TaxTMI 
TaxTMI 
2024 (10) TMI 425
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....in rejecting the books of account of the assessee by applying the provision of Section 145(3) of the Income Tax Act, 1961 without asking the assessee to produce the books of account and without examining the books of accounts. 2. On the facts and in the circumstances of the case, the ld. CIT(A) erred in sustaining the addition of Rs. 2,64,00,000/- on account of cash deposited in bank accounts in the demonetized currency, as unexplained cash credit of the assessee by applying the provisions of section 68 of the Act as against addition made by ld. AO u/s 69A and taxing the same by applying provisions of section 115BBE of IT. Act alleging the same as undisclosed income of appellant and further erred in reducing the same income from business income declared by the assessee and adding the same as Income from other sources. The entire findings of lower authorities are based on presumption, assumption and having no material or irrelevant material and without providing the adequate opportunity of submission of documents. The addition was made without considering the submission and documents of the assessee in the judicial perspective. 3. The appellant prays for leave to A....
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.... the assessee company has deposited Rs. 2,79,00,000/- in its various bank accounts during demonetization period. The assessee accepted this fact and mentioned the same amount in return filed by it on 06.03.2018. Vide notice u/s 142(1) on various dates during assessment proceeding the assessee was asked to explain the source of cash deposited during the demonetization period from 09.11.2016 to 31.12.2016. The assessee submitted that it had sold cheja stone and other material in cash of Rs. 3,24,44,415/- during the year under assessment and the cash deposited during the demonetization period is received from such sale made by the assessee. Further, the assessee stated that "regarding deposit during demonetization, a surrender of Rs. 15.00 Lac has been made before D.D.I.T Kota under P.M.G.K.Y scheme and Rs. 7,48,500/- was deposited as tax & FDR of Rs. 3,75,000/- was also made under the scheme for just to purchase the peace of mind". 3.3 As per assessee's submission, the assessee has sold material worth Rs. 3,24,44,415/- from 01.04.2016 to 08.11.2016 and no such sale has occurred after 08.11.2016. The contention of the assessee is not found convincing as the material worth Rs. 3....
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....oned in the order that as per information available on record during the year under consideration, the assessee company has deposited Rs. 2,79,00,000/- in its various bank accounts during demonetization period. As per assessee's submission, the assessee has sold some material worth Rs. 3,24,44,415/- from 01.04.2016 to 08.11.2016 and no such sale has occurred after 08.11.2016. The contention of the assessee is not found convincing as the material worth Rs. 3,24,44,415/- was sold in first 7 months and no such material was sold in next 4 months. This fact is unbelievable. The assessee has also not shown any stock of such material in its Books of Accounts of current and earlier years. Further, as business concern, sale of material worth Rs. 3,24,44,415/-in cash during the F.Y sounds uncommon. And no such sale has occurred in any previous years. Further, the assessee has not provided any bills and vouchers in support of sale of such material worth Rs. 3,24,44,415/- The AO further noted that the claim of the assessee that Rs. 3,24,44,415/- is included in its P&L and including the cash deposited during demonetization in its total income for the year will amount to double taxa....
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....the appellant. The appellant has not provided any bills and vouchers in support of sale of Cheja Stone. In the absence of these evidences, the explanation of the appellant is rightly rejected by the AO that the cash deposited during demonetization period is from the sale of Cheja Stone. The AO also recorded that the assessee company has deposited Rs. 2,79,00,000/- in its various bank accounts during demonetization period. As per assessee's submission. the assessee has sold some material worth Rs. 3,24,44,415/- from 01.04.2016 to 08.11.2016 and no such sale has occurred after 08.11.2016. The contention of the assessee is not found convincing as the material worth Rs. 3,24,44,415/-was sold in first 7 months and no such material was sold in next 4 months. This fact is unbelievable. The assessee has also not shown any stock of such material in its Books of Accounts of current and earlier years. Further, as business concern, sale of material worth Rs. 3,24,44,415/- in cash during the F.Y sounds uncommon. And no such sale has occurred in any previous years. In these facts and circumstances, the AO was correct in holding that the source of cash deposited during demonetization....
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....ed. Books of account, comprising of Cash Book, Bank Books, Ledger, etc., along with Bank Statements, bills and vouchers, were produced before the Ld. AO for examination Copies of Cash Book, Bank Books, Bank Statements and Sales Ledger were submitted to the Ld. AO. Copy of audit report, audited statement of Profit and Loss, Balance sheet and Computation of Total Income were also submitted. The reply of the appellant is not found to be acceptable in view of the findings made by the AO in the assessment order. The AO noted that the appellant has not provided any bills and vouchers in support of sale of Cheja Stone. The AO also recorded that the assessee company has deposited Rs. 2,79,00,000/- in its various bank accounts during demonetization period. As per assessee's submission, the assessee has sold some material worth Rs. 3,24,44,415/- from 01.04.2016 to 08.11.2016 and no such sale has occurred after 08.11.2016. The contention of the assessee is not found convincing as the material worth Rs. 3,24,44,415/- was sold in first 7 months and no such material was sold in next 4 months. This fact is unbelievable. The assessee has also not shown any stock of such material in it....
