TaxTMI 
TaxTMI 
TaxTMI 
2024 (2) TMI 1198
X X X X Extracts X X X X
X X X X Extracts X X X X
....of natural justice. 3. That on the facts and in the circumstances of the case the ld. CIT(A) grossly erred in upholding the provision of sec 145(3) of the Act applied by the ld. AO for rejection of books of accounts. 4. That on the facts and in the circumstances of the case the ld. CIT(A) grossly erred in sustaining addition of Rs. 8,95,23,633/- in respect of cash sales made on 08/11/2016 deposited in bank account as unexplained money u/s 69A of the Act. 5. That on the facts and in the circumstances of the case the ld. CIT(A) grossly erred in recording observation and finding in the appellate order contrary to the principle of law laid down by Hon'ble Courts and also against the principle of natural justice. 6. That on the facts and in the circumstances of the case the ld. CIT(A), grossly erred in treating the normal transaction in respect of business transaction as something unusual and out of the ordinary only as undiscernigiy which is against the principle of natural justice. 7. That on the facts and in the circumstances of the case the ld. CIT(A), grossly erred in upholding the difference of Rs. 1,09,57,300 in respect of valuation as adopted by assessee and actual mar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t year under consideration and the quantum of the turnover from AY 2015-16, AY 2016-17 and even in AY 2018-19 is much less that even the books of account are not audited. There is no business in the proprietorship concern M/s Shrinath Jewellers, which is evident from the Bank A/C which was came into operation on 28.07.2016 and there is no transaction before this date. Further, assessee has also not declared balance on date 31.03.2016 in the return filed by him for AY 2016-17. As per submission of assessee, he is running his business at 'Bhistiyon Ka Bass, Patel Chowk, Jodhpur'. It is also pertinent to mention that assessee is a director in the Dwarika Jewellers Pvt. Ltd. which is also running its trade business on the same premise. As the assessee had deposited Rs. 9,38,64,808/- into bank account during the demonetization period. On the perusal of above business profit of the assessee it is evident that these two facts does not commensurate with each other, further investigation was conducted on the purchase and sale of the goods traded during the year under consideration. Assessee has submitted that he had disclosed 44.90 Kgs of Gold under IDS scheme 2016. As per assessee'....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and showing as income from service is not acceptable. As he has current bank account in the name of Shree Nath Corporation A/C No. 200003147881 in Indusind Bank Ltd. Further, in the ITR for AY 2017-18 he has made claim of expenses of Rs. 2544581/- against receipt of Rs. 5793875/- and not shown any opening stock or closing stock. Even in his the revised return and his reply he has accepted that silver was seized by sales tax department and released in 2011, by the order of Hon'ble High Court. Further, High Court also imposed penalty of Rs. 4500000/- on the silver and as such the silver should have been sold then and there to deposit the penalty. There was no stock available with assessee is also proves from the return of AY 2011-12 in which no closing stock has been mentioned by the assessee. Notwithstanding to the shop timings and without prejudice to the assessee's claim it is accepted that on the date of demonetization his shop was not closed at 8.00 PM as mentioned in his reply. In this regard it is worth to mention here that the Hon'ble Prime Minister has announced the demonetization in a live National Televised Address at 20.15 IST. Thus, it is presumed, unless ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he actual weight in the weighing machine, preparing bill, giving cash and checking the cash by the self either by physical counting or through cash counting machine and delivering the jewellery in a proper packed condition. It is also pertinent to mention here that there is also need to cut the raw gold in the pieces as per the requirement of the purchaser. Moreover, from the details of cash sales and invoices raised there is no proper mention of complete address of the parties to whom such cash sales were made. The action of the assessee, clearly establishes the fact that the assessee intentionally made such arrangement of manufacturing artificial bills. Further, during the assessment proceeding assessee had provided invoices/bills generated from tally software which is signed by the assessee. As it is clear that assessee was the sole person handling all the affairs of the shop. The counter sign is also substantiating it. Further, as per the signature of the assessee it is clear that he was not in hurry and took his sweet time to put it on the bills, which is a time consuming process in itself. It is also important to note here that even the simple exercise of feeding data related....