TaxTMI 
TaxTMI 
2024 (9) TMI 1449
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....gs. nd 2. On the facts and circumstances and law, the Ld. CIT (A) has erred in admitting the additional evidences under Rule 46A of the Income Tax Rules, 1962 in spite of the fact the assessee could not furnish relevant documentary evidences during assessment proceedings and hence, remained uncorroborated. 3. On the facts and circumstances and in law, the Ld. CIT (A) has erred in deleting the addition made by the AO of Rs. 8,60,03,806/- u/s 68 of the Income Tax Act, 1961 cash deposited in assessee's bank account during the year under consideration applying the provisions of section 115BBE of the Income Tax Act, 1961 ignoring the fact that the assessee couldn't furnish copy of cash book and other relevant documentary evidences during assessment proceedings. 4. On the facts and circumstances and in law, the Ld. CIT (A) has erred in deleting the addition made by the AO of Rs. 12,63,307/-by disallowing 25% of expenses incurred in cash and ignoring the fact that the assessee has failed to provide justification with supporting evidences in respect of the same." 3. Succinctly, the fact as culled out from the records is that the assessee e-filed his re....
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....ble income at Rs. 15,53,040/-. 3.1 From the information available on record, one of the reasons for selection of the case of the assessee for scrutiny was "Large cash deposits in bank account". As such, vide notice u/s 142(1) of the Act dated 18-11- 2021 at query No. 5, the assessee was specifically required to furnish detailed bank account statement along with explanation regarding the source of cash deposit as well as copy of cash book for the year under consideration. In response thereto, the assessee didn't furnish any reply within the stipulated time. As such, reminder notices u/s 142(1) of the Act were issued on 14-12-2021 and 04-01-2022. In response thereto, the assessee furnished his reply on 12-01-2022, wherein he uploaded the copy of bank statements only and submitted that he is engaged in the business of Adatia in his three proprietorship concerns namely M/s. Kanhaiya Lal Nenumal, [Reported turnover of Rs. 6,72,58,081] Prashant Kumar Lakhmichand [Turnover of Rs. 10,33,14,035/-] and M/s. Radhey Radhey Commission agency commission of Rs. 1,00,000/-. 3.2 From the details so submitted by the assessee ld. AO, NFAC noted that a total Rs. 8,60,03,806/- has been dep....
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....idn't furnish the copy of cash book maintained by him. Further, from perusal of bank account statements, it was noticed that the assessee has made payments involving significant amounts bearing the name of trading firms instead of farmers. As such, vide notice u/s 142(1) of the Act dated 18-02-2022, the assessee was specifically required to provide his explanations on this issue besides required to furnish other pending details. In response thereto, the assessee furnished his reply on 02-03-2022 contending that the "The assessee has sold agriculture produce on behalf of the farmers and the payment has been made to such farmers either in cash or through banking channels which all the entries are duly appearing in the bank statement and the cash book. Further, the assessee has to issue receipt to the farmers when the agriculture produce is being received from them for being sold in the market on their behalf." The ld. AO from the reply furnished by the assessee noted that the slips furnished (seems to be hand written) by the assessee as documentary evidence for verification, it is observed that the slips bear the name on top, no. of parcel containing goods, qty, in each parcel....
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....0403, it has been noticed that the assessee has made a total payment of Rs. 81,59,317/- to Sh. Keshav Gabhire. In view of the above-said facts, ld. AO noted that it became abundantly clear that besides charging commission on selling perishable goods on behalf of the farmers, the assessee also involved in sale purchase of these goods for earning profit and for which he has not declared any transaction in the ITR filed for the year under consideration. However, during the course of assessment proceedings, the assessee has repeatedly denied this fact and just claimed to be selling perishable goods on behalf of the farmers. On 05-03-2022, the assessee uploaded the copy of cash book maintained for the year under consideration in respect of one of his proprietorship concern M/s Prashant Kumar Lakhmi Chand. From perusal of copy of cash book provided by the assessee, it has been noticed that the Opening Balance as on 01-04-2019 was taken at Rs. 12,324/- and on 01- 04-2019, Rs. 5,41,553/- has been generated as cash on account of "FARMER SALE" against which the assessee has paid cash amounting to Rs. 1,16,873/- "DAILY MULTI FARMER SALE" and "Freight" paid in cash at Rs. 1,25,598/- and ....
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....continuously paying Freight out of his cash book but has not claimed the Freight as expenses (the total of these expenses as debited in the cash book of M/s Kanhiya Lal Nenumal, works out to Rs. 115.5 Lakhs) in the P&L A/c in order to just lend authentication to his statement that he is just earning commission on sale of goods on behalf of farmers besides keeping the cash in hand at the year-end in check. Moreover, the amount of freight payment exceeds Rs. 10,000/- (paid in cash) in most of the cases and also exceeds Rs. 35,000/- on daily basis in most of the cases. The other peculiar feature in the cash book of M/s Kanhiya Lal Nenumal that has been noticed is that, the cash from farmers sale runs from 01-04-2019 to 22-07-2019 and halted till 01-11-2019 and restarted on 02-11-2019 and runs till 05-02-2020 and again halted till the year end i.e. 31-03-2020 and that trend also applies in case of freight payment. It is again pertinent to mention here that the assessee was requested to provide the copy of cash book of all its proprietorship concerns vide notice u/s 142(1) dated 18-11-2021 but till 15-03-2022 he did not provide the cash book maintained for all of his proprietorship c....