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.... In view of these facts the decisions relied upon by the appellant are not found applicable on the facts of the case. It is argued that once the assessing officer accepts the books of account and the entries in the books of account are matched, there is no case for making the addition as unexplained. The claim of the appellant is not found to acceptable as the AO has not accepted that the source of cash deposited during demonetization was from the sale of Cheja Stone. Therefore the argument and decisions relied upon by the appellant are not found applicable on the facts of the case. It is argued that the Ld. AD has made the huge addition under section 69A without rejecting the books of account by invoking the provisions of s. 145(3) The Income Tax Law does not empower the AD to make exorbitant addition without rejecting the books of account under section 145(3) The appellant also relied upon some decisions. Considering the reply of the appellant and facts of the case, it was considered that as per the provisions of I.T. Act, the CIT (A) has coterminous powers. On the facts of the case, the AO should have rejected the books of accounts of the asse....
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....much subject matter of appeal so far as the power of the Commissioner (Appeals) exercising enhancement of income. In this case also the amount of Rs. 2,64,00,000/- was subject matter of assessment which were taken up by the Assessing Officer during the scrutiny assessment. Therefore, this issue is very much subject matter of appeal and within the power of the Commissioner (Appeals). Therefore, on the facts of the case, the decision relied upon by the appellant is not found to be applicable. The appellant relied upon the decision of ITAT DELHI BENCH 'SMC' in the Case of Toffee Agricultural Farms (P.) Ltd.V.Income-tax Officer [2022]141 taxmann.com 429 (Delhi - Trib.). On reading this judgement it is noted that in that case it was noted by the ITAT as under - "I find merit into the contention of the assessee that there is no power conferred upon the learned CIT(Appeals) to assess a particular item under different provision of the Act what the Assessing Officer had done without giving a specific notice to the assessee regarding such action. The Revenue has not brought any material to suggest that the assessee was put to notice by the leamed CIT(Appeals) before....
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....the issue which was at all dealt with by the assessing officer, or even a question of verification made by Id AO. There was no inquiry made by the Id AO on the issue of capital gain shown by the assessee. The Id AO has not at all considered the issue of sales consideration received by the assessee on sale of house as an issue of dispute before him. Therefore according to us, Id CIT (A) could not have made enhancement on the issue holding that capital gain shown by the assessee itself is not in accordance with the law and given a finding that no capital gain has accrued to the assessee. CIT (A) further held that funds received by the assessee is unaccounted income of the assessee and chargeable to tax u/s 68 of the act. On the matrix as held by the Honourable Delhi high court the above issue falls within the scope of the provision of section 147 of the act and not u/s 251 (1) (a) of the act. Further the Honourable Delhi high court in para no 27 has also held that power of the first appellate authority is not restricted to examine only those aspects of assessment about which the assessee makes a grievance but it covers the whole assessment to correct the order of the Assessing Office....
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....d by the Id AO. However, in the case of the appellant the addition of Rs. 2,64,00,000/- was not only considered by the AO but the addition was also made by the AO. Therefore, the reliance placed by the appellant is not found to be applicable on the facts of the case. The appellant relied upon the decision of THE ITAT DELHI BENCH 'E' in the case of Hari Mohan Sharma v. Assistant Commissioner of Income-tax, Circle- 63(1), New Delhi [2019] 110 taxmann.com 119 (Delhi-Trib.). On reading this judgement it is noted that in that case it was noted by the ITAT as under- "19. The principle culled out from the above judicial precedents clearly shows that words "enhance the assessment are confined to the assessment reached through a particular process. It cannot be extended to the amount which ought to have been computed. There being other provisions which allow escaped income from new sources to be taxed after following a certain prescribed procedure. So long as a certain item of income had been considered and examined by the Assessing Officer from the point of view of its accessability and so long as the CIT(A) does not travel beyond the record of the year, there has....
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....addition which is being confirmed is not only considered by the AD but the AD made addition also. Therefore, the decision relied upon by the AD is not found to be applicable on the facts of the case In the absence of any statutory provision, the general principle relating to the amplitude of the powers of the CIT (A) is that such powers are coterminous with that of the initial authority, in the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. (Supreme Court- September 4, 1990[1991] 187 ITR 688 (SC), Jute Corporation Of India Limited). While considering the scope and powers of the appellate authority, under the Income Tax Act, 1961, courts have consistently held that the power of the first appellate authority are coterminous with that of the Assessing Officer and that the appellate authority can do what the Assessing Officer ought to have done and also direct the latter to do what he has failed. Appeal is also a continuation of original proceedings and unless some fetters are placed upon the powers of the appellate authority by express words, the appellate autho....
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....there is no provision regarding issuing show cause for applying tax rate as provided in section 115BBE. It is natural consequence if addition is made under these sections. Therefore, the argument of the appellant are not found to be acceptable that specific show cause was required to be given for applying section 115BBE. In this regard ITAT RAJKOT BENCH IN THE VijubhaJitubha Jadeja v. Principal Commissioner of Income-tax [2023] 154 taxmann.com 615 (Rajkot - Trib.) held as under - "Further the AO having made addition u/s 68 of the Act, taxing it at the rate prescribed u/s 1558BE of the Act was a natural corollary. Admittedly the law itself prescribes a special rate of tax for additions made u/s 68, 69,69A/B/C of the Act u/s 115BBE of the Act. Even the Ld. Counsel for the assessee does not dispute this position of law. The AO, therefore having not taxed the addition made on account of unexplained creditors u/s 68 of the Act, as per the rate prescribed u/s 115BBE of the Act, is clearly an error causing prejudice to the Revenue." In view of the above discussion, the addition of Rs. 2,64,00,000/- is confirmed u/s 68 as unexplained credits and the charging section 115BB....
