Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI VIJAY PAL RAO & SHRI B.M. BIYANISmt. Pritiben Patel
This appeal by the Revenue is directed against the order dated 23.11.2022 of Commissioner of Income Tax(Appeals)-3, Bhopal, for Assessment Year 2017-18. The revenue has raised following grounds of appeal:
“1.Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was justified in law in deleting the addition amounting to Rs. 1,37,25,000/- made u/s 68 of the IT Act, 1961 on account of unexplained cash credit? 2. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was justified in law in admitting additional evidences?
Pritiben Patel Page 2 of 15 3. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was justified in law in admitting additional evidences ignoring the fact that the assessee couldn't explain the reasons for non-furnishing of these details during assessment proceedings and the case of the assessee does not fall in any of the exceptions mentioned in Rule 46A of the IT Rules?”
The assesse is individual and engaged in trading of Petrol, Diesel and Lubricant Oil under the name & style of M/s Sugam Petroleum KSK. The assesse filed a return of income for the year under consideration on 25.11.2017 declaring total income of Rs.11,78,200/-. The case was selected for scrutiny under CASS on the issue of large cash deposited in the bank accounts during the demonetization period. The AO called the information u/s 133(6) of the Act from the banks and found that the assesse has deposited cash of Rs.1,22,58,500/- in the bank account with State Bank of India and Rs.14,67,000/- in the bank account with Bank of Baroda in demonetized notice between 10.11.2016 to 30.12.2016. The AO asked the assesse to furnish the requisite details. After verification of the details filed by the assesse in the shape of cash book, bank account statements, stock register and ledger account of the assessee in the books of IOCL showing the transactions of purchase and sale of High Speed Diesel (HSD) and Motor Sprit (MS) the AO noted certain discrepancies in the opening and closing stock of various months in comparison to details shown in the ledger account of the assesse with IOCL. Accordingly the AO made addition of the entire cash deposit in bank accounts of Rs.1,37,25,500/- as unexplained cash credit u/s 68 of the Act. On appeal the assesse explained that there are factual mistakes in the ledger account maintained by the IOCL regarding purchase made by the assesse during the year and particularly for the disputed period. The Ld. CIT(A) called for a remand report and after considering the remand report has deleted the addition made by the AO.
Before the Tribunal the Ld. DR has submitted that the assessing officer has given the details of large cash deposited by the assesse in the two bank accounts during the demonetization period between 10.11.2016 Page 2 of 15
Pritiben Patel Page 3 of 15 to 30.12.2016. The assessee was asked to explain the source of cash deposit during the demonetization period and finally the assesse produced the details in response to the show cause notice issued by the AO. On verification of cash book, the AO noted that there are discrepancies in the cash book and the bank accounts of the assesse regarding the cash deposit as there is a gap of one or two days between the entries showing in the cash book and finally cash was deposited in the bank account. Further the AO noted from the ledger account maintained by the Indian Oil Corporation Ltd. regarding the purchase made by the assesse that there were negative opening and closing balances in various months. The AO has given details of the negative opening and closing balance of petrol and diesel after comparing the details as recorded in the ledger account maintained by the IOCL as well as monthly stock summary produced by the assesse. Thus on examination of the comparative details of the stock of petrol and diesel as per the ledger account of IOCL and monthly summary of the stock of petrol and diesel as per the books of the assesse the AO found that purchase shown by the assesse in the monthly summary were actually not purchased by the assesse as per ledger account of IOCL. Therefore, the AO was of the view that the assesse inflated her purchase of diesel and petrol with a view to show corresponding cash sales and to introduce her unaccounted cash in her books of account. The AO held that the assesse has made such bogus sales of diesel and petrol and therefore, the books of account of the assesse are not reliable and liable to be rejected u/s 145(3) of the Act. The AO consequently treated the entire cash deposit in the bank account of the assesse to the tune of Rs. 1,37,25,500/- as unexplained cash credit and added to the income of the assesse u/s 68 of the Act. The Ld. CIT(A) has deleted the addition made by the AO by considering additional evidence produced by the assesse without proper verification and examination of the same. The AO in the remand report objected to the additional evidence produced by the assesse before the Ld. CIT(A) when the assesse did not produce the same despite sufficient opportunities
Pritiben Patel Page 4 of 15 given by the AO during the assessment proceedings. He has relied upon the order of the AO.
