TaxTMI 
TaxTMI 
2023 (4) TMI 1277
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....eals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No. 51/SRT/2022 for assessment year 2017-18, have been taken into consideration for deciding the above appeals en masse. 3. Although, appeals filed by the Assessee, and Revenue contain multiple ground of appeals. However, at the time of hearing we have carefully perused all the grounds raised by the Assessee and Revenue. We find that most of the grounds raised by the Assessee and Revenue, are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of the assessee, as well as Revenue. With this background, we summarize and concise the grounds raised by the Assessee and Revenue, as follows: 4. (a) Summarized and Concise ground of appeals for ITA No. 51/SRT/2022 for AY. 2017-18 (Revenue appeal), are as follows: (i) Ground No. 1 & 2: CIT(A) erred in deleting the addition of Rs. 2,85,00,000/- on account of 5% profit on turnover and give direction to assessing officer for telescoping of income estimated on undi....
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....022 for AY. 2016-17, are as follows: (1) CIT(A) erred in not giving telescopic effect of profit earned on trading against income disclosed under PMGKY Scheme for Rs. 5 crores or against excess stock found in the survey proceedings in AY. 2017-18, as discussed in para 7.1 of the CIT(A) order. (2) CIT(A) erred in estimating profit at 2.5% on undisclosed turnover as discussed in para 6 of the CIT(A) order. 5. Now we shall take these summarized and concise grounds of appeals one by one. The summarized and concise ground No. (a) is reproduced below for ready reference as follows: (a) Summarized and Concise ground of appeals for ITA No. 51/SRT/2022 for AY. 2017-18 (Revenue's appeal), are as follows: (i) Ground No. 1 & 2: CIT(A) erred in deleting the addition of Rs. 2,85,00,000/- on account of 5% profit on turnover and give direction to assessing officer for telescoping of income estimated on undisclosed turnover, whereas two sets of books of accounts were maintained by the assessee in computer and assessee admitted that it has not disclosed the turnover to the extent of Rs. 57.08 crores. (ii) Ground No. 3: The Ld. CIT(A) erred in restricting the ....
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....of which are reproduced as under: "Your reference is invite to the Pdf file "DG16-17" showing Trial balance for the F.Y. 16-17, till the date of Survey, extracted from the impounded data i.e. from the 500 GB Hard disk, path:-old_D\ORN2008\data\DG1617\020217.zip. This same PDF file was also found during the survey action and duly confronted with the director Shri Kishor Ganna. Shri Kishor Ganna has also placed his signature on the printout of the same which is duly impounded. A copy of the same is reproduced in page No. 3 of assessment order. 26.3 As per this trial balance, your company has already booked Sales till 03.02.2017 at Rs. 120,01,39,474/-. The Sales made in the remaining part of February month and March 2017 is not included. Whereas in the Return of Income field by you for the A.Y. 2017-18, you have shown sales of Rs. 76,90,71,597/- only. Please submit your reply explaining the difference and also provide the supporting documents on which you had relied upon while furnishing your return of income for the year under consideration. Also please file your explanation as to why the difference of Rs. 43,10,67,877/- + Sales made in the month of February and Mar....
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.... was in respect of Cash deposited during the demonetization period. Therefore, both the disclosure were made by the assessee against specific discrepancies noted during the survey proceedings, set off of the same therefore cannot be allowed against profit earned on undisclosed turnover. The explanation filed by the assessee is therefore not valid and not acceptable. Therefore, a sum of Rs. 2,85,40,000/- as submitted by the assessee itself, being 5% of gross profit on undisclosed sales was added to the total income of the assessee. 9. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the CIT(A), who has deleted the addition made by Assessing Officer. 10. Aggrieved by the order of ld. CIT(A), the Revenue is in appeal before us. 11. Learned Departmental Representative (Ld. DR) for the Revenue argued that during the course of survey action, a hard disc (a data make) of 500 GB capacity containing books of accounts was also found and impounded. The Director of the M/s Dagina Jewellers (I) Pvt Ltd, Shri Ramesh Ganna in his sworn statement recorded on 03/02/2017 confirmed the ownership of this, hard disc and admitted in reply to question....