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....eceding paragraphs. The appellant gets partial relief accordingly. The ground number 2 is treated as partly allowed." 5. Feeling not satisfied with the finding so recorded by the ld. CIT(A) on the issue of applicability of section 145(3), 69A and 115BBE of the Act on the issue the assessee preferred the present appeal on the grounds as reiterated herein above. In support of the grounds so raised by the assessee ld. AR of the assessee, has filed a detailed submissions in respect of the two grounds raised by the assessee and the same is reproduced herein below: "The assessee company is engaged in real estate business as builder and developer. Return of Income for the A.Y. 2017-18 declaring Total Income at Rs. 3,67,82,720 was E-filed by the company on 06.03.2018. The case for the AY 2017-18 was selected for scrutiny through CASS. The assessment was completed u/s 143(3) by ld. AO; DCIT, Central Circle, Kota at the total income of Rs. 6,46,82,720/- by making the following disallowance and addition. S.No Particulars Amount (Rs.) 1. Lumpsum disallowance out of Other Expenses 15,00,000 2. Addition u/s 69A by treating cash deposited in bank accou....
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.... Income from other sources. The entire findings of lower authorities are based on presumption, assumption and having no material or irrelevant material and without providing the adequate opportunity of submission of documents. The addition was made without considering the submission and documents of the assessee in the judicial perspective. 3. The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. 3) Submission of Assessee 3.1 Ground No 1 & 2 are inter connected and basically relate to holding the receipts of Rs. 2,64,00,000/- from cash sales which was deposited in bank account in demonetised currency as unexplained cash credit u/s 68 and taxing the same at higher rate u/s 115BBE of I.Tax Act by rejecting the books of account of the assessee. 3.1.1 Issues Involved in the appeal Basically three issues are emerged from the appeal of the assessee filed before Hon'ble Tribunal. (A) Treated the cash sales of Cheja (Masonry) Stone, fire wood, and scrap steel which was deposited in demonetized currency as unexplained credit entries u/s 68 of I.Tax Act and taxing ....
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....of account by invoking section 145(3) of I.Tax Act by holding that assessee failed to furnish credible evidence in support of the source of cash deposited during the demonetization, hence the books of account of assessee are not reliable. (Page 38 of order) b) The ld CIT(A) reduced the amount Rs. 2,64,00,000/- from business income of the assessee and upheld the addition of Rs 2,64,00,000/- as income from other sources u/s 68 of Income Tax Act treating the cash deposited during demonetization as unexplained credit as against unexplained investment held by ld AO u/s 69A and taxing the same under 115BBE of the Act, 1961. (page 30, 38 and 39 of order) a.3 Submission of assessee:- a.3.(i) The assessee maintains proper books of account which were audited by Chartered Accountants: - The assessee is a private limited company and maintains regular books of account. According to Section 2(12A) of the Income Tax Act, 1961, books or books of account, include ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as electronic data. The books of account are audited by Chartered Accountants under Co....
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....ters. The building plan was sanctioned by Kota Development Authority vide letter dated 15/10/2015. The most of the land in Kota is stony or say rocky and the assessee's land was also situated in a stony/rocky area. Whenever the excavation was made, it is natural that either sand is digged out in sandy land or stone is digged out in rocky land. Since the land of the assessee was stony or say rocky, huge quantity of stone was digged out while excavation of two basements and foundation of building. These stones are used as masonry stones/cheja stone. Further, in shuttering process, while casting of roofs, rafts, columns, beams wooden shuttering is also used and during this process some shuttering is damaged and becomes waste and used as fire wood. Similarly, tor steel is used in casting of rafts, beams, columns, and roof, and while cutting of tor steel bars in required sizes, scrap which is in the form of small cut of tor steel is derived and these small cut sized bars of tor steel cannot be used otherwise and are always sold as scrap. Therefore, during the process of construction of building on land, the masonry stone, scrap wood and scrap steel was obtained which the assessee sold i....
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..... AO neither found any concrete and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of non-existing of stock as on the date of sales and non-existing cash in the books of account, there is no such findings in the assessment order. A perusal of the finding of Ld. AO in the Assessment Order which clearly show that the cash sales are duly recorded in the books of account but the Ld. AO has not considered the explanation of the assessee satisfactory and made addition under section 69A which is not tenable in the eyes of law because assessee had recorded such transactions in its books of account and once they are recorded, then no explanation is required to be to be offered so far as section 69A is concerned. The ld CIT(A) invoked section 68 as against 69A applied by the ld AO and taxed the amount Rs. 2,64,00,000/- under section 115BBE as against normal tax rate. The findings of both the lower authorities are not in accordance with law and unsustainable in the eyes of law. a.3.(iii) The cash sale of cheja (Masonry) stone, fire wood, and scrap sale was treated partly as explained and partly unexplained while the nature of tra....
