TaxTMI 
TaxTMI 
2017 (10) TMI 240
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....r called "the Act"). 2. The grounds of appeal raised by the assessee (ITA No. 1295/Mum/2014, A.Y. 2006-07) in the memo of appeal filed with the tribunal read as under:- "I. The learned Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)]erred in estimating higher Gross Profit @ 5 % on sales shown in the books without appreciating the submissions made by the assessee and ignoring the facts of the case. [hereinafter referred to as the "Act"] II. The learned CIT (A) ] erred in enhancing the income by way of addition of Rs.l,35,516/- being the difference in Closing capital balance of M/s. Meenakshi Enterprise as un-explained income of the assessee. 3. The following grounds of appeal are raised by the Revenue in ITA No. 2415/Mum/2014 for the assessment year 2006-07 in the memo of appeal filed with tribunal which reads as under:- "1. Whether on the facts and circumstances and in law, the Ld CIT(A) has erred in deleting undisclosed income which was added to the total income of assessee as the assessee could not produce any evidences of purchase and sale transactions? 2. Whether on the facts and circumstances and in law, the Ld....
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....lowing details of purchases from two parties situated at Ahmedabad, Gujarat as under:- S No. Name of purchase party Date of purchase Quantity Amount (Rs) Mode of payment 1 M/s Padmavati Bullion, Ahmedabad 1.4.2005 45 kg 2,75,62,185 By cheque 2 -do- 4.4.2005 56 kg 3,36,30,190 -do- 3 -do- 6.4.2005 100 kg 6,09,03,300 -do- 4 -do- 7.4.2005 20 kg 1,22,16,168 -do- 5 -do- 8.4.2005 120 kg 7,34,25,360 -do- 6 -do- 11.4.2005 40 kg 2,43,06,720 -do- 7 -do- 12.4.2005 45 kg 2,63,60,677 -do- 8 -do- 14.4.2005 125 kg 7,60,21,300 -do- 9 -do- 18.4.2005 60 kg 3,65,61,000 -do- 10 -do- 20.4.2005 20 kg 1,21,70,300 -do- 11 -do- 22.4.2005 25 kg 1,54,52,125 -do- 12 -do- 25.4.2005 10 kg 61,96,200 -do- 13 -do- 27.4.2005 75 kg 4,64,68,125 -do- 14 -do- 28.4.2005 55 kg 3,46,89,200 -do- 15 M/s Kuber Ahmedabad Bullion, 21.7.2005 3 kg 18,47,940 -do- The A.O. observed that these alleged purchases have been covered in fifteen transac....
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.... -do- 8 8 12.4.2005 -do- 45 kg 2,64,45,000 -do- 9 9 14.4.2005 -do- 125 kg 7,61,11,200 -do- 10 10 18.4.2005 -do- 60 kg 3,66,12,000 -do- 11 11 20.4.2005 -do- 20 kg 1,22,19,000 -do- 12 12 22.4.2005 -do- 25 kg 1,54,75,000 -do- 13 13 25.4.2005 -do- 10 kg 62,20,035 -do- 14 14 27.4.2005 -do- 75 kg 4,65,00,000 -do- 15 15 28.4.2005 -do- 55 kg 3,47,76,000 -do- 16 16 22.7.2005 -do- 3 kg 18,49,440/- -do- The assessee although was based at Mumbai but has shown the following address in the sales bills raised by it: "Flat No. 3, 1st floor, Aakash Ganga Flats, Aakash Seth Kuvani Pole, Madan Gopal Haveli, Manek Chowk, Ahmedabad - 380 001. A perusal of the assessee's sale bills reflected that no sale bill bears the name of so called purchaser and all the sales were made in cash. The assessee was asked to disclose the identity of the purchaser, however, the assessee expressed his inability under the pretext that the entire transactions were conducted telephonically on....
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....e assessee to introduce his undisclosed income and accumulated cash in the business. Thus, the A.O. brought to tax in the assessee's hands as 'undisclosed income' without giving any deduction on account of purchases amounting to Rs. 49,l7,69,925/- , vide assessment order dated 29-12-2008 passed by the AO u/s 143(3) of the 1961 Act. 5. Aggrieved by the assessment order dated 29-12-2008 passed by the A.O. u/s 143(3) of the 1961 Act, the assessee carried the matter in appeal before the ld. CIT(A). 6. Before the ld. CIT(A), the assessee had submitted that the assessee was denied reasonable opportunity and evidence placed on record has not been considered. It was submitted that the AO had issued notice u/s.133(6) of the Act to verify the purchases made from M/s. Padmavati Bullion. Since the supplier was out of town, the assessee obtained from the said suppliers purchase bills, bank statement, delivery challans and confirmation duly signed by the suppliers with PAN, however, the AO did not accept these evidences on the ground that the supplier should personally come and file the details , which has led to the denial of natural justice to the assessee. It was submitted that the ....
