Income Tax Appellate Tribunal - Mumbai
Reliable Spaces P.Ltd, Mumbai vs Dcit Cir 10(3), Mumbai on 25 September, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH "A", MUMBAI
BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND
SHRI RAJESH KUMAR, ACCOUNTANT MEMBER
ITA No.3085/M/2015
Assessment Year: 2008-09
M/s. Reliable Spaces Pvt. Deputy Comm. of Income
Ltd., Tax,
Reliable House, LBS Circle 10(3),
Road, Vs. Mumbai
Kanjurmarg,
Mumbai,
Maharashtra-400 078
PAN: AACCR0843F
(Appellant) (Respondent)
Present for:
Assessee by : Dr. P. Daniel, A.R.
Revenue by : Shri Anoop Hiwase, D.R.
Date of Hearing : 23.08.2018
Date of Pronouncement : 25.09.2018
ORDER
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 18.02.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2008-09.
2. The grounds raised by the assessee are as under:
"1) The Learned Commissioner of Income Tax Appeals-24 erred in confirming that the Learned Assessing Officer was justified in reopening the Assessment U/s 147 of the Income Tax Act, 1961.
2) The Learned Commissioner of Income Tax Appeal -24 erred in sustaining an addition of Rs. 56,19,155/- on account of unexplained cash credit being the peak negative cash balance found during the course of survey.2 ITA No.3085/M/2015
M/s. Reliable Spaces Pvt. Ltd.
3) The Learned Commissioner of Income Tax -24 erred in not appreciating the following facts (which were already explained to the Deputy Commissioner of Income Tax during the Assessment Proceedings ) in the case of Your Appellant which were submitted before him during the course of Appellate Proceedings "Quote
a) That there was no negative cash balance during the financial year 2007-08
b) During the financial year 2007-08, there was cash sales of Fabrics amounting to Rs. 69,29,954/- for which separate cash memos in separate bill books were maintained.
c) Originally, the Accountant of the Company at Corporate Office passed a consolidated entry of cash sales of Rs.69,29,954/- as on 31 March, 2008.
d) Due to this consolidated entry intermittently the cash balance was negative.
e) During the course of survey the CD of old data was copied other than the new data Wherein separate entries for individual cash memos have been made.
f) The account of your appellant are statutorily audited not only under the Companies Act, 1956 but also under Sec. 44AB of the Income Tax Act, 1961 and no discrepancy therein has been observed or reported by the Auditors.
g) The total cash sales of sale of fabrics of Rs. 69,29,954/- was already reflected in schedule 'M' -Sales as local sales forming part of Profit & Loss Account for the Year ended 3J march, 2008 as follows:
Sr. No. Item Amount
1 Local Sales 51,54,750/-
2 Sale of Fabrics 69,29,954/-
Total 1,20,84,704/-
h) From the foregoing Your Honor would observe that income of Rs.69,29,954/- has already been accounted in the books of the appellant by way of sales and the same has already been offered to tax as income
i) By once again making an addition of Rs.56,19,155/- the Learned Dy. Commissioner of Income Tax erred in taxing the same income twice."
j) In view of the above Your Appellant submits that the Dy. Commissioner of Income Tax was wrong in coming to the conclusion that There were negative balances in the cash book of your appellant during the financial year 2007-08 The peak negative cash balance amounted to Rs. 56,19,155/-
3 ITA No.3085/M/2015M/s. Reliable Spaces Pvt. Ltd.
The source of this peak negative cash balance was undisclosed.
k) Moreover, During the course of Assessment Proceedings the following details were submitted:
Summary of Cash sales during the Financial Year 2007-08 Day wise cash sales during the financial year 2007-08 .
Copies of cash memos for Cash sales of R. 69,29,954/-
Copy of cash book showing daily cash balances for the entire financial year 01.04.2007 to 31.03.2008. wherein there was no negative cash balance on any day.
l) Unfortunately, the submissions made by Your Appellant were not considered in the right prospective and the Dy. Commissioner of income Tax proceeded with his own calculations based on conjecture and surmise.
m) When Your Honor goes through Para 5.3 of the Assessment Order, Your Honor would observe that as per the Dy. Commissioner of Income Tax the peak negative balance was Rs.49,71,209/- but still he proceeded to make an addition of Rs.56,19,155/-.
Unquote
4) The learned Commissioner of Income Tax Appeal erred in disallowing a sum of Rs.2,52,500/- being ROC Charges incurred for increasing the authorized capital."
3. We would like to deal with the ground No.2 as raised by the assessee on merit against the confirmation of addition of Rs.56,19,155/- by Ld. CIT(A) as made by the AO on account of unexplained cash credit being peak negative cash balance found during the course of survey.
