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2022 (10) TMI 116
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....ched this appeal on following grounds of appeal:- "1. Whether on the facts and in the circumstances of the case the ld. CIT(A) was justified in deleting the addition of Rs. 12,17,48,500/- by treating the same as part of turnover whereas the same was found to be bogus and false entries or undisclosed income of the assessee which was induced in the books under the garb of cash sales and advance from customer and receipt from debtors, deleting the addition of Rs. 12,17,48,500/- made u/s 68 of the IT Act, 1961 which was deposited by the assessee during the demonetization period and which was also remained unverified during the assessment proceedings. Deleting the addition of Rs. 12,17,48,500/- and treating the same as part of turnover and apply NP rate of 2.59% on the whole transaction including the sham transaction of Rs. 12,17,48,500/-, deleting the addition of Rs. 12,17,48,500/-, deposited during the period of demonetization, and spoil the sole purpose of curbing out black money under tax bracket." 4. Brief facts of the case are that the assessee company e-filed its return of income for the previous year 2016-17 relevant to Assessment Year 2017-18 on 31.10.2017 declaring....
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....g 10 months of that year. Further when the trend of cash sales is compared to previous years it was noticed that in October 2015 cash sales was just 11% of the total sales and in October 2014 it was 13% compared to total sales. d) Further, Assessee failed to furnished the details of the persons such as full name, address and PAN to whom cash sale was made during the demonetization period. e) Further, it is found that the assessee has revised its quarterly VAT return for the AY 2017-18 wherein the turnover of the assessee has been significantly increased which is tabulated as under: Quarter Original VAT return Revised VAT return 1st 15047440 300269589 2nd 10653316 260005971 3rd 376741818 991231791 4th 41629068 --- The revision of the VAT return related to the pre demonetarization period further strengthen the fact that the assessee company has booked bogus cash sale for the period before demonetarization which subsequently increase the sale of the assessee and to show the sale as genuine the assessee revised its VAT return for First 3 quarters. The assessee also revised the VAT return of 4 quarter however the tu....
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.... 15.12.2019 at 5.30PM 4 7834 28.10.2016 Vijay Ji Gokhro 94140788 92 57000 No response by debtor call dated 15.12.2019 time 5.45 PM 5 8218 04.11.2016 Asmita Ji 99820760 35 10000 No response by debtor call dated 15.12.2019 time 5.47PM 6 8267 05.11.2016 Asha Singh 94140623 55 42413 Debtor not remember that's she has purchased any item In the above verification genuineness of the cash receipt from debtors not found substantiated which further reveals that the assessee has booked bogus debtor to accommodate his unaccounted income under grab of receipt from debtors. In view of the above, it is evident that, assessee has fabricated the whole transaction to make it look real, however, when the trends of cash sales and series of transactions are considered, it beyond any shadow of doubt that the whole transaction is fabricated and the assessee has deposited its undisclosed income under the grab of cash sales. 7. Based on these observations the ld. AO issued a show cause notice to the assessee requesting to show cause as to why the cash deposited ....
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....imilar way as they purchase vegetables. d) The assessee has justified the abnormal sale by correlating with incident with Diwali Festival and marriage ceremonies stating that people were having budget for marriage ceremonies and when demonetarization declared they consumed the same. However, same is not acceptable considering the fact that all the sale invoice are below 2 lakhs and it cannot be believe that the person who has budget for the marriage ceremonies will purchase all the items below 2 lakhs. e) The argument of the assessee that sale of the jewellery business depends on occasion such as Diwali and Marriages not found convincing considering the fact that the purchase made on these occasion are not a purchase like walking person come to the showroom of the assessee and purchase anything as he has to has purchase which is also evident from the methodology of issuance of invoices wherein no detail such as address, full name has been noted. f) Further, the argument of the assessee is contrary itself. As per logic of the assessee when demonetarization was declared people rushed to jewellery shop than there should be extra ordinary increase in the sale....
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....e provided as the assessee has not furnished full name, address and PAN of such persons and summon u/s 131 of the Act can be issued to these persons on the basis of telephone no. k) Further in respect of the enquiry conducted u/s 133(6) of the Act in case of one of the purchaser M/s Paras Gems & Jewellery. The assessee has claimed that the letter was issued on a wrong address. The same also not as acceptable since the notice was sent at the address mentioned in PAN so provided by the assessee. Further the notice was issued through ITBA which was also served to the assessee at his registered e-mail: However, no reply to the notice was received. Hence the claim of the assessee does not have any substance, Further, as assessee has claimed bogus purchase is from M/s Paras Gems & Jewellery amounting to Rs. 110561454/-. Therefore, Penalty proceedings u/s 270A of the Act is initiated separately for under reporting of the income and misrepresent of the fact. l) Furthermore, in the confirmation so furnished the name of proprietor Shri Mahesh has been duly written as signature authority for Paras Gems & Jewellery whereas the assessee has claimed that he is not known to Shri....
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.... of gold on credit for 3 to 4 months. Further, from perusal of the purchase bill issued by M/s Girdhar Jewllers Pvt. Ltd. it is noticed that in the said bills in the description part only 'gold ornament' has been written and from such details nature of gold ornament cannot be determined whether it is chain, Neckless or some other item. Further, from the bill it cannot be determined that jewellery item so purchase is 14 krt or 18krt or 22 krt gold item. In these circumstances the said purchase cannot be verified from stock register. q) Further, it is found that the cash so deposited in the bank account of assessee having no 911020053773688 and account no. 916030041790950 held in the Axis Bank during the period of demonetarization subsequently transferred to Girdhar Associate in significant amount which is sister concern of Girdhar Jeweller Pvt. Ltd. having same address at C-114, Lal Kothi C-Scheme, Jaipur and same director which is further strengthen the fact that no actual purchase was made from Girdhar Jeweller Pvt. Ltd. as purported by the assessee and only book entry of purported purchase was made to show high stock before demonetarization so that bogus sale can....
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....g AY 201718 assessee has induced his undisclosed income in books under the grab of cash sale, cash advance, receipt from debtor as discussed in above Para, out of the total turnover of Rs. 2,09,09,94,399/- the bogus turnover to the extent of Rs. 12,17,48,500/- is deducted and on balance turnover of Rs. 1,96,92,45,899/- Net profit is recomputed at average NP rate of 2.59% as tabulated above @ 2.59% which computed at Rs. 5,10,03,468/- as against Rs. 5,19,80,398/- declared by the assessee in the retun and the same is considered for total income of the assessee. Since, the assessee deposited amount of Rs. 12,17,48,500/- in the demonetized currency which the AO treated the same as unexplained cash credit of the assessee and by applying the provisions of section 68 of the Act the same was added as income of the assessee and the same taxed as per the provisions of section 115BBE of the Act. The assessment of the assessee was completed by ld. AO vide his order dated 29.12.2019 wherein the total income of the assessee was assessed at Rs.16,45,24,988/- as against the return income of Rs. 4,37,53,418/-. 10. Aggrieved by the order of the assessing officer making the assessment based on the ....
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.... furnish full name, address and PAN of such persons on the basis of which summons u/s 131 could be issued to these parties the sales made to these persons remains unverified. Thus apart from the amount of Rs. 25,96,480/- realized from debtors, further advance of Rs. 11,86,250/- received by the appellant from its customers was also not found verifiable by the AO in absence of complete details. Accordingly, I find that the AO is justified in rejecting the books of accounts of the appellant by invoking the provisions of section 145(3) of the Act. It is also observed that the AO has applied Net Profit rate at 2.59% for the year under consideration as against 2.36% declared by the appellant. However, while applying the aforesaid rate, the AO has treated the amount of Rs. 12,17,48,500/- as bogus turnover and taxed the same u/s 68 of the Act. Since in the above paras, I have held Rs. 12,17,48,500/- to be part of total sales and deleted the addition made by the AO u/s 68 of the Act, accordingly, the Net Profit rate of 2.59% applied by the AO is now directed to be applied on the total turnover of Rs. 2,09,09,94,399/- (including the amount of Rs. 12,17,48,500/-) declared by the appellant for....
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....ect based on the findings by the assessing officer by calling the respective parties and they have not confirmed to have made purchases from the assessee. Even the assessee has recorded the purchases on credit before the demonetization from M/s Girdhar Jewellers Pvt. Ltd, on credit before demonetization period from 19.07.2016 to 15.10.2016 amounting Rs 18,83,64,457/-. Based on all these defects noted by the ld. AO, he has rejected the book results of the assessee u/s. 145(3) of the Act and proceeded to considered the cash sales to the extent of Rs. 12,17,48,500/- as unexplained cash credit u/s. 68 of the Act and also proceeded to estimate the profit as per last three-year profit declared by the assessee as arrived at 2.59 % and applied that the same on the remaining part of the sales after reducing the cash sales added separately which is correct action based on the detailed findings recorded by the ld. Assessing Officer and based on these reasoning he supported the order of the assessing officer and submitted that the AO is justified in rejecting the book result of the assessee and the considering the detailed defects noted the ld. DR submitted that cash sales shown by the assesse....