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....to accept only cash, against the gold. The existence of such practice though obvious and patent was not accepted by the AO without assigning any valid reason on tenable ground. The assessee submitted that sometime buyers do not have ready cash and payments are deposited in bank in installments but the supplies of the gold are made only after realizing entire sale proceed in cash. The assessee submitted that there are several purchasers who want to buy gold without revealing identity. The assessee submitted that there is no rule or law which stipulate that the identity of the purchaser should be established by the seller on cash memos and sales are genuine and the assessee as prudent business man wanted to make maximum profits and hence sold gold against cash. The assessee submitted before learned CIT(A) that the assessee has maintained regular books of accounts which are subjected to audit. It was submitted that the transaction has taken place at Ahmedabad because there is no VAT on gold bars in Gujarat and in view of this the purchaser's cost would be less, hence, all bulk transactions had taken place in Ahmedabad to save the cost. The assessee submitted that it had 5 kg of go....
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....ii Bullion and the assessee fixing the case to 12.2.2013 for recording of statement. On the appointed day, Shri Champaklal Sanghvi did not attend. Instead, a letter was received from the representative to adjourn the case by 8 to 10 days and the case was fixed for hearing on 12.2.2013 at 11.30 AM. On that day, there was no compliance. The assessee also did not attend on 12.2.2013. There was a request to adjourn and refix the case by 8 to 10 days. The case was later reaffixed to 25.2.2013. On that day, Shri Manjunath Gowda, CA representative of the assessee and the assessee attended before me at 3.30 P.M.As the recording of statement was about to begin, the assessee's behavior was such that he became indisposed, all of a sudden. He told me that he is a B.P. patient and that he forgot to have his medicine on that day. After seeing the plight of the assessee, the representative told me that the assessee will have to be taken to a hospital. The representative explained that the assessee after recovery of health will make himself available in next few days. In these circumstances they were allowed to leave the office. Later, 1 briefed the Addl.CIT about the developments, wh....
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....di of business, the assessee in answer to Q.No. 5 of the statement recorded on 05.11.2008 stated as follows: "I used to get enquiry about the availability of gold bars, quantity and rates, after that I used to confirm the availability from the purchaser. After getting confirmation from the purchaser the same was conveyed to the buyer. Subsequently the buyer was asked to deposit cash in my bank account at Mumbai/Ahmedabad wherever convenient. After confirming the cash deposit I used to issue cheque to purchaser mainly Padmavati Bullion, Ahmedabad. On submission of the cheque, I used to take delivery of gold bar from Padmavati jwellers and delivered the same to the buyer at my bussiness address at Ahmedabad " However, the facts on record do not support this. For example; the sales by M/s Padmavati Bullion to the assessee up-to 18.04.2005 were to the tune of (37,09,86,902) whereas the assessee made the payments of Rs. 13,89,04,600/- (Annexure 3) only till 18-04-2005. As per the assessee averment, he used to issue cheque(s) to Padmavati Bullion after receipt of full cash/consideration from his parties. If that is so, there cannot be so much balance liability as on 18.....
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.... Thirdly, M/s Padmavati Bullion got sales tax registration on 14.2.2005. The assessee also claims to have started business in March, 2005. The commencement of both the business are simultaneous. Further, according to the details the assesse carried on the newly started business mainly till the end of April, 2005. Barring an instance of a stray sale in July, 2005, it was abruptly closed in April. 2005 itself. Likewise. M/s Padamavati Bullion also closed down business later and the exact date of dissolution of partnership of M/s Padmavati Bullion is not known as explained by the representative of the assessee. According to the details filed, the details of turnover of the assesee's activity are as under: Asst. Year. Total Sales G.P. rate NP rate 2005-06 Rs.6,85,05,332 0.26% 0.07% 2006-07 Rs. 49,17,69,925 0.18% 0.03% Thus, when the business was commenced i.e. in the very first month (March,2005) the assessee's sales are to the tune of Rs. 6.85 Crores. In a new business that too at a new place particularly in this type of business in precious metal, the assessee cannot (on his own) attract customers having la....
