DIGENDRAKUMAR MOHANBHAI PATEL,SURAT V. INCOME TAX OFFICER, WARD-2, BARDOLI

ITA 135/SRT/2024

AI Insights

The case involves Digendrakumar Mohanbhai Patel, an authorized dealer of Indian Oil Corporation Limited, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, which confirmed the addition of Rs.14,41,189 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was taxed at an enhanced rate of 60% under section 115BBE. The assessee argued that the addition was unjustified as all sales were recorded and supported by various documents including the stock register maintained by Mamlatdar. The ITAT found that the discrepancies noted by the Assessing Officer were due to the timing of entries and not due to any inflation of sales. The Tribunal also found that the application of section 115BBE was incorrect as the addition was related to business activities.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 33911 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-10-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 07-02-2024
• Other Referred Cases: Samir Shantilal Mehta vs. ACIT, ITA No.42/SRT/2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: SAPNESH SHETH
• Keywords: Unexplained cash credit
• Section: 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT (SMC) BENCH BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 135/SRT/2024 for AY: 2017-18 (Physical hearing) Digendrakumar Mohanbhai Patel, ATN – Post Andhatri, Tal – Valod, Dhamaniya Andhatri, Surat – 394630, Gujarat PAN : AKXPP7317A Vs The ITO, Ward – 2, Bardoli APPELLANT RESPONDEDNT Appellant by Shri Sapnesh Sheth, CA Respondent by Shri Mukesh Jain, Sr. DR Date of Institution 07/02/2024 Date of hearing 03/10/2024 Date of pronouncement 03/10/2024 Order under Section 254(1) of Income tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by assessee is directed against the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (in short ‘the NFAC’), Delhi, dated 11.12.2023 for Assessment Year (AY) 2017- 18. The assessee has raised following grounds of appeal: “1. On the facts and circumstances of the case as well as on the subject, the learned CIT(A), NFAC has erred in confirming the action of assessing officer in making addition of Rs.14,41,189/- by treating cash deposit as unexplained cash credit u/s 68 of the I.T. Act, 1961. 2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals), NFAC has erred in confirming the action of assessing officer in invoking provisions of section 115BBE of the Act and in thereby taxing the addition at 60% & levying surcharge at 25% which is not applicable on above amount. 3. It is therefore prayed that above addition made by Income-tax (Appeals) may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of appeal.” ITA No.135/SRT/2024/AY.2017-18 Digendrakumar Mohanbhai Patel 2 2. Rival submissions of the parties have been heard and record perused. The learned Authorized Representative (ld. AR) for the assessee submits that assesse is an authorized dealer of Indian Oil Corporation Limited (IOCL) and having its dealership name M/s Ma Umiya Petroleum. The assessee filed his return of income for AY.2017-18, declaring total income of Rs.9.62 lakhs and agricultural income of Rs. 9,230/-. The case of the assessee was selected for scrutiny. During assessment, the assessee furnished complete details as and when required by Assessing Officer along with relevant supporting documents on account of sales as well as cash deposits during the demonetization period. The Assessing Officer noted that there is a variance in the figure of sale of cash book and the sale data furnished by assessee and on the basis of his observation issued a show cause notice as to why a difference of sales of Rs.14,41,189/- should not be treated as cash credit. The assessee is an authorized dealer of petroleum product and was allowed to accept old currency note / specified bank note of Rs.500/- and Rs.1,000/- currency notes during demonetization. The entire sales were recorded in the books of assessee. Despite substantiating the sale recorded in his register and as per stock register, the Assessing Officer added Rs.14,41,189/-. The assessee is also assessed under the provision of Value Added Tax (VAT) and filed return under Value Added Tax Act. No discrepancies in such return were found by concerned authority. The Assessing Officer taxed the addition u/s 115BBE of the Act. Provision of section 115BBE is not applicable for the impugned assessment order as has been held by division bench of this Tribunal in the series of decisions. The ITA No.135/SRT/2024/AY.2017-18 Digendrakumar Mohanbhai Patel 3 Ld. AR submits that no addition is liable to be sustained. In alternative submission, the Ld. AR of the assessee submits that to avoid the long drown litigation and possibility of revenue leakage ad hock disallowances may be made. Though, the assessee has submitted all details about sale during the relevant period. 3. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) of the Revenue supported the order of lower authorities. The ld. Sr. DR submits that all the submissions of assessee was duly considered by Assessing Officer as well as by Ld. CIT(A). The Assessing Officer made addition on the basis of difference vis-à-vis the sale registered and the sales as per stock register of Mamlatdar shown by the assessee. 