On the other hand, Ld. AR of the assesse has submitted that the source of the cash deposit in the bank account was explained by the assesse by producing cash book, ledger account, summary of purchase and sales of HSD and MS. He has further submitted there were factual mistakes in the ledger account maintained by the IOCL which was pointed out by the assesse by producing the invoices and bank account details of payment made for purchases by the assesse. Ld. AR has pointed out that in the details of the purchases as per ledger account maintained by the IOCL, the quantities of certain purchases are wrongly mentioned. For example he has referred to page 71 of the paper book and submitted that in the said ledger quantity of purchase is shown as 6 KL of MS whereas as per the invoice of purchase dated 27.04.2016 placed at page no.113 of the paper book the quantity is 12 KL. Therefore, the discrepancies as noted by the AO are due to the factual errors in the entries of ledger maintained by IOCL. He has further submitted that the assesse has purchased both HSD and MS of 6 KL each, total quantity comes to 12 KL per order. Similarly, he has referred all the entries in the ledger maintained by the IOCL which was considered by the AO and reconciliation was made with the details given in the invoices of purchase. Ld. AR has referred to the page 20 of the CIT(A) where a comparative chart giving the correct details as well as incorrect details shown in the ledger maintained by the IOCL is reproduced which clearly shows that there are factual mistakes regarding the quantity of purchase of HSD & MS during the year under consideration.
Ld. AR has further contended that the AO has made the addition of the entire deposit ignoring the crucial fact of normal undisputed monthly sales of the assesse. He has further submitted that the gap of one day for deposit made in the bank account after withdrawn from the cash book is due to the reason that during the demonetization period there were large queue in the banks and it was not possible to deposit the cash on the Page 4 of 15
Pritiben Patel Page 5 of 15 same day. The AO has not pointed out any discrepancy in the amounts which were withdrawn from cash book and subsequently deposited in the bank account. The Only objection raised by the AO is a gap of one day in deposit in the bank account and that too only on few occasions. The Ld. AR has referred to the monthly stock summary at page no.26 & 27 of the paper book and ledger account of IOCL in the books of the assesse at page no.28 to 38 of the paper book and submitted that there is no discrepancy either in the quantity of purchase made during the year nor in the value of purchase & sales and closing stock of each months. Thus, the Ld. AR has submitted that the addition made by the AO based on the factual incorrect details appearing in the ledger account maintained by the IOCL is not justified when the assesse has duly reconciled the difference and explained the reasons for short quantity shown in the ledger maintained by the IOCL by comparing the same with invoices of the purchase as well as the payment made by the assesse as reflected in the bank account statement. He has supported the impugned order of the Ld. CIT(A).
We have considered the rival submissions as well as relevant material on record. The AO has reproduced the details of the purchase shown in the leger account maintained by the IOCL as well the monthly stock summary of petrol and diesel maintained by the assesse. The AO found that the assesse has inflated the purchase as shown in the monthly summary of petrol and diesel in comparison to the purchase shown in the ledger account maintained by the IOCL. Based on these discrepancies the AO held that the assesse inflated the purchase and consequently showing the bogus sales with a view to introduce unaccounted income in the cash book to justify the cash deposit made in the bank account during the demonetization period. Accordingly the AO has made the addition of the entire deposit of Rs.1,37,25,500/-. It is pertinent to note that