TaxTMI 
TaxTMI 
2022 (4) TMI 537
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.... Rs. 2,04,85,395/- against the addition of Rs. 2,19,85,395/- on account of alleged unexplained cash deposits in the regular bank account of the assessee, during demonization period, which was on account of accounted for sales of the assessee, duly recorded in the regular books of accounts of the assessee. 2. That the Ld. CIT(A) has failed to appreciate that all the purchases and sales are fully vouched and no defects in the quantitative details or in the day to day stock register, maintained by the assessee have either been found and, therefore, the confirmation of addition of Rs. 2,04,85,395/- is against the facts and circumstances of the case. 3. That the Ld. CIT(A) has failed to appreciate that there was no difference in the stock of jewellery as noticed by departmental officials during the course of search, conduced in the premises of assessee in April 2017 and, therefore, it is not a case of 'unexplained money' as being alleged by the CIT(A) but the accounted for sale proceeds of the jewellery, which have been deposited in the regular bank account of the assessee. 4. That the Ld.CIT (A) has failed to appreciate that the Assessing Officer havi....
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.... grounds of appeal before the appeal is finally heard or disposed off. 4. Vide Ground No. 1, to 8 the grievance of the assessee relates to the sustenance of addition of Rs. 2,04,85,395/- on account of alleged unexplained cash deposits in the regular bank account. 5. The facts related to this issue in brief are that a search operation under section 132 of the Income Tax Act, 1961 (hereinafter referred to Act) was conducted in Kalaneedhi group of cases on 12/04/2017. Thereafter a notice under section 153A of the Act was issued to the assessee on 30/10/2017. In response to the said notice the assessee filed its return of income on 29/11/2017 declaring an income of Rs. 22,52,980/-. During the course of assessment proceedings the A.O. noticed that the assessee had deposited Rs. 2,90,20,000/- during post demonetization in its CC Account and that during the course of search, books of accounts and sale bills books relating to demonetization period and pre demonetization period were verified which revealed that the assessee was maintaining its books of account in the computer of its Accountant. The A.O. further observed that on examination of digital data it was noticed that there wer....
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....that the statement of Sh. Naveen Goyal do not have evidentiary value as the same was recorded at the back of the assessee and is without corroboration. This plea of the assessee is also not convincing as the statement of Sh. Naveen Goyal was ouiy confronted with Sh. Kamal Aggarwal in his statement recorded u/s 132(4) and the relevant part of the statement is reproduced as under: "Q 4 I am showing you the statement of Sh. Naveen Goyal S/o Sh. Tara Chand, Patiala, your part time Accountant, taken u/s 131 of the IT. Act, 19861 in the camp office at 123-C, Model Town, Patiala on 12.04.2017 wherein he has submitted that after demonetization on 08.11.2016 he had modified and change the actual books of accounts of your business concerns M/s Kalaneedhi Jewellers LLP, Bhupindra Road, Patiala by modifying the cash sales in the month of October, 2016 and November, 2016 ending 08.11,2016 by an amount of Rs. 2.90 crores (Approx.). He further submitted that the said modification was done on your directions on 10.11,2016 on the basis of sales bills provided by you which were back dated to generate cash in hand of Aprox. 2.90 crores \on 08.11.2016- In the notes of old currency of Rs. 500/....
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....s on account of sales shown as per bill book Sr. No. 1 to 50, 51 to 100 and 101 to 150. These bill books are not as per the running Serial number which is 435 onwards for this period. Further, accountant Sh. Naveen Goyal in his statement recorded during the course pf search confirmed that he has changed the sale figures by increasing cash sates after demonetization to increase the cash in hand. Copy of statement of Sh. Naveen Goyal is enclosed. ii) During this period you have shown investment on the construction of showroom as per your books of accounts at Rs. 73,06,405/-. The issue of cost of construction was referred to Valuation Call of the Income Tax Department by the. DDIT(inv.). As per Valuation report a copy of which has already been provided to you. the total cost of construction has been worked out at Rs. 1,32,24,900/- and Investment on construction during the A.Y. 2017-18 has been estimated at Rs. 92,92,400/- whereas you have shown lesser amount in your books of accounts. On verification of seized/impounded documents during the course of search/survey, it has been noticed that the following bills of material in respect of construction of showroom has not been sho....
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....e to submit as under - 1. As regards point no 1 - Point Missing in Questionner 2.(i) As regards point no 2 (i) - As regards the billing for Sr. No. 1-50, 51-100 and 101- 150 correctly said the bills are not in serial number because the regular Sr. No. is 435 and me serial number 1-50, 51-100 and 101-150 come before 435, resultingly this cannot be said to be in Sr Numbers. The bills have been issued and accounted/recorded/disclosed I declared in the books that's why the bills have been found and the provisions of section 44AA requires the maintenance of books 6f account which has been done. The increase in sales relatable to kundan to be excluded from gold (exhibition) and various other market related forces resulted into increase in sales, which required bills to be issued and this maintenance &: issuance~~of the bills is required even by the department. While the sales were increasing as explained above then for the need of the time there were certain bill books which were pending (and relates to studded Jewellery itself - please note {S) mentioned on impugned bill book impounded signifying Studded jewellery) to be completed (1-50. 51-100 and 101-150) hence t....
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....g work on cum-material basis thus to avoidance to the payment duplication. 3. Regarding Section 145(3), it is submitted that the assessee has maintained the books of accounts with the supporting vouchers and necessary evidences, however there is a difference of opinion in the view point qua this process of maintaining books of accounts and additionally it is submitted that the 1 st notice for starting of the assessment proceedings was received on dated 13/12/2018 and thereafter the assessee has submitted number of replies and additionally visited number of times in person to explain the written replies. Resultingly the completion of assessment u/s 144 is an unwarranted action ad devoid of merits. 4. Regarding the cash deposit in cash credit limit account No. 65183224280. The detailed explanation has already been furnished on dated 25/02/2019 along with present reply (Supra) of Pg. 1-4 and the said explanation of 16 Pages is enclosed. 5. It is humbly submitted that with the aforesaid facts and circumstances explaining everything, it does not call for any addition and in the respectful pleading the prayer is to kindly vacated such an action. 5.3 The A.O.....
