TaxTMI 
TaxTMI 
2020 (11) TMI 873
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...., New Delhi dated 27.04.2018 allowing the appeal being ITA No. 6527/Del/2017 filed by the Assessee relating to the Assessment Year ('AY') 2014-15. 7. Briefly stated, the Respondent-Assessee, Shri Akshit Kumar filed his ITR on 31.03.2015 for AY 2014-15 declaring his income of Rs. 41,60,010/-. The declared sources of income of the Respondent-Assessee were salary, income from business and profession and other sources. The declared income included an amount of Rs. 3,19,580/- under the head income from business and trading of textiles. The case was selected for scrutiny and notices under Sections 143(2) and 142(1) were issued by the Assessing Officer ('AO') from time to time. The AO noticed certain peculiarities which have been summarized by the Appellant-Revenue in the present appeal as under: "a. In the return of income, the assessee had shown his residential as A-32 Preet Vihar Delhi and was also filing its ITR with AO at New Delhi. b. It was also noticed that the assessee was having its business at 75A/2 Kon Village Mumbai, Panvel, Raigad. c. It was further noticed that the assessee was actually residing at Navi Mumbai. d. It was further observ....
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....of the said survey, the AO concluded that the premises from where the Respondent-Assessee purportedly conducted his business had been abandoned for several years and there was no built-up area in its vicinity. The AO also gave a categorical finding that there was no weighing machine installed. Thus, on the basis of aforenoted facts, the AO held that it was a case of money laundering and a false impression had been created that the entire cash deposits in the bank account of the Respondent- Assessee were purported sale proceeds. The AO also held that the entire cash deposits found in the bank account of the Respondent-Assessee were, in fact unexplained income and not sale proceeds and accordingly made an addition of Rs. 4,20,62,550/- on account of unexplained credits while completing the assessment under Section 143(3) of the Act at a total income of Rs. 4,62,22,560/-. Thereafter, a rectification order was passed to delete an addition of Rs. 3,19,580/- under the head 'income from business or profession' from the assessed additions of Rs. 4,20,62,550/-. On appeal, the CIT(A) noted that as per the verification report under Section 133B dated 05.11.2016, there was no weighing machine f....
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....ng into consideration the findings of the AO raising serious concerns about the genuineness of Respondent-Assessee's claim of doing business which had been fully endorsed by the CIT(A). 10. We have carefully considered the contentions advanced by Mr. Ajit Sharma and have also perused the findings of the Income-Tax authorities and that of the learned ITAT. The learned ITAT after analysing the contentions urged by the parties and also on the basis of the material placed on record observed as under: "13. We have heard the rival submissions, perused the relevant finding given in the impugned orders as well as the material placed on record. Here in this case we have to analyse various factors and background highlighted by both the parties as to whether the sales of fabric/ cloth bales is to added as unexplained income or sale of existing stocks or not. From the Revenue's perspective, it is palpable that AO had made very genuine efforts to carry out a physical inquiry to find out whether such trading of fabric was done by the assessee from the premises mentioned in the audit report or not. But at the same time it is also and admitted fact that on the date of inquiry, i.e., ma....
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....ven to the assessee during the financial year 2013-14. Electricity bill has also been produced to show that premises did existed at 75A/2, Kon Village Mumbai, Panvel, Raigad, the copy of electricity bill as well as the letter by M/s. S.K. Wheels have been placed at the paper book at pages 152 and 154 of the paper book. Apart from that, certain rental receipts issued by one RA enterprise has been given to show that M/s. S.K. Wheels Pvt. Ltd. was having premises on rent. However, all these evidences adduced by ht assessee is how far credible and acceptable in wake of inquiry made by the AO and whether it can be conclusively held that the assessee was carrying out any business from the premises made available by M/s. S.K. Wheels or not. The finding recorded by the AO in light of her inquiry prima facie negates most of the assessee's claim regarding the premises available to the assessee at a given place for carrying out such a large scale of trading of fabric/cloth bales. Such a detailed finding of the AO and Ld. CIT (A) for the existence of any trading business especially at the time of inspection has not been properly countered by the assessee except for adducing certain evidences w....
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....ns of stock were never disturbed and were duly reflected in the audited accounts. In the assessment year 2012-13 again the assessee's trading activity and books of accounts were subjected to detailed scrutiny in proceedings u/s 143(3), wherein the AO had noted the trading account figures like, turnover, profit rate, profit ratios vis-à-vis turnover and stock positions and based on his detailed reasoning, AO had rejected the trading result and has even enhanced the GP rate and thereby making an addition at Rs. 42, 51,463/- in the trading account. Thus, in this manner the entire trading activity of the assessee stood accepted and only addition made was on account of higher profit rate, but the sales made during that year; trading/business carried out by the assessee was duly accepted, including opening and closing stock. Again in the assessment year4 2012-13 the opening and closing stock and trading account including sales has not been disturbed, now in the impugned assessment year 2014-15, the audited balance sheet reflected an opening stock of Rs. 19,53,29,660/- which opening stock stood accepted by the department either under the scrutiny proceedings or by not selecting the....
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....hen in the impugned assessment year can it be held that there was no stock in existence at all and only activity done by the assessee was to deposit certain unaccounted cash in the garb of the sale and rotate his unaccounted money year after year. A stock existing in the books of accounts cannot be said to have been vanished in this year, when it has been stated that in subsequent year, that is, in July, 2015 the entire stock was sold and business was closed down which was prior to the initiation of the impugned assessment proceedings and much before the inspection carried out by the AO in November, 2016. 16. Though there may be a lot of strength in the AO's inquiry, however the same simply whittles down from the fact that; firstly, it has been done after one and a half year from the closure of the business; secondly, the assessee's purchases and the stock acquired in assessment year 2006-07 and 200708 have neither been repudiated nor has been disturbed, which only goes to show that such stock did existed with the assessee and were also subjected to scrutiny from time to time; thirdly, once a huge investment shown in the books of account for the purchases of stock which ha....
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....ome has been accepted u/s 143(1). Thus, we hold that AO is not justified under law to treat the sales as income from unexplained sources and accordingly addition made by the AO and sustained by the CIT (A) of Rs. 4,20,62,550/- is directed to be deleted. 19. In the result appeal of the assessee is allowed." (Emphasis supplied) 11. From the aforesaid extracted portion of the impugned order, it is easily discernible that the enquiry under Section 133B of the Act which has been strongly relied upon by the Appellant-Revenue, was conducted in Financial Year 2016-17 i.e. post closure of the business. The learned ITAT has juxtaposed the same against the other relevant material on record. The crucial factor that prevailed upon the learned ITAT to decide the case in favour of the Respondent-Assessee was the history of the case. The learned ITAT went by the trading account in the earlier years viz. opening stock, purchase and sales, closing stock, gross profits and assessment made by the Department in AY 2007-08 when assessment was framed under Section 143(3)/147 of the Act. The learned ITAT observed that since the entire books of account had been scrutinised and the Respondent....