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed by the various methods and skills developed over the time. Further, the action of the assessee in relation to late cash deposit on 07.12.2016 also supports the aforesaid view. Assessee has not given any valid reply with proper supporting documents in relation to restriction by bank and safety purpose. Thus, out of total cash deposit, amount claimed to be received on date 08.11.2016 of Rs. 8,95.23,633, being the cash sale on 08-11-2019 reported by the is nothing but the unaccounted cash of the assessee routed through books as cash sales. The Human probability Test" could be applied when the Assessee makes the Officer to believe his/her story as a valid event. The false claims of the assessee cannot sustain before the test of Human Probabilities. As enumerated in the decision of the Hon'ble Supreme Court in the case of Roshan Di Hatti vs. CIT (1977) 107 ITR 938 (SC), Kale Khan Mohammed Hanif vs. CIT(1963) 50 ITR 1 (SC), it has been held in various judicial pronouncement that where the nature and source of any receipt/investment, whether it be a money or other property, cannot be satisfactorily explained by the assessee, it is open for the revenue to hold that it is the income of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as under.- I. The appellant is engaged in the business of trading and had sold silver and gold to various person in cash. In last two AY, his total turnover is 25.30 lakh and 57.93 Ikah. It is pertinent to mention here that in the year under consideration the total turnover is Rs 16.92 cr which is exorbitant high and that too sale in cash. It is again important to mention here that books of accounts are not audited. 30 - 30m ^ 2 * 3 Book of MC me andred II. The AO specified in the assessment order that the assessee had not furnished the correct position of opening and closing stock in the ITR of previous year and subsequent year. It shows that the assessee was not having such stock. The AO had doubted that there was no opening stock or no such stock was available for such huge cash sale of stock. III. The assessee had disclosed 44.90 kg of gold under IDS scheme 2016 valued at 12.76 Cr. The assessee converted the same into stock in trade on various date and claimed LTCG as the gold was pertains to AY 2011-12.It is noticed that the assessee had sold such stock on various dates starting from 15 September 2016. Out of total sale of Rs 15.63 cr, the assessee had shown cash sale o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ents. The facts of the present case are different from other cases which are as under a. The day to day stock register was not maintained in the present case whereas in the case laws replied upon by the appellant, the stock register was maintained on day to day basis and the same were produced before AO as well before appellate proceedings. In the present case the AO had unearthed the stock anomalies, b. In the present case the AO had proved and doubted the availability of stock on the day of cash sale whereas in the case laws replied upon by the appellant the stock availability was not doubted C. In the present case the books of accounts were rejected u/s 145(3) of the Act whereas in some case laws replied upon by the appellant the books of accounts were accepted by the AO. d. The case laws relied by the appellant in the case of Smit Harshila Chordia vs. ITO, the matter was related to section 68 but in the present case the AO had proved that the appellant had unaccounted cash money which he had deposited in bank and added u/s 69A. e. In various case laws, the appellant argued that it is matter of double taxation. But the same is not true. The appellant had disclosed stoc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k in trade on various dates and LTCG was paid on it. The gold stock declared in IDS was of Rs 12,76,81,150/- and after conversion into stock in trade the total sale proceeds was Rs 15,63,62,967/- the AO had observed that the per gram rate taken by the appellant was higher than the per gram value of prevailing rate. The AO concluded that the assessee was trying to diver the difference of amount between as LTCG; however the same should be considered as business income. The AO had given detailed chart in which date wise rate taken by appellant, stock converted in gm and rate as per prevailing market was there and accordingly calculated that the Appellant had taken excess value of Rs 1,09,57,300/- in underline LTCG rather than it should be taxed as business income. The appellant argued that the addition was based merely on assumption. This argument is not on merit. The AO had taken rate per gram as per prevailing market rate on which the appellant had not taken any objection. The prevailing market rate taken by the AO was factually correct. Thus, it is proved that the appellant had shown excess LTCG instead of showing such sale amount in business income. In view of the facts and circum....
