TaxTMI 
TaxTMI 
2024 (6) TMI 6
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....in the circumstances of the case and in law, the learned CIT(A) was justified in admitting the additional evidences under Rule 46A of the I.T. Rule on the ground that the assessee's case is covered by sub-rule (1) clause (b) of rule 46A as he was prevented by sufficient cause from producing the evidences." 3. Ground of appeal in CO No. 03/Jodh/2020 "1. That the CIT(A) has grossly erred in sustaining the validity of notice u/s 148 which is illegal and void ab-initio. Accordingly, the assessment u/s 144/147 is void-as-initio, wrong and bad in law. 2. That the CIT(A) has grossly erred in allowing expenses claimed by the assessee in the return of income and treating gross profit declared as the net profit. 3. That the CIT(A) has grossly erred in enhancing the GP ratio declared by the assessee from 1% to 1.2% net profit and also erred in treating gross profit as net profit. 4. The respondent reserves his rights to add, amend, alter or withdraw any ground of cross objection." 4. Ground of appeal in I.T.A. No. 94/Jodh/2020 "1. Whether on the facts and in the circumstances of the case and in law the learned CIT(A) was justified in reducing....
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....3.2019 based on information received from the DDIT (Inv.), Unit-1(2), Mumbai. In compliance to notice issued by the AO, the assessee filed belated return of income on 20.07.2019. The AO has completed assessment u/s 144/147 of the Act on 29.12.2019 determining the assessee's total income at Rs. 4,43,13,580/- on account of unexplained bank deposit u/s 69A of the Act. The relevant part of the assessment order as page no. 11 is reproduced as under: "The AO noted that during the FY 2010-11 relevant to the AY 2011-12, the appellant had deposited huge cash of Rs. 1,52,90,000/- and Rs. 2,81,57,000/- on various dates in the bank accounts maintained with HDFC (a/c no. 11052560004645) and ICICI Bank (a/c no. 026105005823) respectively opened in the name of Ridhi Sidhi Jewels. Besides, the AO noted that as per Individual Transaction Statement details, the assessee had deposited Rs. 8,60,000/- in his bank account maintained with ICICI Bank Ltd. The AO issued a show-cause notice dated 19-12-2018 wherein he gave details of amounts deposited and dates of deposits in two separate charts for deposits in HDFC and ICICI Banks and required the assessee to explain the sources of such deposits w....
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.... 8. Being aggrieved with the assessment order, the assessee went in appeal before the ld. CIT(A) who has confirmed the validity of the reopening of assessment u/s 147 of the Act, however, granted relief to the assessee in quantum on merits of the case by observing as under: "5.2 Along with the above written submissions, various purchase bills, bank statements of the assessee and copies of confirmed accounts were filed by the appellant, which were considered as additional evidences. Vide this office letter no. 242 dated 25-07-2019, appellant's written submissions and these evidences/documents were sent to the AO for submission of remand report thereof. In response, the AO submitted his report dated 11-09-2019, which was also provided to the appellant for counter comments. The appellant furnished his counter comment on 19-02-2020. In the remand report, the AO objected to admission of additional evidences furnished by the appellant. As regards the merits of the additional evidences, the AO submitted as under:- "Now coming to the merits of the additional evidence, it is submitted that the assessee has furnished copy of some bills of purchase purportedly made by him....
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....ns for its admission. (3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity- (a) to examine the evidence or document or to cross-examine the witness produced by the appellant, or (b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant. (4) Nothing contained in this rule shall affect the power of the [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] to direct the production of any document, or the examination of any witness, to enable him to dispose of the appeal, or for any other substantial cause including the enhancement of the assessment or penalty (whether on his own motion or on the request of the [Assessing Officer]) under clause ( a ) of sub-section (1) of section 251 or the imposition of penalty under section 271.]" On perusal of Rule 46A reproduced hereinabove, it is seen that the case of appellant is covered by sub-rule (1) Clause (b) as he was prevente....