4. The facts in brief are that the assessee filed the return of income on 29.09.2008 declaring income of Rs.1,96,33,826/- which was processed under section 143(1) of the Act accepting the income returned. A survey was conducted under section 133A of the Act on 10.01.2012 at the premises of the assessee and on the basis of some informations/materials impounded during the course of survey the case of the assessee was 4 ITA No.3085/M/2015 M/s. Reliable Spaces Pvt. Ltd.
reopened for A.Y. 2008-09 by issuing notice under section 148 of the Act dated 25.03.2013. The case was reopened on the ground that in the paper impounded and soft copy of the accounts of the books showed negative cash balance from April 2007 to November 2007, the peak of which was Rs.56,19,155/-. According to the AO, the source of the said amount is not disclosed and thus the facts noticed at the time of survey constituted sufficient material to form a belief that the assessee has not disclosed fully and truly all material facts as to the assessment of income and therefore Rs.56,19,155/- has escaped assessment. The assessee is engaged in the business of manufacturing and exports of readymade garments and also derived income by way of rentals. During the year, the turnover of the assessee was Rs.32,56,64,199/- and the rental income was Rs.1,45,00,000/-. Accordingly, the AO issued show cause notice dated 22.11.2013 asking the assessee to explain the reasons along with evidences, the negative cash balances and as to why the same should not be added to the income of the assessee. The said show cause was replied by the assessee by submitting that there was no negative cash balances in the books of accounts as the assessee has cash sales amounting to Rs.69,29,954/- from April 2007 to March 2007 which were duly accounted for in the books of accounts which were finally audited by the auditors of the company on the basis of which the return of income was filed for the impugned assessment year and the AO also found the books of accounts in order. The assessee, however, admitted that at the time of survey the negative cash was there in the books of accounts as the sales made in cash section was taken by the accountant on the last 5 ITA No.3085/M/2015 M/s. Reliable Spaces Pvt. Ltd.
day of the financial year whereas in the books of accounts maintained and audited by the chartered accountants of the assessee all these entries were duly reflected and recorded date wise and thus were no negative cash balances. According to the AO there were negative cash balances as stated in para 5.3 of the assessment order and therefore the explanation of the assessee was not acceptable. The AO finally calculated the peak of Rs.56,19,155/- of negative cash balances which was added to the income of the assessee on account of negative cash balances which remained undisclosed by framing assessment under section 143(3) read with section 147 of the Act. However no defects were pointed out in the books of accounts produced before the AO which were also not rejected.
5. The Ld. CIT(A) dismissed the appeal of the assessee after considering the explanation/reply of the assessee by observing that the separate bill book in which cash sales amounting to Rs.69,29,954/- was recorded for F.Y. 2007-08 was not brought to the notice of the AO either at the time of survey or immediately after the survey and also that no documentary evidences were furnished before the first appellate authority. According to the Ld. CIT(A) the indigenous sales of Rs.1,20,84,704/- comprising local sales of Rs.51,54,750/- and sale of fabrics in cash Rs.69,29,954/- were not doubted by the AO whereas the total sales including export were Rs. 32,56,64,199/-. According to the Ld. CIT(A) the entire cash sales was accounted for on the last day of the accounting year and he came to the conclusion that there was negative cash balance on the date of survey from April 2007 and March 2008. Finally, 6 ITA No.3085/M/2015 M/s. Reliable Spaces Pvt. Ltd.
the Ld. CIT(A) upheld the order of AO on the ground that even if the alleged cash sales are taken into account on the respective dates there still remains some negative cash balance which has not been explained by the assessee was converted even before the Ld. CIT(A) and thus AO rightly did the addition on account of negative cash balance remaining unexplained.
6. The Ld. A.R. vehemently submitted before us that authorities below have not properly appreciated the facts of the case that assessee's cash sales to the tune of Rs.69,29,954/- made from April 2007 to March 2008 were duly recorded in the books of accounts and accounted for on the respective dates in the final books of accounts of the assessee which were duly audited by the company auditors and tax auditors and were found in order by the AO and there was no adverse comment on the maintenance of books of accounts by the tax auditors and company law auditors. The Ld. A.R. submitted that during the course of reassessment proceedings the books of accounts were examined by the AO which were found to be in order and no negative cash balances were found and the same were accepted by the AO. The Ld. A.R. submitted that when the books of accounts were accepted the AO, then the AO should not be allowed to question the negative cash balance based on the incomplete books of accounts of the assessee which were finally completed and audited by the company auditor in which no discrepancy or negative cash balance was found. The Ld. A.R. drew our attention to page No.73 of the paper book wherein a monthwise tally of cash balance was drawn up and submitted that there was no negative cash balance in the books of 7 ITA No.3085/M/2015 M/s. Reliable Spaces Pvt. Ltd.
accounts of the assessee as noted by the AO. The Ld. Counsel submitted that if the addition of Rs.56,19,155/- is sustained that would result into double taxation of the same amount as the assessee has duly incorporated in the books of accounts the cash sales and offered the same to tax while filing the income tax return. The Ld. A.R. submitted that the order of Ld. CIT(A) was also based on wrong assumption of facts and therefore needs to be reversed and the AO should be directed to delete the addition as there is no provision under the Act to assess the same income twice. The Ld. A.R. finally prayed that since there is no unexplained cash in the books of accounts of the assessee the same should be deleted. Alternatively the issue may be restored to the file of the AO to re-examine the facts and decide the same accordingly.
