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Facts
The assessee, engaged in the textile business, initially filed a return declaring an income of Rs. 16,44,900. Upon receiving information about high-value transactions in her bank account, a notice under section 148 was issued, leading to a revised return showing an income of Rs. 25,78,490. The Assessing Officer (AO) made an addition of Rs. 4,91,38,720 under section 68 for unexplained credits.
Held
The CIT(A) restricted the addition to Rs. 4,66,797, considering the difference between deposits and withdrawals, and the Tribunal noted that the sales and purchases were part of business activity reflected in the bank statement and confirmed by parties. The Tribunal found no infirmity in the CIT(A)'s order and upheld it.
Key Issues
Whether the additions made by the AO under section 68 for unexplained credits related to business transactions are sustainable, and if the CIT(A)'s restriction of the addition is justified.
Sections Cited
143(3), 147, 139(1), 148, 68, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue against order dated 28/07/2023 passed by NFAC, Delhi for the quantum of assessment passed u/s. 143(3) r.w.s. 147 for the A.Y.2012-13.
In the grounds of appeal, the Revenue has challenged the order of the ld. CIT (A) restricting the addition of Rs.4,66,797/- as against addition u/s 68 of Rs.4,91,38,720/- made by the ld. AO on account of credits in the bank account.
Chhaya Dinesh Vora A.Y. 2012–13.
The brief facts are that the assessee is into business of textiles and yarns on wholesale basis and runs business in the name of proprietary concern, M/s. J.K. Textiles, besides she was also the partner in M/s. Bharti Textiles. On an average, she has been disclosing G.P rate @1-1.5% p.a. from her proprietary business and she has been regularly assessed to tax for the A.Y.2012-13. Assessee had filed her return of income on 28/09/2012 declaring income of Rs.16,44,900/- based on tax audit report finalized by the Accountant. Later on, based on information received from the office of ADIT Investigation Wing, that assessee has done some high value transaction in the bank account with the Kalapur Commercial Co-operative Bank Ltd., wherein total credits for F.Y. 2011-12 were at Rs.23.20 Crores and debits of Rs.23.17 Crores. Accordingly, notice u/s.148 was issued on 20/03/2019. In response to the notice u/s.148, assessee revised the return and declared total income of Rs. 25,78,490/-. In the notice u/s.148, she declared total purchases at Rs.16,60,74,320/- and sales at Rs.16,90,51,280/-; as against purchase at Rs.11,74,02,396/- and sales of Rs.11,94,45,763/- disclosed in the original return of income filed u/s.139(1). During the course of assessment proceedings, assessee had furnished the statement explaining the excess debits and credits in the bank account which was purely on account of purchase and sales made by the assessee during the course of the business and these debits and credits were stated to be missed out by mistake as it was not noted by the Accountant. However, all these transaction was duly reflected and was evident from the Chhaya Dinesh Vora A.Y. 2012–13. bank statement only. Further, in response to show-cause notice, assessee had given the details of the parties through whom she has made the purchases and sale transactions. The ld. AO had also sent notices u/s. 133(6) to the parties to whom assessee had made sales which was served whereby these parties were required to furnish the copy of ledger accounts and the copies of their return of income. In response, these parties had furnished a ledger account confirmation of the transactions entered with the assessee. However, the ld. AO held that they have only furnished the ledger accounts but did not file any supporting evidences. Thus, he concluded that assessee has failed to prove the genuineness of the purchases and sales which were not offered by her in the return of income filed u/s. 139(1) and accordingly, he treated the entire difference of credit shown in the original return and the revised return of Rs.4,96,05,517/- as unexplained credit which has been added u/s.68.
