Omission in mentioning name of lender in the audit report no basis to discard cogent documentary evidence – ITAT
In a recent judgment, ITAT Agra has held that any omission in mentioning the name of lender/payee in the tax audit report cannot be made basis to discard assessee’s cogent documentary evidence.
ABCAUS Case Law Citation:
4763 (2025) (10) abcaus.in ITAT
In the instant case, the Revenue had challenged the order passed by the Commissioner of Income-tax (Appeals), NFAC in deleting the addition made by the Assessing Officer (AO) towards unexplained credits u/s 68 of the Income Tax Act, 1961 (the Act).
The respondent assessee ran a proprietary business which dealt in scrap trading of ferrous and non-ferrous metals. The case was selected for compulsory scrutiny under CASS with the reason – “Low income from TCS receipts – Scrap”.
Statutory notices were issued and served upon the assessee. The AO observed that total credits in the bank account were much more than the amount received as loan, sales after adjusting sundry debtors. Hence, he showcaused the assessee proposing to treat the said difference in receipts as unexplained credits and accordingly brought to tax u/s. 68 r.w.s. 115BBE of the Act.
Before the CIT(A) the assessee furnished the reconciliation of the credits in the Bank account vis-a-vis the receipts as per P&L Account (i.e. as per the audited Books of Account). The assessee further stated that the bank entries credited, did not represent sales figures solely but involved any other figures like GST, Loans, internal bank transfers and contra entries etc., and reconciled the whole difference.
The CIT(A) observed that the Assessing Officer ought to have applied due diligence that the credits in the Bank Account cannot be exact reflection of the sales figures since many factors such as GST, VAT, Loans, internal bank transfers and contra entries etc. can make a real difference in the Bank Credits vis-a-vis sales recorded in Books. Thus, the Assessing Officer was not Justified in making the impugned addition without giving due consideration to the above factors.
Therefore, the Assessing Officer was directed to the delete the addition.
After considering the assessee’s submissions, the Assessing Officer observed that the assessee had failed to furnish the reconciliation statement for the credits in the bank account and receipts as per the books of account. Therefore, he added the said difference as unexplained credits u/s 68 of the Act to the returned income.
Before the Tribunal, the Revenue submitted that the assessee had failed to submit the reconciliation statement for the credits in the bank account and receipts as per the books of accounts before the Assessing Officer. Hence, the Assessing Officer had rightly added the unexplained credits in the income of the assessee.
It was also submitted that the CIT(A) had erred in deleting the addition towards alleged short loan taken on the basis of details of loan creditor furnished by the assessee without examining the fact that no such lender name was mentioned under point no. 31(a) of the tax audit report of the assessee.
It was further submitted that the CIT(Appeals) did not afford an opportunity to the department for verification of the additional evidence in respect of the details of GST on sales, VAT refund and reconciliation/bank statements for the verification and prayed to restore the matter back to learned Assessing Officer for the verification of the same and passing order afresh in accordance with law.
The Tribunal observed that the impugned order showed that the CIT(Appeals), having co-terminus powers of the assessing officer, found the details furnished by the assessee matched with the corresponding bank statements after examining the reconciliation of credits in the bank account vis-à-vis the receipts as per P & L account. The CIT(Appeals) had left no stone unturned to take out the grain from the chaff.
The Tribunal further opined that any omission in mentioning the name of lender/payee in the audit report cannot be made basis to discard assessee’s cogent documentary evidence.
n the result, the revenue’s appeal was dismissed.
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