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.... section 145(3) of the Act. After rejecting the books of accounts of the assessee the ld. AO estimated the net profit rate of assessee 2.59%, being average NP of last three years and applied the same on the sales of Rs. 1,96,92,45,899/-(Rs. 209,09,94,399/- (Sales as per Books) - 12,17,48,500/- (cash deposited in bank) computed by the ld. AO at his own. The ld. AO reduced the amount of Rs. 12,17,48,500/- deposited in the demonetized currency, which was against sales, realization from debtors and advance against sales, out of total sales of Rs. 2,09,09,94,399/- declared by the assessee. Thus the ld. AO computed the net profit of the assessee Rs. 5,10,03,468/- as against Rs. 5,19,80,398/- declared by the assessee. ii) Further the assessee deposited amount of Rs. 12,17,48,500/- in the demonetized currency which was out of cash balance available with the assessee from sales made by it, amount realized from sundry debtors and advance received against sales. The ld. AO treated the same as unexplained cash credit of the assessee and by applying the provisions of section 68 of the Act the same was added as income of the assessee and the same taxed as per the provisions of section 1....
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.... 3.2 The grounds in appeal raised by the assessee, as per modified form-36 filed on 28.07.2022, are as under: - "1. On the facts and under the circumstances of the case and in law the ld. AO erred in rejecting the books of account of the Appellant by invoking the provision of section 145(3) of the Income Tax Act, 1961 and CIT (A) further erred in sustaining the rejection of books of accounts for the sole reason that amount received from debtors and advance from customers, which deposited into bank in demonetized currency, was not found verifiable. 2. On the facts and the circumstances of the case and in law the ld. CIT (A) erred in estimating the net profit of Appellant Rs. 5,41,56,755/- by applying the net profit rate @ 2.59% on declared turnover of Rs 2,09,09,94,399/- and thereby confirming the addition of Rs. 47,72,297/- 3. The Appellant prays for leave to Add, to amend, to delete, to modify the all or any grounds of appeal on or before the hearing of appeal." Departmental Appeal 4). Submission on Grounds of Appeal raised by department The sole ground raised by department is regarding to the deletion of addition of Rs. 12,17,4....
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....rom 03.11.2016 to 08.11.2016 is as under: - Particulars Amount (In Rs.) Opening Balance as on 03.11.2016 3,96,75,854 Add: - Sales made during 03.11.2016 to 08.11.2016 11,98,09,806 Add: - Amount realized from debtors from 03.11.2016 to 08.11.2016 25,96,480 Add: - Amount received as advance from customers during 03.11.2016 to 08.11.2016 11,86,250 Less: - Cash Deposited in bank during 03.11.2016 to 08.11.2016 (i.e.before demonetization) 4,11,00,000 Less: - Cash Expenses/payments during 03.11.2016 to 08.11.2016 70,000 Closing Balance as on 08.11.2016 12,20,98,390 Out of closing cash balance as on 08.11.2016 the amount of Rs. 3,49,890/- was in non-demonetized currency i.e.notes of 50, 100 etc. and the amount of Rs. 12,17,48,500/- was in demonetized currency. 3) The date wise detail of amount of Rs. 12,17,48,500/- deposited in demonetization currency is as under: - Date of deposit Amount deposited Name and Address of Bank 10.11.2016 7,20,00,000 Axis Bank Ltd., Apex Tower, Lal Kothi, Tonk Road, Jaipur A/c No. 916030041790950 10.11.2016 4,80,00,000 Axis Bank Ltd., Apex Tower, Lal Kothi, Tonk Ro....
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.... bills for the complete year were submitted in the office of AO. 2) Monthly summary of stock registerwere submitted along with submission dated 11.03.2019 (Copy of the same is at PB Page 166 to 177). Day to day stock register submitted along with submission dated 15.10.2019 (The of the same is at PB Page 178 to 183). 3) Copy of sales ledger from the books of accounts of assessee for the period from Septermber-2016 to December-2016 were submitted along with submission dated 11.03.2019 (The copy of submission dated 11.03.2019 is at PB Page 63 to 71). 4) Copy of cash book for the financial year 2016-17 was submitted along with submission dated 11.03.2019 (The copy of submission dated 11.03.2019 is at PB Page 63 to 71). 5) Detail of debtors from whom cash was received prior to the demonization and utilized to deposited in bank after demonetization as submitted along with letter dated 14.08.2019 & 15.10.2019 (Copy of the same is at PB Page 161 to 162)andalsosubmitted (corrected) along with letter dated 21.12.2019 (Copy of the same is at PB Page 163 to 165). 6) Copies of VAT quarterly returns (Original)submitted along with letter dated 21.12.2....
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....on for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Therefore, it is important to examine whether the case of the assessee falls into these parameters are not. The assessee is engaged in the business of Jewellery and one of the biggest Jeweller of the Jaipur city. The retail selling counters of the assessee is in three story building at Tonk Road, Two showrooms (one of which is made with three shops) at Johari Bazar. In the trade of the assessee many of the customers usually pay in cash and as such, the assessee normally has sufficient cash balance throughout the year. The cash received against such cash sales is subsequently deposited into the banks from time to time as per the convenience of the assessee. The huge cash balance is regular feature of the assessee and the same is apparent from the summary of the cash balance at the end of each month submitted to ld. AO in submission dated 15.10.2019 (Copy of such submission is at PB Page 75 to 79). Such summary is as under: - a) Comparison of month wise Cash in hand in last four years:- Months F....
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....90,027.00 6% October 17,60,14,563.00 13% 11,66,19,434.00 11% 18,81,89,611.00 18% November 15,50,86,535.00 12% 19,17,28,186.00 17% 13,55,23,909.00 13% December 8,87,48,722.00 7% 14,34,51,580.00 13% 3,74,76,942.00 4% January 11,73,96,954.00 9% 10,39,43,067.00 9% 6,61,27,330.00 6% February 10,20,73,837.00 8% 10,79,76,964.00 10% 7,87,31,379.00 8% March 12,39,57,357.00 9% 70,70,689.00 1% 7,09,50,678.00 7% Total 1,34,27,23,157.00 100% 1,10,59,04,120.00 100% 1,01,89,06,594.00 100 Thus, the cash sales & corresponding cash deposits into the bank accounts of the assessee have been a regular feature of the assessee's business since the past several years. The same is clearly borne out from the details of cash sales and cash deposits made by the assessee in the past Financial Years viz. F.Ys 2014-15 & 2015-16 filed before the A.O. c) Comparison of Cash sales in the month Nov and % to total sales in last three years:- Year FY 2014-2015 FY 2015-2016 FY 2016-2017 Month Amount of Cash Sales(Rs.) % to Total Sales....
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.... and justification of Heavy cash sales as on 08.11.2016 So far as heavy cash sales of Rs. 9,73,23,724/- as on 08.11.2016 i.e.the day on which the demonetization was announcedthe appellant submits that, with the announcement of the Hon'ble Prime Minister in respect of demonetization of currency notes of denomination Rs. 500/- and Rs. 1000/-, there was frenzy amongst people who wanted to convert their SBN into gold. The jewellery stores had remained opened till midnight on 8th of November 2016, in order to top the high demand from customers. The appellant too had met with the high demand of the customers and had made sales amounting to Rs. 9,73,23,724/- on 08/11/2016 and this cash sales includes the regular sales of 08.11.2015 i.e.sale made prior to announcement of demonetization. Further it was relevant to mention here that there was no overall increase in cash sales of assessee during the month Nov 2016 but the sale of a particular date i.e.8/11/2016 was increased which shows the shifting of regular cash sales of other dates of Nov 2016 to a particular date 08/11/2016 because there was frenzy amongst the customers who wanted to convert their SBN into Gold. Since the demone....
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....declared i.e.in the month of Nov.-2016, people rushed to Jewellery shop, petrol pumps, medicines shops to buy things with old currency. There was huge increase in sale of jewellery, petrol medicines etc. in the month of November-2016....". Thus, in the remand report ld. AO also accepted that after demonetization the peoples rushed to Jewellery shop. The sale of ornaments had subsequently for the rest of the month of November and December 2016 had seen a dry spell as the people had purchased jewellery in demonetized currency during the closing hours of 8th November itself not only for the wedding in immediate vicinity but also for weddings and functions in late November or December and also even otherwise for future use. This fact can be seen from the amounts of cash sales of October to December of last three years which is as under: - Year FY 2014-2015 FY 2015-2016 FY 2016-2017 Month Amount of Cash Sales(Rs.) Amount of Cash Sales(Rs.) Amount of Cash Sales(Rs.) October 17,60,14,563.00 11,66,19,434.00 18,81,89,611.00 November 15,50,86,535.00 19,17,28,186.00 13,55,23,909.00 December 8,87,48,72....
