TaxTMI 
TaxTMI 
TaxTMI 
2023 (4) TMI 529
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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 bank accounts without appreciating that the said cash was part of the cash account submitted w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ook 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, refined oil and other allied items and the said cash was deposited out of sale proceeds, cash withdrawal and out amount realized from de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 copy of same is placed at page no 64-68 of APB. h) Copy of month wise stock statement submitted to the AO vide reply in response to notice 142(1) dated 11.11.2019 and the copy of same is placed at page no 63 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 start of business. During the earlier years, there has been no dispute of any nature, whatsoever, and the book results of the assessee have been accepted by the department. b) For the year under consideration, the return of income was filed an i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om 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 [please refer page 63 of the PB]. The Ld. AO has not doubted the purchases, opening stock and quantitative tally. It is a matter of record The purchase & sale have duly been reflected in the VAT return filed before the Punjab VAT Authorities. g) As regard AO's objection regarding increase ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 account of assessee, engaged in resale of jewellery, diamond etc. -Assessing Officer observed that there were two sets of books of account, i.e., one in computer of accountant and another in pen drive of accountant with different sales figures for October 2016 and assessee having failed to furnish documentary evidence regarding source o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able, 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 - Cash credit (Bank deposits) - Assessment year 2017-18 -Assessee-company was engaged in business of selling dry fruits - post-demonetization, assessee deposited cash amounting to Rs. 180.53 crore in its bank accounts - Assessing Officer held that cash deposits made by assessee represented unaccounted income and accordingly, made additions - Tribunal analysed data pertainin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 has given detailed explanation for increase in sales due to festival season and addition in product line. The same has duly been submitted before the AO in reply enclosed at page no 80. That the applicant is regulating depositing cash in accounts which is evident from the fact that the case for A.Y. 12-13 has been selected based on cash deposit of Rs 3,02,06,000/- in HDFC limit. The same has been accepted by the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nswhich 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 AO has made the addition on the basis of surmises and conjectures even without going through the Audit Report. 2. Besides the above, we are also enclosing herewith the ledger account of electricity expenses from which your goodself will find that the electricity expenses for the godown are duly debited in the profit and loss account. Refer Page no 50 of reply dated 22.02.2023. 3. It is pertinent to mention here that....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 therefore, Assessing Officer as well as Commissioner (Appeals) had erred in law in confirming disallowance. ii. Paramount Impex v. AC IT, Circle-J, Ludhiana [2020] 117 taxmann.com 802 (Chandigarh Trib.) Section 145 of the Income-Tax Act, 1961 - Method of accounting - Rejection of Account (Non-maintenance of stock register) - Assessment year 2013-14 - Whether where assessee was dealing in a large number of small items and it was consistently following method of dete....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 being placed upon the following case laws: - Sr. No Citation Brief Hon'ble Supreme Court of India in the case of Omar Salay Mohamed Sait vs. Commissioner of Income-tax reported at [1959] 37 ITR 151 (SC)[05-03-1959] "Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Order of - Assessment year 1948-49 - Whether Tribunal should not base its findings on suspicions, conjectures, or surmises nor should it act on evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h 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 suspicion, howsoever, strong it may be, cannot take the shape of evidence. Reliance is being placed on the following judgments:- i. Commissioner of Income Tax Vs. Ram Narain 224 ITR 180 (P&H) ii. JCIT Vs. Gramophone Company of India Ltd. 265 ITR (Kol-Trib) 46 (AT) iii. DCIT Vs. D.N. Kamani (HUF) 70 ITD (Patna-Trib) 77 iv. Elite Developers Vs.. Dy. Commissioner of Income Tax 73 ITD (Nagpur-Trib) 379 v. Monga Metals Pvt. Ltd. Vs. ACIT 67 TTJ (All) 247 vi. Daulat Ram Rawatmull 87 ITR 349 (SC)" 8. The ld. counsel further argued in respect of ground no. 8and pla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cumstances, 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 out of its opening stock were not treated as unexplained income, to be taxed as income from other sources. It thus manifests that the ITAT has taken into consideration the entire material placed on record including the report of the AO. The ITAT has applied the rule of consistency and rejected the enqjiry made by the AO in the relevant assessment year. No doubt principles of res judicata are not applicable to the Income-Tax proceedings however, it is equally well settled law that rule of consistency is a well- established and recognised principle applicable to the Income-Tax proceedings. Pertinently, the Assessee had closed his busi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: 51b[Provided further] that nothing contained in the first proviso 51c[or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.] b) On perusal of the text of section 68, it is evident that section 68 can only be invoked if the assessee is unable to explain the source of any sum found credited in the books of accounts. However, in the present case, the appellant had duly explained that the cash was deposited out of business rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 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, opening stock, closing stock, expenses as debited in the books of account. Therefore, the making of addition on account of deposit of cash which was duly accounted for in the books of account was against the facts and circumstances of the case. The reliance was placed on the following case laws: Sr. No Citation Brief 1. [2016] 73 taxmann.com 100 (Karnataka) CIT, Belgaum v. Bahubali NeminathMuttin Section 69B, read with section 145, of the Income-tax Act, 1961 - Undisclosed investments (Stocks) - Whether where books of account of assessee had been rejected by assessing authority, same books of account could not be relied upon in an addition on account of trade creditors and also for arriving at closing stock - Held, yes [Para 15....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 any compliance during assessment proceedings. Therefore, it appears the appellant is not interested in prosecuting the appeal. In view of the above the various additions and disallowances made by the AO are upheld. The Grounds of appeal are dismissed." 12. We heard the rival submission and relied on the documents available in the record. That the ld. A.O. had not disputed, the purchases, quantitative stock and sales for the entire period except October & November. It is pertinent to mention here that the assessee has duly submitted books of accounts, sale & purchase register, confirmations, bank statements, expenses, parties from whom the purchase and to whom sales were made. However, the Ld. AO has alleged that the appellant has inflated sales for the month of October &Novem....