Additions u/s 68 & 69A made without Examining Books of Accounts: ITAT remands case for Reassessment [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) remanded the case back to the assessing officer ( AO ) as the additions under Sections 68 and 69 of the Income Tax Act, 1961  were made without examining the book of accounts.

The assessing officer ( AO ) under the assessment order passed under Section 143(3) of the Income Tax Act, 1961 for the assessment year ( AY ) made the following additions, such as Rs. 5,47,443 on account of enhancement in profit and, on an estimate basis, Rs. 30,01,129 due to unverified sundry creditors under Section 68 of the Income Tax Act. The assessing officer also made the addition of Rs. 56,45,000 on cash deposited during demonetization under Section 69 A of the Income Tax Act.

The AO had mentioned in the assessment order that although several attempts were made to get a proper response from the assessee and requests to produce books of accounts and relevant vouchers, only partial compliance was made. The assessee provided some written responses on December 2019.

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The assessee could not present his case before the Commissioner of Income Tax ( Appeals ) [ CIT( A ) ] and the CIT( A ) upheld the additions made by the AO.

The counsel on behalf of the assessee contended that once the gross or net profit is enhanced through estimation, without rejecting the books of accounts, then no further additions should be made, especially concerning business turnover. He further argued that that the additions under Section 68 of the Income Tax Act for trade creditors or cash deposits during demonetization under Section 69 of the Income Tax Act cannot be made solely on suspicion when regular books of accounts are maintained.

The ITAT bench, by closely going through the impugned order, noticed that the books of accounts and vouchers were never produced before the authorities, and thus the AO made additions without going through them.

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The Bench emphasized that the AO should review the books of accounts and supporting documents to verify if the trade creditors are recorded in the business turnover and if the cash deposited during demonetisation aligns with the cash book maintained by the assessee.

The ITAT, comprising Sanjay Garg ( Judicial Member ) and Sanjay Aswathi allowed the appeal filed by the assessee and remanded the case back to the file of the AO.

To Read the full text of the Order CLICK HERE

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