7. The Ld. D.R., on the other hand, relied heavily on the orders of AO and Ld. CIT(A) and submitted that at the time of survey the material gathered and seized showed that assessee has negative cash balance though the Ld. D.R. candidly admitted that cash sales of Rs.69,29,954/- was made through a separate bill book which was not considered on the various dates on which the cash sale was made. The Ld. D.R. further submitted that the AO has clearly brought out the negative balance of the cash monthwise and therefore submitted that the order of Ld. CIT(A) should be affirmed as the negative cash balance was not explained. On the issue of non rejection of books of account by the AO the ld DR submitted that these discrepancies were noticed in the documents seized at the time of survey.
8 ITA No.3085/M/2015M/s. Reliable Spaces Pvt. Ltd.
8. We have heard the rival submissions of both the parties and perused the material on record including the impugned order. The undisputed facts are that the books of accounts of the assessee were audited by the tax auditor and company law auditor and were found to be in order with no adverse reporting on the maintenance of accounts or defects in the books of accounts. We, further, note that these books of accounts were also place before the authorities during the course of assessment proceedings and there was no defect found or pointed out by the AO in the said books of accounts. Moreover, the books of accounts were not rejected by the AO at the time of making this addition of Rs.56,19,155/- on account of peak negative balance which according to the AO remained unexplained. A survey team found some documents in the form of computer prints out/soft copy and found that assessee has negative cash balances during the months commencing from April 2007 to November 2007 the peak whereof was Rs.56,19,155/- in the month of September 2007. The authorities below has not considered the cash sales of the assessee to the tune of Rs.69,29,954/- during the year on the various dates which were duly accounted for in the books of accounts of the assessee. The only basis of addition by the AO was the discovery of papers during the survey which reflected negative cash balances from April 2007 to November 2007 which culminated to Rs.56,19,155/- as peak negative cash balance. We have also gone through the cash book of the assessee which is filed from page No.81 to 159 which shows a closing balance of Rs.13,613.25 on 31.03.2008. We have gone through each and every day of the cash book and observed that there was no 9 ITA No.3085/M/2015 M/s. Reliable Spaces Pvt. Ltd.
negative cash balance in the said cash book. We observe from the relevant records as placed before us that the assessee's books of accounts were audited and were found to be in order and when present before the AO during the course of assessments proceedings no defect was pointed out. The AO has only added negative cash balance as found in the documents/soft copy in the course of survey but failed to point out any defect in the audited books of accounts in which the assessee has duly accounted for the sale of Rs.69,29,954/-. The assessee has also filed a summary of cash balance which is extracted below:
CASH CORPORATE OFFICE RELIABLE SPACES PVT LTD 1-Apr-2007 to 31-Mar-2008 Transactions Particulars Debit Credit Closing Balance Opening Balance 82230.60 D April 3260368.15 3338195.00 4403.75 D May 1985508.00 425507.00 1564404.75 D June 1016848.00 2002279.00 578973.75 D July 4481200.00 1031427.00 4028746.75 D August 3754003.00 5549986.00 2232763.75 D September 3291051.00 4868492.00 655322.75 D October 1303745.00 630902.50 1328165.25 D November 258264.00 219777.00 1366652.25 D December 595370.00 230783.00 1731239.25 D January 1416976.00 343629.00 2804586.25 D February 2207215.00 3810882.00 1200919.25 D March 2957690.00 4154996.00 13613.25 D Grand Total 26538238.15 26606855.50 13623.25 D We find merits in the contentions of the assessee that since the books of accounts were accepted by the tax authorities with no defects or deficiency therein, the order of Ld. CIT(A) is wrong and should not be accepted. We fail to understand that as to how addition on account of negative cash balance could be sustained 10 ITA No.3085/M/2015 M/s. Reliable Spaces Pvt. Ltd.
by the Ld. CIT(A) when the books of accounts were accepted in which no defect or deficiency was pointed out during the assessment proceedings. In view of the aforesaid facts, we are of the view that the assessee has a very strong case in its favour and the order of Ld CIT(A) can not be sustained. We, therefore, set aside the order of Ld. CIT(A) and direct the AO to delete the addition as there is no unexplained cash in the books of accounts of the assessee.
9. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 25.09.2018.
Sd/- Sd/-
(C.N. Prasad) (Rajesh Kumar)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai, Dated: 25.09.2018.
* Kishore, Sr. P.S.
Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT (A) Concerned, Mumbai
The DR Concerned Bench
//True Copy// [
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.