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....ring demonetization During demonetization the assessee had deposited Rs. 2,90,20,000/- in its CC Account with State Bank of Patiala. During the course of assessment proceedings, data taken on pen drive and Hard disc of accountant's computer were operated in the presence of assessee and printout of sales account and various other accounts were taken. A comparison of the sale account for the month of October, 2016 as taken from pen drive and as taken from hard disc revealed that bills from Serial number_ 15 to-147 totaling Rs. 2,19,85,385/- have not been entered in one set of books. These bills were prepared and entered after demonetization i.e. 08.11,2016 and shown to have issued in the month of October, 2016 back dated to increase cash in hand as on 08.11.2016 for justifying cash deposit of Rs. 2,90,20,000/- in its bank account. This fact was admitted by the accountant of the assessee who stated that the sales of the month of the October were changed after demonetization. The assessee could never rebut the statement of accountant which was confronted during search as well as during assessment proceedings. The argument of the assessee that there is a general in....
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....tionate addition made on account of investment in the show room over and above the amount which has been debited in the books of accounts of the assessee. Facts in Brief 3. It is submitted that the assessee is a Limited liability partnership firm constituted, which was constituted on 17.08.2011 and is engaged in the business of resale of jewellery, diamond and other related items. The assessee is maintaining regular books of accounts and such books of accounts are being audited year after year and the return of income of the partnership concern have been filed on the basis of such audited books of accounts. There has been no dispute in respect of assessments of the earlier years and the assessee's book result have been accepted year after year on the basis of 'stock tally' of different items of jewellery and said stock register have been maintained right from the date of start of business. During the earlier years, there has been no dispute of any nature, whatsoever, and the book results of the assessee have been accepted by the department. 4. For the year under consideration, the return of income was filed an income of Rs. 22,52,980/- and the assessment ....
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....n doubted. Therefore, the addition as made by the Assessing Officer in this case on account of 'alleged inflated cash', which have been deposited in the bank and is as per books of accounts, may, please, be deleted and also alleged difference in the valuation of investment in the Show-Room. 9. Addition of Rs. 2,19,85,395/- on account of inflated cash in hand. As already submitted that the assessee is maintaining audited books of accounts and year after year at the time of filing the return of income, in the Tax Audit Report, the complete quantitative detail of various items of Gold, Diamond and other related jewellery have been given and which form the part and parcel of the books of accounts. For the year under consideration, the Tax Audit Report alongwith Balance Sheet is attached at page 1 to 27 of the Paper Book and against which, no discrepancy have been pointed out/noticed by the Assessing Officer during the course of assessment proceedings. 10. In fact, the assessee is maintaining day to day 'stock register' of each and every item dealt in by the assessee, which takes into consideration the opening stock, purchases, sales and closing stock....
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....nished all the requisite details with supporting documents and necessary evidences while responding to notices and questionnaires. The explanation furnished that there has been completely accounted, recorded, disclosed and declared purchases having reconciliation closing stock which has been carried forward with effect from A.Y 2012-13 to 31.03.2018 and, thereafter, brought forward as on 01.04.2018 for which the returns filed u/s 139(1) reveal the complete integrated reconciliation of all the purchases and sales from retrospect to the subsequent period. Complete purchase details, sales details, stock summary from period 01.04.2015 to 30.06.2017 were submitted before AO, wherein the same have been accepted as such, during the assessment being an accepted fact on record. Please refer to chart in para 35, page 21 of this submissions. 15. During assessment proceedings u/s 153A, assessee had deposited Rs. 2,90,20,000/- during post demonetization in its cash credit account. AO order [dt. 31.03.2017 Pg. 2 Para 3 and Pg 10 Para A] alleged that assessee maintained 2 sets of books of accounts i.e. 1) in the computer of accountant and 2) in the Pen drive of the accountant. On compari....
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....arket & customers require new and changing pattern with new designs, so in order to introduce new designs stock, old design jewellery is required to be cleared first which by clearing the old stocks the assessee get working capital for business to replace old designs and with new stock. The following is the chart showing higher sales in the month of exhibition in earlier years and in this year:- Year and month of exhibition March, 2014 July, 2015 October, 2016 Turnover of the month of exhibition 10865654.00 19271320.00 40833914.00 Turnover of the previous month 5053901.00 8829268.00 25069156.00 Difference of Turnover 5811753.00 10442052.00 15764758.00 % increase in sales in the month of exhibition as compared to previous month 114.99% 118.26% 62.88% Assessee has held exhibition every year and in said months, sales were exorbitantly higher than other than months of the year, hence the trend of similarity and consistently conducting the said sales. Further in October 2016 for the reason that alongwith exhibition, there was festival season in October 2016 & during that period as per Hindu Tradition, people usually pu....
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....assessee (Sh. Kamal Aggarwal) qua the statement of Sh Naveen Goyal (Accountant) given at the time of search that assessee (Sh Kamal Aggarwal) directed the accountant to change the sale figures of October 2016. AO merely relied upon statement of accountant, which was recorded behind the back of assessee during the course of search and even cross examination of accountant was not provided during assessment proceedings despite various verbal requests to call and summon the accountant resulting in misuse and abuse to the procedure of law at the hands of the Department. Assessee as already submitted above, the reason for increase in sales during October 2016, which was attributable to exhibition by the assessee for marketing of Gold and Kundan Jewellery. Thus, cash deposited during demonetization was as per books and verifiable from sale bills. Further, AO at Pg. 4 Para top has just brushed aside the request of assessee for cross examination of Sh. Naveen Goyal, Accountant by saying that statement of Sh. Kamal Aggarwal shows that the statement of Sh. Naveen Goyal was duly confronted with him & except disagreeing he could not say anything. 22. As regards AO's objection regarding....