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....the detailed ledger account of all the debtors/creditors for the year under consideration clearly reflecting opening balances, transactions during the year and closing balance at the year end. From the reply, it was noticed that the assessee has just furnished a ledger account of M/s Vasudev Commission agency wherein the opening credit balance was shown at Rs. 18,13,845/- and the credit balance at the end of year was at Rs. 21,32,614/-. However, in his reply furnished on 10-08- 2022, the assessee has furnished ledger account of debtors / creditors. From that ledger account total of sundry debtors and creditors in all the proprietary Concerns of the assessee works out at Rs. 30,64,293/- and Rs. 40,66,713/- respectively whereas in the Balance Sheet, the amount of Sundry Debtors & Creditors were shown at Rs. 31,10,746/- and Rs. 56,83,348/-. The ld. AO also noted that as per Balance Sheet shown in the ITR of the assessee for the year consideration, the amount of Balance outstanding at the year end Rs. 7,82,662/-. In the reply filed by the assessee on 12.01.2022, the assessee furnished detail of 10 bank accounts maintained by him in individual/business capacity and the total balance ....
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.... In the present case, the appellant e-filed his return of income for A.Y.2020-21 on 29/12/2020 declaring net taxable income at Rs. 15,53,040/-. Later the AO completed the assessment by assessing the total income at Rs. 8,88,20,150/- by adding an amount of Rs. 8,60,03,806/- u/s 68 of the Income Tax Act, 1961 and an amount of Rs. 12,63,307/- being expenses incurred in cash to the income of the appellant. Penalty proceedings u/s 271AAC and u/s 270A(9) of the Income Tax Act, 1961 were initiated separately. Being aggrieved by the same the appellant has preferred instant appeal. The AO stated that the case was selected for Complete Scrutiny under CASS due to 'Low income compared to large commission receipts' and 'Large cash deposits in bank account(s)'. The appellant derived income under the head 'Income from business / profession' being Adatia (i.e. selling the perishable goods and charging commission thereon). The appellant being sole proprietor runs three commission agency viz. M/s Kanhiya Lal Nenu mal, M/s Prashant Kumar Lakhmi Chand and M/s Shri Radhey Radhey Commission Agency and earned a total commission amounting to Rs. 96,11,422/- and has decl....
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....armers under the proprietorship concern M/s KANHIYA LAL NENU MAL and @5% on cash sale under the proprietorship concern M/s PRASHANT KUMAR LAKHMI CHAND. However, the appellant didn't furnish any explanation as to how he had discharged the payments which were required to be made to farmers. Further, from perusal of bank account statements, it was noticed that the appellant has made payments involving significant amounts bearing the name of trading firms instead of farmers. Cash books of two of the appellant's concerns had been submitted but the Cash book of the third concern M/s Radhey Radhey Commission Agency and bills/vouchers of the expenses were not submitted. The AO noticed from the details of the proprietorship concern namely M/s Kanhiya Lal Nenumal, that the appellant had claimed to have sold goods (Gross) on behalf of farmers to the extent of Rs. 6,72,58,081/- on which it has earned commission of an amount of Rs. 36,77,572/-. The goods sold on behalf of agriculturist also included cash sale amounting to Rs. 1,78,95,635/- and the goods sold on behalf of the farmers (on credit basis) worked out to the tune of Rs. 4,93,62,446/- which as per version of the appell....
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....t found satisfactory in view of provision of section 145(3) of the Income Tax Act, 1961 and were hence rejected by AO. During the course of appellate proceedings, the appellant stated that he is aged at nearly 64 years and was assessed to tax for last more than 40 years and since inception he was engaged in the business of Adatia of agriculture products mainly the Lemons, Green Chilies and other perishable vegetables and is having income from commission from such activity being carried out from his establishment in the Shop area allotted and situated in the Mandi premises which mandi has been developed and controlled by the KRISHI UPAJ MANDI SAMITTEE, an organization created as well as functioning under the control and management by the Government of Rajasthan with the primary objects to fulfill its commitment for a fair price in such open mandi where the products are auctioned by the Commission Agents in the presence of the cultivators or its representatives. The income of commission as earned is offered for taxation after claiming normal business expenses related to the earning of such income which entire of it is vouched and is in full consonance with several previous y....
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....t, 1961 and then went on to make further additions u/s 68 of the Income Tax Act, 1961 which is not correct. As regards disallowance of an amount of Rs. 12,63,307/-, being 25% of expenses on ad hoc basis, the AO after rejecting books of accounts has relied upon the same set of books for making disallowance out of the expenses claimed, which is not correct as per the judgment of the Hon'ble Punjab- Haryana High Court in the case of The Commissioner Of Income Tax vs Dulla Ram on 22 October, 2013 in which the Hon'ble High Court held: 22 October, 201 MEN "The revenue has filed an appeal, under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as, the Act) to challenge order dated 28.4.1999 passed by the Income Tax Appellate Tribunal (for short, the Tribunal), Amritsar Bench, Amritsar, whereby order dated 14.3.1990 passed by the Commissioner of Income Tax (Appeals), Bhatinda setting aside the assessment order, has been affirmed. The revenue has framed the following questions of law: '(i) Whether on the facts and in the circumstances of the case, the ITAT was right in law in sustaining the order of the CIT(A) vide which the C....