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.... had arisen from some undisclosed source not reflected in the books of account as against the accounted cash sales in books of account and also which is regular feature of the trade of assessee. The conclusion of ld. AO is dehors of any credible evidence/material on record is unsustainable both in law and on facts. Addition so made by the lower authorities deeming the impugned cash deposits arising out of accounted cash sales as unexplained cash credits merely on the basis surmises & conjectures is fallacious and deserves to be deleted. a.3.(iv) The Ld AO/CIT(A) rejected the explanation of the assessee without making any inquiry. The AO and CIT(A) neither followed the principle of law nor principle of evidence rather appeared to be bent upon making huge additions without any basis. The lower authorities have not made independent inquiry on this issue. The vast power has been given to Assessing Officer under Income Tax Law. a) It is settled law that the AO is quasi-judicial authority and should be governed in his function by judicial consideration and must conform to the rules of natural justice and must proceed without bias- Tin Box Co. Vs CIT 249 ITR 216....
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....vs. Commissioner of Income-tax [1959] 37 ITR 271 (SC) iii) CIT vs. Kapil Nagpal, DBITA 609/2014 (Delhi HC) iv) Goyal Gases (P.) Ltd vs. Commissioner of Income-tax [1997] 94 TAXMAN 57 (DELHI) It is admitted position of law the suspicion can be initiating point for investigation but not the final basis of assessment/reassessment/addition. i) PCIT v. Aditya Birla Telecom Ltd. [2019] 105 taxmann.com 206 (Bombay) ii) Rustagi Engineering Udyog (P.) Ltd vs. Deputy Commissioner of Income-tax [2016] 382 ITR 443 (Delhi). iii) Principal Commissioner of Income-tax vs. Meenakshi Overseas (P.) Ltd [2017] 82 taxmann.com 300 (Delhi) iv) CIT vs. Shri Jawahar Lal Oswal, DBITA 49/1999 (Punjab & Haryana HC) v) Commissioner of Income-tax v. Neel Giri Krishi Farms (P.) Ltd. [2013] 218 Taxman 95 (Allahabad)(MAG.) a.3.(v) Cash sales cannot be treated as unexplained credit entry u/s 68 of I.Tax Act. The cash deposited in the demonetized currency added as income of the assessee by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in ....
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....appeal of the assessee. The revenue did not pin point which of the findings of the ld. CIT(A) is incorrect and against the facts placed on record by the assessee. The ld. AR of the assessee during the course of hearing taken us to all the points raised by the AO so as to prove that the contention raised by the AO to prove that the sales made by the assessee company as on the date of demonetization is correct and possible looking to the strength of staff, space of demonstration and parking and the considering availability of stock on hand as proved that the sales made by the assessee company is genuine sales recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. As regards the receipt of the cash from the customer the ld. AR of the assessee relied upon the findings of the jurisdiction high court judgement in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC). In this case the Jurisdictional Hon'ble High Court have held that So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the c....
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....lders to account for the income of these items on cash basis. a.3.(vii) No sale after 08-11-2016 The lower authorities failed to understand the nature of the business of the assessee. When the excavation is completed no further stone can be digged out from earth. Similarly when the civil structure work is complete, the waste/scrap from steel or shuttering cannot be obtained. Further there was sales of cheja stone after 08-11-2016 of Rs. 2,38,850/- in legal tender currency and which the ld AO himself treated as explained. A.3.(viii) Section 115BBE cannot be applied in the case of assessee:- As stated in the forgoing paras the whole purpose of the lower authorities in singling out the cash deposited in demonetized currency as arising out of unexplained sources and is to somehow trigger the provisions of section 115BBE read with section 68 of the Act to the income already offered for tax by the assessee (as cash sales) at a higher rate of tax of 77.25% (i.e. flat rate of 60% plus surcharge @ 25% on such tax and cess as applicable). Section 115BBE of the Act is a machinery provision to levy tax on income and it should not enlarge the ambit of section....
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.... as income in its books as unsatisfactory solely to extort higher rates of taxes thereon u/s 115BBE of the Act. The AO/CIT(A) in exercising his powers u/s 69A/68 of the Act is not vested with unfettered powers to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjecture. The AO/CIT(A) is bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by the taxpayer. From the facts of the case at hand, it is clear that the AO/CIT(A) has acted unreasonably and capriciously in rejecting the genuine explanations offered by the Assessee in respect of the impugned cash deposits as unsatisfactory solely with the aim of fastening exorbitant tax liability on the assessee under the garb of section 69A/68 of the Act. Such recourse primarily hedged on surmises, conjecture, assumptions, presumptions and whims of the ld. AO/CIT(A) is clearly unwarranted and the additions so made is unsustainable in the eyes of law and thus deserves to be quashed. The ld. AO/CIT(A) while making the impugned addition u/s 69A/68 and rejecting the explanation offered by the Assessee with respect to the nature....