X X X X Extracts X X X X
X X X X Extracts X X X X
....raised by the lower authority is not tenable. 5.1 To support, contentions so raised the ld. AR of the assessee relied upon the written submission made before the CIT(A) and the same is reproduced herein below: Submission in respect of sales considered as unexplained cash "a) It is an admitted fact that assessee has declared the sales of stock of gold amounting to Rs. 156362967/- out of stock of gold held him on conversion. The complete documentary evidence in support of sales transaction are fumished before the Ld. AO and also disclosed in VAT Return however only on the basis of statistical analysis and assumption & presumption the Ld. AO had made arbitrary allegation "that amount entered in the cash book on date 08/11/2016 ie Rs. 8,95,23,633/- cannot be considered for receipt of sale. However out of total sales made of Rs. 156362967/-, the cash deposited out of cash sales made on 08/11/2016 is treated as not genuine and sales made on earlier dates as genuine. The act done by Id AO against the principal of natural justice and also contrary to provision of law. b] It is submitted that to understand the real nature of the transaction, has to look at the entire transaction as a ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ivery of vehicles was made- Such cash deposits are self-explanatory and would not attract sec 68- Therefore, no addition could be made F ] It is further submitted that the Id. AO made addition in respect of cash deposited in bank account as unexplained money u's 69A which is double taxation on same income as on one hand the Ld. AO had taxed the profit on sale made by assessee and on the other hand Id. AO taxed the cash received from sales realization which was deposited in bank as unexplained money also been added u/s. 69A of the Act. The Hon'ble Supreme Court in the case of CIT vs Devi Prasad Vishwnath Prasad (1969) 721TR194 (SC) that "It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed" The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again, Reliance is also placed on the decision of Hon'ble Supreme Court in the case of CIT vs Durga Prasad More (1969) 721TR807 (SC) in which it was held "If the amount represented the income of the assessee of the previous year, it was liable to be included in the tota....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... case, the assessee had explained that the impugned amount represented the sale which had not been doubted by the authorities below. Therefore, the impugned amount could not be treated as unexplained cash credit under section 68 of the Act merely on the ground that the assessee failed to furnish the details of the existence of the parties. The Tribunal also opined that the provisions of section 68 could not be applied in relation to the sales receipt shown by the assessee in its books of accounts. It was because the sales receipt had already been shown in the books of accounts as income at the time of sale only and once the purchases had been accepted by the authorities, then the corresponding sales could not be disturbed without giving any conclusive evidence/finding" iv. CIT v. Vishal Exports Overseas Limited (Gujarat High Court) Tax Appeal No. 2471 of 2009. Revenue carried the matter in appeal before the Tribunal. The Tribunal did not address the question of correctness of the CIT. (Appeals)'s conclusion that amount of Rs.70 lakhs represented the genuine export sale of the assessee. The Tribunal however, upheld the deletion of Rs.70 lakhs under section 68 of the Act observ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the decision of the ITAT-Mumbai Bench in the case of DCIT VS Karthik Construction Co. in ITA No. 2292/Mum/2016 dated 23.02.2018, wherein the Bench at para 6 thereof has held that addition under section 69A of the Act cannot be made in respect of those assets/ monies/entries which are recorded in the assessee's books of account. In my considered view, the aforesaid decision of the ITAT Mumbai Bench (supra) is squarely applicable to the facts of the case an hand, where the entries are recorded in the assessee's books of account in this view of the matter, I am of the opinion that the addition of Rs 33,23,425/- made under section 69A of the Act is bad in law ITA Nos. 1383 and 1384/Bang/2019 in the facts and circumstances of the case on hand and therefore delete the addition of Rs. 33,23,425/-made there under. The AO is accordingly directed" As regards for invoking the provision of section 145 of the Act a] It is submitted before the Id AO that the cash deposits in the bank account during the period of demonetization out of sales realization. The complete details along with supporting evidences had been produced before the Id AO which established beyond doubt that the sal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts. It was because the sales receipt had already been shown in the books of accounts as income at the time of sale only and once the purchases had been accepted by the authorities, then the corresponding sales could not be disturbed without giving any conclusive evidence/finding." c) That the id AO