TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 770
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....nded on facts of the case and is prayed to be deleted. 2.Grounds of Appeal No.2 Addition on account of unexplained cash amounting to Rs. 3,00,00,000/- The Hon'ble CIT(A) has simply concurred with the findings of the Ld. DCIT in confirming the above addition without analyzing full facts and circumstances of the case. The confirmation of the above addition by the Hon'ble CIT(A) is arbitrary, unlawful, unjustified and is prayed to be deleted. 3.Grounds of Appeal No.3 Enhancement of income by Rs. 3,13,44,002/- on account of unrecorded stock The Hon'ble CIT(A) has erred in law and on facts in enhancing the assessed income of assessee by Rs. 3,13,44,002/- u/s 69A on account of stock (Gold & Silver bullion) which was duly accepted by the Ld. DCIT as genuine stock duly reflected in Books of the assessee duly audited by the Chartered Accountant." 3. Briefly stated, the assessee, a partnership firm, is engaged in the trading of bullion and jewellery. The partnership firm comprises of key partners namely, Shri Kailash Chandra Varshney and Shri Kaushal Gupta. A survey action in the case of the assessee firm was carried out at its branch office located at 1167, First Fl....
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....ank statement reflecting the sale and purchase were produced before the AO to support the assertions. The Assessing Officer however did not find the explanation offered by the assessee to be convincing. The Assessing Officer analyzed month-wise cash sales and observed that the cash sales shown to have been made are not congruent with cash sales reported for other months and also does not resonate with the cash in hand held in previous quarters. It was observed by the Assessing Officer that the books of account were not produced in the course of search but however in the post search inquiry, the assessee filed books of account before the ADIT (Inv.) on 27.10.2014. The AO mainly relied on the statement of the partner deposed under S. 132(4) of the Act in the course of search on 20-21/09/2014 that the partner of the Assessee has averred that the books are not kept; bills evidencing purchases of material are not readily available; bullion are purchased in kaccha account i.e. cash; material found in the course of search worth Rs. 3,13,44,002/- was purchased in cash etc. In the light of deposition made, the Assessing Officer thus invoked provisions of Section 69A r.w. Section 115BBE of t....
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....concerned ADIT(Inv.) to assert that cash and bullion found in the course of search were duly recorded in the books of account maintained by the assessee. 4.3 The assessee also pointed out that the statement of partners in the course of search under Section 132(4) were recorded at odd hours in the mid-night and the partners of the firm deposed under fear and stress of the search team. The copy of statement so recorded was also not provided despite specific request vide letter dated 22/09/2014 immediately after the search and multiple times thereafter. 4.5 As per the first appellate order, it was also pointed out to CIT(A) vide letter dated 5/11/20214, the Investigating team was appraised that the statement of partners were given under fear and exhaustion and were not voluntary. 4.6 The legality of the search was also questioned before the CIT(A). 4.7 Wide ranging submissions made on behalf of the assessee on law and facts as recorded by the CIT(A) in paragraphs no.3.3 to 3.6 of the first appellate order. 4.8 The CIT(A) however did not see any potency in the arguments advanced on behalf of the assessee. 4.9 As regards the addition of Rs. 11,21,920/- towards bogus purchases cont....
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....hought. The CIT(A) negated the plea of the assessee that the Assessing Officer has examined the source of stock as well in the course of the assessment proceedings. The CIT(A) inter alia observed that no bills evidencing the purchase of material/stock was produced before the search party and concluded that the assessee has failed to discharge the onus to support the genuineness of source of purchase of stock found. The CIT(A) thus invoked the provisions of Section 69A and enhanced the income towards the value of bullion stock by Rs. 3,13,44,002/-. 5. In summation, the CIT(A) endorsed the additions made on account of alleged bogus purchases as well as alleged unaccounted cash and also enhanced the assessed income towards alleged unaccounted stock found in the course of search. 6. Aggrieved by the denial of relief and further enhancement of assessed income, the assessee preferred appeal before the Tribunal. 7. When the matter was called for hearing, the ld. counsel assailed the action of the CIT(A) both towards sustaining the addition as well as towards enhancement on multiple points, namely placing undue reliance on the cryptic statement of the partners obtained under duress and ....