the AO has even not considered the undisputed normal purchase and sale made by the assesse during this period of demonetization. On appeal the assesse has produced additional evidence in shape of the invoices of purchase, bank account statements to show that there are factual mistake in the Pritiben Patel Page 6 of 15 ledger account maintained by the IOCL showing incorrect quantity of purchase made by the assesse. We find from the details of ledger account maintained by IOCL that in most of the cases the IOCL is showing purchase of only one product/commodity either HSD or MS whereas as per the invoices and payment of purchase consideration by the assesse it is evident that the assesse has purchased mix quantities of diesel and petrol in the ratio of 6 kl each or 9:3 Kl of diesel and petrol respectively. From the details of purchase shown in the invoices it is clear that the capacity of the vehicle fetching the petrol and diesel is 12 Kl and therefore, in one trip the assesse is purchasing total quantity of 12 kl in the ratio of 6 kl each or 9 kl to 3 kl diesel and petrol respectively. These factual details are clearly evident from the invoices which were produced by the assesse as well as from the bank account statement through which the assesse has made the payment to IOCL. The ld. CIT(A) forwarded the additional evidence to the AO for his comments and verification. The AO in his remand report objected to the admission of the additional evidence without making any inquiry to verify the correctness of the evidence produced by the assesse. We find that the additional evidence produced by the assesse in the shape of invoices issued by the IOCL as well as bank account statements are independent record maintained by the bank and IOCL which cannot be manipulated by the individual assesse. Therefore, scope of any manipulation is completely ruled out in respect of these evidences produced by the assesse before the Ld. CIT(A). The assessing officer ought to have verified correctness of the details but he opted not to do so and raised the objection against the admission of the additional evidence. Once the additional evidence is not prepared by the assesse and the scope of any manipulation on the part of the assesse is ruled out then we do not find any reason for not admitting the additional evidence produced by the assesse. The Ld. CIT(A) has considered this issue in para 4.1.3 to 4.1.4 as under:
“4.1.3. I have considered the facts mentioned in the assessment order, written submission of the appellant, additional evidences furnished by the appellant, remand report and rejoinder thereon. I find Page 6 of 15
Pritiben Patel Page 7 of 15 one of the basis for rejection of books of account made by the AO is that there was variance in date of cash withdrawn as per cash book and deposited in the bank account. Specific variance as pointed out by the AO has already been mentioned in the earlier paras. There was gap of one day between the date of deposit shown in the cash book and bank statement in few occasions. I find force in the submission made by the appellant in this regard. There may be various reasons for such variance. Further, it is known to all that there were long queues in the banks for the depositing SBN currencies in the demonetization period. The fact that on many times cash is not deposited in the bank account on the same day, but, entries in this regard is made in the books of account on the date of withdrawal of cash. Such minor variance cannot be made the basis of rejection of books of account u/s 145(3) of the Act. What is important in such situations is to verify the availability of cash in the cash book. The appellant before me as well as AO has submitted copy of cash book for the relevant period which shows the availability of cash due to cash sales in the cash book. The source of cash withdrawal is cash sales. Hence, cash deposited in the bank account prior to demonetization period or after demonetization is found to be out of cash sales. Thus, such discrepancy has been duly explained by the appellant and cannot become the reason for rejection of books of account and treating the cash deposited as unexplained. Therefore, the basis taken by the AO is, hereby, rejected. 