TaxTMI 
TaxTMI 
2023 (4) TMI 529
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....ellant on 11.08.2022. 3. That the CIT(A) NFAC has erred in deciding the appeal without calling/ downloading the replies submitted by the appellant during assessment proceedings and thus ignoring the vital documents such as, cash book, purchase bills, ledger and VAT returns and thus the order of CIT(A) NFAC is against the principles of natural justice. 4. That the CIT(A) NFAC has erred in passing a non-speaking order which is against the law even if the assessee was not represented before it. 5. That the CIT(A) NFAC has erred in confirming the action of the AO in rejecting the books of accounts by invoking the provisions of sec. 145(3) without even looking at the documents on record and without appreciating that no specific defect in the books of account was pointed out by the AO which is not even part of the assessment order. 6. That the CIT(A) NFAC erred in confirming the action of the AO based upon surmises and conjecture without there being any evidence contrary to the contention of the assessee which is duly supported by documents. 7. That the CIT(A) NFAC has erred in confirming the addition of Rs. 28217200/- being cash deposited in ....
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....ld. Counsel for the assessee filed written submissions which are kept in the record. In the argument assessee has placed that: The book of accounts of the assessee is subject to audit on year to year basis and is maintaining proper quantitative records. That the assessee had filed the return of income for the year under consideration amount to Rs 967203/-and had declared total turnover of Rs 10,38,81,637/-. The Copy of audited balance sheet, trading and profit and loss account is enclosed at page no 15-28 of APB. 3.1. The ld. Counsel argued that the case of the appellant was selected for scrutiny under CASS by issuing jurisdiction notice u/s 143(2) dated 09.08.2018. The copy of same is enclosed at page no 1-4 of APB. The case was selected for scrutiny for the primary reason of large cash deposit during demonetization. Pursuant to the same, the appellant was issued various notices u/s 142(1) requiring the appellant to provide necessary information and documents in respect of source of such cash deposit amounting to Rs 4,09,50,000/- during demonetization. The appellant during the course of assessment proceedings explained that he was in the business of sale / purchase of sugar,....
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.... no 92-148 of the APB c) Quantitative tally for the period 01.04.2016 to 31.03.2017 submitted before AO vide reply in response to notice u/s 142(1) dated 25.12.2019 and the copy of same is placed at page no 75-82 of APB. d) Copy of transport bills along with DharmKanda receipts in respect of purchases made for the period 01.04.2016 to 31.03.2017submitted before AO vide reply in response to notice u/s 142(1) dated 25.12.2019 and the copy of Dharm Kanda receipts duly submitted before the AO in the reply dated 25.12.2019relevant page no. 79 of APB e) Complete books of accounts along with sale & purchase register for the period 01.04.2016 to 31.03.2017was submitted before AO vide reply in response to notice u/s 142(1) dated 27.12.2019 and the copy of same is placed at page no 157 of APB. f) Copy of cash book for the period 01.04.2016 to 31.03.2017submitted before AO vide reply in response to notice u/s 142(1) dated 27.12.2019 and the copy of same is placed at page no 157 of APB. g) Complete Postal address of debtors and creditors to/from whom sale/purchases submitted before AO vide reply in response to notice 142(1) dated 11.11.2019 and the ....
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....) at Rs 9,63,687/- against the actual cash sales of Rs 1,58,06,636/- and Rs 1,53,63,687/-. The said action of the AO is based on surmises and conjectures ignoring the fact that the assessee has duly paid VAT on sales declared in the VAT return for the period 01.04.2016 to 31.03.2017. 3.6. That the CIT(A) confirmed the action of AO by passing the order ex parte without considering the request for adjournment filed by the appellant on 11.08.2022.The copy of adjournment letter as submitted before NFAC on 11.08.2022 on the online portal is enclosed at page no 48 of APB reply dated 22.02.2023. 4. The ld. Counsel for assessee has made ground wise submission which is reproduced as below:- Ground No- 2,3 &7. The ld. Counsel for assessee invited our attention in written submission duly filed before the bench. The relevant paragraphs are reproduce as below: - "12. Submissions in respect of ground No 2, 3 and 7 a) 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 and said stock register have been maintained right from the date of ....