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....e surrounding evidences of conduct of assessee such as, notices issued to about 122 parties seeking confirmations and all other parties appeared and confirmed the transaction. Such near total compliance speaks loud on the bonafides of purchases. In such backdrop, non appearance by just 2 parties thus cannot lead to adverse conclusion where the assessee has no control over the whereabouts of the suppliers. When seen in the context, the payments through cheque and reporting the purchases in the stock register overwhelms such considerations. The ld. counsel pointed out that both the concurrent authorities have proceeded in other perfunctory manner ignoring tell-tell evidences and the payments. It was contended that the plea of the assessee that no excess stock was found was declared irrelevant without meeting the plea on merits. The ld. counsel thus urged that the disallowance towards bogus purchases so made is wholly unsustainable in the facts of the case and thus requires to be reversed. 6.2 Adverting to the additions of Rs. 3 crore on account of alleged unexplained cash found in the course of search, the ld. counsel pointed out that the additions have been made solely on the basis....
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....e Authorities as well as before the Tribunal duly justifies and corroborates the stand of the assessee. It was pointed out that the books of account including bank book, cash book and stock register were duly audited by an independent auditor and the stock tally was found matched. The bullion stock as found and inventoried on the date of search were required prior to purchase and the payments were also made through banking channel prior to search. The original purchase bills for the relevant period were also produced before the Revenue Authorities. The book of account duly audited by the independent auditor has not been rejected by the lower authorities. The stock found at the time of search and cash sales thus cannot be disregarded on the face of such external evidences such as VAT returns payment through banking channel, stock tally, etc. The case found was thus out of cash in hand available on the date of search as recorded in the cash book. The ld. counsel contended that the Revenue Authorities have sought to tax both the cash sales as well as cash generated from sales as unexplained cash which is nothing but double taxation. It was also pointed out that cash sales made in the ....
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....bmitted that no inference with the order of the CIT(A) is called for in the circumstances narrated in the first appellate order. 8. We have carefully considered the rival submissions and perused the first appellate order as well as the assessment order. The materials placed by way of voluminous paper book referred to and relied upon have been perused. 9. Three issues are identified for adjudication in the present case. All the issues are essentially factual in nature. We shall delve into merits of each issue hereunder. 9.1 The first issue concerns additions of Rs. 11,21,920/- on account of alleged bogus purchases identifiable to two parties namely, Arun Yadav at Rs. 4,26,620/- and Ms. Nisha Sharma at Rs. 6,95,300/-. As noted above, the assessee contends that the allegation towards bogus purchases is wholly misconceived in law. To prop up its case, the assessee contends that the Assessing Officer has ignored the overwhelming factual evidences. The confirmations of both the parties are placed on record. The purchases made from these parties have entered in the stock register and the corresponding sales have not been disputed by the Revenue Authorities. The payments for such purcha....
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....ntity wise and value wise cash sales for two years and obtained details of cash in hand for every quarter. Quantity wise and value wise details of closing stock were also obtained by the AO. The balance sheet and profit and loss account for pre-search and post search period were also fled before the AO in the course of assessment proceedings. It is the case of the assessee that both the revenue authorities have proceeded squarely on suspicion, conjecture and surmises on the basis of comparative results of different quarters coupled with a self incriminating statement of assessee extracted in the course of search which was promptly retracted on the grounds of duress and coercion before the investigation team itself. The assessee thus contends that when the statement of partners looses its credibility in the eyes of law, what remains is a bald and bare inference in the realm of conjectures without any definitive material in possession to disprove the stance of the assessee. 9.2.2 On appraisal of material placed on record and long drawn defense propagated on behalf of the assessee, key points that emerges are broadly summarized as; (a) the assessee operates through the main business ....