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....s before Intt. And salary to partners (EBIPS) EBISP /Sales Gross Profit Rate Net Profit Amount (Rs.) Net Profit Rate Tax paid 2012-13 NIL NIL NIL NIL NIL NIL NIL NIL 2013-14 13306600.00 2077895.00 1582830.14 11.90% 15.62% 22830.00 0.18% 1,47,897/- 2014-15 30432382.00 5058084.00 2584508.15 8.49% 16.62% 521970.00 1.72% 2,30,152/- 2015-16 94655149.00 12752813.40 6251917.36 6.60% 13.47% 2381815.00 2.51% 7,35,982/- 2016-17 106848155 13595400 6930321 6.49% 12.72% 542651.00 0.51% 5,13,885/- 2017-18 12,83,62,906 15676038 8064631 6.28% 12.21% 2017448.00 1.57% 6,96,171/- 23. It is hereby submitted that Data from Accountant, Naveen Goyal, cannot be regarded as evidence and as it do not qualify for being termed as Information admissible under Evidence Act 1872 and the Information Technology Act, 2000:- PROVISIONS AS PER EVIDENCE ACT 1872 RELEVANCE IN PRESENT CASE (a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly ....
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.... it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and The impugned computer system found from Naveen Goyal, Accountant was not operating properly during various periods under question and was being regularly got repaired from un unorganized sector with inappropriate non-professional manner which can directly affect the electronic records or the accuracy of its contents the said fact is substantiated with the bills of repairs from unorganized sector vendors showing the repairs. (d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities. The Desktop at the house of accountant do not contain any complete set of books and have no authenticity or Assessee's rightful data, which can be considered to have been fed in the ordinary course of the business of the assessee. The information contained in the seized records/HDD (Hard Disk Drive) cannot gives any inference by presumption that such information was being fed into the computer in the ordinary course ....
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....2 and neither had any such relationship being established in the case set up by the A.O. It was stated that no express or implied authority was given by the assessee to Shri Naveen Goyal for changing / altering the transactions and that the assessee as a principal be it so had not ratified the acts of accountant and had refused the knowledge / authority of such acts. It was stated that Shri Naveen Goyal, Accountant was writing accounts for various persons in Patiala and it was not known neither brought on record as to the recording of his statement was doctored /coercion and under what circumstances it had been given by him. It was submitted that it was not known as to why and how Shri Naveen Goyal maintained two sets of data with what purposes, since no such onus was discharged by the A.O. for arriving at a finding to that extent. Therefore the statement of Shri Naveen Goyal was not sustainable in law particularly when no opportunity was given to cross examine. The reliance was placed on the following case laws: * Prakash Chand Mehta vs CIT (2008) 301 ITR 134 (M.P) * Andaman Timber Industries reported in 281 CTR 241 (SC) 6.2 It was further submitted that the A....
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....34 ITR 328 (Madras) * Roshan Di Hatti vs CIT 107 ITR 938 (SC), * CIT vs Value Capital Services Ltd 307 ITR 334 (Del.), * CIT vs Real Time Marketing (P) Ltd 306 ITR 35 (Del.) , * CIT vs Kamdhenu Steel and Alloys Ltd. 248 CTR 33 (Del.) 6.4 It was also submitted that the amount deposited in the bank account was out of sale of jewellery which had been held by the assessee as stock in trade and since the deposits in the bank account were out of sale of stock therefore the stock of the assessee has depleted and the cash has come in respect of stock, such sales had been disclosed in the trading account against the purchase which had not been doubted, neither the opening and closing stock had been doubted. Therefore, nothing could have been doubted when the source of cash was well explained and was shown in the bank account. However the addition was made only on the basis of statement of account at back of the assessee without establishing any motive on the part of the assessee and without disturbing the closing stock as on 31/03/2017 which had been arrived at after reducing the sale in quantity of stock in trade. The reliance was placed on the decisi....
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....e sales by the assessee while the same are being doubted on presumptions by the department. Alternatively it was submitted that when the A.O. has rejected the books of account under section 145(3) of the Act then the addition under section 69A of the Act amounting to Rs. 2,19,85,395/- and making separate addition under the different provisions of the Act was totally unjustified and due to the said addition the A.O. has resulted in unrealistic net profit rate i.e; 18.7%. It was also stated that even if the A.O. was not satisfied about the correctness or completeness of the account then the assessment could have been framed in the manner provided under section 144 of the Act. It was stated that the A.O. rejected the books of account under section 145(3) of the Act only on the basis of statement of Shri Naveen Goyal, Accountant, whose testimony could not have been relied upon and that no defect was pointed out in purchase and sales, opening stock, closing stock, expenses as debited in the books of account. Therefore, the making of addition on account of deposit of cash which was duly accounted for in the books of account was against the facts and circumstances of the case. The relianc....
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....axman 155 (Chd Trib.) (TM) * CIT vs. Vishal Exports Overseas Ltd. in ITA No.2471 Of 2009 dated 03/07/2012 (GUJ HC) 6.7 The assessee summarized the submissions before the Ld. CIT(A) in the following words: Therefore, to conclude the issue, on the basis of above facts and judicial pronouncements, it is submitted that the addition as made by the AO u/s 69A of the Act r.w.s. 115BBE of the Act is against the facts of the case on the following issues; sales have been accepted as per the trading account filed by the assessee and there is no new unexplained credit/investment since there is available stock with the assessee and the opening stock, purchases, sales, closing sock have been accepted and assessed from ay 2012-13 to AY 2018-19 , thus, on account of the reduction of stocks, the sale proceeds have been recorded in the regular books of accounts and the profit embedded in such sale proceeds have also been offered to tax and taxed accordingly, by the Assessing Officer and, therefore, the Ld. Assessing Officer has grossly erred in making the addition of alleged unexplained cash credit, which amounts to double addition :- ❖ The assessee maintains pro....
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....ot during the year. The reliance was placed on the following case laws: * CIT(Central)-I vs. Vatika Township Private Limited. (2014) 367 ITR 466 (SC) * CIT vs. Scindia Steam Navigation (1961) 42 ITR 589 (SC) * Karimtharuvi Tea Estate Ltd. vs. State Of Kerala (1966) 60 ITR 0262 (SC) * STO v. Oriental Coal Corporation [1998] 68 STC 398 ; [1988] (Suppl.) SCC 308, (SC) * CIT vs. Ansal Land Mark Township (P.) Ltd. [2015] 61 taxmann.com 45 (Delhi), * DIT vs. Medical Trust of the Seventh Day Adventists [2017] 84 taxmann.com 202 (Madras HC) * Jayam and company vs. Assistant Commissioner &Ors., (2016) 15 SCC 125 * Loknathgoenka [2019] 109 taxmann.com 203 (Patna) (FB) * Govind Das and others Vs ITO and Another 1976 (1) SCC 906 6.9 The assessee again furnished the written submissions before the Ld. CIT(A), which have been incorporated in para 3.1 of the impugned order and read as under: Sub: Written submission in the case of M/s. Kalaneedhi Jewellers LLP, House No. 123C, Model Town, Patiala PAN:AALFK4800D for the Asstt. Year 2017-18 in Appeal No. CIT(A), Ludhiana-5/10033/2019-20 We have to su....