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.... C.O. as well as the C.O. of the assessee succeeds and hence it is concluded that it is fair and reasonable to apply a net rate of 10% in the case of the assessee while calculating the profits. XXX 13. After going through the order of the CIT(A), we are of the considered opinion that the order of the CIT(A) does not suffer from any illegality or infirmity regarding his conclusion that the deposits as well as withdrawals of contract receipts have not been properly reflected in the books of accounts and as such no reliance can be placed on this bank account. 14. In view of our above discussion, we are of the considered opinion that the CIT(A) was fully justified in deleting the addition of Rs. 1,98,298/- made by the A.O. Accordingly, the ground of appeal taken by the Revenue is hereby rejected. 15. In the result, the appeal of the Revenue, i.e. I.T.A. No.733(ASR)/1990 fails and the same is dismissed. However, Cross-Objection of the assessee i.e. C.O. No.83 (ASR)/1990 succeeds and the same is allowed." A perusal of the above extract reveals that the Tribunal has affirmed the order passed by the Commissioner of Income, Tax (Appeals) by holdi....
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....entirety and thereafter proceeded to assess income by applying a flat rate of profit of 10%. After applying a flat rate of profit of 10%, the Assessing Officer added Rs. 1,98,298/- to the income of the assessee on the basis of certain 'entries' deemed to be suspicious. The Commissioner of Income Tax (Appeals) as well as the Tribunal have rightly held that as books of accounts were rejected in their entirety, the Assessing Officer could not rely upon any entry in the books of accounts for making an addition of Rs. 1,98,298/-. A bare reading of Section 68 of the Act would reveal that it would not apply to a situation where account books have not been rejected. We find no reason to differ from the opinion recorded by the Tribunal and, therefore, answer the questions of law against the revenue and in favour of the assessee. The appeal is, consequently, dismissed." In view of the factual matrix of the case, the discussion above and the above referred judgment, after rejection of books of accounts, the AO cannot make any further addition on account of unexplained entries treating them as undisclosed income from other sources by invoking Section 68 of the Income ....
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....of the Act and addition of Rs. 12,63,307/- Aggrieved by the above order passed by the AO, the assessee filed appeal before the Ld. CIT(A). Decision of CIT(A): The CIT(A) vide order dated 11.03.2024 allowed the appeal of the assessee by holding that the assessee submitted Cash book of all the three proprietorship concerns, all the bank statements owned by the assessee, ledger account of all the expenses claimed by the assessee, Ledger account of farmers with supporting evidences, details of agriculture produce sold by the assessee on behalf of the farmers from all the concerns, receipts issued to farmers in confirmation of agriculture produce sold on their behalf, available bank details of farmers. After rejection of books of accounts, the AO cannot make any further addition on account of unexplained entries treating them as undisclosed income from other sources by invoking section 68 of the Act. With respect to disallowance of an amount of Rs. 12,63,307/-, being 25% of expenses on ad hoc basis, the CIT(A) held that the AO after rejecting books of accounts relied upon the same set of books for making disallowance out of the expenses claimed which is not correct. ....
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....ass contains the vehicle no., sender's name. In that gate pass when the sender is firm how can it be believed that it is from a farmer. The farmer cannot come from far away of 800-1000 kms. So, for both the addition so made in the hands of the assessee the ld. DR relied upon the order of the ld. AO and prayed to sustain the addition made by the ld. AO. 6. Per contra, ld. AR of the assessee submitted that the ground no. 1&2 raised by the revenue is not maintainable considering the specific observation by the ld. CIT(A) that there is no additional evidence filed by the assessee vide para 4 [page 5] of the order of the ld. CIT(A). Even if so the ld. CIT(A) being quasi-judicial authority has equal power as that the ld. AO has. Assessee is acting as aadatiya licensed to act as such. The assessee is regular in paying the mandi tax on the sales formed by him in the Mandi. This aspect of mandi tax is already referred by the ld. AO in show cause notice page 29 para 7.8. Thus, the ld. AO on the hand trying to reconcile the Mandi tax with sales made and on the other hand did not believe the sale made by the assessee and added a total cash deposited into the bank account. The assessee produ....
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....censes issued by Mandi in the name of Kanhaiyalal Nenumal and Prashant Kumar Lakhmi Chand 1276-1277 (iv) Details of Proceeds from Farmers Sale 1278-1287 (v) Bank Statements duly highlighting entries of Cash deposit 1288-1408 (vi) Bank Statements duly highlighting payments to farmers 1409-1443 (vii) Ledgers of farmers alongwith details of Agriculture produce 1444-1538 (viii) Ledger of Vasudev Commission Agency in the books of Prashant Kumar Lakhmichand 1539-1551 (ix) Copy of ledger of farmers 1552-1575 11. Copy of Reply dated 10.08.2022 filed before ld.AO alongwith: 1576-1578 (i) Party ledgers in the books of Kanhaiyalal Nenumal and Prashant Kumar Lakhmi Chand 1579-1620 (ii) Mandi Tax Receipts 1621-1626 12. Copy of Reply dated 06.09.2022 filed before ld.AO alongwith: 1627 (i) Details of Collection made by Radhey Radhey Commission Agency from customers 1628-1941 (ii) Cash Sale Ledger of Kanhaiyalal Nenumal 1942-1946 (iii) Cash Sale ledger of Prashant Kumar Lakhmi Chand 1947-1951 (iv) other supporting documents 1952-1964 13. Copy of Reply dated 19.09.2....