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....IT(A) is dehors of any credible evidence/material on record is unsustainable both in law and on facts. Findings so made by the AO/CIT(A) deeming the impugned cash deposits arising out of accounted cash sales as unexplained investment/cash credits merely on the basis surmises & conjectures is fallacious and deserves to be deleted. It is also pertinent to mention here before applying the provisions of section 115BBE of the Act the specific show caused notice did not give to the assessee and in absence of specific show cause notice the provisions of this section cannot be applied mechanically. Reliance is placed on the decision of Hon'ble Jodhpur bench of ITAT in the case of Suraj Kanwar Devra v/s ITO 2(2), Udaipur in ITA No. 50/Jodh/2021 dated 23.11.2021 Without prejudice to our forgoing submission we may further submit that amendment provisions of section 115BBE of the Act as amended by the Taxation (Second Amendment) Act, 2016 are applicable from 15.12.2016 and are not retrospective in operation and therefore not applicable to the cash deposited in the bank prior to 15.12.2016. The Tax laws as the Taxation (Second amendment) Act, 2016 was amended on 15.12.2016 and....
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....he promulgation of High Denomination Bank Notes (Demonetization) Ordinance, 1946 as unexplained money on mere conjecture and surmise of the Revenue Authorities. The relevant facts of the said case are that the ITO in the course of the assessment noticed that the appellant therein had encashed high denomination notes of the value of Rs. 2,91,000. The ITO asked for an explanation, which the appellant gave stating that these notes formed part of its cash balances including cash balance in the Almirah account. The appellant sought to prove the fact that the high denomination notes encashed by it formed part of its cash balances from certain entries in its accounts wherein the fact that moneys were received in high denomination notes had been noted. Portions of these entries to the effect that moneys had been received in high denomination notes were found by the ITO to be subsequent interpolations made by the appellant with a view to advance its case that the cash balances contained the high denomination notes encashed by it. The ITO rejected the appellant's explanation that the high denomination notes formed part of its cash balances and treated the sum of Rs. 2,91,000 as the appel....
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....llant had offered reasonable explanation as to the source of the 291 high denomination notes of Rs. 1,000 each which it encashed on 19th Jan., 1946. It was not open to the Tribunal to accept the genuineness of these books of account and accept the explanation of the appellant in part as to Rs. 1,50,000 and reject the same in regard to the sum of Rs. 1,41,000. Consistently enough, the Tribunal ought to have accepted the explanation of the appellant in regard to the whole of the sum of Rs. 2,91,000 and held that the appellant had satisfactorily explained the encashment of the 291 high denomination notes of Rs. 1,000 each on 19th Jan., 1946. [para 14] The Tribunal, however, appears to have been influenced by the suspicions, conjectures and surmises which were freely indulged in by the ITO and the AAC and arrived at its own conclusion, as it were, by a rule of thumb holding without any proper materials before it that the appellant might be expected to have possessed as part of its business, cash balance of at least Rs. 1,50,000 in the shape of high denomination notes on 12th Jan., 1946,-a mere conjecture or surmise for which there was no basis in the materials on record before it. [par....
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....ld have found, or the finding was, in other words, perverse and the Court is entitled to interfere. [para 23] j) Lakhmichand Baijnath V. CIT [1959] 35 ITR 416 (SC).) Amount credited in business books can normally be presumed as business receipt. When an amount is credited in business books, it is not an unreasonable inference to draw that it is a receipt from business k) CIT v/s. Kailash Jewellery House ITA No. 613/2010 decided by Delhi High Court on 09.04.2010 In the facts of above case cash of Rs. 24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs. 24,58,400/- was credited in ....
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....ot, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." Therefore, addition under section 68 of I Tax Act can be made only he the explanation of the assessee is not satisfactory in the opinion of "Assessing Officer". The Assessing Officer has been defined u/s 2(7A) of Income Tax act as under:- "(7A) Assessing Officer" means the Assistant Commissioner ^31[or Deputy Commissioner] ^32[or Assistant Director] ^31[or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision of this Act, and the ^33[Additional Commissioner or] ^34[Additional Director or] ^35[Joint Commissioner or Joint Director] who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;]" Therefore, CIT(A) is not assessing officer so he cannot invoke the provisions of section 68 for making the add....
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....conferred upon one authority is in substance exercised by another. The proper authority may share its power with someone else, or may allow someone else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them ". "Ministers and their departments have several times fallen foul of the same rule, no doubt equally to their surprise....":' c) Hon'ble ITAT Chennai Bench in the case of Smt. Sekar Jayalakshmi vs Income Tax Officer [2023] 150 taxmann.com 120 (Chennai - Trib.) held that CIT(A) isn't empowered to change section under which AO made an addition during assessment. The relevant finding is reproduced as under:- "In this case, the Assessing Officer made addition of Rs. 6,00,000/- as unexplained credit. However, the Assessing Officer has not mentioned the relevant section under ....
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....T(A) issued show cause notice to the assessee for rejection of books of account and application of section 68 as against section 69A applied by the ld AO. (copy at PB page 125). The assessee objected the proposed rejection of the books of account by filing detailed reply to ld CIT(A). (Copy at PB page 126-130). However, the ld CIT(A) rejected the books of account by invoking section 145(3) of I.Tax Act by holding that assessee failed to furnish credible evidence in support of the source of cash deposited during the demonetization, hence the books of account of assessee are not reliable. (Page 38 of order) c.3 Submission of assessee:- (i) The ld CIT(A) rejected the books of account without examining the books of account:- The assessee produced complete set of books of account before the ld AO, who examined the books of account and he has not rejected the books of account, on the other hand ld CIT(A) rejected the books of account without asking the assessee to produce the books of account and without examining the books of account. (ii) 145(3) cannot be applied as no finding of ld CIT(A) on the ingredients of section 145(3) of I. Tax Act T....
