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Facts
The assessee, a proprietor of M/s. Srinivasa Chemical Enterprises, faced additions on account of cash credits found during a survey, which were not brought to books. These additions were based on survey findings and a retracted statement of the assessee's husband. The assessee contended that these were sales realizations and advances against sales, which were duly recorded in regular books.
Held
The Tribunal noted that the assessee failed to establish that the cash advances received were culminated into sales and recorded in the books. Despite directions from the ITAT to verify this, the assessee could not provide sufficient evidence. The CIT(A) had also found no infirmity in the order of the lower authorities.
Key Issues
Whether cash credits found during survey, which were not brought to books, can be treated as undisclosed income when the assessee claims they represent sales and advances against sales.
Sections Cited
133A, 143(3), 147, 68, 254(1)
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
above order. The Tribunal vide consolidated order in to 2523/Chny/2016 dated 04.03.2019 restored the issue to the file of A.O for examination of details of buyers/customers who have given advances and whose details were furnished at the time of survey and as to whether the same is tallied with the actual account of the assessee and If the assessee is able to show the advances received to be culminated in sales and the sales have not been recorded in the books of the assessee, then admittedly no further addition would be & 848/Chny/2023 :- 5 -: called for in the hands of the assessee. Following the directions, the A.O completed the assessment u/s. 143(3) of the Act by adding Rs. 3,28,42,884/- u/s. 68 of the Act concluding that assessee has not been able to prove that advances received has culminated to sales and out of cash credit of Rs 4,12,92,884 only Rs 84,50,000 reflected in the balance sheet. The assessee filed appeal against the above addition and the Ld. CIT(A) has confirmed the above addition after considering the detailed submission by assessee and examining the accounts .
Now the assessee is in appeal before us against the above addition.
The Ld. Authorized Representative (A.R) of the assessee has contended that the A.O had made the addition on the basis of rough documents found during the course of survey and on the basis of statement of the husband of the assessee, Shri A.V. Madhava Rao, which has been subsequently retracted. The Ld. AR has submitted that against the advances received, sales have been effected and recorded in the regular books , though there may be variation in the names found in the rough tally sheet during survey and names recorded in the audited books of account . The AR submitted that the Assessing Officer has not doubted the sales which tallies with VAT & 848/Chny/2023 :- 6 -: return and the entry in the rough sheet were subsequently posted in the audited books of accounts and the sale has been effected to the parties from which advance was actually received.
The Ld. Departmental Representative (DR), on the other hand, supporting the orders passed by the lower authorities submitted that the assessment has been completed on the basis of survey conducted by department .During the survey it has been found that there are duplicate set of accounts in respect of cash advance received and Shri A.V. Madhara Rao, the husband of the assessee who managed the business has confirmed that these are unaccounted receipts. The Ld. DR further submitted that the Ld. CIT(A) has examined the explanation submitted by the assessee that sale has been effected to different persons from whom the advance was recorded in the rough book and after examining the account has rejected the explanation. The Ld CIT(A) has examined the account of M/s. Rajam Industries Pvt. Ltd., where there is difference of sundry debtor figure of Rs 2,24,58,328 in the survey data and audited data and doubted that entries made in audited books as number of cash entries of Rs 20,000 each day . The Ld DR submitted that assessee has not been able to submit even confirmation before Ld CIT(A).
& 848/Chny/2023 :- 7 -:
We have heard the rival submissions, and perused the materials available on record. The Co-ordinate Bench vide dated 04.03.2019 in the above case has restored to the file of AO as per following direction :
“The issue is restored to the file of the A0 for examination of the details of the buyers/ customers who have given the advances and whose details were furnished at the time of survey and as to whether the same is tallied with the actual accounts of the assessee. If the assessee is able to show the advances received to be culminating in sales and the sales having been recorded in the books of the assessee, then admittedly no further addition would be called for in the hands of the assessee. With these directions, the issues in these appeal are restored to the file of the A0 for verification of the same. " "Coming to the issue of the reopening of assessment, which has been raised in the Cross-objections fled by the assessee, as the issue on merits are restored to the file of the AO for re-adjudication, we are not giving any finding on the re-opening of the assessment and consequently the issues are left open and restored to the file of the A0 for re-adjudication.”
The A.O in earlier assessment based on the data found during survey has made the addition of Rs. 4,12,92,884/-, as unexplained cash advance received from the customers, but not accounted in the regular books of accounts. In the set aside assessment, the A.O has accepted Rs. 84,50,000/- as accounted in the regular books of accounts and therefore, has made the addition of Rs. 3,28,42,884/-.
The A.O has noted that the assessee did not furnish any details for & 848/Chny/2023 :- 8 -: verification as per the direction of ITAT to show that advance received culminated in sales and the sales have been recorded in the books of accounts. The Ld CIT(A) has considered the assessee’s claim that many cash credits appearing in different parties in survey data relates to cash entries of Rs 20000 or below of M/s. Rajam Industries Pvt. Ltd in audited books and that in the survey data cash credit entries have wrongly been made in various parties instead of this party and rejected the claim as no iota of any evidence was furnished. The assessee neither before A.O nor before Ld. CIT(A) has been able to establish that cash advance received from parties as found during survey , has been cleared by subsequent sales. The Ld CIT(A) has considered all the issues raised and passed well-reasoned order. In view of the above, we do not find any infirmity in the order of Ld. CIT(A) and therefore, order of Ld. CIT(A) is confirmed. The appeal in
The facts of A.Y 2008-09 are identical except that addition of Rs.13,12,379/- made u/s. 68 of the Act . Therefore, our adjudication above for A.Y 2007-08 is mutatis mutandis applies for A.Y 2008-09 & 848/Chny/2023 :- 9 -: also. Hence, this appeal in for A.Y 2008-09 is dismissed.
In the result, both appeals filed by the assessee are dismissed.
Order pronounced on 30th September, 2024.