance to be the closing value and added the differential value as unexplained cash credit. We noted that assessee has filed the copy of ledger account alongwith the copy of agreement. These amounts represents the opening balance paid by the aforesaid two companies under their Customer Retention Programme. The assessee in lieu of the amounts received was to ensure purchase of specified amounts being quota fixed. The assessee during the year has depicted each of the aforesaid amounts above Rs. 2,50,000/- and credit purchase by corresponding amounts. The alleged difference of 5 Rs. 2,50,000/- in each of the parties is basically the income which has already been recognized in each of the year. The same was detailed in the order of the CIT(A) and for the sake of clarity the same is being reproduced as under:-
Name of the Opening Amount Amount Balance as on Remarks party balance as on received repaid / Adj. 31.3.2011 01.04.2010 during the through P&L year account E-Dupont 8,94,342/- ----- (2,50,000) 6,44,342 Rs. 250,000 credited in purchase Exonn Mobil 11,00,000/- ---- (2,50,000) 8,50,000 Rs. 250,000 (Gulati credited in Agencies Pvt. purchase Ltd. )
6.2 We noted that Ld. CIT(A) has rightly recorded the finding of fact in para 3.3.2 that the AO has deemed the value of opening balance to be the closing value, which is not the factual situation. We noted that both the above parties, who were suppliers of the assessee, there is no differential amount against the assessee as correspondingly credited this amount of Rs. 2,50,000/- in each of the parties again as in purchases. We find that the assessee is unable to reconcile the cogent evidence and fully satisfied with the CIT(A). We further noted that there is no violation of Rule 46A of the Rules as Ld. CIT(A) has not admitted any additional evidence without confronting the AO. Hence, we affirm the order of the ld. CIT(A) in deleting the addition on this issue raised by the Revenue.
In the result, appeal of the Revenue stands dismissed.
Order pronounced in the Open Court on 15.12.2025.