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.... day stock register in respect of each & every item of different qualities of gold i.e., 24 Carrot, 22 Carrot, Silver, Stone, Diamond 18 Carrot, Gold in diamond 18 Carrot, Diamond 14 Carrot. In order to substantiate that we had sufficient stock of above said items on the date of the alleged inflation in sales made by the assessee, we have submitting herewith, the details of such sales date-wise from 01.10.2016 to 31.10.2016 in respect of each item of the above said gold and diamond jewellery including silver jewellery, stone and that list, is being marked as Annexure-A and from that your goodself would notice that there is a sufficient stock of such items of gold and diamond jewellery ason the date, when the sales have been made. This proves our contention that the stock has depleted and resultant cash has comes into the books of account, against such sales as recorded in the books and, therefore, it is a conclusive evidence that it is not a case of 'unexplained money' and rather, it is the exchange of one asset i.e., gold and diamond jewellery against the cash, which is reflected in the regular books of accounts. d) The Ld. Assessing Officer while passing the order u/....
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....0-10-2016 844580.00 1409538 564958.00 2 1-10-2016 544005.00 809596 265591.00 22-10-2016 51130.00 51130 0.00 23-10-2016 744783.00 1321489 576706.00 24-10-2016 1285578.00 2103653 818075.00 25-10-2016 1307491.00 1619256 311765.00 26-10-2016 822051.00 1123725 301674.00 27-10-2016 76916.00 404118 327202.00 28-10-2016 1691321.00 4639284 2947963.00 29-10-2016 13000.00 2057776 2044776.00 Grand Total 15766609.00 35537736 19771127.00 From the above chart, if we go by the allegation of the department, there is inflation in the sales from 1-10.2016 to 29.10.2016, for which the data was found from the computer of Accountant and it has been alleged that sales have been inflated by Rs. 1,97,71,127/-. This increase in the sales is not on account of any unexplained money introduced into the books of accounts of the assessee, but against this, extra sales as being alleged, the stock of different varieties of Gold, Diamond or Silver was sold and the stock as per books have depleted, which is proved from the day today stock register from 1.10.2016 to 29.10.2016, whe....
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....16 908748 137577 1046325 19-Oct-16 887412 180575 1067987 20-Oct-16 808580 5000 36000 844580 20-Oct-16 1373538 5000 36000 1409538 21-Oct-16 542205 1800 544005 21-Oct-16 807796 1800 809596 22-Oct-16 6130 45000 51130 22-Oct-16 6130 45000 51130 23-Oct-16 429383 315400 744783 23-Oct-16 1006089 315400 1321489 24-Oct-16 1285578 0 1285578 24-Oct-16 2103653 0 2103653 25-Oct-16 1122680 184811 1307491 25-Oct-16 1434445 184811 1619256 26-Oct-1 6 756451 65600 822051 26-Oct-16 1058125 65600 1123725 27-Oct-16 57016 19900 76916 27-Oct-16 384218 19900 404118 28-Oct-16 983121 708200 1691321 28-Oct-16 3896354 742930 4639284 29-Oct-16 0 13000 13000 29-Oct-16 1894971 162805 2057776 13200935 15000 2565674 15766609 ....
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....ufficient stock which had been converted into cash and the said cash had been deposited afterwards in the regular bank accounts of the assesse after 08/11/2016 and such cash had been generated out of depletion of stock of gold, no case could have been made out of unexplained money having been introduced in the books of accounts of the assessee. The assessee also furnished a Chart showing day to day cash in hand after alleged inflation in sales to prove that such increase in cash had not been utilized anywhere which read as under: Chart showing day to day cash-in-hand after alleged inflation in sales to prove that such increase in cash has not been utilized anywhere. Kalaneedhi Jewellers LLP Particulars l-Oct-2016to 15-Nov-2016 Transactions Closing Debit/Out of cash sales Credit/Out of flow of cash) Balance Opening Balance 443097.60 Dr 10/1/2016 1022564.00 350000.00 1115661.60 Dr 10/2/2016 657029.00 1772690.60 Dr 10/3/2016 271058.00 14404.00 2029344.60 Dr 10/4/2016 1175257.00 100000.00 3104601.60 Dr 10/5/....
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....592.00 109413.60 Dr Average 1048606.70 1055860.70 13482681.82 Dr 6.15 The Assessee also furnished position of day to day cash in hand as per regular books of account from 01/09/2016 to 31/12/2016 which read as under: Daily Cash Balance Kalaneedhi Jewellers LLP 2016-17 Particulars l-Sep-2016 to 31-Dec-2016 Transactions Closing Debit Credit Balance Opening Balance 393484.60 Dr 9/1/2016 8204.00 176500.00 225188.60 Dr 9/2/2016 458350.00 5165.00 678373.60 Dr 9/3/2016 7496.00 180000.00 505869.60 Dr 9/4/2016 8000.00 513869.60 Dr 9/5/2016 5130.00 2480.00 516519.60 Dr 9/6/2016 238687.00 1800.00 753406.60 Dr 9/7/2016 61402.00 17668.00 797140.60 Dr 9/8/2016 307610.00 1019305.00 8544 5.60 Dr 9/9/2016 77983.00 163428.60 Dr 9/10/2016 14550.00 16212.00 161766.60 Dr 9/11/2016 253812.00 415578.60 Dr 9/12/2016 367994.00 680.00 782892.60 Dr 9/13/2016 9929.00 792821.60 Dr 9/14/2016 1060....
