2023 (10) TMI 302 - AT - Income Tax

Tribunal directs AO to verify sales, cash deposits with proper docs, reconsider GP addition

Mr. Girdhari Lal Meena Versus ITO, NFAC, Delhi

Mr. Girdhari Lal Meena Versus ITO, NFAC, Delhi - TMI Issues Involved:1. Legality of Addition by AO and CIT(A).2. Addition of Rs. 86,90,500/- as unexplained cash deposits.3. Trading addition based on comparative Gross Profit.4. Application of Section 115BBE for higher tax rate.5. Mechanical confirmation of addition by CIT(A), NFAC.6. Request to add, amend, or alter grounds of appeal.Summary:Issue 1: Legality of Addition by AO and CIT(A)The assessee contended that the action of the AO in making the addition and the CIT(A), NFAC in confirming it is 'absolutely illegal and unjustified.' The Tribunal noted that the AO had rejected the assessee's books of accounts under Section 145(3) due to non-compliance and absence of books of accounts, bills/vouchers for verification.Issue 2: Addition of Rs. 86,90,500/- as Unexplained Cash DepositsThe AO added Rs. 86,90,500/- as unexplained cash deposits under Section 68, noting that the assessee failed to explain the source of cash deposited during the demonetization period. The assessee argued that the deposits were from sales of petrol/diesel, supported by cash book, bank statements, VAT returns, and stock registers. The Tribunal found that the assessee had submitted sufficient evidence like cash book and VAT returns, but the AO had not adequately considered these. The Tribunal remanded the issue back to the AO for verification of sales vis-à-vis generation of SBN with documentary evidence.Issue 3: Trading Addition Based on Comparative Gross ProfitThe AO made a trading addition of Rs. 4,60,052/- based on a decline in Gross Profit (GP) ratio compared to the preceding year, invoking Section 145(3). The Tribunal noted that the assessee's business involved predetermined prices and commissions, leaving no scope for manipulating GP. The Tribunal found no defects in the audited books of accounts and deleted the GP addition, stating that the AO's action was not justified.Issue 4: Application of Section 115BBE for Higher Tax RateThe AO applied a 60% tax rate under Section 115BBE for AY 2017-18, which the assessee argued was not applicable retrospectively. The Tribunal did not specifically adjudicate this issue, as it was consequential to the main issues.Issue 5: Mechanical Confirmation of Addition by CIT(A), NFACThe assessee argued that the CIT(A) mechanically confirmed the AO's addition without proper consideration. The Tribunal noted that the CIT(A) had dismissed the appeal without considering the adjournment request and additional evidence submitted by the assessee. The Tribunal directed the AO to verify the sales and cash deposits with proper documentation.Issue 6: Request to Add, Amend, or Alter Grounds of AppealThe Tribunal did not specifically address this issue, as it was a general request for procedural flexibility.Conclusion:The Tribunal allowed the appeal for statistical purposes, directing the AO to verify the sales and cash deposits with proper documentation and to reconsider the GP addition. The Tribunal found the AO's rejection of books and addition of unexplained cash deposits to be unjustified based on the evidence submitted by the assessee.