Absence of PAN Alone Doesn’t Make Sales Unexplained if RTO Records Prove Transfer: ITAT Deletes Addition u/s. 68 [Read Order]
The Tribunal observed that exchanging old cars for new ones, along with valid ownership transfer documentation, was sufficient to confirm the authenticity of these transactions.
TheIncome Tax Appellate Tribunal (ITAT), Mumbai bench has set aside an addition under Section 68 of the Income Tax Act, 1961, related to the sale of old cars. The bench ruled that proper transfer of ownership documents and verification by the RTO further confirmed the genuineness of the transactions, justifying the deletion of the addition.
Spectra Motors Limited, the appellant, is engaged in the business of sale and purchase of new and old vehicles. For the Assessment Year 2017-18, the company deposited ₹3,53,23,000 in specified bank notes during demonetisation. The Assessing Officer (AO), during scrutiny, noticed sales of old cars and sought details of buyers. While the assessee provided sales records and confirmed that vehicles were acquired under exchange schemes and sold with proper documentation, it did not furnish Permanent Account Number (PAN) and addresses for all customers.
The AO treated sales proceeds of ₹15,01,57,610 as unexplained cash credit under Section 68 of the Income Tax Act and added it to income. The Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [CIT(A)], upheld the addition, prompting the present appeal.
Representing the appellant, Haridas Bhat argued that the sales of old cars were genuine, supported by exchange records, and duly reflected in business accounts. It was contended that Section 68 was wrongly invoked, as the receipts were from sales transactions and not loans or credits. It was further submitted that ownership transfer was supported by registration documents issued by the Regional Transport Office (RTO).
Representing the Revenue, Kishor Dhule supported the findings of the AO and the appellate authority. It was argued that without PAN and complete identity details of the buyers, the genuineness of the transactions remained unverifiable and justified the addition under Section 68.
The Bench comprising of Saktijit Dey, Vice President and Narendra Kumar Billaiya, Accountant Member observed that once the AO accepted the sales, treating a part of it as unexplained cash credit was not justified. The bench noted that the sale of old cars in exchange for new ones, along with proper transfer of ownership documents, established the genuineness of transactions.
The Tribunal future held that absence of PAN details alone did not make the sales unexplained, especially when registration with the RTO confirmed identity and transfer.
Accordingly, ITAT directed deletion of the addition of ₹15,01,57,610/-.
Therefore, the appeal of the assessee was allowed.
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