4.1.4. Now coming to the issue of inflation of purchases and introduction of unaccounted cash under the garb of bogus sales, the AO has made a comparative chart which is based upon monthly quantitative purchase statement of IOCL and monthly quantitative purchase detail mentioned in the books of account of the appellant. The AO found huge variation between the both. Quantitative purchase from IOCL was found much lesser than the purchase entry made in the books of account. For this reason, the AO has worked out negative closing balances in quantity for both petrol and diesel. This summary has been given by the AO on page no. 18 to 20 of the assessment order. After considering the variation, the AO rejected the books of account of the appellant. Based on the above finding, the AO inferred that the appellant has inflated its purchases and introduced unaccounted cash in the books of account under the garb of bogus sales. While making such conclusion, the AO has not provided opportunity of being heard to the appellant. Therefore, the appellant filed purchase invoices issued by IOCL as additional evidences. In the remand report, the AO has only dealt with the inadmissibility of additional evidences as per rule 46A of the Rules ignoring the vital aspect that the appellant had not given opportunity to respond on the conclusion being made for making addition on account of unexplained deposit of cash of Rs. 1,37,25,500/- in the bank accounts. In the remand report proceedings, the AO should have considered these evidences and a report/comments in this regard should have been submitted. But, the AO did no examine the evidences filed in this Page 7 of 15 regard. Therefore, I have gone through the additional evidences and verified the same from the purchase ledger of the appellant. I find that various invoices have been issued by the IOCL for mixed purchases i.e. partly for petrol and partly for diesel. In the statement of IOCL on which the AO has placed reliance upon, the quantity of purchase of diesel/petrol has been shown less but, value has been shown correctly as per purchases invoices. Few instances are being mentioned hereunder:- As per IOCL statement As per purchase invoices issued by IOCL to the appellant Invoice no. Date Item Quantity Value Invoice no. Date Item Quantity Value sold sold (Rs.) purchased purchased (Rs.) (KL) (KL)
0686994705 27.04.2016 MS 6 681347 0686994705 27.04.2016 MS 6 681347 EURO EURO
HSD 6 0687438405 14.05.2016 MS 6 705600 0687438405 14.05.2016 MS 6 705600 EURO EURO
HSD 6 0687568190 20.05.2016 HSD 6 703288 0687568190 20.05.2016 HSD 6 703288
MS 6 EURO 0687602276 21.05.2016 HSD 6 703288 0687602276 21.05.2016 HSD 6 703288
MS 6 EURO 0687742878 27.05.2016 MS 6 703288 0687742878 27.05.2016 MS 6 703288 EURO EURO
HSD 6 0687870760 31.05.2016 MS 6 703288 0687870760 31.05.2016 MS 6 703288 EURO EURO
HSD 6 0688804873 09.07.2016 MS 6 741046 0688804873 09.07.2016 MS 6 741046 EURO EURO
HSD 6 0688964415 16.07.2016 MS 6 725568 068864415 16.07.2016 MS 6 725568 EURO EURO
HSD 6 0690053683 31.08.2016 HSD 6 690699 0690053683 31.08.2016 MS 6 690699 EURO
HSD 6 0690271573 10.09.2016 HSD 6 726958 0690271573 10.09.2016 MS 6 726958 EURO
HSD 6 0690662551 27.09.2016 MS 6 738067 0690062551 27.09.2016 MS 6 738067 EURO EURO
HSD 6 0691039250 12.10.2016 MS 9 774910 0691039250 12.10.2016 MS 9 774910 EURO EURO
HSD 3 0691099709 14.10.2016 MS 9 774910 0691099709 14.10.2016 MS 9 774910 EURO EURO
HSD 3 0691123967 15.10.2016 MS 6 739810 0691123967 15.10.2016 MS 6 739810 EURO EURO
HSD 6 0692157091 24.11.2016 MS 6 758498 0692157091 24.11.2016 MS 6 758498 EURO EURO
HSD 6 0692220052 26.11.2016 MS 3 762545 0692220052 26.11.2016 MS 3 726545 EURO EURO
HSD 9 0692317517 30.11.2016 HSD 6 758498 0692317517 30.11.2016 MS 6 758498 EURO
HSD 6 0692476444 07.12.2016 MS 9 791519 0692476444 07.12.2016 MS 9 791519 EURO EURO