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....ectly into his account which is then used to issue cheques to the purchaser/supplier for delivery of gold. In such a scenario, it is not possible to have so much cash on hand and the balance if any, should be his bank balance. However, as on 31.3.2006, his bank a/c with ICICI Bank show Debit balance of Rs. 78,254/- debit balance. As on 06.04.2005 M/s Padmavati Bullions sold goods worth Rs. 6,09,03,300/- but received Rs. 1,35,00,000/- only. This is against the modus operandi claimed by the assessee that his purchases were against orders after receipt of full amount in cash from parties and that he did not accept cheques as he needed instant money/profit. Sales Tax Returns:- The assessee has filed a letter dated 17.11.2008 enclosing photo copies of some challans etc (in Gujarati) indicating month wise payment of sales tax. However, as per information received from the Sales Tax Department vide letter dared 31.1.2012 ((Annexure-7) the TIN Number 0713019280 allotted to M/s Padmavati Bullion w.e.f 30.3.2005 is cancelled. Thus it is not clear how M/s Padmavati Bullion carried on the trading activity after 30.3.2005 with the assessee and others. Further, I.C.I.CI Bank ha....
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.... business person. 2. Even now, summons were issued to Champalal Sanghvi who has not complied with it. Besides all these, partner of M/s Padamavati Bullion in an earlier sworn statement stated that the goods were sold only on receipt of money but the facts on records does not support this averment as mentioned earlier in this report. In an earlier statement recorded on 18.1.2010 in answer to question No 8 stated that after realization of cheque of the buyers bill will be raised and gold will be delivered to them but the facts on record does not support this averment. 3. It is also pertinent to mention here that regarding the modus operandi of the business carried by both the assessee and the parner of M/s Padmavati Bullion have given totally identical statements on oath" question No 8. Meenakshi Enterprises:- (started in April 2002 and continued till February, 2005) This is a proprietary concern of the assesse, engaged in trading in Bright Bar. But no details have been brought out in the scrutiny assessment order u/s 143(3) dated 29.12.2008. In the return of Income, the. assessee has shown loss of Rs. 38,248/- from the above firm. However, the det....
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....election of case for selection of case for scrutiny the assessee was proprietor of M/s Meenakshi Enterprises. However, this aspect relating to Meenakshi Enterprises remained to be scrutinized On going through the assessment order, it is seen that the assessee's business income from M/s Meenakshi Enterprises which shows discrepancy in the capital balance has not been verified. The assessee has declared a loss of Rs. 38,248/- from the firm which trades in Bright Bars. The capital account of the assessee for the year ending 31.3.2006, as shown in the computation of income, filed with the return of income, shows capital of Rs. 5,13,241/- with Meenakshi enterprises while the balance sheet of M/s Meenakshi enterprises also filed with the return of income shows a balance of Rs. 6,48,757/-. There are no other documents to verify the exact balance amount of capital of the assessee in the firm M/s Meenakshi enterprises.It is submitted that this fact may also be taken into consideration at the time of deciding the appeal. The action taken on directions given by CIT (A) are as below (point wise) : I. To call for and examine the books of accounts of M/s Padmavati Bullion a....
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....to the trade results of the Appellant to call for the clarifications and examine the same. * Information U/S 133(6) was sought from The Secretary M/s Shree Choksi Mahajan Associates who is associated Bullion Market who has stated that the bullion market is very volatile and difficult to predict the price trend of bullion and also not possible to determine the profit margin in bullion trade, since the margin may differ from trader to trader depending on their style of functioning. 9. Any information with A.O. as to the Appellants assets and liabilities since F. Y. 2005-06 to the current date and whether additions made by the A.O. are substantiated by any such assets in the notice of the A. 0. * No such assets are found in the Balance Sheet of subsequent years. (Return of Income filed only upto 2008-09). The assessee in rejoinder vide letter dated 12.4.2013, as under:- "The appellant thankfully acknowledges a copy of remand report dated 28.03.2013 submitted by the Income-tax Officer-16(2)(3) through Postal Authorities on 12.04.2013. 2. I, before dealing with the contents of remand report, most respectfully submit that report submitted d....