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....sp; 15440066.60 Dr 10/28/2016 3896354.00 150000.00 19186420.60 Dr 10/29/2016 1894971.00 717540.00 20363851.60 Dr 10/30/2016 5806872.00 26170723.60 Dr 10/31/2016 1148716.00 145620.00 27173819.60 Dr 11/1/2016 193078.00 3200000.00 24166897.60 Dr 11/2/2016 250602.00 24417499.60 Dr 11/3/2016 874212.00 25291711.60 Dr 11/4/2016 29227.00 535000.00 24785938.60 Dr 11/5/2016 2184689.00 1630730.00 25339897.60 Dr 11/6/2016 1304031.00 26643928.60 Dr 11/7/2016 1049208.00 1170000.00 26523136.60 Dr 11/8/2016 2520150.00 10500.00 29032786.60 Dr 11/9/2016 29032786.60 Dr 11/10/2016 9500000.00 19532786.60 Dr 11/11/2016 3501500.00 16031286.60 Dr 11/12/2016 9000790.00 7030496.60 Dr 11/13/2016 7029168.00 1328.60 Dr 11/14/2016 1328.60 Dr 11/15/2016 126394.00 18309.00 109413.60 Dr 11/16/2016 109413.60 Dr 11/17/2016 54224.00 55189.60 Dr 11/18/2016 &n....
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....ebit cash in the books of account of the assessee and such sales as per the alleged changed figure of cash sales on the higher side had been reflected in the trading account of the assessee. Thus the resultant profit had been disclosed therein and accepted by the Department. It was further submitted that the cash in hand had always been in the books of the assessee and not utilized anywhere thus no adverse view could have been drawn. It was contended that the sales as well as stock figure as on 01/04/2016 and 31/03/2017 had been accepted and that the cash in hand had not been utilized anywhere till 08/11/2016 and thereafter whatever cash had been deposited it was as per regular books of accounts. 6.17 It was contended that the entries of the sales for the month of October 2016 showing higher sale had been recorded in the regular books of account and there was no interpolation in the regular books of accounts therefore the rejection of books of accounts by the A.O. under section 145(3) was not correct. 6.18 It was stated that vide reply dt. 15/03/2019 it was submitted to the A.O. that the assessee had been maintaining different bill book for different verities of jewellery and al....
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.... further submitted that the percentage of cash sales to the total sales was always very high and in some months it was to the extent of 95% in the preceding as well as succeeding years which proves the modus operandi of the business that majority of the cash transaction took place in this trade, in support of above contention the assessee furnished the details of the sale vs. cash details for the various years in the following manner: Sales v/s Cash Details 2014-15 Month Sales Cash Against Sales % Cash Sales April 11105543.00 10532864.00 95% May 4920266.00 3719576.00 76% June 6292287.00 5592314.00 89% July 6458206.00 5396146.00 84% August 7565869.00 6211400.00 82% September 5506455.00 4004296.00 73% October 10744407.00 7676823.00 71% November 7470736.00 5833701.00 78% December 10245197.00 7017142.00 68% January 10876502.00 8666653.00 80% February 7415973.00 5982199.00 81% March 7095122.00 5672334.00 80% Grand Total 95696563.00 76305448.00 80% Sales v/s Cash Details 2015-16 Month Sales Cash Ag....
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.... 70% October 8507424.00 5406747.00 64% November 14828803.00 10493761.00 71% December 9411290.00 7255015.00 77% January 14405567.00 9886476.00 69% February 14467692.00 8892631.00 61% March 20792348.00 14724127.00 71% Grand Total 151823513.00 112167121.00 74% 6.20 On the basis of the aforesaid chart it was stated that there were cash sales to the tune of 94% during the F.Y. 2015-16 when there was no demonetization and even on an average more than 80% cash sales were there in different years because of the nature of trade and thus, no adverse view could have been taken of such sales during the F.Y. 2016-17 relevant to the A.Y. under consideration. 6.21 It was stated that the assessee furnished the audited sets of balance sheet and audit report for the A.Y. 2014-15 to 2017-18 and the total sales as well as the G.P. earned was as under: ASSTT. YEAR SALES GROSS PROIFT PERCENTAGE 2014-15 3,04,32,382.00 50,58,084.00 16.62% 2015-16 9,46,55,149.00 1,27,52,813.00 13.47% 2016-17 10,68,48,155.00 1,35,95.400.00 12.72% 2017-18 12,83,62,906.50 1,56,76....
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....ee is maintaining its books of account on the computer of its Accountant and on examination of digital data, it was noticed that there were two sets of books of account i.e. one on the computer of the Accountant and another in the Pen Drive of the Accountant. As per AO, on comparison of both the accounts, it was noticed that there was huge difference in sale figures for the month of October, 2016 as cash sale was increase in one set of books of account. The statement of the Accountant was recorded during the course of search and he admitted that he has changed the sale figures of October, 2016 by increasing cash sale after demonetization to generate cash-in-hand in the books of account. It is mentioned by the AO that vide questionnaire dated'21.12.2018, the assessee was asked to furnish documentary evidence regarding source of cash deposit of Rs. 2,90,20,000/- in its bank account. The assessee filed reply which is discussed in the assessment order whereby the first reason stated by the assessee for increase in sale in the month of October was stated to be exhibition by the assessee for marketing Gold and Kundan Jewellery. The assessee also filed pamphlets in support, however as....
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.... the cost of the construction at Rs. 1,32,24,900/-. Also on verification of the document found during the course of search/survey, it has been noticed that certain bills have not been recorded in the construction account in the books. Also payment in cash shown to be made to Sh. Kesar Singh have been denied by him which shows that receipts are not genuine and actual investment have not been recorded in the regular books of account. It was mentioned by the AO that in view of the above facts, books maintained by the assessee are not correct & complete and does not depict the real true state of affairs and proposed to reject the same u/s 145(3) and - assessment to be completed as provided u/s 144. It was further mentioned that during demonetization the assessee deposited Rs. 2,90,20,000/- in its CC account and was required to produced documentary evidence with regard to source of cash deposit and proposed to make appropriate addition on account of 'nongenuine' sales entered after demonetization, in back dates. It was also proposed to make addition on account of unexplained investment in construction of the show room of the basis of valuation report of the Departmental Valuatio....