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....aving the sufficient stock for that much of sales. 4.3.6 Purchases made from M/s Paras Gems & Jewellers and M/s Girdhar Jewellers Pvt Ltd are not genuine:- 1) The purchases made from both these parties are genuine and the same is apparent from the following: - i) The purchases are duly supported by the purchase bill and the copy of purchases bills were also submitted to ld. AO during the course of assessment proceedings. ii) The payment of purchases consideration was made through banking channels. iii) The assessee submitted the confirmation of M/s Paras Gems & Jewellers (Copy at PB Page 186) iv) The ld. AO issued the notice u/s 133(6) of the Act to several parties from whom the assessee made the purchases. Girdhar Jewellers Private Limited is one of them and this party has made compliance to notice and submitted the all requisite documents to ld. AO. The ld. AO did not point out any defects in such documents. v) The assessment of both these parties was completed by their respective AO (Copy of assessment order's are at PB Page 244 -245 & 246 to 247) and in their assessment their entire sales was treated as genuine. 2) ....
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....urchases cannot be treated as non-genuine. Rameshwar Sirkar -Vs- Income Tax Officer reported in (1973) 88 ITR 374 (Copy at Case Law PB Page No. 1-5) wherein the following views were expressed:- "The mere fact that the serving officer did not find the assessee to be served with the notice at his address is not sufficient to establish that he could not be found. It must be shown not only that the serving officer went to that place at a reasonable time when the assessee was expected to be present, but also that if he was not found, proper and reasonable attempts had been made to find him either at that address or elsewhere. A notice by affixture without reasonable attempts to find the assessee is not a proper notice." iv) The assessee has substantiated the purchases by providing the documents such as purchase invoice, confirmation of accounts, payment made through banking channels, VAT No. of the party. The copies of purchases bills of the party and confirmation of account is at PB Page 186 to 191.Thus the initial burden cast on the assessee to prove the genuine of purchases gets discharged. It is relevant to mention here that the assessee purchased....
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....T 102 (Del.) Held(Copy at Case Law PB Page No. 44-47)- j) CIT v/s. Winstral Petrochemicals (P) Ltd. (2010) 41 DTR (Del)139 (Copy at Case Law PB Page No. 48-52) k) CIT v/s. Samir Bio-tech (P) Ltd. (2009) 17 DTR (Del) 224. (Copy at Case Law PB Page No. 53-55) l) 2020 (8) TMI 235 -ITAT Delhi Silburn Papers Pvt Ltd v/s ITO, WARD-23 (4), New Delhi. (Copy at Case Law PB Page No. 56-60 ) m) Hon'ble High Court of Bombay in the case of CIT Vs Nikunj Exim Pvt. Ltd. 2013 TIOL 04. (Copy at Case Law PB Page No. 61) n) Anis Ahmed and sons V/s CIT (A) and Anr(2008) 297ITR441(SC)(Copy at Case Law PB Page No. 62-66) o) ITO v/s Emperor International LtdITA no. 2038 [Delhi] 2009 (Copy at Case Law PB Page No. 67-73) p) Rohini Builder V/s DCIT(2001) 117 Taxman 25 (Ahd)(Copy at Case Law PB Page No. 74-75) vi) It is further submitted that in the written submission dated 21.12.2019 it was requested to ld. AO to provide the copy of notice issued by him and the assessee will try to get the same complied by the party. The confirmation of the party was filed before ld AO wherein the party has confirmed the sales made to assessee and payme....
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.... In the same letter the assessee submitted the stock position of the items purchased from M/s Paras Gems & Jewellers which are Silver Articles 92.5 and Silver Article 97. The stock position was submitted from 07.10.2016 i.e. (the day when first purchase was made from the party) to 08.11.2016 i.e. (the day when demonetization announced).In such summary the assessee submitted the chart including the qty.of goods purchased from this party and excluding the goods purchased from this party. Such chart is as under:- a) Stock position (from 07.10.2016 to 08.11.2016) by including the goods purchased from Paras Gems &Jewellers in Stock quantity : - Name of Item Unit Opening Stock (+) Purchase (+) Mfg(Net) (+) Sales (-) Closing Stock (=) Silver Article 92.5 Gms 5,17,190.53 7,85,800.80 1,49,999.40 3,39,287.80 11,13,702.93 Silver Article 97 Gms 44,237.58 2,80,839.29 2,81,301.30 3,10,511.61 2,95,866.56 Total Gms 5,61,428.11 10,66,640.09 4,31,300.70 6,49,799.41 14,09,569.49 b) Stock position (from 07.10.2016 to 08.11.2016) by excluding the goods purchased from Paras Gems & Name of Item ....
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....ring the course of assessment proceedings the ld. AO issued the notice u/s 133(6) of the Act to this party and in compliance to that the party submitted the requisite documents and also confirmed the sales made to the assessee. The ld. AO did not point out any specific defects in such documents. iii) Assessment proceeding of Girdhar Jewellers Pvt Ltd forthe same year was completed by his jurisdictional AO vide order dated 26.12.2019 (Copy at PB Page 246 to 247)and the sales made by this party has been accepted as genuine by the AO of this party, therefore there remains no doubt that the purchases made from the party is not genuine. iv) It is further relevant to mention here and also apparent from the ledger account of account of this party (Copy at PB Page 192 to 194) the assessee also made purchases of Rs. 13,78,34,488/- from this party during the post demonetisation period from 09.11.2016 to 31.03.2017, which has been treated by ld. AO as genuine. Once it is accepted that the purchase made from this party for the one period is genuine than there remains no reason to treat the purchases made for other period as non-genuine. The ld AO is blowing hot and cold in sa....
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....accepted these credit purchases and outstanding in the assessment framed u/s 143(3) for the relevant assessment year. This also shows that the credit purchases for the period from 1 to 3 month is normal feature in the trade of the assessee. Thus the finding of ld. AO on this footing is perverse and should be ignored. On this matter it is further relevant to mention here that it was for the ld. AO, to have brought on record any evidences to disprove the contents of the books of accounts and documents. Failure of the assessee to making immediate payments cannot be grounds for treating the purchases as non-genuine. It could only lead to a suspicion that the purchases could be bogus but nothing more than to it. However, suspicion cannot be the sole ground for treating the purchases as non-genuine. c) So far as discrepancies noticed by the ld. AO in the purchases bills issued by this party it is submitted that in the segment of gold Jewellery, not studded with diamond & stones, the assessee is dealing only in 22 Krt Gold Jewellery, therefore mentioning of purity in the bills was not much relevant for the assessee. Further, the assessee is duly maintaining the stock reg....
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....bstantiated by such high stock in hand. This fact is also shows that no actual delivery of such stock was received before the demonetarization period and not actual stock was sold on the day of demonetarization and all the adjustment has been made after the demonetarization."Though in view of our submission in forgoing paras the purchases made from the party is completely genuine and this finding of ld. AO have no legs to stand. The above finding of ld. AO is without considering the stock summary as well as day to day stock register submitted during the course of assessment proceeding. On the basis of day to day qty. of stock register your honour will find that if the quantity embodied in the purchases made from M/s Girdhar Jewellers Private Limited, whichare 65,471.570 gms. (verifiable from purchases bills enclosed at PB Page 195 to 214), is not taken into consideration even then the assessee was having sufficient stock to make the sale. This is apparent from the following summary chart of quantity detail of Gold ornaments 22 kt. of the period from 03.11.2016 (i.e. the day from which the amount received against cash sale accumulated with assessee and deposited after 08.11.2016 in ....
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....e from RajImpex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises. In view of above submission it is conclusively proved that the purchases made from both the parties are genuine, verifiable and there was no motive with the assessee to introduced the bogus purchases in the books of accounts. The ld. AO could not bring any positive material on record to prove his allegation to be correct. Therefore, the books of accounts rejected on this footing and further action taken by ld. AO on this ground may kindly be quashed. 4.3.7 Sale of Pure Gold For the finding of ld. AO at 3rd para of page 18 of the assessment order it is submitted that the same is given without appraising the facts of the case property. In this regard we may submit that from the day to day stock summary submitted during the course of assessment proceedings it ....
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.... Rs 4,25,00,000/- 16/11/2016 Kajal Chhabra 31,000.00 gms Rs 10,13,50,000/- 16/11/2016 Namita Chhabra 31,000.00 gms Rs 10,13,50,000/- These group assessees have declared income under IDS 2016 and out of that income they purchased pure Gold and thereafter they sold pure gold to the assessee. The ld AO has not raised any dispute over the said purchases from group members. Further, the sale against these purchases on subsequent dates are through banking channel. Therefore, it has no concern with the SCN deposited by the assessee. The copy of IDS certificate, return filed by them and copy of assessment order passed u/s 143(3) in the case of Kajal Chhabra and Namita Chhabra is at PB Page 269 to 293. On 17-11-2016 there are sales of pure Gold which is through banking channel and it has no concern with the SCN deposited by the assessee. On 21/11/2016 there is purchase of 433.300 gram pure Gold from Jain Associates and this purchase is no concern with SCN deposited by the assessee. On 23/11/2016 there is sales Madhu Sharma, Paras gems and jewellery S.K. Jewellers, and Gopal Sharma and the ld AO has not raised any dispute or objection over genuine....