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....uences of arrest and imprisonment for non-payment of tax, but no authority has done anything to reprimand the Assessing Officer, who made addition by disregarding or even referring to evidence placed on record by the appellant. 4.5 It will interest your Honour to note that at the time when First remand report was called for, my Assessing Officer was a different Assessing Officer and yet the Assessing Officer who originally completed the assessment was preferred to prepare remand report and the fact is placed by me on record. 4.6 The appellant had specifically brought to the notice of the CIT (Appeals) that the' Assessing Officer who completed the assessment was prejudiced against me and was acting vindictively, but thus grievance of mine assessee did not find any favour. Now I my comments on the remand report. The first part of second page deals with attendance of the appellant. The attendance was not relevant appellant factually discharged the onus vesting on him. On page 2 under caption M/s Shankeshwar Bullion is repetition of facts on record stated by me and considered in the assessment and by the learned CIT(A) who partly heard t....
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....my bank account at Mumbai/Ahmedabad wherever convenient. After confirming the cash deposit I used to issue cheque to purchaser mainly Padmavati Bullion, Ahmedabad. On submission of the cheque,. I used to take delivery of gold bar from Padmavati Jewellers and delivered the same to the buyer at my business address at Ahmedabad" Again on page 5 under the caption M/s Padmavati Bullion, the appellant cannot be asked to explain its business. M/s Padmavati Bullion have conveyed the appellant as follows. (a) M/s Padmavati Bullion have appeared for verification of appellant's transactions before (i) DDI Ahmedabad (ii) DDT Mumbai (iii) The Assessing Officer And given all details with complete evidence. Every time when there is a change in the incumbent A.O. or the appellate authority, there are not bound to appear again and again for same matter and if the Department feel that it has a right to do so let them take any action against us. Why did the A.O. did not insist on their attendance? (b) M/s Padmavati Bullion is too big a party to collude with a small fry like me. The have traded in very huge quantity of Bullion....
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....e the same amount to directions to a Superior Authority in the garb of personal view. (c) In substance of the guidance by the AO to your honour or whatever it may establishes genuineness of the purchases. (d) There is no justification or even remote hint as for adoption of gross profit ratio, when the AO herself in later part of the remand report has admitted yield of gross profit in bullion is shown by the Principle Supplier 0.02%. POINT WISE DISCUSSION: Before dealing with point wise report, the appellant emphasis is that the entire exercise made in page I to 7 (part) are exercise in futility, irrelevant and is not worth its value, of paper on which is printed. POINTS: POINT NO. 1 Annexure 8 attached shows that M/s. Padmavati Bullion had sufficient stock of bullion to sell the same to the appellant and as such, no comment is offered by the appellant as it supports the facts of genuine purchase by appellant. POINT No. 2 The A.O. states that party has failed to comply. The AO on directions of CIT(A) ought to have insisted on compliance. In many events M/s Padmavati Bullion had produced all primary reco....
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....y learned CIT(A) that it is quite not believable that the sales of Rs. 49 crores were made by the assessee in 16 transactions, each averaging over Rs. 3 crores and were made to persons only on telephone and the assessee does not know/remember the names of even a single person to whom sales of gold bar was made. It was observed by learned CIT(A) that it was abundantly clear that there is much more to the whole issues than what is disclosed by the assessee and that the assessee by not giving out the names of the persons who have bought huge quantity of gold in cash is trying to shield them. It was observed that the purchases of gold by M/s. Padmavati Bullion, Ahmadabad from ICICI Bank has been established and since M/s. Padmavati Bullion, Ahmadabad has confirmed the sale of gold to the assessee which establishes that purchases were made by the assessee. The payments were made by the assessee through cheque to Padamavati Bullion. Once purchases were established there has to be corresponding sales, as it is no where alleged that the entire gold purchased was kept in stock by the assessee. The contention of the assesse that such substantial quantity of gold was sold in 16 transactions o....