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....osit during demonetization the AO mentioned that assessee deposited Rs. 2,90,20,000/- in CC account. During assessment, data -taken from Pen Drive and hard disk of accountant computer were operated and comparison of sale for the month of October, 2016 revealed that bills from Sr. No. 15 to 147 totaling Rs. 2,19,85,385/- have not been entered in one set of book. As per the AO, these bills were prepared and entered after demonetization on 08.11.2016 and shown to have been issued in the month of October, 2016 i.e. back dated to increase the cash-in-hand as on 08.11.2016, for justifying cash deposit of Rs. 2,90,20,000/- in its bank account. This fact was admitted by the accountant and assessee could never rebut the statement of the Accountant which was confronted during search as well as during assessment proceedings. The arguments of the assessee about general increase in sales in October is not supported by his own books and comparative figures of sales are tabulated by the AO in the assessment order which shows 32% of the annual sales in October, 2016 as compared to maximum percentage of 11.23 in assessment year 2015-16. The AO concluded that on perusal of both set of books of accou....
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....'s house and argued that addition could not have been made in the hand of the assessee for the alleged difference in sales entered in the books. Regarding increase sale in the month of October, 2016, the AR submitted that this was due to exhibition held by the assessee. The AR argued that cash deposited in the bank was as per books of account and the same can be verified from the sale bills and submitted that every year there is higher sale due to clearing of old stock/old design. Regarding the statement of Naveen Goyal, the AR submitted that he has stated certain alleged manipulation in the actual books of the assessee as per direction of partner, may be under coercion/pressure but Sh. Kamal Aggarwal, partner has clearly denied it during the statement at the time of search. It is also argued that the Accountant was only a part time accountant and his computer has data of other assessees also. Regarding the bill books not being in serial number, the AR reiterated the arguments which were taken before the AO at the time of assessment. The AR also argued that statement of the Accountant was recorded at the back of the assessee and even cross examination of the Accountant was not ....
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.... is argued that provision of this section has been applied by the AO at the rate of tax which came into effect on 15.12.2016. However, a perusal of the section shows that the change was inserted with retrospective effect from 01.04.2017. Hence, the arguments of the AR are not found acceptable. In the second submission, the AR has argued that without prejudice, if the data recovered from the residence of the Accountant is considered then also no addition is called for because there is sufficient stock of gold and other items, which proved beyond doubt that cash has been recovered by way of sales and profit on such sales have been disclosed by the assessee and accepted by the AO. The AR argued that from the stock tally, there was no shortage of stock. As per the AR, the AO while computing the income has taken the returned income and then the addition has been made, which as per the AR means that the AO has accepted the sales as per alleged inflated figure of sales and therefore, the profit embedded on such transactions on sales have already been disclosed and no separate addition on account of further credit can be made. For this, the AR placed reliance on various case laws. As per t....
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....ack-dated bills by the accountant as per the direction of the partners. Another fact indicating manipulation and back dating of cash sales is that the sale bill books were not in serial and the AO has rightly mentioned that these bills books, which were out of serial, were not found entered in a particular set of books of account and although there may not any specific rule for using bill books in chronological order but certainly these are the guiding factor while analyzing the sanctity of two data. The arguments about recording the statements of the accountant at the back of the assessee and opportunity for cross examination is also not tenable and here it is relevant to mention that the AO has clearly written in the assessment order that the statement of the accountant was confronted to Sh. Kamal Aggarwal at the time of his statement recorded u/s 132(4) and reproduced the relevant Question No. 4 in the assessment order. It is also important to note that the assessee has also filed return on the basis of data found from the possession of the Accountant. The Accountant is an employee of the assessee and by providing the statement to the assessee, the requirement of the law has bee....
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....considered as part of the sales and added directly to the income of the assessee u/s 69A, then this figure is to be subtracted from the sales shown by the assessee and the corresponding profit on this sale should also be reduced from the gross profit and the income declared by the assessee in the return of income at Rs. 22,52,980/-. The assessee has shown turnover of Rs. 12,83,62,907/- with gross profit of Rs. 1,55,76,039/- declaring a GP rate of 12.21% and the gross profit on the bogus sales of Rs. 2,19,85,395/- comes to Rs. 26,84,416/-. The assessee has declared net profit @ 1.57% and the net profit on the sales of Rs. 2,19,85,395/- comes to Rs. 3,45,170/-. Some of the expenses are fixed expenses not dependent on turnover, however the other expenses relates to the turnover of the assessee and hence, keeping in view the overall facts of the case, the assessee is entitled for relief on this account and ends of justice would be met, if a relief of Rs. 15 lacs is allowed on account of profit corresponding to the back dated sales of Rs. 2,19,85,395/- which have been separately added by the AO to the returned income of the assessee in the assessment order. To sum-up, out of to....
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....h deposits amounting to Rs. 2,90,20,000/- in the bank account of the assessee for which explanation was given that the cash deposited was on account of exhibition sale held in October 2016 and regular sales during the festive season for which pamphlet was furnished, copy of which is placed at page no. 189 of the paper book but the AO had not agreed since no pamphlet was found during the course of search. However, if no such evidence was found in the form of pamphlet, it could not be said that no exhibition was held. It was contended that the AO had referred to the statement of Shri Naveen Goyal, the part time accountant recorded during the course of search in which it had been stated by him that he had enhanced the sales in the books of accounts of gold items from 01/10/2016 to 29/10/2016 out of the available stocks as per the instruction of the management and the said statement was confronted to Shri Kamal Aggarwal one of the partner who had not agreed to the statement of Shri Naveen Goyal therefore the AO issued a show cause notice and made the addition of Rs. 2,19,85,395/- on the basis of cash sales reflected in the sale bills. 8.2 It was further submitted that the assessee m....
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....o. 7 para 19 & 21 of the impugned order. 8.6 It was submitted that the cash was deposited during the post demonetization period as per the books of accounts and was verifiable from the sale bills which were found to be recorded in the regular books of account and there was no requirement to follow that bill books need to be in chronological order, though the provisions of law require transaction to be accounted for in the books of account. It was submitted that the separate bill books were maintained for different items of the jewellery as well as for exhibition and that the AO in para 5.2 of his order had agreed that there was no rule for keeping bill books in chronological order, therefore, no adverse view could have been drawn on this basis that the bill books were not in chronological order. It was stated that no opportunity for cross examination of Shri Naveen Goyal, the then part time Accountant was given for the statement recorded at the back of the assessee, therefore the addition on the basis of the said statement was not justified. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Andaman Timber Inds. Vs. CIT reported in 281 CTR 241. 8.....