HSD 3 0692531647 09.12.2016 HSD 6 758611 0692531647 09.12.2016 MS 6 758611 EURO HSD 6 0692593129 12.12.2016 HSD 3 791519 0692593129 12.12.2016 MS 9 791519 EURO HSD 3 0692646672 14.12.2016 HSD 6 758611 0692646672 14.12.2016 MS 6 758611 EURO
HSD 6 0692688554 15.12.2016 MS 3 725704 0692688554 15.12.2016 MS 3 725704 EURO EURO
HSD 9 0692772195 19.12.2016 HSD 6 788250 0692772195 19.12.2016 MS 6 788250 EURO
HSD 6 0692804626 20.12.2016 MS 3 753567 0692804626 20.12.2016 MS 3 753567 EURO EURO
HSD 9 0692882501 23.12.2016 MS 6 788250 0692882501 23.12.2016 MS 6 788250 EURO EURO
HSD 6 0692913200 24.12.2016 HSD 9 753567 0692913200 24.12.2016 MS 3 753567 EURO HSD 9 0692935936 26.12.2016 HSD 6 788250 0692935936 26.12.2016 MS 6 788250 EURO HSD 6 0692975060 27.12.2016 HSD 9 753567 0692975060 27.12.2016 MS 3 753567 EURO HSD 9 0693004193 28.12.2016 HSD 9 753567 0693004193 28.12.2016 MS 3 753567 EURO HSD 9 0693034523 29.12.2016 HSD 9 753567 0693034523 29.12.2016 MS 3 753567 EURO
HSD 9 0693058116 30.12.2016 MS 6 788250 0693058116 30.12.2016 MS 6 788250 EURO EURO
HSD 6 0693087117 31.12.2016 MS 3 753567 0693087117 31.12.2016 MS 3 753567 EURO EURO
HSD 9 0693168727 04.01.2017 MS 6 805065 0693168727 04.01.2017 MS 6 805065 EURO EURO
HSD 6 0693220305 06.01.2017 MS 3 769094 0693220305 06.01.2017 MS 3 769094 EURO EURO
HSD 9 0693311838 10.01.2017 HSD 6 805065 0693311838 10.01.2017 MS 6 805065 EURO
HSD 6 0693348841 11.01.2017 HSD 6 805065 0693348841 11.01.2017 MS 6 805065 EURO
HSD 6 0693407372 13.01.2017 MS 3 769094 0693407372 13.01.2017 MS 3 769094 EURO EURO
HSD 9 0693430193 14.01.2017 MS 6 805065 0693430193 14.01.2017 MS 6 805065 EURO EURO
HSD 6 0693437069 14.01.2017 HSD 6 805065 0693437069 14.01.2017 MS 6 805065 EURO HSD 6 0693536347 19.01.2017 HSD 9 781799 0693536347 19.01.2017 MS 3 781799 EURO HSD 9 0693698811 25.01.2017 HSD 6 815636 0693698811 25.01.2017 MS 6 815636 EURO HSD 6 0693851468 01.02.2017 HSD 6 815636 0693851468 01.02.2017 MS 6 815636 EURO HSD 6 0693879284 02.02.2017 HSD 6 815636 0693879284 02.02.2017 MS 6 815636 EURO HSD 6 0693939682 04.02.2017 HSD 9 781799 0693939682 04.02.2017 MS 3 781799 EURO HSD 9 0694119881 11.02.2017 HSD 6 815636 0694119881 11.02.2017 MS 6 815636 EURO HSD 6 0694265255 17.02.2017 HSD 6 815636 0694265255 17.02.2017 MS 6 815636 EURO
HSD 6 0694583912 01.03.2017 MS 6 815636 0694583912 01.03.2017 MS 6 815636 EURO EURO
HSD 6 0694707486 06.03.2017 MS 6 815636 0694707486 06.03.2017 MS 6 815636 EURO EURO
HSD 6 0694857789 11.03.2017 MS 6 815636 0694857789 11.03.2017 MS 6 815636 EURO EURO
HSD 6 0695024860 18.03.2017 MS 6 815636 0695024860 18.03.2017 MS 6 815636 EURO EURO
HSD 6 0695150901 23.03.2017 HSD 6 815636 0695150901 23.03.2017 MS 6 815636 EURO HSD 6 0695183649 24.03.2017 HSD 6 815636 0695183649 24.03.2017 MS 6 815636 EURO HSD 6 0695213343 25.03.2017 HSD 6 815636 0695213343 25.03.2017 MS 6 815636 EURO HSD 6 0695250984 27.03.2017 HSD 6 815636 0695250984 27.03.2017 MS 6 815636 EURO
HSD 6 0695309621 29.03.2017 MS 3 781799 0695309621 29.03.2017 MS 3 781799 EURO EURO
HSD 9 0695388166 31.03.2017 HSD 6 815636 0695388166 31.03.2017 MS 6 815636 EURO
HSD 6
From the above few instances, it is evident that the appellant had purchased MS and HSD quality of petrol/diesel, but, in the statement of IOCL only one item and quantity thereof has been shown. Whereas, Page 12 of 15 values of items sold has been taken correctly as per invoices. Thus, the contentions of the appellant that the statement of IOCL was incorrect, are found acceptable. If purchases as per invoices are considered, month wise closing stock of petrol and diesel will be as under: Petrol Month Opening Quantity Add: Purchases not Total Purchase Sales Closing stock Purchased shown in the statement Purchase as per (Litre) Stock (Litre*) as per AO of IOCL but mentioned (Litre) books of (Litre) (Litre) in purchase invoices account (Litre) (Litre)
April 14454 78000 0 78000 78000 79412 13042 May 13042 78000 12000 90000 90000 90648 12394 June 12394 72000 0 72000 72000 76978 7416 July 7416 60000 0 60000 60000 61523 5893 August 5893 72000 6000 78000 78000 60512 23381 September 23381 54000 6000 60000 60000 61719 21662 October 21662 72000 0 72000 72000 68400 25262 November 25262 69000** 6000 75000 75000 73281 26981 December 26981 30000 45000 75000 75000 71910 30071 January 30071 30000 27000 57000 57000 75715 11356 February 11356 48000 27000 75000 75000 74983 11373 March 11373 63000 30000 93000 93000 96185 8188