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....nsactions therefrom (m) as per the books of accounts regularly maintained by the assessee, there was a total cash balance of Rs. 3,74,51,297/- as on 20.09.2014 i.e., on the date of search, in respect of cash sales affected by the assessee and this cash in hand explains the source of the cash found in the course of search (n) the statement of partners was never seen to be clinching evidence by the AO as the AO himself requisitioned the quantitative tally and details of purchases and sales etc. together with books of accounts vide notices under s. 142(1) and based its adverse findings. 9.2.3 We observe that the main plank of assessee is that the cash found at the branch office under search was sourced out of cash sales. The cash sales has the effect on the reduction of stock in hand and thus the explanation offered cannot be regarded as lacking in bonafides in any remotest manner. The Assessee claims that the cash book and the stock register maintained by the assessee affirm its contentions. Significantly, as per books, while a part of total sales have been made in cash giving rise to cash balance of Rs. 3.74 crore, the corresponding purchases have been shown to be made through acco....
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.... Coupled with this, it is also the case of the assessee that merely because the deptt. failed to lay its hands on books which were kept in the main office, the initial onus could not be wrongly shifted on the assessee. To escape the wrath of the deptt., the partner of the assessee-firm deposed in the course of search under fear and duress that he does not maintain books of account contrary to factual position. The income offered in the earlier years based on tax audit report etc. is testament to such facts of existence of books of partnership firm. Pertinently, the a partnership firm is essentially based on principles of mutual agency and accounting records are intrinsic to the edifice of such formal mutual arrangement. The total absence of books and records at the branch office ought to have triggered elementary questions of its whereabouts in the mind of investigation team. The revenue alone is possibly responsible for insurmountable lapse on the part of team. It is the primary contention of the assessee firm that it duly maintains its books of account since inception, to account for banking and cash transactions as well as to ascertain its assets and liabilities and deduce the p....
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.... have duly admitted the figures of purchases and sales carried out. 9.2.6 When the facts delineated above are seen in perspective, the adverse inference drawn towards unaccounted cash at the time of search resulting from cash sales appears unsustainable on facts and law in the absence of any cogent basis. On careful appraisal of the factual matrix presented in the matter, we notice few overwhelming facts to appreciate the matter in perspective; (i) the purchases have been stated to be carried out through banking channel only whereas a part of sales have been carried out in cash and majority of sales have been carried out in cheque. The sales made have the corresponding effect of reducing the closing stock. The stock register has been prepared after giving effect to all purchases and sales. The remaining stock on account of sales including cash sales was not found at the premises of the assessee covered under survey and search. The reduction in stock would mean existence of sales as claimed. Thus, once the existence of cash sales are reckoned, the source of cash found at the time of premises of the assessee stands recognized. The mismatch appears to have resulted owing to partial c....
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....regard, we notice that aforesaid action of the CIT(A) is heavily dependent upon the discredited statement of the partners recorded at the time of search. As noted in the preceding paragraphs, the books of account explaining the source of cash and stock, were claimed to be kept in the main office and thus could not be found in the branch office at the time of search. The assessee claims that the aforesaid stock found in the course of search is duly accounted for in the books of account and has entered the stock register while determining the closing stock. 9.5.1 On perusal, we note that the AO did make enquiry with reference to stock of Gold bullion and silver bars weighing 8998.39 gms. and 178501 gms respectively valuing Rs. 31344002 in aggregate sized on 21-09-2014 as per point no. 28 of notice dated 23.08.2016 issued under s. 142(1) of the Act. The Assessee in its response dated 05/10/2016 has explained the source to be out of past purchases as reflected in stock records which was also produced before him. 9.5.2 The issue raked up by the CIT(A) is towards unexplained nature of stock found in search. The case of the assessee is built on the similar footing as explained in the is....