DCIT-CC-6(1), MUMBAI, BKC, MUMBAI V. PRIYANKA COMMUNICATIONS (I) PRIVATE LIMITED, MUMBAI

ITA 1693/MUM/2025

AI Insights

The case revolves around an appeal by the Revenue against the decision of the CIT(A) which had deleted the additions made by the Assessing Officer (AO) under sections 69A and 69B of the Income Tax Act concerning unexplained cash and stock discrepancies found during a survey under section 133A. The AO had made these additions based on discrepancies between the cash and stock found during the survey and the records maintained by Priyanka Communications (I) Pvt. Ltd. The CIT(A) deleted these additions, stating that sections 69A and 69B apply only when there is excess cash and stock compared to the books, not when there is a deficit. The Tribunal upheld the CIT(A)'s decision, referencing a similar case where it was held that section 69A does not apply when cash in books exceeds physical cash, and section 69B does not apply when stock in books exceeds physical stock.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314092 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Other Referred Cases: CIT, Kanpur Vs. Kesarwani Sheetalaya (2019) 110 taxman.com 415 (All)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHETAN M. KACHA
• Assessee Lawyers: MURALI AGRAWAL
• Section: 131; 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL Mumbai “C” Bench, Mumbai. Before Shri Sandeep Gosain (JM) & Shri Omkareshwar Chidara (AM) ITA No. 1693/MUM/2025 (Assessment Year : 2020-21) DCIT-CC-6(1) Room No. 445 4th Floor, Bandra Kurla Complex, Bandra East Mumbai-400 051. Vs. Priyanka Communications (I) Pvt. Ltd. 143 Oshiwara Industrial Centre, Opp. Oshiwara Bus depot, New Link Road Goregaon West Maharashtra-400 104. PAN : AABCM4898C Appellant Respondent Assessee by : Shri Murali Agrawal Revenue by : Shri Chetan M. Kacha Date of Hearing : 21/04/2025 Date of pronouncement : 05/05/2025 O R D E R Per Omkareshwar Chidara (AM) :- In this above mentioned case, the Revenue filed appeal one two issues viz., unexplained cash under section 69A and discrepancy in stock under section 69B of the I.T. Act. As there are discrepancies in cash balance and stock found during survey action under section 133A of the Act compared to the books of account maintained by appellant company, the Ld. AO made additions under section 69A and 69B of the Act. Ld. CIT(A) deleted the additions stating that section 69A and 69B comes into play only when there is excess cash and excess stock compared to books of account. But, when there is deficit cash and deficit stock are found during survey operations, compared to the books of account, the above sections cannot be invoked to make additions under section 69A and 69B, adjudicated Ld. CIT(A). 2. Aggrieved by the deletion of the addition made by the Ld. AO, the Revenue filed an appeal before the ITAT with the following grounds :- Priyanka Communications (I) Pvt. Ltd. 2 i. \"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.8,39,075/- made by the AO u/s. 69A of the Act without appreciating the fact that the director of the assessee company admitted in its statement taken u/s. 131 during the survey action that discrepancy found between cash in hand and mentioned in books of account for the reason that the difference amount given to service engineers and other technicians and such type of expenses not be updated in books of account?\" ii. \"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.2,89, 13,713/- made by the AO without appreciating the fact that director of the assessee company admitted in his statement taken u/s. 131 during the survey action that the discrepancy found between physical availability of stock and mentioned in the books of account for the reasons that the remaining goods are stored in various godowns and asking time for filing the supporting documents in this regard but not submitted in the due course of proceedings\" 2. From the above grounds of appeal raised by the Revenue, it can be observed that there is no dispute with respect to the fact that there is deficit cash and deficit stock compared to the books maintained by the appellant company. Since this is the appeal filed by the Revenue, the Ld. DR has initiated the case and argued as follows :- a) The addition made by the Ld. AO under section 69A with respect to cash discrepancy found out during survey operation under section 133A was admitted by the appellant when a statement was recorded by the Department under section 131 of the Act. There is a deficit cash of Rs. 8,39,075/- compared to the books of account maintained by the appellant company and the Director of appellant company has stated that some money was given to service engineers and technicians and the books are yet to be updated and hence there is a difference between cash book balance and actual cash found during survey. But, the company has not reconciled the difference and hence addition under section 69A of the Act is correct. Priyanka Communications (I) Pvt. Ltd. 3 b) There is a deficit stock of Rs. 2,89,13,713/- compared to books of account and the Director of the appellant company has stated that this stock is kept in various godowns and asked time to reconcile the difference. But, the appellant company has not reconciled and hence addition under section 69B is correct. 3. The Ld. AR of the appellant company relied on the order of Ld. CIT(A) and argued that section 69A of the 69B will be applicable only when there is excess cash and excess stock, whereas in appellant’s case, there is deficit cash and deficit stock found during survey under section 133A and hence the additions made cannot be sustained and Ld. CIT(A) rightly deleted the additions. 4. Heard both sides. Section 69A of the I.T. Act reproduced for clarity as follows :- 69A. [Unexplained money, etc. [Inserted by Act 5 of 1964, Section 16 (w.e.f. 1.4.1964).] -Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. 5. From the above, it can be seen that if the appellant is found to be the owner of any money and the appellant offers no explanation about source of acquisition of money, then only section 69A of the Act comes into play. In this case, there is no dispute about availability of money and its source. In fact, more money is available in the books of account compared to the physical inspection by the Department and hence this section 69A is not applicable. In this regard, reliance is placed on the decision of CIT, Kanpur Vs. Kesarwani Sheetalaya (2019) 110 taxman.com Priyanka Communications (I) Pvt. Ltd. 4 415 (All), where Hon'ble High Court has held that where cash available in books of account is in excess compared to the physical cash available during inspection by authorities, then section 69A cannot applied and addition made under section 69A had to be deleted. Hence, the addition made by the Ld. AO under section 69A of the Act is deleted. 6. Similar is the case where addition made under section 69B of the Act with respect to deficit stock found compared to stock available as per books of account during the survey operations under section 133A of the Act, section 69B in this regard is worth reproduction as follows :- 69B. Amount of investments, etc., not fully disclosed in books of account. -Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. 7. From the above, it can be seen that under section 69B of the Act, addition can be made by the Ld. AO only when appellant made any investments and could not offer any explanations. In the present case, the investment in the form of stock is more as per books of account compared to physical inspection and hence no further explanation is required to be given about source of making investment in stock. As the stock available during survey operation under section 133A is less compared to book stock, the addition under section 69B of the Act cannot be sustained and hence the addition made by the Ld. AO in this regard is deleted. 8. The alternate argument of Ld. DR that the issue may be sent back to the Ld. AO to verify the discrepancies in stock and cash and take appropriate action as the appellant did not explain the discrepancies. Even here also, the Ld. DR was not specific as to what action can be taken Priyanka Communications (I) Pvt. Ltd. 5 by Department, if the matter is remitted back to the Ld. AO. Hence, this argument is devoid of merit and hence dismissed. 9. The appeal of Revenue is Dismissed. Order pronounced in the open Court on 05/05/2025. Sd/- Sd/- (SANDEEP GOSAIN) (OMKARESHWAR CHIDARA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 05/05/2025 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai PS "