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....ept.) vs. CIT Reported at (1970) 75 ITR 33 (Bom.) * M. Durai Raj vs. CIT reported at [1972] 83 ITR 484 (Kerala) * Ms. Sunny Jewellery House vs. ITO in ITA No. 196/Chd/2014 dated 06.05.2016 (ITAT Chd) * ITO vs. Jethu Ram Prem Chand reported at [2001] 114 Taxman 219 (Delhi) (Mag.) * CIT vs. Vishal Exports Overseas Ltd. in ITA No. 2471 of 2009 dated 03.07.2012(Guj) * CIT (Central)-1 vs. Vatika Township Private Limited (2014) 367 ITR 466 (SC) 8.8 It was submitted that in assessee's case duplicate set of books of accounts had not been found but only two sale records from 01/10/2016 to 29/10/2016 were found in the computer and pen drive of the part time Accountant and the explanation was given to the Ld. CIT(A) by furnishing a chart (copy of which is placed at page no. 188 of the assessee's compilation in order) to substantiate that there had been depletion in the stock of various items of jewellery specially 22 Kt. of Gold resultantly the stock as per books of accounts had depleted and the sales of such accounted stock had been reflected in the books of accounts and the resultant stock had been disclosed in the trading account which had be....
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....rted at 5 ITR 170. 9. In his rival submissions the Ld. CIT DR reiterated the observations of the authorities below in their respective orders and strongly supported the orders passed by them. It was further submitted that the assessee deposited the cash in bank only after the incident of demonetization and that two sets of books were found from the accountant in computer as well as pen drive during the course of search which took place at his residence. It was also submitted that the accountant had given the statement on the basis of which only the AO made the addition after confronting the statement of the accountant to the partner of the assessee. It was further submitted that in the preceding as well succeeding years, sales in the month of October was not at such a high figure as had been shown in the year under consideration. Therefore the addition on the basis of the statement of the accountant as well as by rejecting the books of account u/s 145(3) of the Act, was rightly made by the AO, and since other set of books was found, the findings given by the Ld. CIT(A) were not contradictory as alleged by the Ld. Counsel for the assessee. 10. We have considered the submission....
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....rtment as well as the VAT Department. In our opinion the amount received by the assessee from the customer after selling the goods/ jewellery out of the accepted stock (opening stock and purchases) cannot be considered as the income outside the books of accounts. 10.1 In the present case the Department has not brought any material on record to substantiate that the amount received by the assessee by selling the jewellery / goods out of the opening stock and the purchases was utilized elsewhere and not for depositing in the Bank Account. 10.2 In the instant case the opening stock, purchases and the closing stock has not been doubted, no inflated purchases were found or suppressed sales were noticed during the course of search held on 12/04/2017 i.e; just after the closing year relevant to the assessment year under consideration. It is also not a case that the assessee was not selling the stock/jewellery through exhibition which is clear from the figures given in para 18 of the impugned order which revealed that the percentage increase in sales in the month of exhibition as compared to the preceding month was 114.99% and 118.26% in the month of March 2014 and July 2015 respecti....
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.... the assessee had been credited in the books of account and reduction in the stock has not been doubted, even during the course of search just after the closing of the year under consideration, neither excess nor shortage of stock was found in the stock register maintained by the assessee, the identity of the purchasers to whom cash sales had been made was disclosed in the sale bills where the name, address and PAN was mentioned. It is also not a case that there was sudden spurt in the sale only in the month of October 2016 as the chart furnished by the assessee before the Ld. CIT(A) clearly revealed that the cash sales were on higher side in another months of different preceding years. The AO made the addition on the basis of difference in the cash sales from 01/10/2016 to 29/10/2016, only on this basis that the said difference was there in the computer and the pen-drive found from the residential premises of the part time accountant of the assessee but no opportunity to cross examine the said accountant was given to the assessee and moreover, no specific defect was pointed out in the proper books of account maintained by the assessee in the regular course of business and nothing ....
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....er in appeal. 18.1. We agree with the Tribunal, as observed above, that since no incriminating material was found qua AYs 2012-2013 to 2014-2015 vis-avis share capital/share premium, the addition under Section 68 could not have been made, apart from the fact that the revenue was unable to dislodge the conclusion arrived by the Tribunal that the money invested in the assessee was the assessee's own money. 18.2. Insofar as the submission made by Mr Sharma that, one Mr Praveen Agarwal i.e., the purported accommodation entry provider had denied making any investment in the assessee, and, therefore, it was a factor that the Tribunal ought to have taken into account, is a submission which fails to appreciate the following facts: (i) That Mr Praveen Aggarwal's statement was recorded in a separate search action on 12.11.2012; which, as is obvious from the record, occurred before the search action that was carried out vis-a-vis the assessee on 21.03.2017. (ii) Share capital was received from three companies controlled by Mr Praveen Agarwal i.e., Abhilasha Exports Pvt. Ltd., Subhshree Hirise Pvt. Ltd. and Pushpanjali Commotrade Pvt. Ltd. in AY 2012....
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....at the banks had advised deposit of money in tranches, does not appear to be unreasonable. 18.5. Besides this, as noticed above, the Tribunal, after a detailed analysis, has concluded that the cash deposits made post demonetization were in line with the cash deposits made in the earlier years, against corresponding cash sales. 18.6 As regards the other observations made in the deviation report on which Mr Sharma has placed reliance i.e., that addition on account of share premium should be made under Section 68 of the Act, in cases where money was not sourced from the assessee is answered by the Tribunal after noticing the fact that investments from unrelated parties were received only in AY 2012-2013. The addition made by the A.O. for AY 2012-2013, as observed above, was deleted by CIT(A) in the assessee's appeal. It would be relevant to note that, insofar as related parties were concerned, the deviation report clearly stated in paragraphs 3(iii) to (ix) that the ultimate source of money was the assessee itself. As a matter of fact, the observation made by the A.O., in paragraph 3(ix) of the deviation report, was different from what was understood by the reven....
