INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Suppression of sale -

According to AO, the tax consultant of assessee appeared before him and furnished the month-wise total sales- cash and credit and total cash received from the debtors along with cash book. According to AO, it was seen that as per cash flow statement submitted, cash received from the debtors was shown at Rs. 69,92,779. But AO noted that as per details submitted, total credit sale was at Rs. 57,02,455 and opening balance of sundry debtors was nil and closing balance at Rs. 4,67,017. Thus, there was the difference in amount of Rs. 17,57,341. AO asked assessee to explain as to why the difference amount should not be treated as suppression of sales and as a result should not be treated as income from other sources. Since assessee failed to explain the difference and offered the same for taxation. Therefore, an amount was added back to the total income of the assessee under section 68. Main grievance of the assessee was that when the AO asked the assessee to produce the cash flow statement, though it filed the cash flow statement, there was a mistake which crept into the cash flow statement, which led to the misunderstanding and led to the addition of Rs. 17,57,341. However, during the appellate proceedings, this mistake was corrected/reconciled; and reconciliation was filed before the CIT(A) which had been reproduced by the CIT(A). However, according to CIT(A), the reconciliation was an afterthought and therefore he did not admit the reconciliation and was pleased to confirm the action of the AO. Held: According to assessee, though the accounts were maintained correctly in tally system, however due to wrong classification of the entries made by the accountant while entering the same certain mix-up happened like sales in cash were wrongly classified under the credit sales, etc. Realizing this mistake which crept in to the cash flow statement filed at the assessment stage, the assessee at the first appellate proceedings had filed reconciliation of the cash flow statement which was reproduced by CIT(A). Rather than examining the correctness of reconciliation statement filed by the assessee, CIT(A) had erred in confirming the action of AO and that too without even calling for a remand report from AO. Therefore, matter was remanded back to AO with a direction to verify the reconciliation statement/summary and submissions made by assessee.

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2016-17

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