The ld. CIT(A) after perusing the entire details furnished by the assessee and reconciliation of sales and purchase, has deleted the addition and restricted it to the difference between the deposits and the withdrawal, i.e., debits and credits which worked out to Rs. 4,66,797/-. The relevant observation of the ld. CIT (A) and the finding reads as under:- 10.1 The assessee has filed her return of income in response to section 139(1) of the IT Act on 28.09.2012 wherein she has shown purchases at Rs.11,74,02,396 and sales at Rs.11,94,45,763. During the course of assessment proceedings the assessee has filed her return of income in response to notice u/s 148 of the IT Chhaya Dinesh Vora A.Y. 2012–13. Act wherein she has shown purchases at Rs.16,60,74,320 and sales at Rs.16,90,51,280. The difference in purchases and sales work out to this – As per return u/s 139 As per return filed u/s 148 Purchases - Rs.11,74,02,396 Rs 16,60,74,320 Difference- Rs. 4,86,71,924 Sales- Rs.11,94,45,763 Rs.16,90,51,280 Difference- RS. 4,96,05,517 Since this difference is returned by the taxpayer in the revised return of income filed in response to section 148 this is taken as explanation for deposits/withdrawals @ Rs 49138720 ( avg of Rs 48671924 and Rs 49605517). This difference of Rs 49138720 which is additional income offered is to be retained in the income computation as returned/assessed income. The difference of Rs 466797 remains unexplained. Taking into consideration the fact that the additional purchases and sales are already declared by the taxpayer in the revised return this difference has to be added and the addition to that extend @ Rs 466797 is upheld. During the course of the assessment proceedings, the assessee has stated that they made all the purchases amounting to Rs.4,86,71,924 and sale amounting to Rs 4,96,05,517 in her firm were not offered in her return of income filed in response to section 139(1) of the I. T. Act on 28.09.2012. Considering this the amount of Rs 49138720 is upheld as returned and Rs 466797 is upheld as the difference remaining unexplained.
Chhaya Dinesh Vora A.Y. 2012–13.
We have heard both the parties and also perused the relevant material placed before us and also the findings given by the ld. AO and ld. CIT (A).During the course of hearing, we had required the ld. Counsel for assessee to submit the details of reconciliation of sales which were reflected in the bank statement and to whom the sales were made. In response, the same has been furnished, wherein it has been explained that the actual sales as reflected in the bank statement was Rs. 16,90,51,280/- and purchase was Rs. 16,60,74,320/-. He submitted that, in the original return, by mistake the Accountant has taken the figure of sales of Rs.11,94,45,763/- and purchases of Rs. 11,74,02,396/- and missed out the sales and purchase figures of this amount. To prove that assessee has genuinely made purchases and sales, assessee has given the entire ledger account which was tallied and also reflected in the bank statement furnished before the ld. AO. Further, these parties have also confirmed before the ld. AO in response to show-cause notice u/s. 133(6). Thus, the order of the ld. CIT (A) should be upheld.
On the other hand, ld. DR relied upon the order of the ld. AO and submitted that assessee did not disclosed this sales in the original return of income and trading account and before the AO assessee could not establish the sales through proper evidence and therefore, he has rightly treated the extra credit as income of the assessee.
Chhaya Dinesh Vora A.Y. 2012–13. 7. In the brief manner, the details of sales and purchases shown in the original return; shown in the revised return of income in response to show-cause notice u/s.148; and the addition made by the ld. AO and confirmed by the ld. CIT(A) is reproduced hereunder:-
The reconciliation of differential sales which has been submitted before the ld. AO is as under:-
J.K. Textiles (Prop. Ms. Chhaya D Vora) (A.Y.2012-13)
Chhaya Dinesh Vora A.Y. 2012–13.
Further, we have perused the details of sales for sums aggregating to Rs. 4,96,05,517/-, which has been stated to be missed in the original return of income, it is seen that assessee has made sales to 12 parties and the major parties to whom sales were made were; Sanghavi Exports Ltd., Hera Rupa Clothers Pvt. Ltd., and Zhalak Sarees. All these sales have been made through banking channels duly incorporated in the bank statement furnished before us. Apart from that, these parties had also confirmed before the ld. AO independently in response to notice u/s 133(6). Once the amount of Rs.4,96,05,517/- is Chhaya Dinesh Vora A.Y. 2012–13. part of sales and their corresponding purchase has also been recorded in the bank statement, then, undisputedly it is a business income and part of the business activity and therefore, the entire sales cannot be taxed u/s.68, without giving credit on corresponding purchases which are also reflected in the bank statement. At the most addition on account of GP could have been made and ld. CIT (A) has confirmed the addition on account of the difference between sales and purchases which is nothing but addition of GP. Accordingly, on these facts, we do not find any infirmity in the order of the ld. CIT (A) and we have also independently verified through the documents submitted before us in the form of ledger account and relevant entries in the bank account filed by the assessee before us and find that the amount added by the AO is actually sales and there are corresponding purchases also duly reflected in bank and all these transactions are purely through banking channel and not in cash. Therefore, the addition made by the AO cannot be sustained and accordingly, the order of the ld. CIT (A) is confirmed and grounds raised
by the Revenue are dismissed.
9. In the result, appeal of the Revenue is dismissed. Order pronounced on 30th April, 2024.