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....t should be considered as part of the declaration made by the assessee of Rs. 5 Crores during the course of survey. So, to say, the assessee is asking for telescoping of income earned against the overall declaration made. The Assessing Officer has rejected the plea of the assessee under the pretext that the assessee has made the declaration of R.5 Crore against the excess stock found. In the facts and circumstances of the assessee's case, either source of income needs to be taxed or its application needs to be taxed. If both gets taxed, it would amount to double taxation. In the instant case, the income earned by the assessee is invested in stock of gold bars. The Assessing Officer has not brought anything on record to show that the income earned from undisclosed sales has been invested in any other asset. Therefore, Assessing Officer needs to tax either the income or the application/investment in stock and cannot tax both. Therefore, the ld CIT(A) noted that assessee is entitled for the benefit of telescoping. For this, ld CIT(A) relied on the decision of the jurisdictional High Court in the case of PCIT vs Aliasgar Anwarali Varteji reported in 96 taxmann.com 231 (2018). The d....
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....e is merit in the arguments of the assessee. Higher of source of income-or the investment in asset needs to be taken as the taxable income and it cannot be both. Therefore, ld CIT(A) noted that in the instant case of the assessee, the assessee earned a gross profit of Rs. 2.85 crores. This gross profit would be present in the form of cash / stock/ bank deposit or investment. In the case of the assessee, the assessee will presume for a moment that it is present in the form of stock. If excess stock found is say worth Rs. 5 Crore, the taxman needs to tax Rs. 5 Crore being higher of the source and the application. In this case source is estimated to be Rs. 2.85 Crore but application/Investment is found to be Rs. 5 Crore. If we tax both, it will amount to double taxation. Hence, higher of the two if taxed (in this example its Rs. 5 Crore), it would be just and correct. 15. Therefore, in the facts and circumstances of assessee's case, the application of income earned is found in excess stock found and also in cash deposited in the bank account. The source of earning is from profit earned on undisclosed turnover and application is in stock and cash deposited in Bank. As cash depos....
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....s, the bills were prepared not on the date of sales but on much later dates. The assessee was asked to file its submission to explain the discrepancies noted vide notice dated 17.10.2019. The relevant portion of the notice is reproduced as under: "During the year under consideration, particularly in the demonetization period, you have made cash deposit of Rs. 12.12 Crores in your bank account maintained with Oriental Bank of Commerce. Your reference is invited to Log sheets generated from the computer at your permissions during the survey, in respect of Cash Sales bills. These log sheets were dully impounded during the Survey as per Annexure BF-10 (Total 54 pages, each page signed by Shri Kishor Ganna, director of the company). On perusal of these, it can be seen that Cash Sale bills of November 2016 have been entered in the computer system by giving them prior dates. A copy of log sheet Performa is pasted at page 6 of assessing officer order (Page 54) which clearly gives description such as- Date of entry/modification, Time, Action, User & Voucher date inter-alia other details field. 30.2 A careful glance reveals that these are several Cash Sales entries, though ....
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.... as to why cash deposited of Rs. 12.12 Crore should not be treated as unexplained credit in your books account. 18. In response to this specific query, regarding cash deposit during demonetization period, the assessee filed written submission vide letter dated 24.12.2019, which is reproduced as under: "During the demonetization period, there was cash deposit of Rs. 12.12 crores in the bank account. The cash was deposited out of cash sales prior to 09.11.2016. There was cash on hand higher than Rs. 12.12 crores on closing of 08.11.2016 out of which the amount was deposited during the demonetization period. During the survey proceedings, as per the records impounded, there was sufficient sales in the accounts to prove the deposit of above said cash on hand. The assessee had sufficient cash on hand and sales which is proved by the chart filed herewith. The sales are supported by bills. The assessee has produced the copies of bills and delivery challans for verification. A few sample copies of both are filed. Your Goodself has relied upon certain computer data wherein it is found that the bill date and the date of bill entered in the computer are different....
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....r Goodself make any addition, on account of alleged non-genuine sales, prior to demonetization period against which cash was deposited, than, to that extent, the quantity / value of stock as per account ought to be taken at higher the amount, as according to the revenue, there was no sale. I therefore request Your Goodself to give credit of stock held, not to be sold prior to demonetization period. It is clarified that, my client had reduced the quantity and value of stock by taking into account, sales till the date of survey which includes sales prior to demonetization period. Explanation on cash deposits in demonetization in the tabular form Particulars Amount Amount Cash deposited during the demonetization period 12,12,00,000 Less : Income disclosed in the return of income 5,00,00,000 Less : Cash on hand as on 14.10.2016 26,47,736 Less: Genuine cash sales / recovery debtors 6,85,52,264 12,12,00,000 20. However, the assessing officer observed that as evidenced by the digital analysis of the data found and impounded, which is duly discussed in detail in the show cause notice....