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....h in the books of account. Thus ld. AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus. Merely analysing the data by twisting the same and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. It is further most importantly relevant to mention here that the Commercial Taxes Department had accepted the sales of the assessee declared in its VAT returns as genuine, therefore there remains no reason to doubt the genuineness of part of such sale by the ld.AO. Copy of Assessment order of VAT and CST is at PB Page 139 to 147. It is admitted position of law that no addition can be made in the income of the assessee only on the basis of suspicion. Suspicion howsoever strong but cannot partake the character of evidence. The reliance is placed on following decisions: - i) Dhakeswari Cotton Mills Ltd vs. Commissioner of Income-tax [1954] 26 ITR 775 (SC)(Copy at Case Law PB Page No. 83-89) ii) Umacharan Shaw & Bros vs. Commissioner of Income-tax [1959] 37 ITR 271 (SC) (Copy at Case Law ....
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.... cash sales of the previous months, previous years and next month or years was also made on the same trend with same set of particulars. Therefore, only the sales made and utilized for depositing the demonetized currency cannot be doubted for this reason. It is relevant to mention here that vide letter dated 15.10.2019 it was submitted to AO that being in large number all the sales bills of FY 2016-17 could not be scanned, therefore it was requested to ld. AO to allow to produce the same personally in physical form. The ld. AO was kind enough to allow to the assessee and the assessee submitted the complete sale bills of FY 2016-17 in the office of ld. AO. The sale bill for the period from 29.10.2016 to 08.11.2016 were filed with ld. AO vide letter dated 15.10.2019. Although not required by law still most of the sales bills issued for the period from 03.11.2016 to 08.11.2016 had the name of the customers as provided by the customers. It is also relevant to mention here that sales bills for the lesser amount as prescribed under Income Tax law does not require to have name, address and PAN and in these cases the assessee is not under obligation to verify the correctness of na....
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....lower rate than prevailing market price. In view of these facts and circumstances, we hold that there was no justification in rejecting the books of account and disturbing the trading result." iii) ITAT Delhi in Kishore Jeram Bhai Khaniya, Proprietor, M/s Poonam Enterprises v. ITO ITA No. 1220/Del/2011 ITAT Delhi Judgement dated 13.05.2014) (Copy at Case Law PB Page No. 159-167) The Hon'ble Tribunal held that We find that so long as the availability of stock in there and there is nothing adverse against the cash memos issued by the assessee, such cash sales cannot be doubted. Here it is pertinent to note that the volume of such cash sales at Rs.22.06 is to be seen in the light of assessee's total turn- over of Rs.10.29 crores. It is but natural that if a customer makes cash purchase and lifts the goods, there is no duty cast upon the seller to insist for the address of the purchaser. In the light of the fact that stock record was available with the assessee, which evidenced the making of sale, we fail to appreciate as to how any addition can be made by treating cash sales as bogus........................................We are dealing with a situation in w....
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....ery of vehicle was made to them. Ld AO accepted cash deposit in bank against all other cash sales except cash deposited in demonetization period: - It is also pertinent to note that while the A.O. has accepted the cash deposited in the bank accounts in the previous financial years, cash deposited in banks during the impugned F.Y. 2016-17 in the predemonetization period and cash deposited in banks from the sales made after 08.11.2016. The ld. AO did not accept the same modus operandi with respect to the cash deposited in demonetized currency merely on the pretext that the same was deposited in demonetized currency and hence was suspicious in nature. Thus, ld. AO is blowing hot and cold in same stream accepting and rejecting the explanations offered by the assessee with respect to the transactions of identical nature at his sheer convenience merely on the basis of surmises and conjecture without any evidence or material on record. Thus, bald allegation of ld. AO that the cash deposited in demonetized currency had arisen from some undisclosed source not reflected in the books of account as against the accounted cash sales in books of account and alsowhich is regular ....
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....as made with bias pre-set mind and with sole motive to treat the same as income of the assessee in any manner. This fact is apparent from the assessment order which was framed on the basis of wrong or/and inappropriate facts and without considering the submission as well as facts of assessee in right perspective, which lead to wrong addition in the income of the assessee which was not supposed to be made. The same is apparent from the following: - a) The amount deposited in demonetized currency out of cash balance as on 08.11.2016 is entirely added as income of the assessee presuming that as on this date the assessee did not holding any single legitimate SBN (Specified Bank Note) at the end of 08.11.2016. b) SBN (Specified Bank Note) was deposit out of the funds realized during the period from 03.11.2016 to 08.11.2016 against cash sales, realization from sundry debtors and advance from customers and the same was entirely added as income of the assessee by presuming that during these days the showroom of the assessee was not functioning and there was no regular cash sales of single pennyon these days. c) The purchases from the genuine parties, whose assess....
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....een audited by an independent reputed auditor. The cash sales & receipts are duly supported by relevant bills, which were produced before the AO in course of the assessment proceedings, and nothing adverse in connection therewith was noted by the A.O. iv) The fact that cash sales and corresponding cash deposits in banks have been regular feature of the assessee's business over the past several years has not been denied by the A.O. In fact, in the past, the AO after conducting a detailed scrutiny of books of account of the assessee and after arriving at complete satisfaction with respect to the correctness of the entries recorded therein1accepted the cash sales and corresponding cash deposits in banks in the assessments framed u/s 143(3) of the Act. Thus, there is no reason why similar modus operandi, which continued in the current F.Y. 2016-17 (A.Y. 2017-18), should not be accepted by the AO and rejected on mere surmises and conjecture of the A.O. 4.3.13 The ld.AO wrongly applied the provisions of section 115BBE with a motive to levy the tax on the higher slab rate. 1) The addition so made taxed as per the provisions of section 115BBE of the Act while no ....
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....licable). It is also proposed to provide that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing deemed income under the said sections. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years." 4) Thus, the intention of the Legislature behind introduction of section 115BBE was not to bring to tax genuine receipts already offered to tax as income by the Assessee at higher tax rates. Such an interpretation wouldlead to recurring attempts on the part of the revenue authorities to reject genuine explanations offered by the assessee with respect to sums credited/offered as income in its books as unsatisfactory solely to extort higher rates of taxes thereon u/s 115BBE of the Act. The A.O in exercising his powers u/s 68 of the Act is not vested with unfettered powers to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjecture. The AO is bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by....
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....on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into, force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force. 18. The Surcharge Act having come into force on September 1, 1957, and the said Act not being retrospective in operation, it could not be regarded as law in force at the commencement of the year of assessment 1957-58. Since the Surcharge Act was not the law in force on April 1, 1957, no surcharge could be levied under the said Act against the appellant in the assessment year 1957-58. 4.3.14 The submission on the observations/findings of ld. AO, as enumerated in para 4.1 (page 2 of assessment order) and 4.6 (page 14 of assessment order), is as under: - Para No of AO's Order Observations of AO Explanation of Assessee Para 4.6 (1) page 14 4.6(1 &(2) page 15 The cash sale of Rs. 9,79,23,724/- on a single day does not seems genuine following the past year's trends. The assessee has justified the abnormal sale by correlating the incident of....
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....assessee has further claimed that there was a rush in the shop to purchase the jewellery after the news was published in various newspapers. The claim of the assessee totally misplaced as the Hon'ble Prime Minister declared demonetization at 8:30 PM on 08-11-2016 through electronic media. Further, the SBN currency of 500 and 1000 was legal tender till 12:00 PM of 08- 11-2016 and assessee has issued 725 invoices within 3 hours. It while be reasonable to presume that first half an hour would have lapsed to react on such declaration and finding out how to consume SBN note of 500 and 1000. Further the gold jewellery is not an item which can be purchased within 4 to 5 minutes but it takes several minutes to choose the jewellery items at their requirement such as measurement of the gold items and their capacity to pay on such item. Hence it cannot be accepted that people rush to the premises of the assessee and purchase gold jewellery item in a similar way as they purchase vegetables. So far as issuing 725 invoices with the within 3 hours it is submitted that as stated in earlier para the sales also include the sales made on 08.11.2016 prior to announcement of demonetization. In the r....
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....ubmit that the cash realized against/for the sale in the month of October-16 was already deposited in the bank a/c before demonetization, therefore, the comparison of data of sale of October-2016 is not relevant in this case. However still it is relevant to mention here that one of the main reasons for lower sale in the month of October 2015 was that the sale of Jewellery was influenced according to Hindu Auspicious festival Dhanteras and Diwali. In the year 2015, Diwali festival was on 11/11/2015 while in the year 2014 & 2016 it was in October month. Therefore, in the year 2014 & 2016 the sale of the October month was higher than sales of same month in the year 2015. Correspondingly the sale of November month of year 2014 & 2016 was lower than to sale made in November-2015. Therefore, the combined sales for Oct and Nov 2014 & 2015 should be compared with the combined sales of 2016. The sales of the October and November months are relatively high in comparison to sales in other months due to Diwali festival and marriages. From the following chart of data of sales in the month of October and November of these years it is apparent that the sale of the Diwali month was higher th....