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..../s Prashant Kumar Lakhmichand - operating as Adatia (Mandi License at APB 1276) ii) M/s Kanhaiya Lal Nenumal - operating as Adatia (Mandi License at APB 1277) iii) M/s Radhey Radhey Commission Agency - operating as factor (doing payment collection work) Return of Income for the year under appeal was filed on 29.12.2020 declaring total income at Rs. 15,53,040 (APB 3-7). Case of assessee was selected for scrutiny. Information and documents as sought by ld.AO were furnished by assessee from time to time and verbal submissions were also made through video conferencing. Ld. AO completed the assessment vide order dated 27.09.2022 passed u/s 143(3) r.w.s.144B of the Income Tax Act, 1961 whereby books of accounts were rejected by invoking provisions of section 145(3) and following additions / disallowances were made: (i) Addition u/s 68 on account of Cash deposit in bank Rs. 8,60,03,806/- (ii) Adhoc disallowance out of expenses Rs. 12,63,307/- Further the provisions of section 115BBE were invoked on the additions made u/s 68 towards the bank deposits by treating the same as unexplained. Aggrieved of the order so passed, assessee preferr....
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....nvoking of provisions of section 69A of the Income Tax Act, 1961 by relying on various case laws, it is pertinent to mention here that these were initiated on the basis of intentional delay in production of Cash Book maintained for all of his proprietorship concerns, within stipulated period, absence of which the sources of cash deposits in the bank remain unexplained. Hence, the case laws referred by the assessee in his reply w.r.t. invoking the 69A of the Income Tax Act, 1961 dealt accordingly." Thereafter, while concluding assessment proceedings, ld.AO eventually considered all the documentary evidences furnished and made addition by invoking the provisions of section 68 as against 69A as was originally proposed. In support of the above submission, copies of acknowledgements of submission made before ld.AO, whereby cash books of all the three proprietary concerns were submitted is enclosed. It is therefore submitted that no additional evidences were furnished by assessee during appellate proceedings before ld.CIT(A). It is therefore submitted that grounds of appeal no.1 & 2 raised by the department are contrary the facts and thus deserve to be rejected....
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.... the broker (Adatia like the assessee) and the customer, take delivery of the goods (produce). It is also relevant to state that in no case any advance payment is ever made to the producer i.e. the principal of the goods and only after the successful bid and after receiving consideration from the successful bidder, payment is made to the farmer / agriculturists after deducting charges on account of freight and unloading etc. which is paid by the assessee in advance on their behalf. The mode and manner of the payment is fully dependent upon the instructions given by the principals i.e. the farmer / agriculturist. It is also a matter of fact and is to be noted that the entire process starting from the entering the produce into the mandi premises till its disposal in the shape of sale is closely supervised and controlled by the officials the Krishi Upaj Mandi Samiti, a State Government Undertaking who not only records all these transactions in their records but also periodically verifies such records from the respective shop owners. The State Government has levied Mandi Tax @1.5% on the amount of produce sold from such transaction (which was abolished by the State Government ....
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.... Besides this the freight of the vehicle through which the produce is brought to the mandi is though paid by the adatia like the assessee, however the same is borne by the agriculturists therefore, the same is never claimed by the assessee as expenses and an entry of the payment is made in the cash book where the payment made to truck driver is recorded and debited to the account of such agriculturist who brought the produce to the shop of the assessee. In lieu of commission charged, the license holders i.e. the shop keepers like the assessee are responsible for soliciting the sale of produce and after making recovery of the produce so sold to the customers either in cash or on credit basis as per terms and conditions decided between them, made the payment to the agriculturist of the value of their produce after deducting the freight and unloading charges wherever applicable. In the case of the assessee, both in cash as well as through banking channels the payments are being made to the agriculturists. However, in most of the cases of credit consignment sales, the payments have been received in cash for which the assessee has formed a separate firm for better control and a....
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.... copy of Balance Sheet furnished during the course of assessment proceedings. On this basis ld. AO has alleged that assessee might have engaged in the trading business which as not disclosed and the cash deposit in the bank account of his commission agency firm belonged to such undisclosed trading activity and accordingly treated the said cash deposit as unexplained cash credit and made the addition of entire cash deposited into bank at Rs. 8,60,03,806/- u/s 68 of the Income Tax Act. While alleging so the ld. AO has failed to appreciate the fact that the bank accounts under which the said cash was deposited belonged to and pertaining the transactions carried out by the proprietorship firms of the assessee namely M/s Kanhaiya Lal Nenu Mal and M/s Prashant Kumar Lakhmi Chand where the consignment sale of more than 17.00 crores were carried out and part of the same was received in cash and duly recorded in the books of accounts maintained. Had there been any other trading business which is not disclosed that there must exits other undisclosed bank account where the cash from undisclosed business was deposited but as submitted above, the entire cash was deposited in the banks accounts ....