in his order had rejected the books of accounts for the sole reason that the sales made by assessee were bogus. However, the addition has been made & based on these very books of accounts only. It is settled law that once, the books of account had been rejected thereafter no addition can be made on the basis of books of account as held by Hon'ble ITAT Kolkata Bench in the case of Kabra Brothers ITA No 2022/Kol/2017 dated 08.07.2020. Further also the Hon'ble Jurisdictional High Court [Rajasthan High Court) in the case of CIT VS. G.K. Contractors, 19 DTR 305 has held that if the books of accounts are rejected then no separate addition can be made on account of cash credit under section 68 of the Act even though the assessee has failed to discharge its onus of proof in explaining the amount shown in the books of accounts as market outstanding. d] Further also [TS-5139-ITAT-2010(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iple of natural justice but also contrary to law decided by Hon'ble Courts. Further also it is settled principle that no additions can be made on own guess work, assumption. presumption and suspicion. An allegation remains a mere allegation unless proved. Suspicion may be strong however cannot take the place of reality. In this regards I rely on the decision of Hon'ble ITAT Visakhapatnam bench in the case of M/s Hirapanna Jewellers in ITA No 253/Viz/2020 dated 12/05/2021. On the identical issue the Hon'ble Bench." On the issue of capital gain considered partly as business income "That the addition so made by Id AO only on the basis of assumption & presumption and also against the principle of natural justice. It is further submitted that once the capital assets had been converted in the stock in trade and paid capital gain on such transaction as per provisions of the law. The Id AO should have treated subsequent transaction as business transaction as the gold is part of business assets and which was converted as per provisions of the law. Further it is expected of the Officers of the State is to apply the law equally to all and not be overzealous in seeking to make ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....6 taxmann.com 245 (Chhattisgarh) 15/03/2022 The ld. DR argued that ld. AO by giving the chart explained that in the earlier year the assessee was not liable for audit and has declared much less turnover and ultimately in the year under consideration directly recorded sales of Rs. 16,92,11,685/-. The assessee has not disclosed the correct position of stock of business in the earlier return of income filed by the assessee. The bank account of Shrinath Jewellers, came into operation on 28.07.2016 and there is no transaction before that date. The ld. DR reiterated the chart made in the order of the assessment wherein deposited of cash before in Nov. 2015 with that of Nov. 2016 were compared and demonstrated that they are giving the absorbed results. The ld. DR referring to chart made at page 8 of the assessment order reported that the chart is bell shape and it is only shows higher on November 2016 and therefore the sales reported and thereby the cash deposited is all an afterthought by the assessee. The cash sales were made by raising more then 500 bills on single day which is also not human probability of sales. All the bills are with signature and that too typical for whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ear 2011 and that IDS was considered, and form no. 4 was issued. Further, the assessee claimed that he had converted the said disclosed gold into stock in trade on various dates 19 dates referred in the computation of income starting from 15.09.2016 to 08.11.2016. The said conversion was accepted by the revenue but the rate adopted was disputed by the ld. AO and on that count the ld. AO noted that the assessee has shown capital gain higher side for an amount of Rs. 1,09,57,300/- and business income less to that extent. So on this issue once the assessee has converted the capital asset into stock in trade, the revenue sum moto cannot changed the value adopted by the assessee on the ground that income under one head shown higher and on the other head less. Here we note that once the conversion of capital asset converted into stock in trade is not disputed by the revenue and the rate adopted by the assessee which is higher then what is reflected in the online platform. The contention of the assessee that online platform rate is for buying and sell online without physical delivery whereas the rate of physical delivery always remain higher side and therefore, he has take the higher rate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er, on date 08.11.2016 the assessee recorded cash sale from the gold for an amount of Rs.8,95,23,633/- which is unusual. On the perusal of details filed by the assessee the ld. AO noted that assessee has raised total number of 504 cash sale invoices in the month of November 2016, which is exceptionally high. Further, all the cash sale of gold was made on the day of 8th November 2016 only. It was observed that no other cash sales were recorded before and after 8th November 2016 except on 15.09.2016 and on 03.10.2016. This pattern of sale is highly suspicious and raises serious concerns about the books of account. In this regard, the assessee was show caused as to substantiate this anomaly in his books of account but the submission received from assessee was not found acceptable. The ld. AO also noted that bills were generated from tally software which is signed by the assessee meticulously which is not possible to do all these work on 8 the November night when the demonetisation announced, as it is clear that assessee was the sole person handling all the affairs of the shop. The counter sign is also substantiating it. Further, as per the signature of the assessee it is clear that he....