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....escribed limit. The reliance is placed on the following decisions: - i) Hon'ble High Court of Bombay in the case of R.B. JessaramFatehchand(Sugar Dept.)v/s Commissioner of Income Tax [1970] 75 ITR 33 (Bombay) (Copy at Case Law PB Page No. 153-156) ii) Hon'ble ITAT Jaipur Bench in the case of ACIT Circle-1 Jaipur Vs M/s Uttam Chand Deshraj(ITAT Jaipur Bench ITA No 419/JP/2010 Order dated 25/03/2011) (Copy at Case Law PB Page No. 157-158 ) iii) ITAT Delhi in Kishore Jeram Bhai Khaniya, Proprietor, M/s Poonam Enterprises v. ITO ITA No. 1220/Del/2011 ITAT Delhi Judgement dated 13.05.2014) (Copy at Case Law PB Page No. 159-167) Para 4.6 (5) page 16 The quarterly VAT returns for AY 2017-18 have been revised by the assessee which he explained stating that composition sales were omitted being reported in original return. However, it is surprising that the assesseeforget to report composition sale to the extent to Rs. 28.52 cores, Rs. 26.00 cr., Rs. 61.4 cr. in each quarter respectively. However, the aforesaid composition sale comes around 70% to 80% sale of total sale of the assessee. The mistake was not happened once but again and again till demonetarizati....
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....ency because the original return was itself filed much after the date of deposit of cash in bank account and if the assessee was intended to book the bogus sale to justify the cash deposit in demonetized currency than it would have declared such sale in original return also. This shows that the revision of VAT return of this quarter was also made for bona-fide reasons. In revised return the composition sale of Rs. 61,44,79,913/- reported while the assessee deposited Rs. 12,17,48,500/- only in demonetized currency. It is also relevant to mention here that most part of SBN i.e. Rs. 12.00 crore was deposited on next very first working day of bank after demonetization i.e.on 10/11/2016 and rest of the amount was also deposited before Dec 2016. Had the revision would have been made with the intention of book the bogus sale to justify this deposit than in the revised return the sale would have been increased with this amount only and not more than to that more specifically the balance sales has been accepted by ld. AO himself as genuine. The data of sales of VAT return of fourth quarter (i.e. for the period from 01.01.2017 to 31.03.2017) are not at all relevant with wake to source of ....
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....fore there remains no reason to doubt the genuineness of part of such sale by the ld. AO. Para 4.6 (6) page 16 Name, telephone number and address of debtors not available. The credit sales of Jewelleryis made to the parties who are either well known of salesman/staff or well known of existing reputed customers or known persons of the assessee group. In case of sales to unknown parties the delivery of the goods are given when the complete payment is received from the party. Sometime the delivery of the goods are not handed over to the party at the time of sales because some time after purchase of Jewellery the customer want some alteration in the size/design of the Jewellery or filing of wax etc. and therefore such Jewellery, after finalization is left with the assessee for such alteration. In such a situation the invoice is generated at the time of finalization of Jewellerybut the delivery of the Jewellery is given at later date after doing the work as directed by the customer. Therefore, in such situation the entire or part payment is received when the delivery of the Jewellery is given to the party. In both the cases the payment of the assessee always be secure the....
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....d. AO alleged that that the purchases made from M/s Paras Gems &Jewellers and Girdhar Jewellers Private Limitedis not genuine. The elaborate submission on this issue was given to CIT (A) and relevant submission is at PB Page 298 to 305. After considering the reply of the assessee the CIT (A) treated the purchases made from both the parties as genuine. The finding of CIT (A) is at Para 6.2 (ix and x) page 48 and 49 of order of CIT (A). Since, the department not challenged to the finding of CIT (A), whereby she treated the purchases made from both these parties as genuine, therefore this issue has attained to finality and therefore, no further submission is required on this issue. Still, on this issue we have submitted our detailed reply in para 4.3.6 above. Copy of Assessment Order u/s 143(3) PB page 244-245 & 246- 247 Para 4.6 (2) Page 18 ld. AO doubted the genuineness of advances of Rs. 11,86,250/- received from the customers during the period from 03.11.2016 to 08.11.2016 So far as doubt of ld. AO regarding the genuineness of advances of Rs. 11,86,250/- received from the customers during the period from 03.11.2016 to 08.11.2016 it is submitted that receiving of adv....
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....5,000 06.11.2016 50,000 Pankaj Ji 13.12.2016 Bill No. MG-9826 68,000 06.11.2016 6,500 Richa Shukla 15.12.2016 Bill No. MG-9891 56,500 06.11.2016 5,000 Komal Sharma 11.11.2016 Bill No. MG-8820 32,800 07.11.2016 15,000 Jassi Ji 03.12.2016 Bill No. JB 3264 42,200 07.11.2016 50,000 Kailash Ji 08.11.2016 Bill No. JB-2863 1,37,500 07.11.2016 5,000 Krishna Joshi 13.05.2017 Bill No. MG-2202 44,380 07.11.2016 10,000 Rakesh Ji 23.11.2016 Bill No. MG-9058 18,265 07.11.2016 13,000 Suman Ji 02.12.2016 Bill No. MG-9382 43,000 08.11.2016 60,000 Ankit Ji 18.11.2016 Bill No. JB-3128 1,51,200 08.11.2016 1,40,000 Ashok Ji 18.11.2016 Bill No. JB-3127 1,80,400 08.11.2016 3,000 DeenDayalG urjar 21.11.2016 Bill No. MG-9019 1,46,500 08.11.2016 10,000 Shubham Ji Jain 03.01.2018 Bill No. MG-13757 14,490 08.11.2016 28,500 Malvika Ji Mathur 25.11.2016 Bill No. MG-9138 32,400 08.11.2016 20,000 Puneet Ji 09.11.2016 Bill No. MG-8813 1,35,700 08.11.2016 1,100 Anil Ji Bhilwara 02.01.2018 Bill No.....
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.... 1) ITAT Chandigarh in the case of SmtCharu Agarwal & M/s Kalanidhi Jewellers Vs DCIT ITA No 310 & 311/Chd/2021 order dated 25/03/2022 The findings of Hon'ble ITAT is in para 10 of the order. Hon'ble ITAT after considering the decision of the Hon'ble Delhi High Court in the case of Pr. CIT (Central)-3 V/s M/s Agson Global Pvt. Ltd. In ITA No. 68-73/2021 and various other High Courts and decision of Hon'ble ITAT Vishakhapatanam Bench on identical issue in the case of ACIT v/s Hirapanna Jewellers (2021) 128 Taxmann.com 29 held that the assessee was maintaining complete stock tally, the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. 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. - Decided in favour of assessee. 2) ITAT Hyderabad....
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....lakhs made by the Assessing Officer in the Bank A/c during the demonetization period in old currency notes of Rs.1000. Accordingly, the order of the NFAC on this issue is set aside and the grounds raised on this issue are allowed. 3) 2021 (5) TMI 447 - ITATVisakhapatnam Asst. Commissioner of Income Tax, Central Circle-1 Visakhapatnam Versus M/S Hirapanna Jewellers (Vice-Versa)) (Copy at Case Law PB Page No. 181-184) Addition u/s 68 r.w.s 115BBE - assessee had deposited the sum in high denominations of specified bank notes (SBNs) post demonetization - CIT-A deleted the addition - HELD THAT:- The assessee produced the newspaper clippings of The Hindu, The Tribune and demonstrated that there was huge rush of buying the jewellery in the cities consequent to declaration of demonetization of Rs. 1000 and Rs. 500 notes on 08.11.2016. As cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there ....
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....ITAT observed that assessee also filed its VAT returns, which are not found to be in variance with the accounting and tax records. Therefore, it cannot be substantiated that the assessee has backdated the transactions of the sale. 5. ITAT further observed that CBDT had issued various standard operating procedures under 'Operation Clean money'. ITAT opined that "...it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money." 6. In the result the addition of Rs. 73.13 crore sustained by Ld CIT(A) on account of deposit of demonized currency was deleted by Hon'ble ITAT. In appeal by the Revenue, the Hon'ble High Court Pr. CIT (Central)-3 V/s M/s Agson Global Pvt. Ltd. In ITA No. 6873/2021 order dated 19-01-22 dismissed the bunch of appeals filed by the Revenue by observing in para 17.6 as under: "17.6. Having regard to the extensive material which has been examined by the Tribunal, in particular, the trend of cash....
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.... source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. As in the case of CIT Vs. Associated Transport Pvt. Ltd. [1994 (1) TMI 18 - CALCUTTA HIGH COURT] on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. When cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE - See M/S HIRAPANNA JEWELLERS AND (VICE-VERSA) [2021 (5) TMI 447 - ITAT VISAKHAPATNAM] - thus the addition made is not sustainable and the same is directed to be deleted. Appea....