*The AO has converted quantity of purchase/stock/sales in litres, but inadvertently, he has written units in Kilo Litre in the assessment order, but actually it should be ‘litre’. **In the assessment order, the AO has taken purchase of 75000 litres as per IOCL statement, whereas, correct quantity of purchase comes to 69000 litres. The closing stock and purchases as worked out above are tallied with the entries made in the books of account of the appellant. Diesel Month Opening Quantity Add: Purchases not Total Purchase as Sales Closing stock Purchased shown in the Purchase per books (Litre) Stock (Litre*) as per AO statement of IOCL (Litre) of account (Litre) (Litre) but mentioned in (Litre) purchase invoices
(Litre)
April 14353 96000 6000 102000 102000 99929 16424 May 16424 132000 18000 150000 150000 154226 12198 June 12198 108000 0 108000 108000 107305 12893 July 12893 36000 12000 48000 48000 50705 10188 August 10188 54000 0 54000 54000 40686 23502 September 23502 18000 6000 24000 24000 42745 4757 October 4757 108000 12000 120000 120000 99529 25228 November 25228 138000 15000 153000 153000 158896 19332 December 19332 159000 42000 201000 201000 184517 35815 January 35815 69000 30000 99000 99000 127135 7680 February 7680 105000 0 105000 105000 101256 11424 March 11424 78000 33000 111000 111000 114158 8266
*The AO has converted quantity of purchase/stock/sales in litres, but inadvertently, he has written units in Kilo Litre in the assessment order, but actually it should be ‘litre’. The closing stock and purchases as worked out above are tallied with the entries made in the books of account of the appellant. The AO should have carried out the above exercise in the course of remand report proceedings. On perusal of the above analysis/data, it can be said that the appellant has not inflated its purchases. All purchases are backed by invoices issued by IOCL, wherein, quantity and value have been shown. The necessary entries in the books of account/stock register have been made by the appellant. The sales have been made out of the genuine purchases made from the IOCL. In view of these facts, the AO has rejected books of account on incorrect premise which cannot be upheld. The deposits have been made out of genuine sales proceeds. Purchases have not been found inflated. Accordingly, the addition of Rs. 1,37,25,500/-, being cash deposit in the bank accounts does not come under the purview of unexplained cash deposit u/s 68 of the Act. Therefore, the above addition is hereby deleted. The appeal on the above grounds is allowed.
We further noted from the monthly details of purchase made by the assesse as well as the payments as reflected in the bank account statement of the assesse that the quantity of the purchase and Page 14 of 15
Pritiben Patel Page 15 of 15 corresponding payments are duly matched without any discrepancy whereas in the ledger account maintained by the IOCL the factual mistakes are apparent regarding the quantity of purchases as shown only 6 kl instead of 12 kl and in some cases it is shown only 3 kl or 9kl. Therefore, these quantities as shown in the IOCL statement are not even matching with the value shown in the same documents. Comparative chart as reproduced by the CIT(A) clearly manifest these factual mistake in the IOCL statement regarding the quantity of purchase and hence, the assessment order is entirely based on incorrect facts without verifying the correct details and the facts from the supporting documents being the invoices issued by the IOCL and corresponding purchase consideration paid by the assesse. Accordingly in the facts and circumstances of the case as discussed above we do not find any error or illegality in the impugned order of the Ld. CIT(A), same is upheld.
In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 30.08.2023.