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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-Durgapur dated 18.01.2016. Assessment was framed by ITO Ward-1(2), Durgapur u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 29.12.2011 for assessment year 2009-10.
Shri Manish Tiwari, Ld. Authorized Representative appeared on behalf of assessee and Md. Ghyas Uddin, Ld. Departmental Representative represented on behalf of Revenue. A.Y. 2009-10 Sh. Mahendra Singh Chauhan Vs. ITO Wd-1(2), DGP Page 2 2. The effective inter-connected issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance made by the AO for ₹966,535/- and ₹7,64,549/- on account of unexplained cash credit u/s. 68 of the Act.
Briefly stated facts are that assessee, an individual, is a labour contractor. The AO during the course of assessment proceedings observed that there is negative cash balance in the cash book of assessee on two different occasions. Firstly, the negative cash balance of ₹9,66,535/- dated 10.06.2008 and secondly on 31.03.2009 for ₹7,64,549/-. The AO observed the aforesaid negative cash balance from the cash book of the relevant period which is recorded on pages 2 and 3 in his order. On question by the AO about the negative cash balance, the assessee submitted fresh cash book and clarified that such negative cash balance arose on account of putting “wrong date” in the books of account. However, AO disregarded the claim of assessee by observing that the date in the corresponding ledger for wage and consumables expense has not been changed. Accordingly, the AO treated the negative cash balance of ₹9,66,535/- and ₹7,64,549/- as unexplained cash credit u/s. 68 of the Act which was added to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee submitted before Ld. CIT(A) that the provision of Section 68 of the Act is not applicable to the instant case. It is because the negative balance has arisen on account of expenditure and not on account of any amount found credited in the books. The assessee also submitted that it was engaged to supply labourers to M/s Joy Balaji Industries Ltd., and SPS Steel Ltd. All the transactions are matching with the party ledger issued by the principal employer. However, Ld. CIT(A) disregarded the submission of assessee and confirmed the order of AO by observing as under:- “6. I have gone through the findings of the AO given in the assessment order as well as I have gone through the submissions of the appellant. In this case the appellant has not confronted the finding of the AO rather he has strengthened the finding of AO by saying that the appellant was mislead by the people and the business was contractually nature and considering the nature of business emergence involved and the fresh of financial prices by which appellant A.Y. 2009-10 Sh. Mahendra Singh Chauhan Vs. ITO Wd-1(2), DGP Page 3 suffering. The case may be set aside and the assessment may be annulled as the AO has framed the order and decide the proceeding on the basis as misleading books of accounts.
The above mentioned statement of the appellant is the evidence that he has no plausible explanation regarding cash credit made in the books of accounts and agricultural income shown by the appellant’s in the return. It is pertaining to mention here that the appellant had never tried to prove its claim as stated above by submitting of correct books of account as he claimed. The appellant has merely prayed for estimating the profit at presumptive rate. Whereas he has failed to prove his contention and also fail to controvert the findings of the AO. Considering the facts of the case and elaborate discussion made in the assessment order of the AO the contention of the appellant are treated as business without any evidence and fails. Hence, the addition made by the AO is hereby confirmed. The appeal filed by the appellant is hereby dismissed.”
Being aggrieved by this order of Ld. CIT(A) assessee came in second appeal before us on the following grounds:- “
1. That on the acts and in the circumstances of the case, Ld. CIT(A) is wrong and unjustified in dismissing assessee’s appeal and confirming the addition made by Assessing Officer.
2. That on the facts and in the circumstances of the case, Ld. CIT(A) is wrong and unjustified in confirming the addition of Rs.9,66,535/- towards unexplained cash credit u/s. 68 of Income Tax Act, 1961 without a speaking order on merit of appellant’s contentions.
3. That on the facts and in the circumstances of the case, Ld. CIT(A) is wrong and unjustified in upholding the addition of Rs.7,64,549/- towards unexplained cash credit U/s 68 of Income Tax Act, 1961 without a speaking order on the merit of the appellant’s contentions.
4. The appellant craves leave to add, alter, adduce and amend any ground or grounds on or at the time of hearing of the appeal.”
5. Ld. AR for the assessee before us submitted that books of account was duly audited and there was no defect found in such audited account and negative cash balance arose only on account of wrong date entered made by the Accountant. Ld. AR also submitted that no defect has been pointed out in the supporting documents except the date by the Authorities Below. On the other hand, Ld. DR submitted that in the ledger of labour and consumable an entry of ₹10,24,500/- was made on 06.06.2008 vide voucher No.61 and alteration of voucher No. clearly showed that there was negative cash balance. As per the ld. DR there can be error in the date and not in the voucher no. The entry in the cash book A.Y. 2009-10 Sh. Mahendra Singh Chauhan Vs. ITO Wd-1(2), DGP Page 4 was modified but not in the ledger of labour and consumables. Thus it was submitted by the Ld. DR that the plea of the assessee that the accountant has made a mistake in data entry cannot be relied upon. In this connection, the ld. DR relied in the judgment of Hon'ble Kerala High Court in the case of River View Bar & Silver Restaurant vs. CIT (2011) 15 taxmann.com 84(Kel) and he vehemently relied on the order of Authorities Below.
We have heard the rival contentions of both the parties and perused and carefully considered the materials on record; including the judicial pronouncement cited and placed reliance upon. The issue in the instant case relates to the negative cash balance shown by assessee in his cash book which was treated as unexplained cash credit by the Authorities Below. Indeed, in the original cash book, the assessee has shown negative cash balance but in the subsequent cash book submitted by assessee where no negative balance was reported as well as no defect was pointed out by the Authorities Below. In our considered view, simply, the assessee entered wrong date in his books of account cannot be the basis of making such addition u/s. 68 of the Act on account of negative cash balance. In the case before us, the AO did not exercise his power by issuing a notice to the respective party u/s. 133(6) of the Act vis-à-vis to ascertain the actual date of payment made by those parties. We find that AO was empowered u/s. 131 of the Act as well as for conducting necessary inspection to find out the actual facts of the case which he failed to do so. In view of above, in our considered view, the negative balance cannot form the basis of addition u/s. 68 of the Act. The case law cited by Ld. DR in the case of River View Bar & Silver Restaurant (supra) is distinguishable as in that case the assessee failed to produce any evidence. In the instant case before us, the assessee has made submission before Ld. CIT(A) that it is engaged by the two parties for supplying labours and it has received payments from the parties which are matching with the ledger of the parties. Besides the above, it is also pertinent to note that the Assessing Officer has made the addition u/s 68 of the Act. A careful perusal of the provision divulges that in order to invoke this provision, it is sine qua non that there should credit entries which are recorded in the books of account. The factum of the assessee having incurred expenses which are recorded in the books and there is no credit entry found in the books which A.Y. 2009-10 Sh. Mahendra Singh Chauhan Vs. ITO Wd-1(2), DGP Page 5 remain unexplained. Adverting to the facts of the instant case, it is found that there was no credit entry found in the books which remained unexplained. Thus, in view of the above, we are inclined to reverse the order of Authorities Below and direct the AO to delete the same. Hence, this ground of assessee’s appeal is allowed.