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....le, quantity and description of the item purchased or sold has been given in full form. f) It is beyond doubt that the Assessee was having sufficient stock and the same was duly accounted for in the books of accounts for the year under consideration. The entire sales were made from the regular stock in hand of the Assessee. So, under such circumstance, the sales cannot be doubted. The items are sold and from which cash has been received by the Assessee and the same stands deposited in the Bank accounts of the Assessee itself during the demonetization period. In other words, it is only a case, wherein the existing stock in hand as available with the Assessee is sold for cash. Hence, it is a case, wherein the stock is out and in return is cash is in, which stands deposited in the bank account and the same is disclosed in the books of accounts of the Assessee. The books of accounts of the Assessee are further duly audited by a Chartered Accountant. Thus, there is no scope of any default on the part of the Assessee.It is pertinent to mention here that the appellant had made purchase to the tune of Rs. 3,09,69,406/-in October 2016 on which the assessee has duly paid the VAT [pl....
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....e had explained the nature and source of cash deposits in the bank account and that nowhere in the assessment order, the A.O. had mentioned that he was not satisfied with the explanation offered to him since no deficiency was raised by him with regard to the said deposited cash. It is also submitted that the assessee deposited cash amounting to Rs.4,09,50,000/- during the demonetization period out of cash sale proceeds, cash withdrawals to the tune of Rs. 46,05,000/- and cash received from debtors and the same stands reconciled from the cash books, PVAT Returns filed with the Trade &Taxes Department along with the P&L Account for the relevant assessment year. The copy of vat 20 is enclosed at page no 85-91 of the paper book." 5. The ld. Counsel for the assessee further respectfully relied on the orders of the Hon'ble Courts& ITAT which are extracted as below: i. Smt. Charu Aggarwal Vs. Deputy Commissioner of Income-tax [2022] 140 taxmann.com 588 (Chandigarh - Trib.). "I. Section 68, read with section 153A, of the Income-tax Act, 1961 - Cash credit (Unexplained cash deposits) -Assessment year 2017-18 - Certain cash was deposited during post-demonetization in acc....
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....Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts - Assessment year 1999-2000 - Assessing Officer on examination of books of account of assessee allegedly found various discrepancies which when confronted to assessee, no satisfactory explanation was filed by it - Further as trading results declared by assessee were much variable, by applying provisions of section 145(3), Assessing Officer rejected books of account and by applying GP rate of 8.5 per cent on enhanced sale, made an addition - Commissioner (Appeals) as well as Tribunal deleted additions - Whether since Commissioner (Appeals) as well as Tribunal had gone into detail in discussing evidence and recording conclusion after appreciating same, and on basis of evidence, they concluded that no discrepancy could be found in maintenance of accounts and even Assessing Officer who was present before Commissioner (Appeals) could not point out any such discrepancy, conclusion reached by Commissioner (Appeals) and Tribunal was correct". iv. Principal Commissioner of Income-tax v. Agson Global (P.) Ltd. [2022] 134 taxmann.com 256 (Delhi). "IV. Section 68 of the Income-tax Act, 1961....
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....sbelieve details furnished by parties and assessee -Whether, on facts, no addition could be made under section 68". vi. ACIT, Central Circle - 1, Visakhapatnam v. Hirapanna Jewellers [2021] 128 taxmann.com 291 (Visakhapatnam -Trib.) INCOME TAX: Where AO made addition under section 68 on account of huge cash amount deposited by assessee-jeweller in its bank account post demonetization, since assessee had explained source of said cash deposits as sales of jewellery, produced sale bills and admitted same as revenue receipt as well as offered it to tax and assessee also represented outgo of stocks which was matching with sales, impugned addition was to be deleted. [ Emphasis supplied] 6. The ld. counsel for the assessee further placed argument in ground no. 5 and filed a submission which is extracted as below: - Reason for rejection Explanation (i) Cash sales for October 2016 [Rs. 15806536] and November 2016 [Rs. 15363687] are abnormally high as compared to cash sales in October 2015 [Rs. 527717] and November 2015 [Rs. 520020]. [Para No 4.1 of the order enclosed at page no 4-5 of the paper book] 1.It is pertinent to mention here that the appellant ha....
