TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 551
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....sequently issued u/s 133(6) which remained uncomplied with and amounts remain unexplained; and the CIT(A) relied on entirely different submission of the assessee that alleged loans were raised from persons other than these. 2) The CIT(A) has erred in deleting the addition of Rs. 1,06,99,740/- made by AO by estimating the commission income @1% of total purchases of Rs. 1,06,99,74,009/- by establishing that the assessee was not running regular business but only providing accommodation entries since assessee failed to substantiate sales; taken together with the fact that negligible expenditure has been shown to be incurred in a business of purported sale of Rs. 180 crore, and in view of it being factually ascertained that there was no/ negligible regular business activity being carried out by the assessee." 2. The brief facts of the case are that the assessee is a partnership firm comprising of two partners, Shri Anand Swaroop Malik and Smt. Ranjna Malik since 01.04.2006. The assessee firm is stated to be engaged in the business of bullion, gold, silver jewellery, ornaments and also in diamond jewellery and precious stones. He filed his return of income on 30.09.2008 declaring in....
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....l purchases made. 4. Further, the Assessing Officer found that one of the partners Shri A.S. Malik has introduced fresh capital of Rs. 36 lacs. On being asked for the source of capital introduction, the assessee submitted that the source of capital of Sh. Anand Swaroop Malik are loans from M/s PRJ Automobiles Pvt. Ltd, (Rs. 14,00.000), M/s BNT Associates Ltd. (Rs.7,00,000/-) and Captain Vijay Kumar Trehan (Rs.20,00,000/-). Notices u/s 133(6) of the I.T. Act were issued to these parties for verification of loan transactions with the partner or assessee. The requisite informations have not been received from M/s PRJ Automobiles Pvt. Ltd. and M/s BNT Associates Ltd. directly. The notice u/s 133(6) issued to M/s BNT Associates Ltd. has received back unserved with the comments "no such company at such address". However, as per explanation of entries of saving account of Sh. A. S. Malik with India Overseas Bank submitted by the AR of the assessee, Sh. Malik received Rs. 7,00,000/- + Rs. 7,00,000 from PRJ and Rs. 7,00,000/- from BNT out of which Rs. 20,95,000/- was given to M/s Anishka Jewellers. Again Sh. Malik received Rs. 10,00,000/- from ? (not verifiable) out of which Rs. 7,00,000/-....
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....erved that the Assessing Officer has added part of the capital introduced by the partner, Sh. A.S, Malik, by treating it as unexplained income of the firm routed through its partner, on the ground that the assessee could not satisfactorily explain the sources of entries in the bank account of the partner. This, however, cannot be taken as a ground for making such addition in the hands of the firm in the absence of any cogent reasons or evidence to the contrary brought on record and in view of the well settled position of law on this issue. 8.2. It has been submitted by the Ld. Counsel in this regard as follows: a) During the course of the assessment proceedings, the Assessing Officer enquired on addition to partner's capital a/c and asked for certain confirmations which were duly submitted. b) Copy of bank statement of the partner, Mr. Anand Swaroop Malik, from where the amounts were given to the appellant firm was also duly submitted. c) The AO asked for details of following credit entries, which were duly submitted by the appellant: Amount Date Instrument No. Name of Person from whom received Remarks 700000/- 28.04.2007 83888 PRJ Automobiles P. Ltd. PAN:....
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....d: "Once the firm has satisfactorily explained that the credit entries in the name of partners represents the amount invested by them the burden of proof stood discharged and the amount cannot be treated as income of the firm under s. 68." * In Smt Shanta Devi vs. CIT (1998) 171 ITR 532 (P&H), it was held: "Books have to be the books of the assessee himself and not of any other assessee. Addition in respect of cash credit found in the books of partnership firm in which assessee was a partner, cannot be made in the assessee's hands." * In CIT vs. Value Capital Services Pvt. Ltd. (2008) 307 ITR 334(Del), the Hon'ble High Court of Delhi has held that: "There was an additional burden cast on the revenue to prove that the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income". In the instant case, the Ld. A,0. did not bring any material to prove that the payments received by the appellant for addition in capital actually emanated from the coffers of the appellant so as to enable it to be treated as undisclosed income of the appellant." 8.4. In view of the above discussion, it is h....
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.... 18 to 29 of the impugned order. For sake of convenience, relevant paras of the impugned order are reproduced as under : "7.1. It is observed that the Assessing Officer has made the addition @ 1% of the total purchases made by the assessee by assuming that the assessee was engaged in the business of providing bogus accommodation entries, primarily on the ground that most of the sales were made in cash and the assessee had deposited cash in its bank account before making the payment by cheque against the purchases. This, however, cannot be taken as a ground, let alone a sufficient one, for making such addition in the absence of any cogent reasons or evidence to the contrary brought on record. It is also a well settled position of law that the AO cannot proceed to make an arbitrary addition and base his conclusion purely on conjecture and surmises. It is also observed that the Assessing Officer has no evidence or material whatsoever on record to support any such theory. 7.2. It has been submitted by the Ld. Counsel in this regard that the facts of the case are that the appellant is a partnership firm conducting the business of trading in gold bullion having its principal place o....
