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Facts
The assessee, M/s. S.S. Jewellers, appealed against the order of the CIT(A) which confirmed two additions made by the AO: Rs. 28,81,957/- for excess stock and Rs. 12,00,000/- for cash deposits during demonetization. The assessee claimed the cash deposits were from sales of gold and silver, supported by vouchers, but could not present this plea to the AO during faceless assessment.
Held
The Tribunal restored both issues to the file of the AO for fresh verification. For the excess stock, the AO will examine the reconciliation statement of closing stock vis-a-vis VAT returns and audited accounts. For the cash deposits, the assessee needs to provide complete details and explanations to the AO, who will then decide based on examination of bills, vouchers, and sales.
Key Issues
Whether the additions made by the AO for excess stock and unexplained cash deposits are justified, and if so, whether proper opportunity was provided to the assessee to explain.
Sections Cited
144, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI JAGADISH
आदेश /O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) in Order Nos.ITBA/NFAC/S/250/2024- 25/1065708403(1) dated 18.06.2024. The assessment was framed by the Income Tax Officer, Non-Corporate Ward 6(2), Chennai
At the outset, the ld.AR for the assessee pointed out that there are two additions made by AO and confirmed by CIT(A) i.e., in regard to difference in closing stock being excess stock of Rs.28,81,957/- as disclosed in VAT returns comparing with disclosed in the audited accounts filed along with the return of income and the second addition of cash deposit of Rs.12,00,000/- during demonetization period in Specified Bank Notes (SBNs) added as unexplained money u/s.69 of the Act. The ld.AR for the assessee drew our attention to the following ground Nos.2 & 3:-
2. That the Ld.CIT(A) is not justified in confirming the addition of Rs.28,81,957/- made by the Assessing Officer towards alleged inflated purchases.
3. That the Ld.CIT(A) is not justified in sustaining the addition of Rs.12,00,000/- made by the Assessing Officer treating cash deposits in the bank account during the demonetization period as unexplained money u/s.69 of the Act.”
The ld.AR stated that as regards to addition made by AO of excess stock of Rs.28,81,957/-, the aggregate stock is disclosed in the books of accounts and audited accounts enclosed with the return of income at Rs.2,63,52,884/- and whereas as per the VAT returns and as per computation of AO, the total VAT stock is Rs.2,34,70,927/-. The ld.AR now filed reconciliation statement of closing stock and stated that, in any case, this VAT returns have two or three elements that VAT paid and non-VAT stock and the VAT returns stock as per VAT returns computed by AO does not give a clear picture. He filed the following reconciliation:- (Rs.) AY 2014-15 2015-16 2016-17 2017-18 Opening Stock 79,01,609 60,00,642 1,23,16,573 2,47,12,785 Closing Stock 60,00,642 1,23,16,573 2,47,12,785 2,26,60,555
When this was confronted to ld. Senior DR, she only stated that the matter can be restored back to the file of the AO for verification. As confessed by both the sides, the reconciliation statement is being referred back to the file of the AO, who will examine the closing stock disclosed in the books of accounts and as brought in the audited accounts viz-a-viz, the stock which includes in VAT return and the opening stock which has been included and also other purchases other than VAT, thereafter the AO will carry out verification of the same and then decide whether there is any difference or not, after giving due opportunity to the assessee to explain its case. In term of the above, this issue is restored back to the file of the AO. The orders of lower authorities are set aside accordingly.
5. The next issue of cash deposit of Rs.12,00,000/- deposited during demonetization period in SBNs, the ld.AR for the assessee now before us claimed that the assessee is engaged in the business of gold and silver trading from past 23 years and this specified bank notes were received on account of sales and for that, the assessee is ready to produce bills and vouchers and can correlate these entries and qua that few of the vouchers were filed in assessee’s paper-book which consists of 86 pages. The ld.AR stated that unfortunately the assessee could not take this plea before the AO and assessee could not upload the bills and vouchers in the faceless assessment because of volume of bills and vouchers. However, it was contended that in the faceless appeal, the assessee has filed entire details, which was overlooked by CIT(A) and has not gone into the details.
When this was confronted to ld. Senior DR, she could not point out how this information submitted by assessee before CIT(A) in regard to cash deposits out of sales is verified. She could not reply but she requested that matter can be referred back to CIT(A) or AO again for verification.
In view of the above discussion and going by the facts, we are inclined to restore this issue back to the file of the AO, who will examine the bills and vouchers viz-a-viz, the sale of items by assessee and cash deposits. The assessee will file complete details of cash deposits made in bank account and will explain how it arises out of sales before the AO and the AO after examination will decide this issue afresh. In term of the above, this appeal of assessee is allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court at the time of hearing on 22nd October, 2024 at Chennai.