2013 (9) TMI 529 - AT - Income Tax

Tax Tribunal directs fresh review of cash balance discrepancies & investment issues, partially allowing appeals.

The Tribunal found that the lower authorities did not properly address the issues related to discrepancies in cash balances, treatment of transactions, ... Addition of Opening Excess Cash - Held that:- If there is some recording mistakes and if this fact is found to be correct, the same has to be considered and adjusted - There is no absolute rule that the opening balance of a year only has to be taken as a gospel truth even when it is due to mistaken accountancy - the issue has not been properly dealt with by the authorities below - Therefore, we restore this issue to the file of the Assessing Officer with a direction that he shall properly consider the above reply of the assessee and after giving plausible reasoning decide this issue afresh - He will not summarily reject the same. In case the contention of the assessee is found to be correct, the same has to be considered in correct perspective - Needless to mention, that he will give opportunity of being heard to the assessee - Hence this ground is allowed for statistical purposes –Decided in favour of Assessee. Treatment of Transactions - Actual Expenses OR Speculative Transaction - Held that:- There is enough proof qua the possession of biscuits - As to who brought these biscuits and what was the mode of travel is not of much relevance for this matter. The bill proves purchase of the biscuits. The non-recording of this purchase in the books on the date of survey also stands explained - The assessee has explained, through his elder brother [the manager] from the time of survey, the procurement of these ten biscuits. He has also given the source of purchase of these ten biscuits. He has also given the source of the purchase amount. Transactions Recorded in the 'Order Book' – Held that: -The A.O. has not properly dealt with these issues – all the issues were restored to the file of the A.O. for de novo consideration - This issue is the subject-matter of all the remaining grounds of assessee's appeal and the sole ground of revenue's appeal - Neither the A.O. nor the ld. CIT(A) had articulated the issues and have not given their clear-cut finding - The issues have been so jumbled and mixed up that it is impossible to cull out clearly full and final facts of the case. Issues Involved:1. Addition of excess cash amounting to Rs. 24,000.2. Treatment of transactions recorded in the 'Note Book' as actual purchases and sales of gold biscuits and silver.3. Application of the theory of peak investment on speculative transactions.4. Estimation of Gross Profit (G.P.) involved in the sale transactions.5. Set-off of regular cash balance from peak undisclosed investment.6. Set-off of unexplained investments in gold and silver ornaments.7. Reduction of addition made by the A.O. on account of undisclosed investment in bullion business.Detailed Analysis:1. Addition of Excess Cash (Rs. 24,000):The issue revolves around a discrepancy of Rs. 24,000 in the opening cash balance found during a survey. The assessee explained that the difference was due to an accounting error where the salary was wrongly debited. The Tribunal found that the issue was not properly dealt with by the lower authorities and restored it to the Assessing Officer (A.O.) for fresh consideration, instructing the A.O. to properly consider the assessee's explanation and decide the issue afresh.2. Treatment of Transactions in the Note Book:The transactions recorded in the note-book were treated by the A.O. as actual purchases and sales of gold and silver, while the assessee claimed them to be speculative transactions. The Tribunal noted that the A.O. did not properly address the issue and restored it for de novo consideration, directing the A.O. to reassess the nature of these transactions.3. Theory of Peak Investment on Speculative Transactions:The A.O. applied the theory of peak investment on the speculative transactions noted in the order book. The Tribunal found that the A.O. did not properly articulate the issues and mixed up the facts, making it impossible to clearly understand the case. Therefore, the Tribunal restored the issue to the A.O. for fresh computation and a clear-cut finding.4. Estimation of Gross Profit (G.P.):The A.O. estimated the G.P. involved in the sale transactions at 2% for both gold and silver bullion. The assessee contested this estimation. The Tribunal noted that the issue was not properly articulated and restored it to the A.O. for fresh consideration and a speaking order.5. Set-off of Regular Cash Balance:The assessee claimed a set-off of the regular cash balance of Rs. 797,209 from the peak undisclosed investment of Rs. 1,507,500. The Tribunal found that the issue was not properly addressed and restored it to the A.O. for fresh consideration.6. Set-off of Unexplained Investments:The assessee sought a set-off of unexplained investments in gold ornaments (Rs. 79,450) and silver ornaments (Rs. 171,278) from the computed peak investment. The Tribunal restored this issue to the A.O. for fresh consideration, directing a proper examination and decision.7. Reduction of Addition on Undisclosed Investment in Bullion Business:The revenue contested the reduction of the addition made by the A.O. on account of undisclosed investment in the bullion business from Rs. 31.08 lakhs to Rs. 15.07 lakhs by the CIT(A). The Tribunal noted that the lower authorities did not give a clear finding and restored the issue to the A.O. for fresh consideration and a detailed, speaking order.Conclusion:The Tribunal found that the issues were not properly dealt with by the lower authorities and restored all the issues to the A.O. for fresh consideration. The A.O. was directed to pass a speaking order on each issue, providing clear findings and reasoning. The appeals were partly allowed for statistical purposes, and the entire appeal of the revenue was restored to the A.O.'s file with the direction to provide an opportunity of being heard to the assessee as per law.