4. In rejoinder submission, the Ld. AR submits that sometime this stock register maintained by Mamlatdar is not updated. However, fact remained the same, there was no discrepancies in the purchase register and the sale register. The Mamlatdar is maintaining such sales as petroleum product are essential commodities. 5. I have considered the submission of both the parties and have gone through the orders of lower authorities carefully. I find that during the assessment, the Assessing Officer noted that during the demonetization period till 02.12.2016, the assessee made cash deposit of Rs.1.15 crore in his bank account. To substantiate cash deposit, the assessee furnished purchase register, sale register, cash book and the stock register with Mamlatdar stock register for whole of the assessment year. The Assessing Officer on the basis of Mamlatdar stock register found that there were ITA No.135/SRT/2024/AY.2017-18 Digendrakumar Mohanbhai Patel 4 certain discrepancies on various dates in November, 2016. The Assessing Officer prepared such summary of difference in para 7 of his order and recorded that there is difference in the sale register and the sale reported as per Mamlatdar stock register. Such sale is inflated to show cash balance in cash book. On the basis of such observation, the Assessing Officer was of the view that assessee inflated his sale of Rs.14,41,189/-. The Assessing Officer added such difference under section 68 of the Act while passing assessment order. The Assessing Officer accordingly treated such difference as an unexplained cash credit, and taxed the same u/s 115BBE of the Act at the enhanced rate of 60%. 6. Before Ld. CIT(A), the assessee made detailed submission as recorded in para 4.2 of the order. The assessee reiterated all his submission as before Ld. CIT(A). The assessee also submitted that vide submission dated 24.12.2019, the assessee furnished complete reconciliation of sale, but the Assessing Officer not accepted such reconciliation by taking view that such cash book is not reliable. During assessment, the assessee furnished audit report, sale and purchase register, reconciliation statement, day-wise stock from 01.10.2016 to 31.01.2017, cash deposit during demonetization period, bank statement, stock register with VAT return. The assessee further submitted that assessee having turnover of Rs.12.34 crore, out of which 24% of diesel and remaining from petrol. During the demonetization period, majority of sales was in cash so generated huge cash. The assessee made payment against purchases through cheques only. Though, the majority of sale generated by cash, during the relevant period of e-payment / online ITA No.135/SRT/2024/AY.2017-18 Digendrakumar Mohanbhai Patel 5 payments were not developed in such scenario. There is no inflation of sale or discrepancy in the figure of sale. The assessee also relied upon certain case laws. 7. The Ld. CIT(A) on considering the submission of assessee held that assessee has not made any submission to justify that how the Assessing Officer is wrong and passing the assessment order. Onus is on the assessee to establish the genuineness of the transaction and that he has not discharged his onus. Thus, Ld. CIT(A) also concur with the finding of Assessing Officer on taxing the addition u/s 115BBE, the Ld. CIT(A) held that as addition is made u/s 68 of the Act, thus, the assessee is liable to pay consequence taxes. 8. I find that apart from stock register of Mamlatdar, the assessee relied on various documents which includes audit report as well as purchase register, reconciliation statement, day-wise sales detail and cash deposit during demonetization period. The assessee also furnished closing stock summary and VAT return. No discrepancy was pointed in any of such documents. The sole ground of addition is on account of certain discrepancies as in the month of November, 2016. I find that negative cash balance recorded by Assessing Officer may be because of intervening period of particular date vis-à-vis the credit and debit entry on the same day. However, the overall stock of purchase and sale is not a dispute. Thus, considering overall facts and circumstances in my view a reasonable and ad hoc estimation of addition would be sufficient to avoid the possibility of revenue leakage. Thus, keeping in view all facts and circumstances of the case 10% of total ITA No.135/SRT/2024/AY.2017-18 Digendrakumar Mohanbhai Patel 6 addition of Rs.14,41,189/- would be sufficient to avoid the possibility of revenue leakage. Therefore, the addition made by Assessing Officer is restricted to Rs.1,44,118/-. In the result, Ground No.1 of the appeal is partly allowed. 9. So far as the taxing of addition u/s 115BBE of the Act is concerned, I find that Division Bench of this Tribunal in a series of decisions including in case of Samir Shantilal Mehta vs. ACIT, ITA No.42/SRT/2022 has already held that provision of section 115BBE of the Act is not applicable for AY.2017-18. Furthermore, the addition is made out of business activities, therefore such addition cannot be taxed u/s 115BBE of the Act. In the result, Ground No. 2 of the appeal raised by the assessee is allowed. 10. In the result, the appeal filed by the assessee is partly allowed. Order pronounced on 03/10/2024 in the open court. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 03/10/2024 SAMANTA Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr.PS/PS, ITAT, Surat "