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.... of Rs. 5.0 Crores disclosed by it in PMGKY. The assessee has also brought on record, a copy of disclosure made under PMGKY of Rs. 5.0 Crores. The Assessing Officer agreed with the contention of the assessee and therefore the balance of cash so deposited in bank account of Rs. 7,12,00,000/- (Rs.12,12,00,000 - Rs. 5,00,00,000 PMGKY) was added to the total income of the assessee for the year u/s 68 of the Act as unexplained cash credit in the books of account. The Assessing Officer also stated that this income is taxed as per provisions of section 115BBE of the Act @ 60%. 21. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has partly deleted the addition made by the Assessing Officer. The ld CIT(A), after considering the factual position of the assessee`s case held that assessee is entitled to gets relief of Rs. 6,76,66,909/(6,23,35,144 +26,29,991+26,47,736). The Ld CIT(A) also directed the assessing officer to tax the balance amount of Rs. 35,33,091/- (7,12,00,000- Rs. 6,76,66,909) u/s 68 of the Act. The ld CIT(A) was of the view that balance amount of Rs. 35,33,091/- is not generated not from actual sale of jewell....
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....016. Similarly, on page No. 47 & 48, it was found that the cash voucher dates were given as 28th to 30th October, 2016 and 8th November, 2016 (one voucher) which were entered on 11th & 13th November, 2016. The assessing officer therefore, assumed that entire cash deposits during the demonetization period, other than the amount disclosed under PMGKY scheme is not on account of genuine sales. assessing officer also did not give credit to the cash on hand while calculating the excess cash over and above the cash as per cash book. It was further pleaded by the ld Counsel that the assessee's business is peculiar in nature, wherein the assessee company sells jewellery / gold bars on counters in shop and most of the sales are in cash. It was further pleaded that this is the position of sales in the case of all the jewelers who sell on counters and the assessee is not an exception. The AR therefore, urged that the receipt and accumulation of cash on hand as per the books of accounts is quite normal and the same ought to be accepted more particularly when books of accounts are not rejected by the assessing officer. The AR submitted that the demonetization started from 12 pm at midnight ....
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....ral entries whose aggregate sales comes to Rs. 6,23,35,144/-(Page No. 143 to 150 of the paper book). Out of the remaining turnover Rs. 26,29,991/- has a difference of single day which can be considered normal i.e. sale of earlier day is entered next dAY. This also in my opinion can be considered as genuine turnover. The remaining turnover which comes to Rs. 5,61,80,827/- is the turnover where the mismatch of dates is much more than one day and the same can be considered as non-genuine turnover i.e. the turnover is shown by the assessee after the demonetization was announced and no actual sales were effected. Following is the table showing the bifurcation of turnover: Bifurcation of turnover Amount No mismatch (Entry of sale on same day) 6,23,35,144 One day difference (Sale of Day 1 entered on Day 2) 26,29,991 Mismatch with difference more than one day (Difference from 2 days to 15 days) 5,61,80,827 Total 12,11,45,962 27. The assessee argued before ld CIT(A) that the mismatch of turnover as per the above table is Rs. 5,61,80,827/- and as the assessee had already disclosed for Rs. 5 Crores in the PMGKY scheme, at the most the balance amount of Rs. 61,....
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....d have been accepted in the later case and not in the former case as the assessee has deposited the entire cash in the bank account. Therefore, the alternative plea of the assessee was rejected.In view of the above facts, the ld CIT(A) observed that the addition on cash deposit sustained is Rs. 61,80,827/- by the cash in hand of Rs. 26,47,736/-. The net addition sustained was at Rs. 35,33,091/-. The assessee got relief of Rs. 6,76,66,909/- (6,23,35,144 + 26,29,991+26,47,736). 30. Therefore, ld CIT(A) directed the assessing officer to tax the said amount of Rs. 35,33,091/- (7,12,00,000- Rs. 6,76,66,909) u/s 68 of the Act as same was generated not from actual sale of jewellery or bullion, therefore, ld CIT(A) held the claim of sale as bogus as evidenced from entries in computer. Accordingly, the ld CIT(A) directed the assessing officer to tax the amount of Rs. 35,33,091/- as per the provisions of section 115BBE of the Act. We do not find any infirmity in the order of Ld. CIT(A), hence ground No. 3 of Revenue is dismissed. 31. Ground No. 4 raised by the Revenue, in ITA No. 51/SRT/2022, is reproduced below: "Ground No. 4: The CIT(A) erred in directing to tax the investme....