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....d as such it was not possible to upload such voluminous sale bills on the online portal, therefore, the assessee has submitted sale register which contains party name, bill number, item name, quantity, price, taxable amount, sale tax and grand total, therefore, the observations of the AO that the sale bills were not uploaded seems to be incorrect. 3. Furthermore, the appellant had also furnished the copy of VAT returnswhich duly substantiate the sales made during the year under consideration. The copy of VAT return is enclosed at page no 85-91 of the paper book. (iv) Assessee does not have too much space to stock a huge quantity of stock [Para No 5.1 of the order enclosed at page no 164-165 of the paper book] 1. As regard the allegation in respect of space to accommodate huge quantity of stock, it is pertinent to bring to your kind attention that during the year under consideration the appellant had takena godown [located on tarn Taran Road, Kochhar rice Mill near Shani Dev Mandir] on rent. The rent expenses incurred during the year are duly reflecting in the audited profit and loss account enclosed at page no 26-27 of the paper book. This clearly shows that the ....
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....see-contractor was selected for scrutiny through CASS due to difference in turnover between Form 26AS and books of account - Assessing Officer completed assessment in case of assessee company by making various additions based on difference between declared amount and that in terms of Form 26AS - Commissioner (Appeals) confirmed findings of Assessing Officer - However, Assessing Officer had not found a single defect in assessee's books of account and enquiry made bv him under section 133(6), had been properly explained by assessee - Assessing Officer's contention that other party had booked expenses could not be reason to make additions since contract receipt was reflected in subsequent year in terms of assessee's regular method of accounting - An addition based on amount in Form 26AS and that shown in books indicated that additions were made by following a pick and choose method - Further, information as per data base of revenue could not, by itself, be a legally sustainable basis for making addition to assessee's income -Grievance of revenue that assessee had not offered correct income was fully explained by assessee and not rejected by Assessing Officer - Whether ....
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....planation regarding decline in GPR and, therefore, he rejected its books of account and applied GPR at 27per cent which resulted in certain addition - On appeal, Commissioner (Appeals) deleted addition holding that Assessing Officer made addition without pointing out any specific defect in books of account - Tribunal upheld finding of Commissioner (Appeals) - Whether there was any perversity in order of Tribunal - Held, no". 7. The ld. counsel further argued in respect of ground no. 6 and placed the broad submission which are extracted as below:- " Submissions in respect of Ground No. 6 Ground No 6 6. That the CIT(A) NFAC erred in confirming the action of the AO based upon surmises and conjecture without there being any evidence contrary to the contention of the assessee which is duly supported by documents. a) As already stated, that the Ld. AO has not referred to any documentary evidence to prove anything contrary to the submissions of the appellant. In such a case where there is no corroborative material. Addition made is mere suspicion and no reasonable belief can be formed and as such the same is liable to be deleted. In this regard, Reliance is bein....
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....adict aforesaid concurrent finding of facts returned by Tribunal and Commissioner (Appeals) - Whether therefore, said concurrent findings could not be interfered with - Held, yes [Paras 3, 4 and 5] [In favour of assessee] Hon'ble Bench in the case of ACIT vs Joginder paul in ITA No. 734/Chd/2014/ reported at 38 ITR 0486. The discretion of not depositing the said cash in hand anytime earlier than these had been actually deposited in bank was with the appellant and mere suspicion on this account could not obliterate the fact of assessee having such cash in hand as on 31.03.2009. In the circumstances, there is no reason to hold that the said cash deposits were from some other accounted income of the appellant and not from available cash in hand. The addition made is merely on suspicion ignoring all factual evidence in this regard and is therefore directed to be deleted." The Assessing Officer has doubted the sales as made by the Assessee, merely on the basis of the higher number of sales bills as issued by the Assessee in span of few days. The said exercise as done by the Assessing Officer is merely on doubts/suspicion and it is a settled law that doubt and su....