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....cient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the '.icome or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time." 10.9 In the present case also the sales made by the assessee to cover the cash deposited in the bank post demonetization, was sufficient source of the cash deposited i.e; the sales from the existing stock available with the assessee and was well explained, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. 10.10 On a similar issue the Hon'ble Delhi High Court in the case of PCIT Vs. Akshit Kumar (supra) held as under: "Enquiry under Section 133B which has been strongly relied upon by Revenue, was conducted in Financial Year 2016-17 i.e. post closure of the business. The ITAT has juxtaposed the same against the other relevant mater....
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....ctual in nature and we are unable to find any perversity in the impugned order. The factual findings recorded by the Income-Tax authorities, have been examined by the last fact-finding authority i.e. the IT AT. In absence of any perversity in the impugned order, court is not inclined to entertain the present appeal, which urges questions of law that are entirely resting on findings of fact. Therefore no question of law, much less substantial question of law, arises for consideration. Accordingly, the appeal stands dismissed." 10.11 In the present case also the opening stock, purchases & sales and closing stock, declared by the assessee has not been doubted, the sales were made by the assessee out of the opening stock and purchases and the resultant closing stock has been accepted, the sales had not been disturbed either by the AO or by the sales tax / VAT Department and even there was no difference in the quantum figures of the stock at the time of search on 12/04/2017, therefore, the sales made by the assessee out of the existing stock were sufficient to explain the deposit of cash (obtained from realization of the sales) in the bank account and cannot be treated as undisclosed....
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....ng with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& L account in page No. 7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed to disprove the condition of the assessee. Suspicion however strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence. 7.2 In the instant case the assessee has established the sales with the bills and representing outgo of stocks. The sales were duly accounted for in the books of accounts and there were no abnormal profits. In spite of conducting the survey the AO did not find any defects in sales and the stock. Therefore we do not find any reason to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in the span of 4 ho....
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....VO being a technical officer and valuation has been prepared by after taking care of all the factors as stated by the assessee. 2. The assessee has further filed detail of other expenditure which were not considered by the DVO while working out the difference. The assessee stated that total investment as per its books comes to Rs. 11233334/ as certain items of electric and furnishers were shown under different head in the books of accounts. After considering the details and evidence filed by the assessee the total investment as shown by the assessee at Rs. l,12,33,334/-is accepted. 3. The assessee further stated that the DVO has given benefit of self supervision @ 3.75% whereas it should be given @ 10%. The contention of the assessee is not acceptable as the assessee has not carried out the construction under his supervision but as per his own version the contract was given to Sh. Kesar Singh for completing civil work including the cost of material. As such the benefit of 3.75% has rightly been given by the DVO and no further benefit on this issue is called for." 12.1 The AO also considered the bifurcation of the investment in the books of account and made the ....
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....involved. It was stated that the assessee got its books audited and the AO had not identified any mistake / omission in those records and no material was found warranting reference to the DVO. It was further submitted that the difference in the value of construction was on account of difference of opinion, benchmark of quality, declared value in the books and as calculated by the department. It was further stated that the DVO applied CPWD rate which were higher as compared to the local rates for the property situated at Patiala and that the benefit of supervision @10% had not been allowed. 13.1 The Ld. CIT(A) after considering the submissions of the assessee observed that the AO had clearly mentioned that the bills which were found during the course of search / survey were not recorded in the books of account and such details were tabulated in the show cause notice dt. 07/03/2019 which had been reproduced in the assessment order therefore the contention of the assessee that the reference to the DVO was to be made only if some material had been found during the course of search was not tenable, since some of the bills in respect of purchase of construction material were found and....
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.... judgments where the difference between the Government valuer and the cost declared by the assessee was within the range of 10%, the difference should have been ignored. 15.2 It was submitted that if the above contention of the assessee were to be accepted then there would remain no difference in the valuation. Considering the rates of the CPWD having been applied and further benefit of 3.75% only was allowed for self supervision instead of 10%, therefore, no addition was called for and the Ld. CIT(A) was not justified in sustaining the addition made by the AO. The reliance was placed on the following case laws: * Honest Group of Hotels Pvt. Ltd. Vs. CIT[2002] 123 Taxman 464(J&K): [2002] 177 CTR 0232 * Suresh C. Mehta, Mumbai Vs. ITO [2013] 144 ITD 427 (Mum. Trib) * John Fowler (India) Pvt. Ltd. Vs. DCIT I.T.A No. 7545/Mum/2014(Mum Trib) * Sita Baikhetan Vs. ITO (2016) 181 TTJ 0549: (2016) 142 DTR 0122: (2016) 050 ITR (Trib)0196(Jaipur-Trib) * Surendra S. Gupta Vs. ACIT(2018) 170 ITD 732 (Mum Trib) * Rahul Constructions Vs. DCIT(Pune Trib. Bench B) (2010) 38 DTR 19(Pune)(Trib) * Krishna Enterprises Vs. ACIT(2017) 146....
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....tune of Rs. 1,12,33,334/- which is evident from Sub Para 2 of para B at page no. 11 of the assessment order dt. 27/03/2019 and the DVO estimated the total cost of construction of showroom at Rs. 1,32,24,900/-. Finally the AO came to the conclusion that overall difference in the A.Y. 2017-18 and 2018-19 was at Rs. 18,71,975/-. The DVO while working out the valuation of the showroom had given benefits of self supervision @ 3.75% which the assessee claimed at 10% and if the PWD rates are applied instead of CPWD rates and the benefit @10% is given for self supervision the difference in the valuation as worked out by the DVO and shown by the assessee in the books of account would be less than 10%. In those circumstances no addition should have been made since valuation is a matter of opinion / estimation. 17.4 On the similar issue, various Benches of the ITAT has taken a consistent view that when the difference in valuation shown by the assessee and estimated by the DVO is less than 10% then the AO was not justified in substantiating the valuation determined by the DVO for the cost shown by the assessee. The aforesaid view is supported by the decision of the various coordinate Benche....