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....d above, in some cases, it had happened that a person collected the produce from the group of agriculturists and bring or sent such produce to the Mandi for sale for which such person issued its goods transfer memo only and no sale bill is generated as he never made any sale of such produce and send them to the assessee for sale at best price. When such produce is received by the assessee, assessee also sold such produce on adat basis only and the sale proceeds are paid to the sender agriculturists after making deduction of expenses relating to such sale such as transportation, unloading etc. Also in support of his business activity of Adatia, assessee submitted following documents before ld.AO alongwith other details during the course of assessment proceedings: i) License of Adatia issued by mandi owned and controlled by Rajasthan State Government (APB 1276-1277) ii) Cash book of all the three proprietorship concerns owned by the assessee (APB 890-1021, 1023-1147, 1171-1273) iii) All the bank statements owned by the assessee (APB 8-222) iv) Ledger account of all the expenses claimed by the assessee in all the three proprietorship concer....
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....transporting the produce and not an invoice as alleged and inferred of purchasing 205 qtl. Lemon from Ram Dass Seth Nimbu Wale from Akola which is 966 K.M. from Jaipur. The goods were sent by the farmer to the assessee for being sold in Mandi at Jaipur on adat basis and the bilty so pasted in the assessment order is the proof of such goods transporting to Jaipur, no matter what the distance it is coming from. Also, with this image, the assessee has uploaded below mentioned other documents with the bilty on 02.03.2022 containing (APB 876-888): 1. Gate pass of Krishi Mandi when such vehicle carrying the lemon entered in the mandi premises at Jaipur 2. Dharam Kanta Slip of Terminal Market Muhana Mandi, Jaipur 3. Registration certificate of the truck as issued by RTO 4. PAN Card of the truck owner alongwith declaration All the above documents so enclosed prove beyond doubt that the agriculture produce from wherever location has come for sale on adat basis in Mandi premises at Jaipur, has received a gate pass of Mandi controlled by State Government. Therefore, it cannot be presumed that such agriculture produce is sold to the assessee more pa....
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....d, however no such document was provided. Further it is a matter of common knowledge that in the Krishi Upaj Mandi operated by the state government, the agriculture produce form PAN India comes for the sale no matter what is the distance and nobody can compel any agriculturist to sell their produce in a particular market. It all depends upon the sweet will of the farmer who always in the search of better price coupled with the genuine person who can sell their produce without cheating them. Therefore, such observations of the ld. AO deserves to be ignored and excluded. Further, ld. AO has emphasized on the category of license issued by Mandi Samiti by observing at page 45 of the assessment order as under: "On this claim of the assessee, from the perusal of the copy of licenses issued by the Mandi Samiti, it is observed that one concerns of the assessee namely Kanhiya Lal Nenu Mal holds the license of ^d* oxZ nyky i.e. a broker and the concern M/s. Prashant Kumar Lakhmi Chand holds the license of la;qDr O;kikjh ^d* oxZ nyky i.e. Combined license of broker and trader." While observing so, the ld. AO considered the licenses of Mandi which are issued on print....
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....ng the various details and submissions furnished by assessee has agreed with the explanation of the assessee so far as applicability of provisions of section 69A of the Income Tax Act is concerned. Subsequently, ld.AO at para 8.1 page 34 of the Assessment order concluded that: "8.1 In view of the facts stated above, the exact sources of cash deposited in the bank account maintained by the assessee remained unexplained and the provisions of section 68 of the Income tax Act, 1961 were rightfully applicable in the case of the assessee which mandates that-"where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation thereof or the explanation offered by him is not, in the opinion of the [Assessing] officer, satisfactory the sum so credited may be charges to income tax as the income of the assessee of that previous year. Therefore, addition of Rs. 8,60,03,806/- were proposed under the provisions of section 68 of the Income Tax Act, 1961 for unexplained cash deposits in bank accounts, besides initiation of penalty proceedings u/s 271AAC of the Income tax Act, 1961, vide show cause notice dated 14.09.2022." ....
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....: It is submitted that table furnished above is self explanatory and from perusal of above, it is evident that the Balance Sheet figures are fully reconciled, therefore conclusion drawn by ld.AO without properly appreciating and understanding the accounting entries, deserves to be ignored and set aside. With the above, it is humbly submitted that books of accounts maintained by assessee are in accordance with accounting principles and policies and trading results declared by assessee are in consonance with industry norms and deserves to be accepted as such. With regards to addition of cash deposits of Rs. 8,60,03,806/- made u/s 68 by treating the same as unexplained, at the outset it is submitted that provisions of section 68 are not applicable to the facts of the case. Ld. AO, while making the addition u/s 68 of the Income Tax Act has made various observations which all are not in parity with the actual facts and the submissions on the same is as under:- 1. At page 2 of the assessment order the ld. AO has observed that various opportunities were given to the assessee for submitting the precise details and at every occasion, the incomplete respon....
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....een completely ignored by ld.AO more particularly when he has not given any adverse comments on such cash receipts. However, the ld. AO has held the cash deposit of Rs. 8.60 crores as unexplained. 3. During the course of assessment proceedings, the ld. AO has asked to furnish the details of payments made to farmers in cash and through bank. In response the assessee vide reply dated 02.03.2022 (APB 321-323) has uploaded the entire bank accounts, which were filed earlier, duly highlighting the entries of cash deposit and the payments made to farmers from the bank accounts of the assessee and AO himself has observed at page 28 to 30 that various payments has been made to farmers and their names are also mentioned in the assessment order. However, on his own whims and fancies has held the deposits as made out of some other trading business though he himself has accepted that such deposits were utilized for making payments to the farmers. 4. The ld. AO has applied the provision of section 145(3) of the Income Tax Act, 1961 and rejected the books of accounts and in such a situation he was required to assess the income on the basis of material available on record however....
