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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 18/11/2024 Date of Order – 20/12/2024
O R D E R PER K.M. ROY, A.M.
The present appeal has been filed by the assessee challenging the impugned order dated 25/09/2023, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], for the assessment year 2017–18.
In its appeal, the assessee has raised following grounds:–
“1. Whether on the facts and in law, the order passed by learned CIT(A) u/s 250 of the Act is bad in law. 2. Whether on the facts and in law, the learned CIT(A) erred in passing an ex- parte order without appreciating the fact about demise of the assessee.
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Whether on the facts and in law, the learned CIT(A) erred in upholding the action of learned AO in making addition in respect of cash deposits of Rs.68,85,500/- u/s 68 of the Act to income of the assessee.
Whether on the facts and circumstances the assessee having justifiable source of cash (i.e business receipts) to explain the amount deposited in the bank account with supporting evidences, the addition made u/s 68 deserves to be deleted. 5. The Assessee craves to add, alter, vary, omit, amend or delete one or more of the above grounds of appeal before, or at the time of, hearing of the appeal, so as to enable the Hon'ble Tribunal to decide this appeal according to law.”
There is a delay of 126 days in filing the present appeal. The legal heir of assessee had filed an affidavit explaining the reasons for the delay in filing the appeal. As per affidavit, the assessee expired on 31/08/2020. The notices were being sent through e–mail of the erstwhile consultant of deceased assessee. Therefore, due to death of assessee, neither notices nor appellate order could be brought to the notice of the legal heir/s in a timely manner. It was only when, the demand recovery notices were manually served on deceased assessee’s premises, the legal heir came to know about the adverse assessment order passed. The present appeal has been filed by the Legal Heir of the assessee. We find that, the assessee has shown a reasonable cause and is thus prevented by filing the appeal belatedly. Accordingly, we condone the delay and the appeal is being admitted for adjudication on merits.
The Assessing Officer has made an addition of ` 68,85,500, on account of cash deposited in old currency during demonetisation period. The Assessing Officer, in the assessment order at Para–4/Page–2, has mentioned as under:–
“4. The assessee uploaded details bank accounts maintained during the year, cash deposit details in bank accounts, summary of purchases, sales, cash book for the F.Y. 2015- 16 and 2016-17, confirmations in respect of loan creditors
3 Nikhil Shankarlalji Waghwani and squared up loans etc. The month-wise details of sales and purchases uploaded by the assessee were examined…’’
On appeal, the learned CIT(A) has reproduced the assessment passed by the Assessing Officer and had dismissed the appeal by observing as follows:–
“8. In view of the above facts and circumstances of the case, it is noticed that the proper opportunity given to appellant at the time of assessment proceedings as well as appellate proceedings to furnish the necessary details/documentary evidences in support of his case but the appellant has failed to produce any supporting material in this regard. Hence, in view of the above and on the basis of the detailed findings and reasons given by the AO in his assessment order, which have not been explained by the appellant and no evidence to the contrary has been submitted either at the stage of assessment or appeal which has been pending for more than 3.5 years, I uphold the addition made by the Assessing Officer, in the absence of any documentary evidences to rebut the findings made in order dated 24/12/2019. Accordingly, the issue is decided against the appellant and the grounds of appeal in this regard are dismissed.”
The assessee being aggrieved by the order so passed by the learned CIT(A), is in further appeal before the Tribunal.
Before us, the learned A.R. appearing for the assessee submitted that the assessee had furnished all the necessary documentary evidences before the Assessing Officer which were relevant to the issue under consideration. The Assessing Officer had issued show cause notice under section 142(1) of the Act which is reproduced at Page–2 of the assessment order. The Assessing Officer had asked the assessee to explain, as to why gross profit rate should not be adopted @2.32% as against 1.82% and difference of ` 26,29,121, is proposed to be added to the total income of the assessee. The Assessing Officer has reproduced working of month-wise closing stock and alleged that there was a negative closing stock for the month of August 2016.
