BABULAL PRASAD SUJIT KUMAR,MUZAFFARPUR V. ACIT, CENTRAL CIRCLE, MUZAFFARPUR

ITA 276/PAT/2022

AI Insights

The case involves Babulal Prasad Sujit Kumar, an individual engaged in the trading of gold, silver, and diamond ornaments, who appealed against the orders of the Assessing Officer and the CIT(Appeals) concerning additions made to his income for the Assessment Year 2018-2019. The additions were based on the discrepancies noted during a survey conducted at the assessee's premises, which included unexplained advances from customers and excess cash found. The Tribunal examined whether these advances were trade-related and if the cash discrepancies were justifiably added to the assessee's income. The Tribunal's decision was influenced by precedents that trade advances should not be treated as unexplained cash credits and the principle that mere non-production of documents at the time of survey does not automatically justify additions to income.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473185 (ITAT-PATNA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Other Referred Cases: Shri Sanjay Agarwal -vs.- ITO, Siliguri, Crystal Networks (P) Limited -vs.- CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Unexplained cash credit
• Section: 68; 69A

Judgement Text

" ITA No. 276/PAT/2022 (A.Y. 2018-2019) Babulal Prasad Sujit Kumar 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA-PATNA ‘e-COURT’, KOLKATA [Hybrid Court Hearing] Before Shri Duvvuru RL Reddy, Vice-President (KZ) I.T.A. No. 276/PAT/2022 Assessment Year: 2018-2019 Babulal Prasad Sujit Kumar,……………….…Appellant Purani Bazar, Muzaffarpur-842001, Bihar [PAN:AALFB9242J] -Vs.- Assistant Commissioner of Income Tax,.….Respondent Central Circle-Muzaffarpur, Chabdralok Bhawan, Near Chandralok Market, Naya Tola, Muzaffarpur-842002, Bihar Appearances by: Shri A.K. Rastogi, Sr. Advocate and Shri Rakesh Kumar, Advocate, appeared on behalf of the assessee Shri Ashwani Kr. Singal, JCIT, appeared on behalf of the Revenue Date of concluding the hearing: November 26, 2024 Date of pronouncing the order: December 30, 2024 O R D E R The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), Patna-3 dated 30th June, 2022 passed for Assessment Year 2018- 19. 2. Brief facts of the case are that the assessee is an individual, who derives income from trading of ornaments of gold, silver and ITA No. 276/PAT/2022 (A.Y. 2018-2019) Babulal Prasad Sujit Kumar 2 diamonds, imitation jewellery and allied items. A survey was conducted on 27.02.2018 i.e. at the fag end of financial year 2017- 18 corresponding to assessment year 2018-19. During the course of survey proceedings, books of account were not found and the same was lying with the part-time Accountant, who was out of station on the date of survey. Subsequently the books of account were produced during the post-survey enquiry i.e. on 03.07.2018. The return of income was filed on 30.12.2018 along with audited set of accounts. The assessee has also submitted the trading account during the period from 01.04.2017 to 27.02.2018 (date of survey). During the course of survey, stock and cash found were inventorized. However, the ld. Assessing Officer has made three additions, i.e. (i) difference between stock inventorized vice-versa stock as per books of account, (ii) advance from customers and (iii) excess cash, which were for an amount of Rs.12,24,240/-, Rs.11,45,414/- and Rs.5,03,565/- respectively. Aggrieved by the order of ld. Assessing Officer, the assessee preferred an appeal before the ld. CIT(Appeals) and after considering the submissions made by the assessee, the ld. CIT(Appeals) dismissed the appeal filed by the assessee. 3. On being aggrieved, the assessee filed this appeal before the Tribunal. 4. The appellant has not disputed the normal difference in stock sustained by the ld. CIT(Appeals) before the Tribunal. The two additions sustained by the ld. CIT(Appeals) are in dispute before the Tribunal and raised the following grounds:- ITA No. 276/PAT/2022 (A.Y. 2018-2019) Babulal Prasad Sujit Kumar 3 (i) That on the facts and circumstances of the case, the ld. CIT(Appeals) has erred in sustaining the addition of Rs.11,45,414/- made by the Assessing Officer treating the advances having been received from the customers as “unexplained” under section 68 of the I.T. Act, 1961. (ii) That on the facts and circumstances of the case, the CIT(Appeals) has erred in sustaining the addition of Rs.5,03,565/- being the difference between the cash found on the date of survey amounting to Rsa.7,36,950/- minus sales made in cash estimated on ad hoc basis at Rs.2,33,385/- ignoring the fact that cash balance on any particular day is the resultant of cash transactions made upto that date. (iii) That on the facts and circumstances of the case, the CIT(Appeals) has erred in sustaining the addition of Rs.5,03,565/- made by the Assessing Officer who had treated the said amount out of Rs.7,36,950/- as ‘unexplained’ money u/s 69A of the I.T. Act, 1961. (iv) For that the appellant craves leave to add, alter, modify, vary, delete any ground of appeal before or at the time of hearing, if necessary. 