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....ed to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10." From the perusal of the provisions of law, it is evident that Act has laid down two fundamental criteria for considering an income as cash credits u/s 68 : a. There has to be a credit entry in the books of accounts of the assessee, b. The credit entry remains unexplained on the part of the assessee or the explanation offered by the assessee is not up to the satisfaction of the AO. In the appellant's case the addition of Rs. 8,60,03,806/- is made by alleging cash deposits in bank as "Income from other sources". At this juncture, as submitted above, it is reiterated that the sale made on behalf of farmers is either (i) Cash or (ii) on Credit. In case of cash sales, net consideration after reducing freight and unloading charges is given to seller, whereas in case of credit sales, assessee charges commission @ 6% for providing credit facility to the buyer. Basically, it is not possible for farmers coming from outside places to revisit/make regular follow ups for recovery of sale consideration (in case of credit sales). On t....
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.... income can be taxed. Ld.AO has neither rebutted the submission of the assessee that cash deposits represent sale consideration received by assessee on behalf of farmers nor brought any material on record by making any independent enquiry that assessee has indulged into the trading activity which was not disclosed and the cash deposited in the bank account is over and above the cash receipts from his regular ADAT business. Your honours would appreciate that ld.AO by accepting commission income, has accepted that assessee has made sale on behalf of farmers, and has thus received money their behalf. In fact, ld.AO is vested with power to make direct enquiries and if he had any doubts, notices could have been issued Mandi Samiti to cross verify the Sales or to bankers to confirm that payments were made to farmers and subsequent deposits were on account of their sale consideration. In this regard the reliance is placed on the decision of hon'ble Supreme court in the case of Orissa Corporation reported in 155 ITR at 159 wherein it has been held that AO has power to issue summons to make enquires if he has any doubts about the credits in the books of accounts which in the presen....
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....ding to the natural import of the term. It is the income which has really accrued or arisen to the assessee that is taxable. Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. When in reality there is neither accrual nor receipt of income by the assessee, even though an entry to that effect might in certain circumstances have been made in the books of account, it would not constitute income for the purpose of levy of tax. A rebate obtained by the purchaser or remission of debt by a creditor would not result in the creation of income in the hands of the purchaser or debtor. 225 ITR 746 Godhara Electricity Co. Vs. CIT (SC) Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialize. In view of above, it is submitted that in the present case, ld.....
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.... is to be adopted. So, it is clear enough that the income in the present case is taxable only under one law. By virtue of clause (k) to Article 371F of the Constitution which starts with a non-obstante clause, it would be clear that only the Sikkim Regulations on Income-tax would be applicable in the present case. Therefore, the income cannot be brought to tax any further by applying the rates of the IT Act. In view of the above, it is submitted that the exorbitant addition of Rs. 8,60,03,806/- made u/s 68 of the Act is legally defective and thus bad in law and after considering the submission made by assessee and evidences adduced, appeal of assessee stood allowed by ld.CIT(A). It is submitted before your honours also that such illogical and mechanical addition of cash deposits made by the ld. AO is bad in law and contrary to the settled legal position by the courts that addition u/s 68 can only be made when there is a credit entry in the books of accounts and the assessee fails to explain that credit entry and thus any addition of the amount not being a credit entry in the books of accounts has been rightly deleted by ld.CIT(A) more particularly when such deposi....
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....smen, loaders etc. which are earning their livelihood from the employment. Further the fact that they have provided services was neither doubted nor can be denied looking to the volume of business carried out by the assessee where the total consignment sale of more than 17.00 crores was taken place in the entire year which could not be possible without the help of manpower. Further except the salary expenses, no doubts were raised on the other expenses claimed by the assessee thus disallowance has been made without pointing out any specific defect in the same. In the circumstances it is humbly submitted that the expenditure so claimed in the Profit & Loss Account are most reasonable and genuine and have been rightly deleted by ld.CIT(A), which order deserves to be upheld. In the last, to sum up the entire arguments taken for all the grounds of appeal are tabulated as under: Issue ALLEGATION of AO Our submission Application of section 145(3) Assessee is a trader Assessee is working as Adatia (आडतिया) under the license granted by Krishi Upaj Mandi created and controlled by State Government and make sale by auctio....
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....rores and such proceeds have been remitted to the principals under proper and day to day basis recording in the regular books of accounts. In the event of the credit allowed to the bidders the bidder might opt to pay in cash or through cheque in the name of assessee Adatia which is an accepted trade practice PAN India and anybody understanding the principal - agent relationship would understand the age old concept prevalent in the country thus there is no room to doubt the credits in the bank account duly supported by regular books of accounts. The AO has totally brushed aside the matching principal of accounting and has miserably failed to point out a single transaction emanating into undisclosed sales, least that the commission earned on such realization on behalf of the principal have been brought to tax meaning thereby that the entire collection on behalf of the principal stands accepted by the AO. The entire exercise is nothing but a flight of imagination and further based on no evidence on record thus the same deserves to be held illegal and untenable. Adhoc disallowance out of expense 25% of the expenses incurred in cash were disallowed mainly for the reason that su....