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....e list of sundry debtors. So on the same reasoning as adopted by the AO to have accepted Rs. 11,08,796/- (invalid currency notes) as genuine (trade receipt), I find no reason not to accept the explanation of assessee that Rs. 12,41,704/- was deposited by the sundry debtors reflected in the books as on 08.11.2016. And since the AO has accepted the sales/turnover of the assessee which were reflected in the audited books of accounts, as well as the explanation of assessee is supported by material on record, the AO/Ld. CIT(A)'s action of addition of Rs. 12,41,704/- cannot be countenanced. So on this factual finding the assessee's explanation regarding Rs. 12,41,704/- is plausible. And it is noted that the AO / Ld. CIT(A) / Ld. D.R could not disprove or controvert this fact and so it is accepted. In the aforesaid facts and circumstances, the assessee depositing invalid notes to the tune of Rs. 12,41,704/- cannot be dis-believed as from any tainted source or termed as black money. So taking into consideration the peculiar over all facts and circumstances discussed supra, it is directed that the addition of Rs. 12,41,704/- be deleted - Appeal of the assessee is allowed. ....
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....cumstances which had been adverted to by the ITO held that the appellant might be expected to have possessed as part of its business cash balance of at least Rs. 1,50,000 in the shape of high denomination notes on 12th Jan., 1946, when the Ordinance above-mentioned was promulgated. The Tribunal came to the conclusion that the nature of the source from which the appellant derived the remaining 141 high denomination notes of Rs. 1,000 each remained unexplained to its satisfaction. It accordingly ordered that the addition be reduced from Rs. 2,91,000 to Rs. 1,41,000. On the said facts, the Hon'ble Supreme Court held that-the Tribunal having held that books of assesseewere genuine which showed a cash balance of Rs. 3,10,681 on the relevant date; the Tribunal could not have accepted the cash balance of Rs. 1,50,000 out of the value of high denomination notes of the value of Rs. 2,91,000 and treated the balance Rs. 1,41,000 as income from undisclosed sources. It was held that in doing so, The Tribunal had indulged in conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained. The relevant excerpts from the order of the Hon'bl....
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..... 1,000 each unexplained. Either the Tribunal did not apply its mind to the situation or it arrived at the conclusion it did merely by applying the rule of thumb in which event the finding of fact reached by it was such as could not reasonably be entertained or the facts found were such as no person acting judicially and properly instructed as to the relevant law could have found, or the Tribunal in arriving at its findings was influenced by irrelevant considerations or indulged in conjectures, surmises or suspicions in which event also its finding could not be sustained. [para 19] As the conclusion of the ITO was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb came to the conclusion that the possession of 150 high denomination notes of Rs. 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of Rs. 1,000 each.[para 20] Therefore, the Tribunal in arriving at the conclusion in the present case indulged in....
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.... one is quite unable to see any reason or basis for the so called finding recorded by the Tribunal that the assessee was in possession of 35 notes on the day the Ordinance was promulgated or that 10 notes were from some undisclosed source. These cannot be recognised as finding at all. The assessee's business was not one in which large amount of petty notes might have been necessary for the purpose of business, and keeping money in large notes is evidently more convenient for counting, for making payments and for other purposes and no material has been placed to show that the explanation offered by the assessee was one which was inherently improbable or one which could not be accepted. The so-called estimate made by the Tribunal was based on no reason and was a mere guess. In fact there was no justification in the circumstances of the case for making an estimate at all. The assessee had a large cash balance which could very conveniently include the 45 high denomination notes encashed by him. The explanation offered by the assessee was not unreasonable and nothing has been said which could justify its being rejected as unreasonable. On the other hand the so-called estimate by the....
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....onsidered the acceptability or otherwise of the assessee's explanation, except making an assertion that it was not acceptable. The other important aspect, namely, whether, on the facts and in the circumstances of the case, it should be inferred that these amounts constituted income of the previous year, though the explanation offered by the assessee was not acceptable, did not receive the consideration of the Appellate Tribunal or the subordinate authorities. Except some agricultural properties, whose annual income came to about Rs. 6,000 according to the assessee, it had no known source of income in India, until it started the toddy business on August 17, 1950. Nor is there any material in the case even to raise a reasonable suspicion that the assessee indulged in any activity of an income-earning nature in the accounting year or in prior years. In these circumstances, a finding that the sum of Rs. 60,518 found with the assesseemust be its income from undisclosed sources during a period of about seven and a half months prior to August 17, 1950, appears a little preposterous. Whatever it may be, the explanation offered by the assessee was not on the face of it improbable, thoug....
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....nal committed an error in not accepting assessee's explanation in toto in regard to all notes - Held, yes - Whether, in view of aforesaid, there was no material before Tribunal for holding that assessee could not have been in possession of any of remaining thirteen notes also and that those notes or any part of them represented income of assessee from some undisclosed sources - Held, yes 17) Hon'ble High Court of Bombay in the case of Narendra G Goradiavs Commissioner of Income Tax [1998] 101 Taxman 571 (Bombay)/[1998] 234 ITR 571 (Bombay)/[1999] 154 CTR 365 (Bombay)(Copy at Case Law PB Page No. 232-237) Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1979-80 - In relevant period assessee had tendered notes of Rs. 1000 denomination valuing Rs. 2 lakhs for encashment - There was no dispute about source of money nor about fact that there was sufficient balance on date of deposit - Assessing Officer, however, made additions of part of amount for want of details of receipts of some of high denomination notes - Whether there was no justification for adding a portion of amount tendered by assessee for encashment of high denomination notes as inco....
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....onetization period - Assessee submitted that the savings were out of accumulated savings in the form of pin money and minor cash gifts received by her from her parents and in-laws on the occasion of birthdays, anniversaries etc. - HELD THAT:- CIT(A) grant relief to Rs. 50,000/- and upheld the addition to the extent of Rs. 2,00,000/-. Before us, assessee has submitted that the deposits to be out of accumulated savings and out of the cash gifts received by her on the occasion of birthdays and anniversaries. It is also a fact that assessee's husband is an income tax payer working for an MNC. In view of the CBDT Circular vide Instruction No. 03/2017 dated 21st February 2017 and relying on the decision of SMT. UMA AGRAWAL BABA KAPUR SUNARAN KA MOHALLA VERSUS I.T.O -1 (3) GWALIOR, M.P. [2021 (6) TMI 712 - ITAT AGRA], the explanation of the assessee about the source of cash deposits cannot be brushed aside without there being any evidence to the contrary.- Decided in favour of assessee. 21) 2021 (9) TMI 1192 - ITAT VISAKHAPATNAM DY. Commissioner Of Income Tax Circle-3 (1) Visakhapatnam Versus Sri Jaya Prakash Babu Valluri And (Vice-Versa) Cash deposits made ....
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....impugned sum represented income of the assessee from undisclosed sources as against the entries recorded in the audited books of the Assessee. The cash deposited in banks against from the explained source could not be treated as undisclosed income of the Assessee u/s 68 without bringing on record any credible evidence/materialin support of such allegation merely on the basis of surmises and conjecture of the ld. AO. 4.3.17 In view of above submission it is submitted that entire sales of the assessee are supported by the bills, duly verifiable from books of accounts & records and the same is completely genuine. The ld. AO did not specify any defects in the sale and the sale is in line of its own previous history of the assessee. The ld. AO could not bring any single evidences on record to prove his allegation to be correct. Further all the surrounding circumstances and human probability of this much cash sale is also in favour of the assessee. The assessee submitted the best possible details/information/documents/explanation to present its case before ld. AO and as explained in forgoing paras no specific defects had been pointed out by ld.AO therein.The entire assessment or....
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....611/-, during October 2015 it stood at Rs. 11,66,19,434/- and October 2014 at Rs. 17,60,14,563/-. Therefore, during the year under consideration cash sales during October month increased by 1.61 times compared to October 2015 and increased 1.07 times compared to October 2014 The ld. AR of the assessee explained that this issue is already considered by the ld. CIT(A) at para 6.2 page 46 of her order. The ld. AR of the assessee further explained by way chart submitted before the AO too where in the comparison of cash sales made by the assessee was explained and he submitted that in Nov 2014 total cash sales were of Rs. 15.51 cr and in Nov. 2015 Rs. 19.17 cr., whereas, cash sales in Nov 2016 was of Rs. 13.55 cr only which is lessor then Nov 2014 & 2015. In terms of % cash sales to total sale, it was 12 % & 17 % in Nov 2014 & 2015 respectively, whereas the same is 13 % of total sales in this period in question only. The revenue could not pin point any fault on these cash sales comparison provided and thus, we do not find any absurd result and there was no abnormal rise in over all cash sales in the sales results of the assessee. The case sales made during October 2016 was 18% and....
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.... for First 3 quarters. The assessee also revised the VAT return of 4 quarter however the turnover was not disturbed which shows that the assessee has revised the Return to duped the Department. The whole excise made by the assessee indicate that the assessee has been indulged in booking of bogus cash sales The ld. AR of the assessee submitted all the four quarter returns were revised and not for any particular quarter. If this contention is accepted then it will also lead to a presumption that the assessee did not made any composition sales for whole of the year. The assessment of VAT were completed and placed on record where in the revision were accepted(APB 139-147). The ld. AR of the assessee further submitted the copy of the receipted VAT taxes paid challan for all three quarters at PB page 110 where in it is explained that all the three quarters respective tax have been paid before the demonetization and the assessee has not foreseen this event and their payment it self proves that the revision of order though the tax paid in advance was just a procedure lapse and since the tax has already been paid related to this composition the merely the return revised cannot be used ag....
