The Cuttack Bench of the Income Tax Appellate Tribunal ( ITAT ) found Rs. 3.4 crore addition related to a sale discrepancy excessive and remanded the case to the Principal Commissioner of Income Tax ( PCIT ) for re-examination.
Prasanta Kumar Mohapatra, the assessee is engaged in various businesses, including a Honda two-wheeler dealership, a fuel filling station, an iron ore crusher, and the retail sale of IMFL (Indian Made Foreign Liquor). The assessing office passed the original assessment order by adding Rs. 3 lakhs to the income declared by the assessee.
The Principal Commissioner of Income Tax (PCIT) invoked Section 263 of the Income Tax Act, claiming the assessment order was erroneous and prejudicial to the interests of the revenue. The PCIT modified the order by adding Rs. 3.44 crores under Section 68 for unexplained cash credits.
Get a Copy of Bharat’s Income Tax Act, Click here
The assessee challenged the PCIT’s revision order before the Cuttack Bench of ITAT arguing that the assessing officer (AO) had fully examined the cash deposits and had concluded that the cash deposits during the demonetization period were sufficiently explained through the cash book records.
The revenue counsel argued that there was a significant and unexplained discrepancy between the sales declared in the profit and loss account and those recorded in the cash book, amounting to Rs.3.44 crores.
The revenue counsel argued that the assessee’s claim of managing the shops on behalf of a friend was not legally valid as per Section 23 of the Bihar and Orissa Excise Act, 1915 which prohibits the transfer or subletting of an excise license. The shops could not have been operated under such an arrangement.
The revenue counsel argued that the assessing officer had not properly examined these discrepancies during the initial assessment, leading to the erroneous and prejudicial order.
Get a Copy of Bharat’s Income Tax Act, Click here
The two-member bench comprising George Mathan (Judicial Member) and Manish Agarwal (Accountant Member) observed that the assessing officer did not properly investigate the difference between the sales figures in the cash book and the profit and loss account.
The tribunal noted that the appellant had not provided sufficient documentary evidence to substantiate the claim regarding the sales discrepancy. The tribunal agreed that the assessment order was erroneous and prejudicial to the revenue because of the failure to resolve the Rs. 3.44 crore discrepancy.
The tribunal also observed that the PCIT’s order which directed the addition of Rs.3.44 crores was too harsh since the appellant was not given sufficient opportunity to explain the difference with further documentary evidence.
Get a Copy of Bharat’s Income Tax Act, Click here
Therefore, the tribunal upheld the PCIT’s invocation of Section 263 but modified the order to allow the appellant another opportunity to explain the discrepancy. The appeal of the assessee was partly allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