5. It was the submission of the assessee before the Tribunal that the assessee deals in gold and silver jewellery ornaments and fashionable items. Sometime the customers have placed specific design for the ornaments and against the order, they have paid the advances. He further submitted that the ledger account of the concerned parties showing the receipts of advances and adjustment of the said advances against the sales made subsequently by bills for the assessment year 2019-20. He further submitted that the advances received by the assessee could not be treated as unexplained cash credit. The ld. Counsel for the assessee also relied on the decision dated 7th June, 2019 of ITAT, Kolkata in ITA No. 2463/KOL/2018 in the case of Shri Sanjay Agarwal -vs.- ITO, Siliguri and also the judgment of the Hon’ble ITA No. 276/PAT/2022 (A.Y. 2018-2019) Babulal Prasad Sujit Kumar 4 Jurisdictional High Court in the case of Crystal Networks (P) Limited -vs.- CIT in ITA No. 158 of 2002 dated 29th July, 2010, wherein it was clearly held that “trade advances received by the assessee not be treated as unexplained cash credits”. The ld. Counsel for the assessee further submitted that ld. Assessing Officer erroneously made an addition of Rs.5,03,565/- on account of difference of cash found of Rs.7,36,950/-. He further submitted that the copy of cash book on the date of survey was not submitted since the same was with part-time Accountant, who was on leave on that day. But as per copy of cash book, there is no such excess cash, but the ld. Assessing Officer erroneously made an addition of Rs.5,03,565/-. Subsequently the same was proceeded before the ld. CIT(Appeals). Therefore, he pleaded to set aside the orders passed by the ld. Assessing Officer as well as by the ld. CIT(Appeals). 6. On the other hand, it was the submission of the ld. D.R. that the assessee failed to produce the details of persons, who paid the trade advances to the assessee. He further submitted that on the date of survey, there was difference of cash as per books of accounts. Therefore, the ld. Assessing Officer made the addition of Rs.5,03,565/- and the same was confirmed by the ld. CIT(Appeals). Ld. D.R., therefore, pleaded to confirm the orders passed by the revenue authorities. 7. I have heard both the sides and perused the material available on record. It is an admitted fact that the assessee was doing the business of gold, silver and diamond jewellery and also ITA No. 276/PAT/2022 (A.Y. 2018-2019) Babulal Prasad Sujit Kumar 5 fashionable ornaments. The main contention of the assessee is that the customers whenever place the order for specific design of ornaments, against the said order they have to pay some advances to the assessee. All the advances were shown in the ledger accounts of the concerned parties showing the receipt of advances and adjustment of the said advances against sales made in subsequent financial year. Therefore, the strong contention of the assessee is that it is nothing but a trade advance received by the assessee, it could not be treated as unexplained cash credit. To establish the said fact, the assessee also furnished the sales, which were made in the subsequent assessment year. The assessee also relied on the decision of the Hon’ble Jurisdictional High Court in the case of Crystal Networks (P) Limited -vs.- CIT in ITA No. 158 of 2002 dated 29th July, 2010, wherein it was clearly held that advances received by the assessee being trade advance, a very nature of activity of the assessee and the same having been adjusted against the sales made to the concerned parties. The said advances could not be treated as unexplained cash credits under section 68 of the Income Tax Act. Therefore, considering the facts and circumstances of the case, I am of the firm view that it is nothing but trade advances given by the creditors/customers were adjusted against the sales of products made by the assessee subsequently to the concerned creditors/customers. The ld. CIT(Appeals) as well as ld. Assessing Officer have not considered the subsequent adjustment of the sales of products made by the assessee and erroneously made the trade advances as unexplained cash credits and added the same to the total income of the ITA No. 276/PAT/2022 (A.Y. 2018-2019) Babulal Prasad Sujit Kumar 6 assessee, which is not sustainable in the eyes of law. Therefore, the ground raised by the assessee is allowed. 8. So far as the difference of cash found during the course of survey is concerned, the main contention of the assessee is that on the date of survey, cash book was not available and subsequently the assessee produced the same before the ld. Assessing Officer, ld. CIT(Appeals) as well as before the Tribunal. However, on perusal of the cash book, I do not find any difference of cash found in the course of survey vis-à-vis the sales, but the only contention of ld. Assessing Officer is that as on the date of survey, the assessee has not produced the cash book, but merely non-production of cash book is not a valid ground to make an addition saying that the excess cash was found. Therefore, I direct the ld. Assessing Officer to delete the addition on account of difference of cash found during the course of survey proceedings. Hence, the ground raised by the assessee is allowed. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 30/12/2024. Sd/- (Duvvuru RL Reddy) Vice-President (KZ) Kolkata, the 30th day of December, 2024 ITA No. 276/PAT/2022 (A.Y. 2018-2019) Babulal Prasad Sujit Kumar 7 Copies to :(1) Babulal Prasad Sujit Kumar, Purani Bazar, Muzaffarpur-842001, Bihar (2) Assistant Commissioner of Income Tax, Central Circle-Muzaffarpur, Chabdralok Bhawan, Near Chandralok Market, Naya Tola, Muzaffarpur-842002, Bihar (3) Commissioner of Income Tax (Appeals); Patna-3; (4) CIT - ; (5) The Departmental Representative; (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. "