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....laimed that the cash amount deposited during the period of demonetarization includes amount of Rs. 2596480/- realized from debtors just before demonetarization between 03-11-2016 to 08-11-2016. The assessee was asked to furnish the detail such as full name, address and PAN no. of such persons. However, no such details were provided by the assessee as such and only contract number and name were provided. As no details of address was provided. Hence, in these circumstances to verify the genuineness of the debtors telephone calls were made to some of the debtors on test check basis from the landline phone of the office of undersigned having no. 01412227574. In the verification the debtors fail to recognize such purchase from the assessee. As rightly confirmed by the ld. CIT(A) that once the sales is considered as genuine the receipt cannot be doubted. The assessee has shared the details of invoices and the AO has merely alleged that the same is without PAN and address. The calls were made to very few person and nominal value of sales and all the cell number given were active. No party has categorically denied about the purchase that they have made so the strata selected was very....
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....ind that out of the total SBN's deposited during the demonetization period, an amount of Rs. 12 Crores was deposited on 10.11.2016. Thereafter the purchases of 13000 gram were made from M/s Girdhar Jewellers Pvt. Ltd. on 15.11.2016, which has no concern with the SBN deposited by the appellant. As regards the possibility of making sales invoice ld. AR of the assessee submitted that regular billing of the assessee is ranging from 100 to 200 per day there are 91 employees for both the show room, all were available and time calculated for 3 hours and not four hours (8+4) then even in 3 hours average 22 minutes can be given to single person [725/90= 8 person can be handled in hours a single men and 60*3=180/8=22.5 minutes available for a customer and that time is sufficient time to attend the 725 person if believe that in a day there is no other sale also in day. This cannot be considered as impossible task for the assessee having stock, place to display and parking availability this fact is also not disputed. The average sales of the assessee in a year is around 200 cr. and looking to strength of the assessee the cash sales which in comparison to past year cannot be considered as non-g....
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....reject the books based on frivolous reasons. 14. We have considered the rival contention and perused the orders of the authorities and the material available on record arguments advanced by both the parties and also gone through the judicial decision relied upon by both the parties to drive home to their contentions. The assessee is a limited company and deriving income from manufacturing and trading of jewellery. The books of assessee's are audited by the independent Chartered Accountant and copy of audit report and statement of profit and loss account is filed by the assessee company. It is noted from the record that the case of the assessee was taken up for scrutiny assessment u/s 143(3) on the basis of CASS and desired information by the AO were submitted by the assessee from time to time. After completion of assessment the AO vide his order dated 29-12-2019 assessed the income of the assessee at Rs.16,45,24,988/- as against return income of Rs.5,37,53,418/- . During the course of assessment proceedings, the AO rejected the books of account of the assessee by applying the provisions of Section 145(3) and estimated the net profit rate of 2.59% being average Net Profit of last....
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....s placed on record by the assessee. The ld. AR of the assessee during the course of hearing taken us to all the points raised by the AO so as to prove that the contention raised by the AO to prove that the sales made by the assessee company as on the date of demonetization is correct and possible looking to the strength of staff, space of demonstration and parking and the considering availability of stock on hand as proved that the sales made by the assessee company is genuine sales recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. As regards the receipt of the cash from the customer the ld. AR of the assessee relied upon the findings of the jurisdiction high court judgement in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC). In this case the Jurisdictional Hon'ble High Court have held that So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standi....
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....n or before the hearing of appeal." 18. The ld. AR of the assessee in support of the grounds raised by them has filed a detailed submission and the same is reiterated here in below : Submission on Grounds of Appeal raised by assessee 1. The assessee raised two grounds of appeal. In the first ground of appeal, the assessee has challenged the rejection of books of accounts and the second ground of appeal is regarding confirming of addition of Rs.47,72,297/- by CIT (A) by estimated the net profit.Since both ground of appeal is interconnected to each other and born out from the common finding, therefore in the written submission the same are commonly dealt with. 2. The ld. AO rejected the books of account of assessee basically for following reasons: - i) Non genuine purchases from Paras Gems and Jewellers and therefore, stock register prepared after thought and does not disclose true income of the assessee. ii) Non verified cash sales during the period from 03.11.2016 to 08.11.2016. iii) The assessee declared total turnover of Rs. 209,09,94,399/-. The assessee deposited Rs. 12,17,48,500/- in bank in demonetized currency, which wa....
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....d taxed the same u/s 68 of the Act. Since in the above paras, I have held Rs. 12,17,48,500/- to be part of total sales and deleted the addition made by the AO u/s 68 of the Act, accordingly, the Net Profit rate of 2.59% applied by the AO is now directed to be applied on the total turnover of Rs. 2,09,09,94,399/- (including the amount of Rs. 12,17,48,500/-) declared by the appellant for the year under consideration. The AO has made an addition of Rs. 5,10,03,468/- by applying the Net Profit rate of 2.59% on reduced turnover of Rs. 1,96,92,45,899/-. Consequently, the Net Profit rate by applying 2.59% on total turnover of Rs. 2,09,09,94,399/- is worked out at Rs. 5,41,56,755/-. Accordingly, an addition of Rs. 47,72,297/- [Rs. 5,41,56,755 - Rs. 4,93,84,458 (as declared by the appellant)]) is confirmed and the balance addition of Rs. 4,62,31,171/- is directed to be deleted." 5.3 Submission of assessee: - 5.3.1 The ld AO has not given any show cause notice for rejection of books of account and estimation of income by apply profit rate:- The AO has never issued show cause notice as to why the books of account may not be rejected under section 145(3) of the Act a....
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.... assessment should be framed u/s 144 of the Act but the ld AO framed this assessment u/s 143(3), meaning thereby either the assessment is bad in law or not application of section 145(3) of the Act. 5.3.3 The purchases from Paras Gems & Jewellers, M/s Girdhar Jewellers Pvt Ltd and M/s Girdhar Associates were held genuine:- The ld CIT(A) has examined the genuineness of purchases from M/s Paras Gems & Jewellers, M/s Girdhar Jewellers Pvt Ltd and M/s Girdhar Jewellers and held the same genuine on the basis of her detailed findings in para 6.2 (ix) and 6.2(x) of her order and the department has not challenged the finding of ld CIT(A) and therefore, the decision of ld CIT(A) over genuineness of purchases has attained finality. Therefore, the books of account cannot be rejected on the ground of genuineness of purchases. 5.3.4 No ground to reject the books of account:- When all the purchases are genuine and correctly recorded in books of account including stock register, the books of account cannot be rejected as the assessee fulfils all the conditions of section 145(3) namely:- (i) The books of account are complete and correctly maintained by t....
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.... looking to the quantum of sales of the assessee and thus cannot be treated as non-genuine and unusual. Further, when the credit sale is accepted as regular feature of the trade of the assessee then it is also obvious that it would be realized on subsequent dates. 3. So far as outcome of telephonic verification made by ld. AO (relevant table at Page 5 of assessment order) from the debtors it is submitted that from perusal of list of sundry debtors, which realized during the period from 03.11.2016 to 08.11.2016 (as submitted along with letter dated 21.12.2019 and enclosed at PB Page 163 to 165) it is apparent that the debtors mentioned at S. No. 1 to 4 of the table (Page 5 of the assessment order) were not realized during the period from 03.11.2016 to 08.11.2016, therefore the verification from such debtors is completely irrelevant to examine the source of demonetized currency deposited into bank a/c. In other two cases the sales of Rs. 19,000/- was made to Asmita Ji on 04.11.2016 against which payment of Rs 9,000 received immediately on 04-11-2016 and balance of Rs 10,000/- was received on 5-11-2016. The sales of Rs. 1,38,000/- was made to Asha Singh on 05.11.2016 against ....
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....ed advance of Rs. 11,86,250/- from the customers. The ld. AO as well as CIT (A) considered the corresponding sales made to these customers as genuine, as while computing the total sales of the assessee, for estimating the NP profit, considered these sales as part of turnover. Receiving of advance from customer is regular feature of trade of the assessee and the same was also prior and after to the period 03.11.2016 to 08.11.2016. Thus, the advances received during the period from 03.11.2016 to 08.11.2016 only cannot be treated as non-genuine. 2. Further, out of total amount of Rs. 12,17,48,500/- deposited in bank in demonetized currency the advance received from customers was of Rs. 11,86,250/- which is very meager amount looking to the quantum of sales of the assessee. 3. The details of advances received viz a viz sales made to such parties, in which the advances were adjusted is as under: - Date of advance Advance amount Name of party Date of sale made and bill No. Amount of sales (after discount) 03.11.2016 10,000 Anil Ji Mehta 07.01.2017 Bill No. MG 10852 55,000 03.11.2016 1,00,000 Asha Ji Bakliwal 30.11.2016 Bill No. ....