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....ed that since the entire books of account had been scrutinized and the Assessee's income had been accepted, it also means that the entire opening stock, sales and closing stock made during the year stood accepted. Additionally, in respect of AY 2012-13 also, Assessee's trading activities were subjected to detailed scrutiny under section 143(3). In the said year, the AO had rejected the trading result and even enhanced the GP rate and made an addition in the trading account. The ITAT thus held that in respect of AY 2012-13 the opening and closing stock and trading accounts including sales has not been disturbed. In these circumstances, the ITAT observed that in the impugned AY 2014-15, the audited balance-sheet reflected an opening stock of Rs. 19,53,29,660/- which stood accepted by the Department either under the scrutiny proceedings or by not selecting the return for scrutiny or by not taking any action to disturb such returned income. In these circumstances, it was held that the quantum figure and the opening stock which stood accepted in the earlier years had to be taken as actual stock available with the Assessee. In view of these facts, the sales made by the Assessee o....
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....e from a source which has already been taxed which would amount to double taxation. a) To begin with, your Honor's kind attention is drawn towards section 68 f the income tax act 1961 which is reproduced hereunder: - Cash credits. 47 68. 48Where any sum is found credited in the books49of an assessee maintained for any previous year, and the assessee offers no explanation49 about the nature and source thereof or the explanation offered by him is not, in the opinion of the 50[Assessing] Officer, satisfactory, the sum so credited may49 be charged to income-tax as the income of the assessee of that previous year : 51[51a[Provided that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a)the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; a....
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.... addition and consequent penalty - Held, yes 10. The ld. counsel further argued in respect of ground no. 10 and placed the submission which is extracted as below: "7. Submissions in respect of Ground No. 10 Ground No 10 10. That the CIT(A) NFAS has erred in confirming the order of the AO ignoring the position of law that no addition u/s 68 can be made where books of account had been rejected by the AO u/s 145(3) and again relying upon the same books of accounts for the purpose of section 68. a) Alternatively, it is humbly submitted that when the A.O. has rejected the books of account under section 145(3) of the Act then the addition under section 68 of the Act was totally unjustified. That due to this addition the A.O. has resulted in unrealistic net profit rate i.e; 28%. That even if the AO 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 is also submitted that the A.O has rejected the books of account under section 145(3) of the Act only on the basis of surmises and conjectures and no defect were pointed out in purchase and sales, ope....
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.... Tax Act, 1961 and the same is taxed u/s 115BBE of the Act at the rate of 60%. Further, penalty proceedings u/s 271AAC(1) of the Income Tax Act, 1961 are also initiated on this issue." 11.1 The ld. CIT DR further relied on the order of the ld. CIT(A)'s para nos. 4 to 4.1are extracted as below: "4. Decision:- The AO in its order u/s 143(3) of the Act has noted that the assessee has made large cash deposit in his bank account during the demonetization period i.e., during 9.11.2016 to 31.12.2016. The AO asked the reasons for this increase in the cash sales i.e. ,of Rs. 40950000/-. After examining the submission of the assessee, the AO as per Para 6.1 had added Rs. 27400000/- u/s 68 r.w.s 115BBE of the Act after allowing the credit of the sales made up-to October 2016 and the profit margin as worked out from the submission of the assessee. 4.1 The assessee filed its appeal and challenged the additions made by the AO. During the appeal proceedings the appellant did not file any submissions to support its grounds of appeal. As discussed above, the appellant has not complied with various notices issued in the course of appeal proceedings and also did not make....