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....r, kindly provide your decree considering the all submissions of appellant, facts and circumstances of the case. We and our client ever grateful for your justice." The ld. CIT(A) partly accepted the contentions of the assessee and observed that although 15 out of 16 sale transactions were concluded by 28th April, 2005 while the cash deposits in the assessee's bank account continued in the months of May, June, July and August 2005 as well. Thus the claim of the assessee that gold were delivered only after full payment was received by the assessee in cash or deposited by the customers in his bank accounts is factually incorrect. It was observed that almost Rs. 27.55 crores was deposited by the assessee in the bank account after 28.4.2005, which meant that the sale proceeds were received in cash which were kept with the assessee and deposited in the bank account later or the sales proceeds were received subsequently, which in either case is not believable. The book results were therefore clearly not reliable and not acceptable were the observation of learned CIT(A). The ld. CIT(A) held that the meager G.P. ratio of 0.17% shown in the books of accounts is not acceptable, hence, ....
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....re is no VAT in Gujarat for the relevant period while there was VAT on gold bar in the State of Maharashtra. The learned counsel for the assessee submitted that the assessee was dealing in gold bars since March, 2005. It is submitted that the assessee had made purchases of gold from M/s Padmavati Bullion who in turn purchased the same from ICICI Bank. The ld. counsel drew our attention to paper book page 2 wherein the assessee's P&L account is placed to contend that all purchases and sales were accounted for and declared in return of income filed with Revenue. The learned counsel for the assessee drew our attention to page 19 of the appellate order of ld. CIT(A) and contended that payments for purchases were made by cheque to said Padmavati Bullion. The ld. counsel also drew our attention to paper book page 158 wherein remand report by the AO to learned CIT(A) is placed. Our attention was also drawn to page 226/paper book wherein the remand report dated 28.3.2013 was placed. The ld. counsel also drew our attention to paper book page 3 wherein the balance sheet of the assessee is placed. The ld. counsel contended that the assesse has own capital invested in the proprietary concern o....
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....re the tribunal, it is submitted that the addition of Rs. 1,35,516/- in respect of difference in closing capital of Meenakshi Enterprises (proprietary concern of the assessee) has led to the enhancing of income by learned CIT(A) and no query has been raised by the ld. CIT(A) before enhancing income of the assessee which is not justifiable, it is submitted that the said difference is highlighted by the A.O. in the remand report only and the AO did not raise this issue while framing assessment u/s 143(3). Thus, it was submitted that no opportunity to rebut was granted by any authority below before prejudicing assessee and it is prayed that this matter may be set aside and restored to the file of the AO for de-novo determination of the issue on merits after hearing the assessee. 9. The ld. D.R. submitted that the business of the assessee was started in the month of March, 2005 and the major transactions of sale/purchase took place in March 2005 and April 2005 and thereafter no business has been done by the assessee except small turnover of Rs. 18.49 lacs in the month of July 2005. It is submitted that the notification by the Govt. of Gujarat levying VAT on Gold was issued on 29-03-....
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.... in the State of Gujarat is stated to be levying of VAT @0.25% at first point of sale of gold bar during relevant period in the State of Gujarat, while said exemption was stated to be not available in the State of Maharashtra which as claimed by the assessee prompted assessee to open proprietary concern in the State of Gujarat keeping in view savings in VAT which could lower costs. The said proprietary concern undertook large magnitude of transactions of sale and purchase of gold bars in the month of March/April 2005 immediately after it was established on 07-03-2005. The major transactions of cash sales of gold bar were to the tune of Rs. 6.85 crores in the month of March 2005 itself while the transactions of cash sales of gold bar were to the tune of Rs. 48.99 crores in the month of April, 2005. Thereafter , there was a solitary transactions of cash sale of gold bar of approx. Rs. 18.50 lacs in the month of July 2005 and thereafter said business of the assessee ceased to operate. The proprietary concern of the assessee namely Shankheshwar Bullion registration with Gujarat VAT was cancelled by Gujarat VAT authorities w.e.f. 30-09-2005(pb/page 261). The proprietary concern of the a....
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.... starting from receipt of gold bars by the assessee from Padmavati Bullions at the time of stated purchases till the said gold bars are delivered to the so called buyers of the assessee whose identities are not revealed Thus, the assessee did not bring on record any proof of delivery of material received by him from Padmavati Bullion and further no proof of delivery of gold bar by the assessee to the buyers to whom the gold bar is stated to be sold by the assessee in cash is placed on record. The assessee had stated to have received cash from un-known/undisclosed buyers which is deposited in the bank accounts of the assessee and cheques are issued to Padmavati Bullion towards purchases of gold bullion. The assessee has contended that only after receipt of the payments from buyers which is deposited in the bank, delivery of the gold to the unrevealed/undisclosed buyers is effected but there is no such evidence on records which could substantiate that the gold bars have been delivered to the undisclosed buyers only after the receipt of cash rather the records reveal opposite wherein cash sales of gold bar to the tune of Rs. 48.99 crores was shown to have been made by the assessee in ....