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....the sale of lemon to the assessee. The ld. AO did not make it necessary rebut those evidence so filed by the assessee. As regards the observation that the assessee is undertaking the trading activity which in fact considering the state laws for sale of agricultural produces is not possible which the ld. AO has not appreciated. The ld. AR vehemently opposed the action of the ld. AO making the addition of the whole of the sum deposited into the bank account stating that on the one hand ld. AO ask the assessee to reconcile the sale with mandi tax and pin point the difference in sale and on the other hand make the addition of the whole cash deposited into the bank account as unexplained. This dual approach shows that the ld. AO has prejudicial mind and has not appreciated the correct facts placed on record. The assessee has nothing to do with the payment of the freight as the same is to be born by the seller of the goods. Even the ld. AO has dropped the proposal of making that disallowance as per provision of section 40A(3) of the Act as proposed in the draft assessment order. Based on these arguments the ld. AR of the assessee supported the order of the ld. CIT(A). 9. We have he....
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....B of the Income Tax Act, 1961 whereby books of accounts were rejected by invoking provisions of section 145(3) and following additions / disallowances were made: I. Addition u/s 68 on account of Cash deposit in bank Rs. 8,60,03,806/- II. Adhoc disallowance out of expenses Rs. 12,63,307/- Aggrieved from the order so passed, assessee preferred appeal, which was decided vide order dated 11.3.2024 passed in appeal No. NFAC/2019-20/10174194, whereby appeal of assessee was allowed. Present appeal has been filed by the revenue challenging the finding of the ld. CIT(A). While doing so the revenue has effectively taken 3 grounds of the appeal. 10. Ground no. 1 & 2 raised by revenue relates to the issue that the ld. CIT(A) has admitted and considered the additional evidence without giving adequate opportunity to the ld. AO in the remand proceeding in spite of the fact that the assessee could not furnish relevant documentary evidence in the assessment proceeding the ld. AO proved that the same are not corroborated with the records so produced by the assessee. So far as these two grounds are concerned, we note that the assessee has placed on record 7 volume of the paper....
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....e to such submission M/s Prashant Kumar Lakhmi Chand 5.3.2022 Page 10 para 4.6 M/s Kanhaiya Lal Nenumal 15.3.2022 Page 12 para 4.7 M/s Radhey Radhey Commission Agency 23.3.2022 Page 21 para 7 (not specified receipt of cash book) As regards the contention of the revenue that the assessee has not submitted the cash book of M/s. Radehy Radhey Commission Agency the ld. AR invited our attention that though, ld.AO has not specifically acknowledged that aspect of the matter in the assessment order but in fact Cash book of M/s Radhey Radhey Commission Agency were submitted on 23.3.2022 and after considering reply dated 23.3.2022 as was filed by assessee in response to show cause notice, ld.AO at page 21 of assessment order ld. AO observed that; "W.r.t., invoking of provisions of section 69A of the Income Tax Act, 1961 by relying on various case laws, it is pertinent to mention here that these were initiated on the basis of intentional delay in production of Cash Book maintained for all of his proprietorship concerns, within stipulated period, absence of which the sources of cash deposits in the bank remain unexplained. Hence, the case laws referred by....
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....e dealing with the ground no. 1 & 2 of the revenue in para 10 held that the assessee has submitted the cash book of all three proprietary concern and therefore, the contention raised by the revenue has no merits. So far as the finding of the ld. AO with that of the ld. CIT(A) the bench noted that on the hand ld. AO trying to match the mandi tax with the sales recorded by the assessee and on the other hand considered the whole cash deposited into the bank account as unexplained credit. The fact that the assessee has produced cash book of all three concerns is evident from the finding so record at para 10 above and the other issue that has been raised by the ld. AO we note that the assessee is earning income as Adatia (Commission Agent) dealing in agriculture produce. The activity in which assessee is engaged, is totally similar to a normal consignment agent where commission is earned on the sales made on behalf of the principal. Whereas in the case of hand the principal is the agriculturists who produces and brings their agriculture products for sale in the State Government owned selling hub known as Krishi Upaj Mandi (owned and established by the Rajasthan State Government) to prov....
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....nment also levies Mandi Tax @1.5% on the amount of produce sold from such transaction (which was abolished by the State Government from 06.08.2019 and later the same was introduced in the name of Krishi Kalyan Cess) which is collected from the successful bidder along with the brokerage payable on such transaction. As submitted above, to determine the liability of Mandi Tax, books of accounts maintained by the assessee are subjected to periodical checking and cross verification on day to day basis by the Authorities of Krishi Upaj Mandi. Thus, the business model as undertaken by the assessee is in compliance of the Mandi norms and had never been doubted either by the Krishi Upaj Mandi Samiti or by the Income Tax Department at any stage in any manner in the past. As such, the assessee has an established past history where the mode and manner of carrying out his business as ADATIA is admitted and accepted by the department in the assessments completed u/s 143(3) also. During the year under appeal also, assessee had continued to undertake his business operations in similar manner and style as was carried out in the past. Thus, the profit ratio and bank deposits shown during the y....