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted the same on date 07.12.2016. The explanation of the assessee in this regard was considered but is not acceptable as the assessee is indulged into trading of gold and in this business line persons are habitual of large cash handling and security of the same is ensured by the various methods and skills developed over the time. Further, the action of the assessee in relation to late cash deposit on 07.12.2016 also supports the aforesaid view. Assessee has not given any valid reply with proper supporting documents in relation to restriction by bank and safety purpose. Thus, the ld. AO considered that out of total cash deposit, amount claimed to be received on date 08.11.2016 of Rs. 8,95.23,633, being the cash sale on 08-11-2019 reported by the assessee is nothing but the unaccounted cash of the assessee routed through books as cash sales. The ld. AO also discussed the Human probability Test" could be applied when the Assessee makes the Officer to believe his/her story as a valid event. The false claims of the assessee cannot sustain before the test of Human Probabilities as enumerated in the decision of the Hon'ble Supreme Court in the case of Roshan Di Hatti vs. CIT (1977) 107 ITR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f available gold stock be considered as from the explained source of sales recorded in books or not. In support of the sales assessee has submitted VAT return, in support of the sales made by the assessee he has placed on record the date of sales, voucher number / sale bill number, name of persons to whom sale is made, weight of the gold sold, rate at which the same is sold, and the amount received from each customer. None of these details disputed and found incorrect by the ld. AO. He has merely stated that the sales recorded by the assessee is not possible to be made on 08.11.2016. The assessee has submitted all the details for sales of gold of Rs. 15,63,62,967/- out of it the ld. AO disputed the cash receipt of 8,95,23,633/- so the revenue has not found fault in the other sales recorded in the same set of books and only disputed part of the sale recorded in the books. The action of the ld. AO is purely based on the presumption and assumption on account of the demonetisation declared and sales made by the assessee as on that date is not believed without doing any independent inquiry, the action of the ld. AO is not correct when he has already accepted part of the sales on the sam....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... DCIT wherein the co-ordinate bench held as under : "We heard the rival submission and considered the documents available in the record. First, we are adjudicating the appeal ITA No. 353/Jodh/2023. The assessee deposited cash by claiming that the amount was originated from the sale of stock. It is never a question that the assessee has never controverted that assessee has in sufficient stock and purchased on the date of announcement of demonetisation on dated 08.11.2016. The assessee sold goods from his shop. Before that date, the assessee was sufficiently covered by the stock. The assessment was completed by the Sales Tax Authority and the turnover and purchased was duly accepted. It is further submitted that from the documentary evidence the source, purpose and sequence of event duly established that there was direct nexus of cash deposit in bank account out of sales realization in cash. It is settled position of law that when the Id. AO had not doubted the sales, purchases, stock and gross profit declared by the assessee then the cash deposit out of such sales cannot be doubted. The authority below had treated the normal transaction in respect of business receipt as somethin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e is written and the it is not finding recorded on oath that sales is only after 8PM. Considering the stock available with the assessee and when the part of the sales is accepted there is no reasons to disbelieve the sales which is recorded on the date of demonetization. Therefore, once the goods is supported by the Invoice recorded in the books and no defects found merely the same is recorded on the date of demonetization addition of cash receipt cannot be made in the hands of the assessee as undisclosed money u/s 69A of the Act. The provision of section 69A of the Act reads as under : Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other va....