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....rading pattern of bullion traders or jewellers, or for that matter, any retail trader. Also, there is no requirement under any law to have the details of such customer. Whenever a customer goes for buying any article from any retail or wholesale shop, store or mall, the owner gives him the desired product on receipt of cash. If the shopkeeper wants to have details of the customers to whom he makes cash sales, it would not be feasible at all. In the appellant's case too, majority of sales is in cash, and in cash sales, the identity of the customer cannot be known to the appellant, as the goods are delivered on receipt of cash. Invariably in all cash sales of jewellery or bullion, be it banks, MMTC or any other big jeweller, more than 95% of the sale is in cash and so is the case of the appellant. The following facts prove beyond doubt that the appellant has made cash sales, which are all genuine: The firm is established since more than last 30 years and doing same business on cash sale basis since inception. Sale bills were produced before the Ld. AO and he has himself mentioned that there are more than 1500 customers, which he never doubted. The appellant has banker....
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.... with the Ld. AO as above, which he never doubted and even sent enquiries u/s 133(6) to all and most of them responded to the same. The appellant has banker's cash credit limit of more than Rs. 5 Crore and bank officials visit the premises of the appellant's premises on regular basis for inspection etc. and the stocks are hypothecated to the bankers. If purchases are held bogus as stated by the Ld. AO, then how are the bankers hypothecating the stocks, as the stocks are there as a result of purchases only. Enquiries were made by the AO from the bankers and nothing adverse was found. All payments were made by A/c payee cheques to the creditors from whom purchases were made, which the AO has taken on record. Major purchases of Rs. 87 Crore approx. were made from M/s Anishka Jewellers, Prop. Pankaj Malik, (a related concern), as they are registered with MMTC Ltd. for purchase of bullion. In fact, most of the payment was made to MMTC by the appellant itself. The Ld. AO has stated that .purchase from MMTC (a government concern) made through a/c payee cheques is bogus, which is totally baseless. Enquiries were made by the AO from MMTC Ltd. and nothing adverse was found. ....
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....tivities. The inspector is correct that there was no business activity at the 1st Floor, as the business activities of the appellant are not at 1st floor but are at the 2nd floor. Hence, the total report of the inspector is factually wrong as he did not visit the premises of the appellant at all and gave a wrong report. Recently taken photographs of the premises of the appellant are enclosed to substantiate that business is being carried at second floor. Photographs of the related concern (M/s Anishka Jewellers) at ground floor are also enclosed to substantiate that it is a separate entity doing separate business. The firm is established since last more than 30 years and doing the same business from the said premises since 1987. The appellant has banker's cash credit limit of more than Rs. 5 Crore and bank officials visit the premises of the appellant's premises on regular basis for inspection etc. If the bankers can see the business premises and advance huge monies, how come the inspector could not see it? VAT audit was conducted by the VAT department at the appellant's premises and they found the business done, but the inspector could not as he had visited th....
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.... Income Tax department in the case of M/s Anishka Jewellers, Prop. Pankaj Malik, has accepted its sales, vide its assessment order u/s 143(3) for A.Y. 2008-09. If its sales are held genuine by IT department, how can the corresponding purchases be held as non-genuine? Copy of the assessment order passed u/s 143(3) in case of M/s Anishka Jewellers is enclosed to substantiate the same. It has, thus, been submitted that in view of the above facts, all the purchases from M/s Anishka Jewellers are genuine. Expenses to run the business. The Ld. AO is of the opinion that the appellant did not incur certain essential expenses to run the business, hence the firm is bogus. The appellant's submissions in this regard are as below: Furniture & fixture and its maintenance - The AO has stated that value of furniture and its maintenance cost is very low. It is submitted that the appellant firm is very old and operating from this premises since 1987. The value of furniture in balance sheet is at WDV of Rs. 9144/-. This is not the cost but WDV after so many years. Further, the photographs of the appellant's office premises enclosed substantiate that the office is a small one an....
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....ses, as brought out earlier. Further, the Ld. AO has not even mentioned any provision of law under which the income was estimated by him. The Ld. AO estimated income at 1% of the purchases/ though almost all purchases were made by a/c payee cheques and virtually all of them have confirmed their transactions with the appellant, and major payments were made to MMTC Ltd., a government undertaking. 7.4. It has, thus, been submitted that the addition has been made purely on estimate basis, based on conjecture and surmises, without there being any material or evidence to substantiate the conclusion that the business is sham and that the appellant is providing bogus accommodation entries. The subsequent action of estimating the net commission thereof @ 1% of the total purchases at Rs.l,06,99,740/- as taxable income of the appellant is, thus, wholly against the facts and bad in law. 7.5. In view of the above discussion, it is hereby held that the Assessing Officer was not justified in making addition as above. The addition of Rs. 1/06,99,7407- made on this count is, accordingly, hereby deleted. The Assessing Officer is, accordingly, hereby directed to take the appellant's income ....