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....ble for trading transactions like deposit of cash out of cash sales and excess closing stock. For that reliance can be placed on the judgment of Hon`ble Gujarat High Court in the case of Shilpa Dyeing & Printing Mills Ltd, Tax Appeal No. 290 of 2013, dated 04.04.2013. Therefore, we direct the Assessing Officer to tax the excess stock/sale, if any, under the head business income, (not u/s 115BBE) and amount of Rs. 35,33,091/- should be taxed at the rate of 2.5% (normal profit rate of assessee). 36. Thus, ground No. 4 raised by the Revenue is dismissed. 37. Summarized and Concise ground of appeals for ITA No. 30/SRT/2022, AY. 2017-18 (Assessee Appeal) are as follows: "(i) Ground No. 1: The learned CIT(A) grossly in not deleting addition on account of cash deposit to the extent of Rs. 35,33,091/- as discussed in para 6 of the appeal order. (ii) Ground No. 2: CIT(A) erred in assuming addition on account of excess stock found during the survey proceedings to the extent of Rs. 4,67,19,066/- as discussed in para 6.3.1 and 6.3.2 of the appeal order." 38. Ground No. 1: During the course of hearing, ld Counsel for the assessee informs the Bench that assessee does n....
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.... it was pleaded by assessee that there were purchase worth Rs. 10,6,18,645/- which were made prior to the date of survey and the stock was already received as on the date of survey, but the same was not given credit to by the assessing officer while working the book stock. It was further submitted that the purchase bills amounting to Rs. 59,95,826/- were found during the course of survey and were impounded by the authorized office. There were another set of bills, which were not received as on the date of survey and were received subsequently, for which the payments have been made by account payee cheques. These details especially of second set of bills were submitted by the assessee during appellate proceedings were remanded to the assessing officer for verification. However, assessing officer has not commented about these purchases in the remand report. As far as the first set of bills (worth Rs. 59,95,826) were found during the course of survey and as such should have been considered by the assessing officer. As regards the second set of bills (worth Rs. 46,22,819/-) which were not found during the course of survey but the bills are all dated prior to the date of survey and even....
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.... survey which belongs to the customers who had given for repairing. 3) If these issues are considered, then no additions of excess stocks are made." 42. Therefore, with help of the above reconciliation, ld Counsel submitted that total addition of Rs. 4,13,92,108/- was made by the assessing officer again during the reassessment proceedings, which amounts to double addition. The survey was conducted in the assessment year 2017-18 wherein the assessee has offered suomoto in PMGKY scheme of Rs. 5,00,00,000/- on account of excess stock/cash sales for the previous assessment years 2013-14, 2014-15, 2015-16 and 2016-17. Once the assessee has offered in PMGKY scheme of Rs. 5,00,00,000/- for these previous assessment years, the assessing officer ought not to have reassessed and estimate the income of the assessee again in reassessment proceedings. In the scrutiny assessment the turnover of the assessee and related income were already taxed, therefore further estimation of profit, (of the preceding previous assessment years viz: 2013-14, 2014-15, 2015-16 and 2016-17) after the assessment year 2017-18 is not justified. 43. For difference of 53,26,958/- in above chart, the ld Co....
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.... such difference is hereby deleted. 48. The assessee`s main job is to trade in jewellery and to do repairing work of customers` jewellery, hence the difference of Rs. 53,26,958/- is hereby deleted. 49. Since we have granted the telescoping of these previous assessment years viz: 2013-14, 2014-15, 2015-16 and 2016-17 therefore, assessee`s following additions are (appeal-wise) deleted: A.Y. 2013-14 23,37,604 A.Y. 2014-15 1,19,52,077 A.Y.2015-16 1,44,08,782 A.Y. 2016-17 1,26,93,645 50. Therefore, following summarized and Concise grounds for assessment years 2013-14, 2014-15, 2015-16 and 2016-17, are allowed. "Summarized and Concise ground of assessee's appeals in (i) ITA No. 303/SRT/2022 for AY. 2013-14, (ii) ITA No. 304/SRT/2022 for AY. 2014-15, (iii) ITA No. 305/SRT/2022 for AY. 2015-16 and (iv) ITA No. 306/SRT/2022 for AY. 2016-17, are as follows: (1) CIT(A) erred in not giving telescopic effect of profit earned on trading against income disclosed under PMGKY Scheme for Rs. 5 crores or against excess stock found in the survey proceedings in A.Y.2017-18, as discussed in para 7.1 of the CIT(A) order. (2) CIT(A) erred in esti....