4 Nikhil Shankarlalji Waghwani In response, the submissions made by the assessee which are reproduced at Page 3 of Assessment Order, are as under:–
“Assessee is engaged in the wholesale grain business from previous so many years, maintaining proper books of accounts and regularly getting it audited and filing the Income tax return. The business is conducted from two places the first is from Anaj Bazar, Itwari, Nagpur and the second is from APMC Market, Kalamna, Nagpur. Many times happens that stock is transfer from Kalamna to Itwari and it is recorded in sales of the assessee. It means that sales are recorded twice due to which there is negative stock. The assessee humbly requests you to kindly don’t reject the books of accounts and accept the same. Considering the G.P. adopted by the assessee in the books of accounts, the assessee request you to kindly adopt the G.P. adopted by the assessee as it is the reasonable in the wholesale grain business. The conditions in which assessee is performing the business is very tough. Seeing the market competition and the worldwide recession there is slow down in market due to which many times the assessee sold the goods below the costing to the assessee for staying in the market. The assessee requests you and prays you to please adopt G.P. as adopted by the assessee in the books of accounts.’’
The learned A.R. thus prayed that the addition made by the Assessing Officer and confirmed by the learned CIT(A) be directed to be deleted.
The learned Departmental Representative relied upon the order of the authorities below.
We have given a thoughtful consideration to the arguments made by the rival parties and perused the material available on record. It was the contention of the assessee that he was doing the business of whole sale trading of food grains, having two places of business i.e., one at Itwari, Nagpur and another APMC Market Kalamna and that it may have happened that the stock was transferred from Kalamna to Itwari, but it was recorded as sales in the books of the assessee. It means that sales were recorded twice due to which there could arise situation of negative stock in month of August
5 Nikhil Shankarlalji Waghwani 2016. Further, the Assessing Officer had calculated the closing stock month wise on the basis gross profit earned for the year. It was submitted that the system of calculating the monthly closing stock with the help of annual gross profit rate was flawed. In the business of assessee, gross profit can never remain constant and it always fluctuates from transaction to transaction of sales and purchases. Thus, the assessee submitted that inference drawn by Assessing Officer that there is negative stock was not correct since the assessee maintained the books of accounts on day–to–day basis which were duly audited. We also find that the Assessing Officer has not pointed any specific document which was required and was not filed by the assessee. The Assessing Officer did not make any addition on account of alleged negative stock. On the contrary, we find that the Assessing Officer having being satisfied with the documentary evidences filed, did not proceed to make any addition towards additional gross profit rate as proposed at ` 26,29,121, as per the show cause notice issued. In the assessment order, however, the Assessing Officer had, without any cogent basis, concluded that the books of accounts were manipulated and thereupon made addition of ` 68,85,500, towards unexplained cash deposits. The Assessing Officer has ignored that the assessee had shown sales turnover of ` 52.97 crore for the assessment year 2017-18 vis-a-vis cash deposits in old currency during demonetization of ` 68.85 lakh. Therefore, cash sales in demonetised currency were reasonable compared to the sales turnover shown. The assessee had submitted audited financials, details of summary of purchase, sales and cash book during assessment proceedings. The cash sales have been recorded in books of account and offered business income for taxation for the assessment year
6 Nikhil Shankarlalji Waghwani 2017-18. The Assessing Officer has also not rejected the books of account by invoking section 145(3) of the Act. Therefore, the action of Assessing Officer in making an addition of ` 68,85,500, is based on suspicions and surmises, without any cogent basis. Normally, the matter could have been remanded back, but in view of the glaring and tell-tale evidences which points out at the hollowness of addition and more particularly when the assessee expired on 31/08/2020, and the legal heir is now perpetrating the case, it is deemed expedient to adjudicate the matter at our end. The Assessing Officer had acted whimsically and the learned CIT(A) has utterly failed to pass a reasoned order which we decline to follow. Under the peculiarity of the circumstances, we direct the Assessing Officer for deletion of the addition and re–compute the income of the assessee accordingly, Thus, the impugned order passed by the learned CIT(A) is hereby set aside by allowing the grounds raised by the assessee.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 20/12/2024
Sd/- Sd/- V. DURGA RAO K.M. ROY JUDICIAL MEMBER ACCOUNTANT MEMBER NAGPUR, DATED: 20/12/2024
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