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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU RL REDDY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
Per contra, the Ld. DR questioned the argument of the Ld. AR that since the goods are of perishable nature how the stock was held for a period of more than two years. The Ld. DR also relied on the order of the Ld. AO where there are no purchases made for a long period. The Ld. DR pointed out that in para 6 of the assessment order, the Ld. AO has extracted purchase ledger of the assessee clearly evidencing that there are no purchases after March, 2003 till March, 2004. The Ld. DR also confronted that no regular cash book was produced before the Ld. AO and the Ld.AO therefore relied on the rough cash book seized during the search operations. The Ld. DR also referred to para 7.1 of the order of the Ld. CIT(A) and submitted that the authorized representative of the assessee has not appeared before the Ld. CIT(A) irrespective of the fact that the case was posted on various dates.
We have heard both the sides and perused the material available on record and the order of the authorities below. We find from the arguments of the Ld. AR that since the accounts have been subjected to audit U/s. 44AB and the return of income filed by the assessee disclosing the cash sales and it has been accepted by the Ld. AO. The Ld. AR has also filed the computation of total income and the Income Tax return filed by the assessee, duly disclosing the profits as per the P & L Account, admitted by the AO. We find no merit in the argument of the Ld. DR that there were no sufficient purchases during the period when the sales made by the assessee has been accepted by the AO. The sales can be either made from the opening stock maintained by the assessee or from purchases made by the assessee. In the instant case, the Ld. AO has not disputed the fact that the assessee had opening stock, but confronted that there are no purchases, but has accepted the sales shown in the P & L Account for the year ended on 31/3/2005. The AO also failed to establish on how the sales were made, when there is no opening stock or purchases. The Ld. AR also submitted in the paper book, the detailed cash book for the period from April
2004 to March 2005 which was subjected to audit which was available on record during the search and seizure operations. From the submissions made by Ld AR, we understand that it was not seized by the Department. The AO simply placed reliance on the rough cash book which was not subjected to audit. The Ld. AO has merely relied on the rough cash book seized during the search operation but has failed to appreciate about the existence of the cash book which was subjected to audit. We therefore find no merit in the arguments of the Ld. DR that the peak negative cash balance in the rough cash book for Rs. 2,09,15,776/- should be treated as unexplained money U/s. 69A of the Act. We also gone through the reply reproduced in para 10.6 of the AO’s order, which is extracted below:
“10.6. Sri RVK Prasad, Partner of assessee firm was asked to explain the negative cash balances and his reply vide statement dated 14/12/2007 is reproduced below: Q.4. The cash book which is maintained in computer and seized for the financial year 2004-05 in the case of SBC Marine Exports indicates negative cash balances. In the month of March, 2005, the opening negative cash balance was Rs. 96,56,676/-. On 5th March, 2005, it was Rs. 1,06,50,676/-. On 9th March, 2005 the negative cash balance was Rs. 1,16,50,676/- and on 29th March, 2005 the peak negative cash balance was Rs. 2,09,15,776/-. Please explain why it shall not be treated as unexplained cash in accordance with the provisions of Income Tax Act. A. It is a draft cash book maintained by the cashier roughly. But actual cash book prepared was given and Income Tax return was accordingly filed within due date with the Department. We have also given the cash book and ledger pertaining to FY 2004-05 during the search proceedings.”
It is pertinent to note here that the cash book was prepared, audited and the return of income was filed accordingly. The assessee has also produced the cash book during the search operation which was not seized during the search operations should not give raise to the suspicion that the assessee has not maintained actual cash book. We therefore find no merit in the argument of Ld DR and consequently, we allow the appeal of the assessee with respect to ground No.3.
Ground No.1 and 4 are general in nature and they need not be adjudicated. Since the appeal is allowed, Ground No.2 raised by the assessee becomes infructuous.
In the result, appeal of the assessee is allowed.
Pronounced in the open Court on the 30th May, 2022.