👍Sales Reversal Entry is not Unexplained Expenditure: ITAT quashes Revision Proceedings

Clipped from: https://www.taxscan.in/sales-reversal-entry-is-not-unexplained-expenditure-itat-quashes-revision-proceedings/277130/

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The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT), quashed revision proceedings under Section 263 of the Income Tax Act, 1961 and held that the sales reversal entry is not unexplained expenditure.

The case of the assessee, M/s. Chotanagpur Petroleum Agency, was selected for scrutiny through CASS followed by serving of notices under Section 143(2) and 142(1) of the Income Tax Act and the reason for selection for the scrutiny was cash deposit during demonetization period.

Prima facie no addition was made on the issue of cash deposit during demonetization period. Subsequently, the Principal Commissioner of Income Tax called for the assessment records and issued show cause notice under Section 263 of the Income Tax Act.

The assessee made the submission that the allegation that there is an unexplained expenditure is not correct and the said amount was received from the customers to whom credit sale was made and even if it is presumed that the said sum is an unexplained expenditure then since the assessee is entitled to reduction of sales of the equivalent amount which will thus, make no impact on the net income of the assessee.

However, the Principal Commissioner of Income Taxwas not satisfied with these submissions and he held the order of the Assessing Officer (AO) as erroneous and prejudicial to the interests of the Revenue and also directed the Assessing Officer to pass a fresh assessment order.

Quashing the revision proceedings initiated by the Principal Commissioner of Income Tax, the Two-Member Bench of Manish Borad, Vice President and Rajpal Yadav, Accountant Member observed that “Therefore, it is merely a sales reversal entry and not a case of unexplained expenditure. Complete documentary evidences in support of these transactions have been filed and we are satisfied that it is not a case of unexplained expenditure.”

“Though the policy adopted by the assessee is not at par with the settled accounting policies since the cash is entered in the books without actually receiving the cash, however, going through the flow of the transactions it is in the nature of sales reversal” the Bench concluded.To Read the full text of the Order CLICK HERE

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Chotanagpur Petroleum Agency vs Pr. CIT

CITATION:   2023 TAXSCAN (ITAT) 976

Counsel for Appellant:   Sh. Siddharth Jhajharia

Counsel for Respondent:   Sh. Sudipta Guha

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