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....business of selling the agriculture produce on behalf of the farmers/ agriculturists and treated the assessee as the trader solely for the reason that in some of the cases produce was sent by the farmer under a title of firm name which is a common feature where a particular farmer collects the entire produce of the village and send it for the sale in mandi, thus there is nothing abnormal or whisper of any trade activity in such kind of transactions. Further for invoking the provisions of section 145(3), ld.AO has not specifically mentioned the reason, however it appears that books have been rejected by alleging that (i) assessee is engaged in sale and purchase (trading) of agriculture produce also and (ii) there were certain discrepancies in figures of Balance Sheet as per ITR and copy of Balance Sheet furnished during the course of assessment proceedings. On this basis ld. AO has alleged that assessee might have engaged in the trading business which as not disclosed and the cash deposit in the bank account of his commission agency firm belonged to such undisclosed trading activity and accordingly treated the said cash deposit as unexplained cash credit and made the addition of ent....
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.... proceedings, the ld. AO has asked to furnish the details of payments made to farmers in cash and through bank. In response the assessee vide reply dated 02.03.2022 (APB 321-323) has uploaded the entire bank accounts, which were filed earlier, duly highlighting the entries of cash deposit and the payments made to farmers from the bank accounts of the assessee and AO himself has observed at page 28 to 30 that various payments has been made to farmers and their names are also mentioned in the assessment order. However, on his own whims and fancies has held the deposits as made out of some other trading business though he himself has accepted that such deposits were utilized for making payments to the farmers. The bench also noted that the the Commission earned is accepted as such, meaning thereby the cash deposited in the bank account, is accepted to be out of sale made by assessee in the capacity of "Adatiya". The cash deposit has been added under the head "Income from Other Sources" on the same deposits, on which commission has been declared. The ld. CIT(A) considering the provision of section 68 of the Act which lay down two fundamental criteria for considering an income as ....
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.... agriculture produce, which was in the name of assessee (though there was no invoice issued in the name of assessee) as reproduced on page 7 and 8 of assessment order and a details submission on the same has already been made. Firstly, "Bilty" is always issued in the name of recipient and assessee, being registered Adatiya in Mandi Samiti was authorized to receive goods for sale. Ld.AO could have verified this fact from the record of Mandi Samiti, which has not been done It is thus submitted that addition made by ld.AO amounts to double addition which is against the principle of taxation. It is further submitted that ld. AO grossly erred in not appreciating the fact that only "Real Income" can be taxed and moreover in the case of assessee, ld. AO miserably failed to understand the facts that in the business of Adatia only commission income can be taxed. Ld.AO has neither rebutted the submission of the assessee that cash deposits represent sale consideration received by assessee on behalf of farmers nor brought any material on record by making any independent enquiry that assessee has indulged into the trading activity which was not disclosed and the cash deposited in the bank accou....
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.... the persons to whom salary is being paid are not techno friendly and is not having legal counsels to look after their respective income tax login along with their mails and rather they are simple accountant, salesmen, loaders etc. which are earning their livelihood from the employment. Further the fact that they have provided services was neither doubted nor can be denied looking to the volume of business carried out by the assessee where the total consignment sale of more than 17.00 crores was taken place in the entire year which could not be possible without the help of manpower. Further except the salary expenses, no doubts were raised on the other expenses claimed by the assessee thus disallowance has been made without pointing out any specific defect in the records which were completely placed on record by the assessee vide letter dated 22.02.2022 In view of the above, we note that ld. CIT(A) has decided the appeal after considering all the documentary evidence furnished by the assessee and evidence adduced which are not disputed. Even ld. CIT(A) also relied upon judicial precedence while doing so. The ld. AO through ld. DR did not bring anything contrary to counter ....
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.... 98.275.00 Manish Hemrajani (PI) 2,15,600.00 2,15,600.00 Rajaram Choudhary(PI) 4,12,500.00 4,12,500.00 Suresh S/O Sh Ram Karanji 10.000.00 10,000.00 Ramesh Chand Shamma 40,000.00 40,000.00 Prashant Hemarjani 1,54,208.00 1,54,208.00 Shankar Singh S/O Bhanwar Singh 5,100.00 Manish Parvani 5,500.00 Total of Other current Liabilities Total of Balance Sheet [LIABILITY SIDE] 2,04,808.00 14,77.868.48 5,100.00 5,500.00 16,82,676.48 16,82,678.00 (1.52) 1,28,92,859.26 1,28,92,860.00 (0.74) Fixed Assets Investment Sundry debtors Pekari Udhar Kishan Leman Co. Mehsan Lemon Drop N.B.R. Jaipur Narayan Pl Okay Trade PTC Jaipur Sweet Ginger Kanhiyalal Nemamal Pakari Udhar A.KR. (Nattu Bhai) Kherva Anil Chon BJ(MK Bharbhai) Kokarwara Hemrajani Export Company 25.86.229.60 6,56,840.00 36,51,562 29 68,94,631.89 68,94,632.00 1,92,000.00 1,92,000.00 1,92,000.00 5,153.00 9.783.00 5.517.00 14.72.186.46 1.875.00 2,20,000.00 289.50 2,537.00 22.520.00 2,647.00 4,00,000.00 1.50.000.00 3,26,963.70 14.72.1....