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Income Tax Appellate Tribunal, “C” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI S. JAYARAMAN
आदेश /O R D E R
PER S. JAYARAMAN, ACCOUNTANT MEMBER:
The assessee filed this appeal against the order of the Commissioner of Income Tax (Appeals)-13, Chennai in dated 28.02.2017.
:-2-: I.T.A. N0. 668/Mds/2017
Shri Vedagiri Ganesh, the assessee, is in the business of three and four wheeler diesel auto rickshaw vehicle, purchase & sales, apart from purchasing and selling spare parts. In the assessment made for assessment year 2012-13, the AO found that the assessee maintained savings bank account with AXIS bank, in which Rs. 59,55,802/- total cash deposits were made during the period relevant to this assessment year. On verification, the sources for these cash deposits were not found in the cash book. The AO pointed out this aspect to the assessee, required him to explain the sources.
The AO assessed Rs. 59,55,802/- as unexplained cash credits stating that the assessee had admitted the same u/s.
Further, the AO found that the assessee received advance from various persons towards booking of auto vehicles which were shown under the head Sundry advances. The assessee could not substantiate smaller amounts of such credits at Rs. 13,45,533/- and hence added it starting that the assessee admitted it. Aggrieved, the assessee filed an appeal before the CIT(A). The CIT(A) called for remand reports twice from the Assessing Officer, shared such details with the assessee and afterward considering assessee’s submissions confirmed the additions. Aggrieved, the assessee filed this appeal pleading that the CIT(A) on the facts and circumstances of the case erred in confirming the addition of Rs. 59,55,802/- as unexplained cash credits. The CIT(A) also erred in confirming the addition of Rs. 13,45,533/- out of sundry creditors even after
:-3-: I.T.A. N0. 668/Mds/2017 production of confirmation letters from the sundry creditors which was also confirmed by the Assessing Officer in his report etc.
The AR submitted that the AO made addition towards unexplained cash credits without any basis and probably on the basis of previous assessments. The assessee is having the cash, which could be from the income from the earlier years additions made in the assessments towards unexplained credits and sundry credits which were to the extent of more than one crore rupees. The AR further submitted in the same account, there are lot of debits which were not considered by the AO. The bank account has an opening balance of Rs. 12,46,487/- and its closing balance at the year end was only Rs. 10,94,177/-. Thus, the addition made is unwarranted. Per contra, the DR submitted that the assessee had an undisclosed savings bank account in AXIS bank in which the total cash deposits made during the years was Rs. 59,54,802/-, the assessee could not explain the nature and sources of these credits, even after the CIT(A) has given two remand proceedings and furnished reports of the remand proceedings to the assessee. The day books, ledger etc produced by the assessee were verified by the AO and he found that the assessee has not made cash withdrawal by which the sources for those deposits could be explained. In other words, there was no cash withdrawals. Hence, it cannot be stated that the cash withdrawn from the business books are deposited in the AXIS bank account. For the reasons
:-4-: I.T.A. N0. 668/Mds/2017 stated by the CIT(A), the addition confirmed by the CIT(A) is warranted. The AR submitted that the assessee is in the business of purchase and sale of three and four wheelers diesel auto rickshaw vehicle and spare parts. The assessee collects cash from the customers towards registration, insurance incidentals etc., which are deposited in the AXIS bank account and they are withdrawn and used for the purpose of the registration, insurance, incidentals etc. Since, the assessee has admitted unaccounted income in the earlier years, the AO using the same admission, continued to make addition this year also, when the assessee has not admitted these credits in this year. The assessee’s admitted income under the head unexplained cash credits and sundry creditors in the earlier years which amounts to more than one crore itself could be a source for these deposits.
We heard the rival submissions, perused the orders of the AO and the CIT(A). The assessee has not disclosed the saving bank account with AXIS bank which had cash deposits of Rs. 59,55,802/-. The assessee pleads that the nature of its business requires receipt of cash from the customers towards registration, insurance, incidentals etc which were credited in that account and used for such purposes. Further, it pleads that the assessee admitted undisclosed income under the head cash credits and sundry creditor in the earlier years itself is more than one crore which could also explain the sources towards these deposits. It appears neither the AO nor the CIT(A)
:-5-: I.T.A. N0. 668/Mds/2017 considered these submissions while examining the assessee’s claim. On the other hand, it appears that the AO examined the cash books, ledger etc of the business and recorded a finding that there were no cash withdrawals from the disclosed business results from which the sources of the impugned deposits could be explained. In the facts and circumstances, we are of the view that this issue has to be set aside and accordingly we set aside the order of the CIT(A) and remit the issue to the AO for fresh examination. The AO shall require the assessee to furnish relevant materials as to whether the deposits appearing in the savings bank account in AXIS bank could be the sum collected from the customers of the three/four diesel vehicles towards registration, insurance, incidentals etc., and examine them. If it is established so, how much was the income, the assessee could have earned from these transactions may be assessed as income. If the AO is not satisfied about the impugned deposits on the basis of the above material etc., then the AO may also consider whether the assessee had sources from the additions made in the earlier assessment years etc., to explain the sources of the impugned deposits. Thus, the AO shall re-examine the above issues afresh, after affording reasonable opportunity to the assessee and then pass a speaking order.
The next issue is addition of Rs. 13,45,533/- towards unproved sundry creditors. The AR submitted that the assessee is in the business of automobiles. At the time of booking, he will get advances from customers
:-6-: I.T.A. N0. 668/Mds/2017 which would be adjusted in the final billing. The assessee has produced the details of evidence to show such adjustments in the billing. Sometimes, the waiting period for the vehicle will range from three to four months and the advances received from them also vary from Rs. 25,000/- to Rs. 50,000/- and on an average there will be more than 50-100 customers on the waiting list.
Without taking these aspects into consideration, the Assessing Officer made the impugned addition as was made in the earlier years. Per contra, the DR submitted that the CIT(A) has given opportunity to assessee twice by remitting the issues to the Assessing Officer and furnished the copies of the Assessing Officer’s report to the assessee. The assessee could not substantiate small credits of Rs. 13,45,533/-. The CIT(A) has extracted the order sheet notings in its entirety, wherein, the assessee and his Authorized Representative agreed for such addition and then confirmed the addition in the appeal order. In the facts and circumstances, the addition made needs to be confirmed.
We heard the rival submissions, gone through the orders. From the order of the CIT(A), we find that the assessee and his Authorized Representative have agreed for the disallowance of Rs. 13,45,533/-- comprising the smaller amounts of sundry creditors and hence, we do not find any merit in the grounds of the appeal on this issue and hence this issue is dismissed.
:-7-: I.T.A. N0. 668/Mds/2017
In the result, the assessee’s appeal is partly allowed for statistical purposes.
Order pronounced on Monday, the 14th day of August, 2017 at Chennai.