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....s to its buyers.The financial documents of Padmavati Bullions are placed in paper book page 170 to 199. Gujarat VAT registration of Padmavati Bullions was also cancelled by Gujarat VAT authorities on 30-03-2005 itself and it ceased to undertake operation towards sale / purchase after 29-06-2005. On the complete appreciation of the facts and also touchstone of human probabilities, the story of sale of gold bars appears to be a smoke screen while real objective is to introduce undisclosed income into banking system by way of deposit of cash in bank accounts. Reference is drawn to decision of Hon'ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801(SC). India is one of the major importer of gold in the world. The sale and purchase of imported gold including its end use is regulated, controlled and monitored by Reserve Bank of India(RBI). M/s Padmavati Bulion from whom the assessee has stated to have purchased gold bars has in turn purchased the said gold bars from ICICI Bank as is emanating from the records before us. The Gold bars sold by ICICI Bank to Padmavati Bullion is imported gold as is clearly reflected in the sale invoices and delivery challans issued by....
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....rcular of July 2005 onerous responsibilities have been placed on approved banks and nominated agencies to do due diligence/KYC/verification of suppliers, importers and user of the gold on a more tightened basis. On the perusal of the documents which are on record it is crystal clear that the assessee was not having adequate infrastructure to handle such huge transactions in gold bars and had no experience to handle turnover in gold bars of such a huge magnitude , rather if the theory of assessee is accepted as to the sale and purchase of gold bars , then by not disclosing the names of ultimate buyers of gold who have allegedly bought gold through assessee, the assessee has in fact facilitated introduction of the undisclosed money of his buyers into the bank accounts of the assessee and its conversion into gold bars without disclosing their identity which also prevented end use of gold bars to be monitored. Reference is drawn to a recent decision of Hon'ble Supreme Court in the case of Binoy Viswam v. UOI reported in (2017) 82 taxmann.com 211(SC) , wherein Lordships have held in no uncertain terms that menace of the black money which is deep rooted in the economy need to be tackl....
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....e are dealing with an Assessee who does not deny that he is an accommodation entry provider. He, in fact, makes no bones of the fact that he either owned or floated 'paper companies' only for that purpose. He also does not dispute the fact that he has not been able to explain the source of all the deposits in his accounts or the ultimate destination of all the outgo from his accounts. 16. The Assessee's plea that he should be taxed only on a composite 'peak credit' is based entirely on principles of accountancy. He questions the logic behind allowing peak credits for some of the credit entries by way of cheques and denying it for the other entries in cash. He also questions the practice of working out separate peak credits for cheque and cash transactions. 17. The premise underlying the concept of peak credit is the squaring up of the deposits in the account with the corresponding payments out of the account to the same person. In Bhaiyalal Shyam Bihari v. CIT (supra), the Allahabad High Court explained that benefit of peak can be given only when the assessee owns up all the cash credits in the books of accounts. It was further held: "....
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.... the Assessee should be sustained. The peak credit worked out by the Assessee was on the basis that the principle of peak credit would apply, notwithstanding the failure of the Assessee to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. That is not permissible in law as explained by the Allahabad High Court in the aforementioned decisions which, this Court concurs with. Conclusion 21. As already noted, the ITAT went merely on the basis of accountancy, overlooking the settled legal position that peak credit is not applicable where deposits remain unexplained under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e. in favour of the Revenue and against the Assessee. The impugned order of ITAT is, accordingly, set aside and the order of the AO is restored to file." Reference is also drawn to the decision of Hon'ble Calcutta High Court in the case of Rajmandir Estates Private Limited v Pr. CIT (2016) 386 ITR 162(Cal. HC), wherein Lordships has discussed the concept of laundering of black money as follows: "In a commentary on th....