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....ould be disbelieved. This burden is on the AO/CIT(A) to discharge - not on the assessee. As mentioned earlier, no irregularly has been pointed out by the ld CIT(A) regarding the books of accounts maintained by the assessee. Therefore the books of account regularly maintained by the assessee in ordinary course of business are acceptable evidence u/s 34 of Evidence Act (iv) Verification of cash sale cannot be a valid ground to reject the books of account. The ld CIT(A) rejected the books of account by holding that the assessee has not produced credible evidence in support of cash sales. The lower authorities failed to appreciate the nature of cash sales. The assessee is not in the business of Cheja Stone (Masonry Stones), or wood or steel scrap but the assessee was constructing huge multi-storeyed building at Plot No 1,2,3,4 with two basements, stilt and building upto height of 30 meters. The building plan was sanctioned by Kota Development Authority vide letter dated 15/10/2015. The most of the land in Kota is stony or say rocky and the assessee's land was also situated in a stony/rocky area. Whenever the excavation was made, it is natural that sand is digged out i....
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....re should be some material that cash sales made by assessee either on account of sale on a lower price or sale made out of the material which is not shown in the books of account. There is no instance that cash sales have been made on lower rate than prevailing market price. In view of these facts and circumstances, we hold that there was no justification in rejecting the books of account and disturbing the trading result." iii) ITAT Delhi in Kishore Jeram Bhai Khaniya, Proprietor, M/s Poonam Enterprises v. ITO ITA No. 1220/Del/2011 ITAT Delhi Judgement dated 13.05.2014) The Hon'ble Tribunal held that We find that so long as the availability of stock in there and there is nothing adverse against the cash memos issued by the assessee, such cash sales cannot be doubted. Here it is pertinent to note that the volume of such cash sales at Rs. 22.06 is to be seen in the light of assessee's total turn- over of Rs. 10.29 crores. It is but natural that if a customer makes cash purchase and lifts the goods, there is no duty cast upon the seller to insist for the address of the purchaser. In the light of the fact that stock record was available with the assessee, wh....
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....unt therefore there is no justification in estimation of income by applying NP rate and accordingly the lower authorities are directed to delete the addition of Rs. 47,72,297/- sustained by ld CIT(A)." (i) M. DURAI RAJ vs. COMMISSIONER OF INCOME TAX HIGH COURT OF KERALA (1972) 83 ITR 484 (KER):- Held What is relevant to consider in such cases is whether the assessee's accounts are maintained according to the method regularly employed by him, whether they are correct and complete, and whether the income can be properly computed from the accounts. There is no finding that the purchases have been exaggerated or the sales have been suppressed, or that any transaction has not come into the accounts. In these circumstances, the grounds stated by the Tribunal are neither valid nor relevant in rejecting the accounts of the assessee. (c) ST Teresa's Oil Mills Vs State of Kerala 76 ITR 365 (Ker) Accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reason to indicate that they are unreliable. (e) Haridas Parikh Vs ITO 113 TTJ 274 (ITAT Jodhpur):- Hon'ble ITAT Jodhpur....
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.... For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. Hon'ble ITAT placed reliance on -Radhasoami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC), CIT vs. A.R.J. Security Printers (2003) 183 CTR (Del) 323 : (2003) 264 ITR 276 (Del) and CIT vs. Neo Poly Pack (P) Ltd. (2000) 245 ITR 492 (Del). (g) Avdesh Pratap Singh Abdul Rehman & Bros Vs CIT (1994) 210 ITR 406 (All) 186-187 -Held that absence of stock register may not per se lead to an inference that accounts are false or incomplete. (h) Pandit Bros Vs CIT (1954) 26 ITR 159 (Pun) PB 188-194-Held that absence of stock register is not sufficient ground to reject the books of account. (i) Ashok Refractories Pvt Ltd Vs CIT (2005) 279 ITR 475 (Cal) PB 195-201 - Held that absence of stock register may not per se lead to an inference that accounts are false or incomplete. Therefore, in view of submission, the ld CIT(A) has not justified in rejecting the books of account by invoking the section 145 and the action of ld CIT(A) deserves to be set aside 3.3 Ground No 3:- Not pressed Prayer of assessee:- ....
