TaxTMI 
TaxTMI 
2021 (6) TMI 1013
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.... identity of the investors, genuineness and creditworthiness of investors by not producing the investors before the A.O during the assessment proceedings though he was requested to do so? 2. Whether, on the facts and circumstances of the facts and in law, Ld. CIT(A) was justified in deleting the addition made on account of estimation of GP amounting to Rs. 71,71,873/- without appreciating the facts that books of [ accounts, original bills/vouchers were not produced for examination though those were called for during the course of assessment proceedings? 3. On the facts and circumstances of the case, Ld. CIT(A) ought to have upheld the order of the assessing officer. 4. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of assessing office may be restored to the above extent." 2.Facts of the case which can be stated quite shortly are as follows: The assessee company has filed his return of income on 28.09.2012 showing total income at Rs. 13,09,020/-. The return of income was processed u/s 143(1) of the I.T. Act. The case was selected for scrutiny and accordingly notice u/s 143(2) of the Act was issued on 06.08.2013 and du....
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....t of return of income were received. The Letters u/s 133(6) were issued and replies were received. But in case of Shri Hashmukh Dobriya letter could not be served and in following cases no reply was received from investors. i) Haresh Vekariya, ii) vijay Ramani, iii) Bhagirath Narigra, iv) Vinubhai Ramani, v) Dharmendra Atara, vi) Jitendra Venkariya, Banks statements of investors were inquired by assessing officer and it was found that all the investors have received same amount in their bank account and transfer the same company as their investment. None of the investor has made investment out of their own capital but have made the investment out of receipts of unsecured loans. 4. During the assessment proceedings, the assessee was asked to produce all the investors at specific time on 12.03.2015, 13.03.2015 & 14.03.2015. But, on the fixed date none of the investors have attended the office of the assessing officer. Summonses were issued to the six investors but again no one attended in compliance of the summons issued. None of the investors were attended in compliance of summons. The majority of investors were either directors or the family member or their friends. The....
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....ls called for. On enquiry from Notice server who served the summons, has stated that at all the addresses given were of residences and as per his observation no trading activity were running from those addresses. As none of the persons attended office of the Assessing Officer in compliance of summons issued. Therefore, Assessing Officer noted that identity of those persons remained unexplained and genuineness of transactions as well as creditworthiness of those creditors are also remained unexplained. The AO made further inquiry and observed that explanation offered by the assessee found unsatisfactory, therefore he made addition to the tune of Rs. 5,21,31,100/- under section 68 of the Act. 6. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before ld. CIT(A) who has deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in appeal before us. 7. Shri Ritesh Mishra, Learned CIT- DR vehemently assailing the action of the Ld. CIT(A) has reiterated the contentions raised by the AO to justify the addition made against the assessee. According to Ld. CIT, DR, the share applicants in this case have common shareholding....
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....ll 6 is Rs. 3.82 crores. So, out of Rs. 5.21 crores of share application money received Rs. 3.82 crores (i.e. 73 %) is received from the very promoters of appellant - company and their spouses. The rest of the share applicants are also stated to be relatives / friends of the promoters. (vii) In case of share - applicants appearing in serial nos 1, 2, 3, 5, 6, 10, 13, 16 & 17, simultaneously scrutiny assessments were conducted for assessment year 2012-13 by the concerned AOs. The copies of orders u/s 143(3) are produced in Paper Book. These 9 share applicants together account for 86 % of the total share application money received during the year. There is no addition, or adverse inference in any of the cases, in the assessment orders. (viii) In the case of share applicants - Source of investment - The appellant has explained the source of the share applicants for each installment as reproduced in table (at para 5.7 of the assessment order ). The immediate "source" in most of the cases are unsecured loans received by cheques. The appellant has furnished copy of ITRV of the 'unsecured loan" creditors of the share - applicants. It is seen that the Id Assessing Off....
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....he basic point is the introduction of a sum of money in books. Logically too, unless there is a receipt of actual money there is no chance of introduction of unaccounted money. Mere [ journal/notional entries do not give scope to introduce unaccounted income or from undisclosed source. 11. The prime facie evidence is receipt of money for logical steps to invoke the jurisdiction of section 68 of the Act. The Section puts the assessee under a cloud and must dispel that cloud to the reasonable satisfaction of the assessing authorities, upon the establishing the prime cause of receipt of money. The assessee had to prove that the money he has received in his books has either not under the scope of taxation or it had already suffered tax. In case, the assessee fails to satisfy, the AO, about any of the conditions, then said sum is treated as his income from undisclosed source or unexplained source. During the appellate proceedings, the ld CIT(A) noticed that assessee has submitted documentary evidences, including ITR, bank accounts, assessment orders passed by the jurisdictional AOs of the share applicants as well as the loan creditors (sources) of the share applicants, the subsequent....
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....ess and (iii) genuineness of the transactions.That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 13.Ground no.2 relates to addition on account of estimation of Gross Profit (GP) amounting to Rs. 71,71,873/-. 14. Brief facts qua the issue are that during the assessment proceedings assessee was asked to furnish Gross Profit (GP) ratio of A.Y. 2012-13 and preceding two years. In response, the assessee furnished the Gross Profit (GP), which are given below: A.Y. 2010-11 NA (Business not started) A.Y. 2011-12 0.88% A.Y. 2012-13 0.24% Assessee was asked to furnish the reason of downfall of GP with supporting evidences. No reason for GP was furnished. On 09.01.2015 assessee was again asked to furnish the same vide notice u/s 142(1) as under: "In your Submission dated 21/08/2014 in point no. 27 to stated the gross profit is higher than immediate previous year. But G P chart mentioned by you explains that G P of current year 0.24% which is much lower than previous year G P rate of 0.88%. Please furnish detai....
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....e on given address. Other person did not comply the summon issued. In view of the above facts, you are requested to please show cause as to why your books of accounts should not be rejected as per provisions of section 145 [ of the IT Act and gross profit should not be estimated as shown in the preceding year." 16. On the fixed date i.e. on 26.03.2015, no one attended. On 28.03.2015 assessee furnished his reply before Assessing Officer and stated that assessees business is based on orders of customers and the orders are directly delivered by suppliers. Delivery challans and transport details are available with suppliers. During the year under consideration assessee has jumped its turnover by 10 times and to achieve the higher volume of business his gross profit ratio is decreased. With the show cause reply assessee stated that assessee has complete record with regard to books of accounts and computer prints out are produced before Assessing Officer. Assessee further stated that complete quantitative information are available with assessee and are submitted but neither the computer printout nor books were produced nor quantitative details were furnished before Assessi....
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....ested in higher volumes and increase absolute terms as against the percentage (%). The AR before me explained that, no addition can be made on the GP rate shown by the appellant, when such a huge jump in turnover justifies reduction in margins and when the accounts are subjected to Tax Audit and Audit under the Companies Act. 10.3 The AR pointed out that books of accounts can be rejected only on cogent finding of defects in the books of accounts, when the Id AO has not examined the books of accounts, there is no question of rejection of same. The Id AO could have invoked sec. 144 of the Act in the absence of books of accounts, which the Id AO has not done. The AR in para 22 (a) of submission (reproduced above) argues that copies of bank statement ledger a/c of creditors, major expenses, cash book, etc. were produced before the Id AO. 10.4 In view of the above facts and circumstances, I am of the opinion that, the rejection of books of accounts as well as estimation of Gross Profit is uncalled for. The ld assessing officer is directed to delete the addition of Rs. 71,71,875/- made on this account. Consequently, the ground no 2 is decided in favour of the appellant.....