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...."It has to be kept in view that India has a problem of black economy, which is unacounted and many a time the holders of black money also launder the black money in order to acquire legitimate assets. Legal or illegal income which evades tax and illegal income that comes within the exempted taxation slab constitute the unreported Gross Domestic Product or black economy. Laundering the black money and laundering proceeds of crime are two different issues, although there is frequent overlap between the two. While laundering black money is to be handled through taxation laws or similar laws, the laundering of proceeds of crime is to be handled through special anti-money-laundering laws." Now coming back to the controversy in hand , we have observed that the assessee has allegedly made sales of gold bars to the tune of Rs. 49,17,69,925/- during the impugned assessment year wherein sale proceeds have been stated to have been received in cash from undisclosed buyers which has been deposited by the assessee in the bank account of the assessee and hence sources of these cash deposit could not be satisfactorily explained by the assessee although the same is stated to be cash received on ....
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....version into gold without revealing identity of the buyers. It is stated by the assessee that there is no onus on the assessee under any law to reveal the identity of buyers who allegedly bought gold bars from the assessee, this argument is fallacious as the amount of cash allegedly received from unknown buyers of gold bars stood deposited in the bank account of the assessee and are cash credits appearing in books of accounts of the assessee and the assessee has to fulfill three ingredients requirements as are mandated u/s 68 before the said cash credits can be accepted viz. identity of the creditors, credit worthiness of the creditors and genuineness of the cash credits. Thus, to say that no burden lay on the assessee to fulfill all the three ingredient requirements sated above before its accepted wherein one of the ingredient requirement is to establish identity of the creditor. Thus, these so called proceeds of cash sales deposited in bank accounts of the assessee are cash credits appearing in the books of accounts of the assessee sources of which are not satisfactorily explained by the assessee keeping in view detailed factual matrix of the case discussed by us in preceding ....
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....evious year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." The assessee failed to satisfactorily explain the sources of these cash deposits in bank accounts of the assessee which are in the nature of cash credits in the books of accounts /bank accounts of the assessee, which is stated to be from cash sales of gold bar wherein identity of the buyers is not revealed by the assessee and is a devise used to convert undisclosed income/money into gold bars without disclosure of the identity of depositor of cash in bank accounts, and thus burden cast on the assessee u/s 68 did not stood discharged and the said cash credit will be deemed to be income of the assessee from the undisclosed income chargeable to tax within deeming fiction of Section 68 of the 1961 Act, which in the instant case we hold this issue against the assessee and in favour of Revenue based on factual matrix of the case detailed above. Reference is made to the decision of Hon'ble Calcutta Hi....
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.... to do what was within his power then he could be said not to have discharged his burden. The judgement in the case of Exoimp Resources (India) Ltd. (supra) is distinguishable because in that case the case of the assessee was that he had furnished evidence which was not considered and therefore the matter was remanded. The judgement in the case of Jaora Flour and Foods (P.) Ltd. (supra) is distinguishable because in a search and survey, a sum of rupees ten lakhs were found which the Revenue thought was unaccounted money, but it transpired that it had duly been reflected in the books of accounts. Double taxation could not have been permitted and that was not also a case of Section68. Section 68 is squarely applicable in this case because the money was found credited in the books of accounts of the assessee and the assessee was unable to satisfy the Assessing Officer by adducing proper evidence. Which evidence was not adduced by the assessee will appear from the judgement of the Assessing Officer which reads as follows: "It is further found that assessee has shown cash receipt from M.L. Dhingra & Associates for Rs. 10,61,834.44 and from sale of shares amounting to Rs. 21,559....
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....de. The judgement of the CIT(A) is restored." Reference is also drawn to the decision of Hon'ble Karnataka High Court in the case of P M Abdulla v. ITO ( 2015) 60 taxmann.com 52(Kar.) , decision of Hon'ble Punjab and Haryana High Court in the case of Self Knitting Works v. CIT (2014) 27 Taxman 253(P&H HC) and decision of Hon'ble High Court of Karnataka in the case of Smt Rekha Krishnaraj v. ITO (2013) 215 Taxman 159(Kar) , wherein SLP filed against the said case stood dismissed by Hon'ble Supreme Court in the case of Rekha Krishnaraj v. ITO (2017) 85 taxmann.com 256(SC). The whole controversy can also be seen from the another angle , the assessee could not satisfactorily explain the sources of expenditure incurred by the assessee towards purchases to tune of Rs. 48.78 crores during the subject assessment year as the payments for these purchases are stated to be made out of cash deposited in bank accounts out of so called cash sales of gold made by the assessee of which identity of the buyers is not revealed by the assessee. Provisions of Section 69C as were applicable for impugned assessment year are reproduced below:- " [Unexplained expenditure, etc. 69C. W....