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....p; 9 CIT vs. Kapil Nagpal, DBITA 609/2014 (Delhi HC) 81-89 10 Goyal Gases (P.) Ltd vs. Commissioner of Income-tax [1997] 94 TAXMAN 57 (DELHI) 90-93 11 PCIT vs. Aditya Birla Telecom Ltd. [2019] 105 taxmann.com 206 (Bombay) 94-104 12 Rustagi Engineering Udyog (P.) Ltd vs. Deputy Commissioner of Income-tax [2016] 382 ITR 443 (Delhi). 105-117 13 Principal Commissioner of Income-tax vs. Meenakshi Overseas (P.) Ltd [2017] 82 taxmann.com 300 (Delhi) 118-136 14 CIT vs. Shri Jawahar Lal Oswal, DBITA 49/1999 (Punjab & Haryana HC) 137-162 15 Commissioner of Income-tax vs. Neel Giri Krishi Farms (P.) Ltd. [2013] 218 Taxman 95 (Allahabad)(MAG.) 163-169 16 R.B. Jessaram Fatehchand (Sugar Dept.) v/s Commissioner of Income Tax [1970] 75 ITR 33 (Bombay) 170-177 17 CIT v/s. Kailash Jewellery House ITA No. 613/2010 Delhi High Court dated 09.04.2010 178-179 18 Gurumukh Singh Vs CIT 12 ITR 393, 427 (FB) 180-207 19 As in the case of CIT Vs. Associated Transport Pvt. Ltd. [1994 (1) TMI 18 - CALCUTTA HIGH COURT] 208-210 20 Ghanshyam K. Khabrani vs. ACIT [2012] 346 ITR 443 (Bom) 211-216 21 CIT ....
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....tnam Dy. Commissioner Of Income Tax Circle-3 (1) Visakhapatnam Versus Sri Jaya Prakash Babu Valluri And (Vice-Versa) 642-648 43 Karthik Constructions [2018 (3) TMI 39 - ITAT MUMBAI] the Ld.CIT(A) 649-652 44 Hon'ble Income Tax Appellate Tribunal Delhi Bench 'D': New Delhi in ITA No. 2835/Del/2015 (Assessment Year: 2012-13) Smt. Tripat Kaur Date of pronouncement 09/10/2018 653-667 45 Hon'ble ITAT Chennai Bench in the case of Smt. Sekar Jayalakshmi vs Income Tax Officer [2023] 150 taxmann.com 120 (Chennai - Trib.) 668-670 46 Haridas Parikh Vs ITO 113 TTJ 274 (ITAT Jodhpur) 671-673 47 Vishal Infrastructure Ltd Vs ACIT 104 ITD 537 (ITAT Hyderabad) 674-693 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee submitted all the details including the ledger account of the sale of cheja stone. The assessee is in the business of development of immovable property. The assessee has excavated the land which is under development. For the basement of the property to be developed was rock land. Assessee excavated 10 feet which of two basements and five feet four foundation of....
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....at has not been correctly appreciated by the lower authorities. As regards the sales of stones, provisions of TCS are not applicable so while selling that part of stones offered as revenue receipts. When this arguments was advanced by the assessee before the lower authority they did not feel to make the spot enquiry about the contentions raised by the assessee. As regards the contentions of rocky land has been rejected without making any enquiry. The decisions cited by the lower authorities are different on facts and thus are not applicable. To support the contentions so raised by the ld. AR of the assessee, he has relied upon the various case laws cited in the paper book filed. The ld. AR Vehemently opposed the action of the revenue that they cannot charge new source of income which is already reflected in the books of the accounts. 8. Per contra, the ld. DR relied upon the order of lower authorities and also filed a report of ld. AO which reads as under:- "Subject:--Calling of report on Appellate proceedings in the case of Suwalka and Suwalka Properties and Builders Pvt. Ltd., PAN- AAHCS7054C for the A.Y. 2017- 18 before the Hon'ble ITAT-reg. Respected Si....
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....of the assessee by applying the provision of Section 145(3) of the Income Tax Act, 1961 without asking the assessee to produce the books of account and without examining the books of accounts. 2. On the facts and in the circumstances of the case, the Ld CIT (A) erred in sustaining the addition of Rs 2,64,00,000/- on account of cash deposited in bank accounts in the demonetized currency, as unexplained cash credit of the assessee by applying the provisions of section 68 of the Act as against addition made by Id AO u/s 69A and taxing the same by applying provisions of section 1158BE of 1. Tax Act alleging the same as undisclosed income of appellant and further erred in reducing the same income from business income declared by the assessee and adding the same as Income from other sources. The entire findings of lower authorities are based on presumption, assumption and having no material or irrelevant material and without providing the adequate opportunity of submission of documents. The addition was made without considering the submission and documents of the assessee in the judicial perspective. 3. The appellant prays for leave to Add, to amend, to delete, or modif....
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....Kota under P.M.G.K.Y scheme and Rs. 748500/- was deposited as tax & FDR of Rs. 375000/- was also made under the scheme for just to purchase the peace of mind". During the assessment proceedings, as per assessee's submission, the assessee has sold some material worth Rs. 3,24,44,415/- from 01.04.2016 to 08.11.2016 and no such sale has occurred after 08.11.2016. The contention of the assessee is not found convincing as the material worth Rs. 3,24,44,415/- was sold in first 7 months and no such material was sold in next 4 months. This fact is unbelievable. The assessee has also not shown any stock of such material in its Books of Accounts of current and earlier years. Further, as business concern, sale of material worth Rs. 3,24,44,415/- in cash during the F.Y sounds uncommon. And no such sale has occurred in any previous years. Further, the assessee has not provided any bills and vouchers in support of sale of such material worth Rs. 3,24,44,415/-. Further the contention of the assessee is that the Rs. 3,24,44,415/- is not included in its P&L and including the cash deposited during demonetization in its total income for the year will amount to ....
