2025 (8) TMI 43 - AT - Income Tax

Assessee's appeals allowed; additions under sections 68, 69A, and 115BBE deleted due to sufficient documentation and explanations

ACIT, Circle-2, Pune Versus Bhikshu Granimart

The ITAT Pune allowed the appeals of the assessee against additions made by the AO. The tribunal held that the assessee had furnished sufficient details ... Addition of purchases - AO has alleged that the assessee did not produce the books of account / bills / vouchers for verification and has also alleged that no details were forthcoming from the side of the assessee - HELD THAT:- From the various details furnished in the paper book by the assessee we find that the assessee has filed the requisite details before the Assessing Officer from time to time. The assessee has filed the details of purchases, details of sales along with invoices etc. Assessee has filed the details of sundry creditors exceeding Rs. 1 lakh and list of parties for expenses exceeding Rs. 1 lakh during the year with names / full addresses / PAN etc. The various other details furnished before the AO are also given in the paper book. AO without pointing out any defect in the books of account, has made an adhoc addition of Rs. 1 crore. Further, the assessment orders for assessment years 2013-14 to 2015-16 which were passed u/s 143(3) of the Act show that no additions were made out of purchases. The GP and NP rates declared by the assessee for the impugned assessment year are also higher than the past four years. Under these circumstances, without pointing out any defect in the various details furnished by the assessee, addition of lump sum amount of Rs. 1 crore made by the AO in our opinion, is not justified. Decided in favour of assessee. Addition u/s 68 r.w.s.115BBE - It is an admitted fact that as on 31.03.2016 an amount of Rs. 5 lakhs is shown in the name of Ashish Madan Mutha as “advances from customers”. This amount of Rs. 5 lakhs has been transferred to loan account through journal entry and after receiving another amount of Rs. 20 lakhs from Ashish Madan Mutha, the assessee has shown receipt of Rs. 25 lakhs. Since the assessee has erroneously shown this loan of Rs. 5 lakhs received in the preceding year as advance received from customers but rectified the same in the subsequent year through a journal entry, therefore, we do not find any infirmity in the order of the Ld. CIT(A) / NFAC deleting the addition. Decided in favour of assessee. Addition u/s 69A - as argued assessee has sufficient cash balance on the date when the deposits were made - HELD THAT:- Admittedly the assessee has filed number of documentary evidences during the course of assessment proceedings explaining the source of such deposits which is out of the cash sales. Further, the total cash sales during the year roughly 1.67% of the total turnover shown by the assessee. Since the assessee has produced the cash book, sales registers and monthly VAT returns during the course of assessment proceedings and the cash withdrawals of Rs. 7,60,000/- has been explained with the help of cash book and bank book which were produced during the course of assessment proceedings, therefore, we do not find any infirmity in the detailed order of the CIT(A) / NFAC accepting cash deposit of Rs. 40 lakhs being out of opening balance, cash sales and cash withdrawals which were subsequently deposited. Decided in favour of assessee. ISSUES: Whether the deletion of disallowance of Rs. 1 crore made on purchases/expenses due to alleged non-production of supplier details and books of accounts was justified.Whether the deletion of addition of Rs. 5 lakhs made under section 68 r.w.s. 115BBE on discrepancy in unsecured loan confirmation was justified.Whether the deletion of addition of Rs. 40 lakhs made under section 69A on unexplained cash deposits during demonetization period was justified.Whether the admission and reliance on certain evidences by the appellate authority contravened the provisions of Income-tax Rules 46A(1), 46A(2), 46A(3) r.w.s. section 251 of the Income-tax Act, 1961. RULINGS / HOLDINGS: The disallowance of Rs. 1 crore was deleted as the assessee had furnished detailed purchase registers, ledger extracts, invoices, and other supporting documents before the Assessing Officer, and no defect in books of account was pointed out; the addition was held to be an arbitrary lump sum disallowance without scientific basis.The addition of Rs. 5 lakhs under section 68 r.w.s. 115BBE was deleted since the discrepancy arose from a journal entry rectifying an earlier erroneous classification of Rs. 5 lakhs as advance from customers, which was properly accounted for in the subsequent year.The addition of Rs. 40 lakhs under section 69A was deleted as the assessee produced sufficient documentary evidence including cash book, sales ledger, VAT returns, and explained cash withdrawals; the cash deposits during demonetization were held to be from legitimate sources comprising opening cash balance, cash sales (1.67% of turnover), and cash withdrawals.The appellate authority did not admit any additional evidence beyond the record before the Assessing Officer; hence, no violation of Rules 46A(1), 46A(2), 46A(3) r.w.s. section 251 was found. RATIONALE: The Court applied the statutory provisions under the Income-tax Act, 1961, including sections 68, 69A, 115BBE, 143(3), 142(1), and 133(6), and procedural rules under Income-tax Rules 46A and section 251. The Court emphasized the onus on the assessee to substantiate claims but also noted that no adverse findings were recorded on the books of account or documentary evidence produced.The Court relied on the principle that lump sum disallowances without detailed analysis or scientific basis are arbitrary and unjustified, especially when books of accounts are audited and no discrepancies are found in prior years.The Court recognized that rectification of accounting errors through journal entries is a valid explanation for discrepancies in loan amounts under section 68.The Court acknowledged that cash deposits during demonetization require examination of source and that legitimate cash sales and opening balances supported by documentary evidence can explain such deposits, negating unexplained money additions under section 69A.No doctrinal shift or dissent was recorded. The Court upheld the appellate authority's detailed appreciation of facts and evidence, rejecting Revenue's contention of procedural violations or non-compliance with evidentiary rules.