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....w: A.Y Profit to be sustained on jewellery at 2.5% of the suppressed turnover Profit to be sustained on bullion at 0.2% of the suppressed turnover Total addition to be confirmed Relief granted to the assessee 2014-15 Rs. 1,18,25,829/- Rs. 1,26,248/- Rs. 1,19,52,077/- Rs. 1,48,55,770/- 2015-16 Rs. 1,42,58,089/- Rs. 1,50,693/- Rs. 1,44,08,782/- Rs. 1,78,74,713/- 2016-17 Rs. 1,26,10,243/- Rs. 83,042/- Rs. 1,26,93,645/- Rs. 1,46,11,876/- 56. The basic facts narrated by ld CIT(A) are that a survey u/s 133A of the Act was carried out by the DDIT(Inv.)-1, Surat on 01.02.2017. During the course of survey action, a hard disc containing books of accounts was found and impounded. The Director of M/s Dagina Jewellers (I) Pvt. Ltd., Shri Ramesh Ganna in his sworn statement recorded on 03.02.2017 confirmed the ownership of the said hard disc and admitted in reply to question 6 & 18 of the statement that two sets of books of accounts are being maintained which are stores in the said hard disc. It was also admitted that one set of books of accounts contained real data of the business and other set of books....
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....e basis of such differences/incriminating details found during the course survey, the cases were re-opened by the assessing officer after taking approval from higher authorities and notices u/s 148 were issued on 30.03.2021 for all the 3 AYs. The assessing officer completed the assessments u/s 143(3) r.w.s.147 of the Act on 29.03.2022 for all the 3 assessment years (AYs). The assessing officer made a single addition being estimation of profit on unrecorded/suppressed turnover for A.Y 2014-15 to 2016-17. 58. Aggrieved by the said additions, the assessee carried the matter in appeal before ld CIT(A) and has raised 3 grounds of appeal for each of A.Y 2014-15 to A.Y 2016-17 before ld CIT(A). 59. Before ld CIT(A) the assessee has raised Ground No. 1 which is relating to addition of Rs. 2,68,07,847/- for A.Y 2014-15, Rs. 3,22,83,495/- for A.Y 2015-16 and Rs. 2,73,05,521/- for A.Y 2016-17 on account of estimation of profit on unrecorded/suppressed turnover. The assessing officer has taken 5% of the suppressed turnover as estimated profit earned by the assessee and made the above additions in the respective assessment years (A.Ys). Before the assessing officer, the assessee had raise....
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....ssessment as under: PARTICULARS UNACCOUNTED TURNOVER MARGIN AMOUNT BULLION 6,31,23,785 0.10 63,124 JEWELLERY 47,26,95,502 5.00 2,36,34,775 TOTAL 2,36,97,899 The assessee urges that there was bona fide mistake while adopting net margin of profit which was taken including income disclosed in the survey proceedings for A.Y 2013-14. The assessee urges that the actual margin of profit on turnover as per accounts of the current year ought to be considered and in that case, the revised margin of profit is as under: PARTICULARS UNACCOUNTED TURNOVER MARGIN AMOUNT BULLION 6,31,23,785 0.10 63,124 JEWELLERY 47,26,95,502 2.03 95,95,719 TOTAL 96,58,843 The assessee urges that the profits on undisclosed turnover for the entire year would be just Rs. 96,58,843/- as worked out hereinabove. The assessee strongly urges that, the learned assessing officer simply adopted the margin of profit estimated in the A.Y 29017-18. The assessee urges that, the major profit on undisclosed turnover was already covered by way of additional amount of stock disclosed for Rs. 5 ....
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....The assessee relies on following decisions whereby courts have allowed telescopic of income disclosed or taxed against the application of income in the subsequent years or in the current year." 62. Before us, ld Counsel for the assessee has made same arguments, as made before ld CIT(A). On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 63. We have heard both the parties. The ld CIT(A) observed that as far as quantification of suppressed turnover is concerned there is no dispute. The dispute is only relating to estimation of profit and not bifurcation of bullion turnover and jewellery turnover. Before ld CIT(A) the assessee submitted that bullion is merely purchased and sold without there being any value addition. So to say, it is merely a trading. Normally the margin of profit in trading of bullion is 0.1% whereas, the jewellery business consists of converting the bullion into jewellery which involves embedding the precious stones/diamonds in the jewellery which involves value addition and thus the margin of profit i....