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.... 1,46,500 08.11.2016 10,000 Shubham Ji Jain 03.01.2018 Bill No. MG-13757 14,490 08.11.2016 28,500 Malvika Ji Mathur 25.11.2016 Bill No. MG-9138 32,400 08.11.2016 20,000 Puneet Ji 09.11.2016 Bill No. MG-8813 1,35,700 08.11.2016 1,100 Anil Ji Bhilwara 02.01.2018 Bill No. MG-13719 3,420 Total 11,86,250 28,33,573 From the perusal of the above chart it is apparent that subsequently the assessee made the total sales to above named parties of amounting of total Rs. 28,33,573/- and after adjustment of advance payment of Rs. 11,86,250/- the balance payment of Rs. 16,47,323/- was received through parties in cash as well as banking channels. The sales of this balance amount is treated by the ld. AO as genuine, therefore there should not be any reason to amount received as advance during period 03.11.2016 to 08.11.2016 as non-genuine. The single transaction is assessed by ld. AO by dual analogy i.e.part amount realized during period 03.11.2016 to 08.11.2016 as non-genuine and amount realized thereafter as genuine. In case the ld. AO wanted some more details from the assessee in respect of advances....
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....of sale on a lower price or sale made out of the material which is not shown in the books of account. There is no instance that cash sales have been made on lower rate than prevailing market price. In view of these facts and circumstances, we hold that there was no justification in rejecting the books of account and disturbing the trading result." iii) ITAT Delhi in Kishore Jeram Bhai Khaniya, Proprietor, M/s Poonam Enterprises v. ITO ITA No. 1220/Del/2011 ITAT Delhi Judgement dated 13.05.2014) (Copy at Case Law PB Page No. 159167) The Hon'ble Tribunal held that We find that so long as the availability of stock in there and there is nothing adverse against the cash memos issued by the assessee, such cash sales cannot be doubted. Here it is pertinent to note that the volume of such cash sales at Rs.22.06 is to be seen in the light of assessee's total turn- over of Rs.10.29 crores. It is but natural that if a customer makes cash purchase and lifts the goods, there is no duty cast upon the seller to insist for the address of the purchaser. In the light of the fact that stock record was available with the assessee, which evidenced the making of sale, we fail ....
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....ult. So far as closing stock is concerned, inventories of existing stock were not found to be incorrect by the AO i.e. that position of stock as shown in the account books was not incorrect. There being no dispute about the sales and purchases, nonmaintenance of stock register lost its significance so far as arriving at GP is concerned. Therefore, the CIT(A) was right in his reasoning about admitted state of affairs. Resorting to estimate of GP rate was founded on no material. It was merely a case of making certain additions on the basis of certain defects pointed out by the AO and which he has shown in different account by giving margin of unvouched expenses. He has disallowed certain expenses. 11. The Tribunal committed basic error in not appreciating the reasoning given by the CIT(A). It is trite to say that in the facts and circumstances of present case, account books are maintained as they were ordinarily maintained years after years and which were found to yield a fair result. Mere deviation in GP rate cannot be a ground for rejecting books of account and entering realm of estimate and guesswork. Lower GP rate shown in the books of account during current year and fal....
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....sing stock of raw material, opening stock of finished goods, finished goods produced during the year, finished goods sold and closing stock of finished goods) were prepared and audited by certified accountant and were enclosed with Form No. 3CD which had been placed on record, but the Assessing Officer had ignored the factual figures, both in qualitative and quantitative terms, enclosed with the return and filed during the course of assessment proceedings. It was for that reason that the Commissioner (Appeals) was satisfied that the assessee had furnished complete details, including quantitative details in respect of purchase of raw material, manufacture of copper wire and sale of the finished products. In those circumstances, the accounts maintained by the assessee could not have been said to be incomplete or inaccurate. In fact, the Assessing Officer had no material before him to treat the accounts of the assessee as defective or incomplete. [Para 6] As regards the marginal increase in the weight of the finished product, the explanation given by the assessee had been accepted not only by the Commissioner (Appeals) but also by the Tribunal. The Assessing Officer had no ma....
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....losed with the return. In any case, there is no statutory provision under the income-tax regime requiring the assessee to maintain the daily stock register. Hence, even if no such register was being maintained by the assessee, that, by itself, would not lead to the inference that it was not possible to deduce the true income of the assessee from the accounts maintained by her, nor the accounts could be said to be defective or incomplete for that reason alone. If the stock register is not maintained by the assessee, that may put the Assessing Officer on guard against the falsity of the return made by the assessee and persuade him to carefully scrutinize the account books of the assessee, but the absence of one register alone does not amount to such a material leading to the conclusion that the account books were incomplete or inaccurate. Similarly, if the rate of gross profit declared by the assessee in a particular period is lower as compared to the gross profit declared by him in the preceding year, that may alert the Assessing Officer and serve as a warning to him to look into the accounts more carefully and to look for some material which could lead to the conclusion that the ac....
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.... sub-s. (3) of s. 145 does not apply to this case. As noted by the CIT(A) as well as by the Tribunal, the AO had not pointed out any defect in the accounts books maintained by the assessee, which, admittedly, were produced before the AO for his consideration. This is also not the finding of the AO that the account of the assessee was not complete. No provision either in the Act or in the rules requiring an assessee carrying business of this nature, to maintain a stock register, as a part of its accounts has been brought to notice. As regards non-production of stock register, the assessee has given an explanation which has been accepted not only by the CIT(A) but also by the Tribunal and both of them have given a concurrent finding of fact that maintaining stock register was not feasible considering the nature of the business being run by the assessee which was engaged in the business of manufacturing readymade garments by purchasing fabric which was then subjected to embroidery, dyeing and finishing and then converted into readymade garments by stitching. Sec. 145(3) therefore could not have been applied by the AO to the present case. As regards failure of the assessee to produce t....
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....e which are free from any defect cannot be rejected merely because the average GP rate was slightly lower than the average GP rate of the earlier year. g) Vishal Infrastructure Ltd Vs ACIT 104 ITD 537 (ITAT Hyderabad) :- Hon'ble ITAT Hyderabad A Bench held that the undisputed fact is that the assessee which is a limited company has been consistently following a particular method of accounting. Its accounts are audited both under the Companies Act as well as under s. 44AB. Such audited accounts are being filed with the Registrar of Companies as well as with the IT Department for more than 7 years. The Revenue has scrutinized the accounts and the method of accounting regularly employed and adopted by the assessee year after year have not been found fault with. Auditors of the company both under the Companies Act and the IT Act have been consistently certifying that the assessee has been regularly following the method of accounting and that the annual profits can be properly deduced from such method of accounting employed by the assessee. The auditors over the years have also been certifying that the accounts are regularly maintained and are complete in the sense that there i....
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.... "The basis of rejection of books of account was nonmaintenance of day-to-day stock register and quantitative details of goods purchased and sold. No reference whatsoever was made to the notification applying Accounting Standards in case of the assessee's maintaining books on mercantile basis". "The assessee had recorded purchases and sales of each item in the ledger which was admittedly produced before the Assessing Officer. From the said ledger, the assessee's auditor prepared quantitative detail and the same was filed with the return. The above statement contained all necessary details of opening stock, purchases, sales and closing stock. When complete ledger account of purchases and sales was maintained, it could not be said that accounts of the assessee were not subject to verification. Stock available with the assessee, on any given date, could be found out by making reference to the ledger account. Therefore, books of account could not be rejected on the ground that they were not correct or incomplete or not subject to verification". j) Avdesh Pratap Singh Abdul Rehman & Bros Vs CIT (1994) 210 ITR 406 (All) -Held that absence of stock register may not per s....
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....ssessee are not correct and complete or the method of accounting adopted is such that true profits cannot be deduced therefrom. Therefore, the Assessing Officer is required to indicate specific defects in the books of account which clinches the profit shown by the assessee or its state of affairs". "Therefore, the action of the lower authorities in rejecting the book results merely because the assessee had not maintained stock register, without pointing out any specific defect in the books of account, of any nature whatsoever was not justified. Therefore, the book results of the assessee were to be accepted". 19. Per contra, the ld. DR supported the rejection of books of account by the lower authorities and thereby estimation of profit too and supported the arguments advanced in the respective order of the lower authorities on the issue. 20. We have considered the rival contention and perused the orders of the authorities and the material available on record arguments advanced by both the parties and also gone through the judicial decision relied upon by both the parties to drive home to their contentions. We find from the records that show cause notice so as to reje....
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....ered these sales as part of turnover and thus treated the cash received from the debtors immediately at the time of Sales of Rs.13,30,000/- and Rs.2,49,515/- received after 8-11-2016 as genuine and verified. We feel that out of total amount of Rs.12,17,48,500/- deposited into bank account, the cash realized from debtors was of Rs.25,96,480/- which is a meager amount looking to the quantum of sales of the assessee and this cannot be treated as nongenuine. It is also noted from the record that the AO made the telephonic enquiry / verification from the debtors on test check basis for 6 cases only where the list contains more then 250 names, however, in case of discrepancy the opportunity of cross examination was required to be made by the assessee but it was not made by the AO. Therefore, it can be said that the assessee was deprived of cross examining the parties due to lapse on the part of the AO. As regards the genuineness of advance from customers, the assessee received advance of Rs.11,86,250/- from the customers which the lower authorities considered the corresponding sales made to these customers as genuine and it happens in such business that receiving of advance from customer....