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....assessee are not found applicable on the facts of the case. It is argued that the Ld. AO has made the huge addition under section 69A without rejecting the books of account by invoking the provisions of s. 145(3). The Income Tax Law does not empower the AO to make exorbitant addition without rejecting the books of account under section 145(3). The appellant also relied upon some decisions. Considering the facts of the case, it was considered that as per the provisions of I.T. Act, the CIT (A) has coterminous powers. On the facts of the case, the AO should have rejected the books of accounts of the assessee as the source of cash deposited during the demonetization period is not satisfactorily explained by the assessee. Therefore, the assessee was issued show cause notice on 29-12- 2023 as per provisions of section 251(2) of the Income Tax Act by the CIT(A). In response to the show cause notice, the assessee furnished reply on 03-61 2024. The appellant mainly argued in the reply that CIT(A) has no power to trail beyond the subject matter of the assessment. It is argued that the CIT (A) is no entitled to assess new source of income. While considerin....
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....wn any stock of such material in books of accounts and the fact mentioned by the assessee for sale of material to the tune of Rs. 3,25,45,415/- cannot support the contentions. The assessee failed to provide any bills/vouchers for recording such high value of sale recorded in the books. The assessee has merely submitted the ledger account and cash book which was not sufficient to prove the source deposit of cash into the bank account under the demonetization period for an amount of Rs. 2,64,00,000/- and thereby the Assessing Officer reasoning were correct. When the matter carried out before ld. CIT(A) by the assessee, CIT(A) has rightly observed that the addition is to be made in the hands of the assessee u/s 68 of the Act and not u/s 69A of the Act. The ld. CIT(A) has done that as per co-judicial before vested upon him. While doing so ld. CIT(A) has also relied upon the various judicial decisions as cited in his order. The assessee even before the ld. CIT(A) could not submit any details of source of such cash deposited into bank account. The ld. CIT(A) has also fairly directed the ld. AO to give relief of amount already recorded in the books of account and has confirmed the levy of....
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....e that they sold material worth Rs. 3,24,44,415/- from 01.04.2016 to 08.11.2016 and no such sale has occurred after 08.11.2016. Ld. AO found that contention of the assessee as not convincing as they have sold stone in first 7 months and no such material was sold in next 4 months. Ld. AO also noted that the assessee has also not shown any stock of such material in its Books of Accounts of current year as well as for the earlier years. Further, as business concern, sale of material worth Rs. 3,24,44,415/- in cash during the year sounds uncommon as also no such sale has occurred in any previous years. Further, before AO the assessee not provided any bills and vouchers in support of such sale. Assessee contended that Rs. 3,24,44,415/- is included in its Profit & Loss Account and that explain the source of cash deposited during demonetization. Charging it again will amount to double taxation, but that submission was not found convincing to AO. The assessee has not provided any bills and vouchers in support of its claim of sale of Rs. 3,24,44,415/- and it could not establish that the cash obtained from such sale is deposited during demonetization. The assessee has only provided cash book....
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....dence are available to prove that genuineness of the sales was made from which the cash was received and deposited during the demonetization period. The assessee also asked to show cause as to why the cash deposited should not be treated as unexplained credit in the books of accounts as per provision of section 68 of the Act. Assessee on 03.01.2024 filed a detailed submission objecting to the action of the ld. CIT(A)stating that the invoking of both the provisions are beyond the scope of appellate proceedings. 15. The assessee contended that impugned addition represents the amount realised on account of the sales recorded in the regular books of accounts of the assessee. Those books of accounts are audited as per the provisions of the Companies Act as well as under the Income tax Act. There are no adverse remarks in the books of accounts maintained by the assessee. The ld. AO has not rejected those books of accounts while examination of the said books of account and based on the information so called for also not found any defects in the records so maintained by the assessee. The sales so made by the assessee is duly accepted and offered for value added tax and that sales have a....
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....s not considered. While doing so ld. CIT(A) has not satisfied the condition as required as per provision of section 145(3) of the Act and that too without pointing out any defects in the books of accounts. The ld. CIT(A) merely rejected the book results because the assessee deposited cash in demonetized currency, and that was the reasons to reject the book results which is not a valid reason to invoke the provision of 145(3). Thus, at this stage it would be better go through the provision that section and the same reads as under : Method of accounting. 145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assess....
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....rror, therefore, the issue is answered in favour of the assessee and against the Department. Here we note that out of the sales of worth Rs. 3,24,44,415/- sales worth Rs. 2,64,00,000/- was not considered as genuine because the assessee out of those sales deposited the amount in the specified bank notes. Thus, on the same set of records revenue was satisfied for sales of Rs. 60,44,415/- [ Rs. 3,24,44,415 less Rs. 2,64,00,000/- ] and for Rs. 2,64,00,000/- hold a view that the assessee has not maintained proper sales records and therefore invoked the provision of section 145(3) of the Act is not correct. Ld. AO or that of ld. CIT(A) has not considered it fit to make the verification of the contention at the place of business / site to verify the contention and thereby tried to collect the corroborative evidence and without doing so part sales is accepted and part not is not correct reasons to reject the books of accounts. Based on these observations ground no. 1 raised by the assessee is allowed. 16. Ground no. 2 relates to action of the lower authority treating the part of the sales attributable to cash sales as unexplained money (under section 69A) or that of the unexplained c....