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....bsequently withdrawn to make payments to sellers of bullions. The appellant claimed that in these business transactions, he received commission @1% only. Thus, the appellant contended that entire bank deposits could not be purchases of the assessee, either it was sale on which profit should be estimated by adopting NP rate or peak credit theory. To buttress his contention, the appellant relied on various judicial precedents. Considering the various evidences and details furnished before me, it is clear that the appellant was engaged in the business of trading of bullions in the name and style of Riddhi Siddhi Jewels. The modus operandi of the appellant's business was that first he purchased bullion from various sellers and after selling these bullion, made payment to sellers through his bank accounts and his profit came to be about 1% of sales. In this regard, the appellant has furnished various purchase and sale bills and bank account copies which substantiate the appellant's claims. The AO, while treating the entire deposits as unexplained money u/s. 69A, only considered the deposits whereas he totally ignored the debit entries which were payments to sellers of bullion. The appel....
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....% of the said cash deposits and cheques deposits could not be considered for estimating the undisclosed income of the assessee. However, we find that the facts undisputed are that there were deposits as well aswithdrawals from time to time from the said Bank account. Therefore, we are of the considered view that the peak of the amount deposited in the said undisclosed bank account in the Financial year relevant to the Assessment Year under consideration should be considered as undisclosed income of the assessee. Accordingly, we modify the impugned orders of the authorities below and direct the Assessing Officer to assess the undisclosed income of the assessee by considering the peak amount of deposit in the said undisclosed Bank account. We order accordingly." Considering the facts of the case as discussed above and judicial precedents as cited supra, it is held that the AO is not justified in adding the entire deposits to the total income of the appellant, particularly when there is ample evidence to show that deposits were sale proceeds which were later on transferred to actual sellers. Considered the facts of the case, a reasonable NP rate has to be applied on total ban....
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....rious bank accounts during the year under consideration in the name of Ridhi Sidhi Jewels and considered the same as unexplained money without appreciating the fact that the Ridhi Sidhi Jewels was the name of the business run by the appellant assessee during the under consideration. So, it was obviously money out of sale proceeds irrespective of the bank accounts and it could not be treated as unexplained money. He pleaded that the Assessing Officer has been unjustified in treating the cash deposits amounting to Rs. 4,43,07,000/- as unexplained u/s 69A instead of sale proceeds. The counsel has contended that during the assessment proceedings, he couldn't file the required details before the AO as the notices and show cause notices issued by the AO have not been served on the appellant assessee. He contended that merely issuing of notices by the AO per se wouldn't amount to service of the notices on the Assessee which culminated in passing the assessment order exparte qua the assessee u/s 144 of the Act. Later, in appellate proceedings before the Ld. CIT(A), the assessee has filed additional evidence under clause (b) to sub-rule 1 of the Rule 46A of the I. T. Rules inclusive of all ....
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....ppellant frequently deposited sale proceeds in the bank account and there were subsequent withdrawals for making payments to sellers also. As per information and explanation provided by the appellant I find that in the instant case, it would be most judicious to apply reasonable NP rate on entire sale proceeds/cash deposits to estimate the true and correct profit for the year under consideration. It is settled legal position that entire proceeds cannot be regarded as profit or income of the appellant since net profit rate is to beapplied (Manmohan Sadni vs CIT (2008)304 ITR 52(MP); CIT vs Bal Chand Ajit Kumar (2003) 263 ITR 610(MP). In this regard, the case-laws relied on by the appellant also duly supported his case. ITO vs Md Asraf AM ITA no. 169/K/2009IDel Trib).... " 15. Considering the facts of the case as discussed above and judicial precedents as cited supra, it is held that the AO is not justified in adding entire deposits to the total income of the appellant, particularly when there is ample evidence to show that deposits were sale proceeds which were later on transferred to actual sellers. Considered the facts of the case, a reasonable NP rate has to be applied o....
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....her than the bullion business. The Ao has also not brought out any material or document on record to prove that these receipts were utilised for other purposes than the business purpose. iv. The assessment order deals mainly the information received from DDIT(Inv.) and the bank statements obtained from the Banks: "the assessee has made huge cash deposits totaling to Rs. 4,43,07,000/- in Bank Account maintained with HDFC and ICICI Bank." v. The Assessing officer has not visualized the fact that "how such huge cash can be deposited by the assessee when there is no other source of income is on record or not brought out by the AO on record, other than jewel business. vi. The Assessing Officer has solely workedon the basis of the assumption that these cash deposits were made by the assessee and further he is unable to explain the source of deposits. This is the totally wrong and incorrect assumption. The addition made on the basis of presumption and assumption is not judicious and deserves to be deleted. vii. The true nature of the cash deposited is business receipts and not any other else. Once it is established that these deposits are business recei....
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....h sufficient precision the material on which the assessment is based so that the appellate authority can form a just opinion of the fairness of assessment. (CIT vs Khem Chand Ramdas (1940) 8 ITR 159, 179 (Sind). In our case, the AO has not provided or considered the other side of the bank statement, hence, a Fairview cannot be drawn. The AO should examine the whole and true nature of bank receipts and payments, then, make the rational assessment." 11. Heard the rival contentions, perused the material on record, impugned order and case law cited before us. Admittedly, the AO passed the assessment order ex-parte qua the assessee u/s 144 of the act and that the Ld. CIT(A) admitted the additional evidence under clause (b) to sub-rule 1 to Rule 46A of Income Tax Rules 1963 after taking the AO's objection on record and he held that the additional evidence contains vital evidence which was essential for deciding the claim of the appellant assessee in the light of the various judicial precedents. 12. It is seen that the assessee filed a petition before Commissioner (Appeals) for admission of additional evidence stating that the notices under section 142(1) issued by Assessing Officer....
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....detailed finding in this regard relying on the judgments of higher judicial forums, where the Commissioner (Appeals) also considered the remand report of the Assessing Officer. In this regard, the CIT(A) has also well taken cognizance of the fact and a direction to decide the application under rule 46A by the Hon'ble Bombay High Court (Supra). 15. In view of the above discussions, we hold that the CIT (A) was correct in admitting the additional evidence while deleting the addition on merits of the case. Accordingly, the department's objection in ground no.2, regarding admission of additional evidence under clause (b) to sub rule1 to Rule 46A of I.T. Rules is rejected. 16. Next issue is regarding reduction of addition of Rs. 4,43,07,000/- to Rs. 5,31,684/- on account of unexplained cash deposits u/s 69A of the Act. 17. It is seen that the AO observed that in absence of any details filed by the assessee to explain the sources of the total deposits of Rs. 4,43,07,000/-, the same is treated as unexplained income u/s. 69A of the Act and added to the total income of the assessee. The Ld. CIT(A) discussed that the appellant has explained that during the year under consideration, ....
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....that sufficient number of opportunities were granted to the assessee to explain the source of the deposits and hence, no credence can be given to additional evidences furnished during the appellate proceedings. Under the facts and circumstances, and given details, the sources of deposits in his saving bank accounts the appellant stands explained. 19. From the above, it is established that during the year under consideration, the appellant frequently deposited sale proceeds in the bank account and there were subsequent withdrawals for making payments against purchases also. From the information and explanation furnished by the counsel for the assessee, we are of the view that the Ld. CIT(A) decision has been most judicious in applying NP rate of 1% on entire sale proceeds/cash deposits to estimate the true and correct profit for the year under consideration in the light of the settled legal position that entire proceeds cannot be regarded as profit or income of the assessee and net profit rate has is to be applied as per standard principle of accountancy as well. 20. Considering the facts of the case and judicial precedents as cited supra, we do not find any infirmity or perve....