TaxTMI 
TaxTMI 
2024 (10) TMI 692
X X X X Extracts X X X X
X X X X Extracts X X X X
....ited in bank account of the Assessee u/s 69A of the Act during the period of demonetization. 1(b) That the ld. CIT(A), Ludhiana erred in law, by relying on non-jurisdiction High court decisions even which is contrary to the facts and circumstances mentioned in the assessment order. 1(c) That the appellant craves leave to add or amend any ground or appeal before it is finally disposed off. 3. There is a Cross Objection, i.e., C.O. No. 09/Chd/2024 in this case filed by the Assessee, which we shall deal in latter part of this order after deciding the appeal of the Revenue. 4. The appeal of the Revenue on first ground is basically in respect of deletion of addition of Rs. 1,58,607/- made by the Assessing Officer of GP shown by the Assessee by increasing GP rate from 3.18% to 3.43% and the second ground is regarding deletion of addition of Rs. 6,89,67,208/- made by the Assessing Officer in respect of cash deposited in bank account of the Assessee u/s 69A of the Income Tax Act, 1961 (in short 'the Act'). 5. Brief facts of the case that the Assessee firm is engaged in the business of manufacturing as well as trading of knitted cloth, mink blankets, manufacturing of T-shirts....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ellant is maintaining four series if bills, which are introduced at different time of the year with some bills having same invoice numbers though the series are different. 7. Despite being enough cash in hand, the unsecured Loans and Car loans are not set off. 8. Despite being enough cash in hand there is a withdrawal of cash in the month of October and November- 9. More cc Loan during 2016-17 despite having so much cash in hand. 10. The Appellant had manipulated his books of accounts and made back dated cash sales in order to adjust the demonetized cash. 11. There is a failure on the part of appellant to provide month-wise quantitative details in the said format. Farther no valuation and quantification of closing stock has been uploaded by the assessee. 12. There is no maintenance of stock register. 13. Further, it is clear that the Appellant is changing its stand again and again with respect to Kolkata Branch. It only leads to the conclusion that the neither there is any Kolkata Branch nor any person is appointed by the Appellant to manage the affairs of the branch. It is the unaccounted money of M/s. Shree Balaji processors lying somewhere in Kolkata which the Appe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade by the Appellant at various occasions of the amount less than Rs. 2 Lakhs where the Appellant doesn't maintain the name and address of the purchaser. Thereby observing that the Assessee must have done bogus sales to increase turnover. Further, the doubts as to Kolkata operations and cash deposited at Kolkata led the AO to observe that the unaccounted money of M/s Balaji Processors find somewhere in Kolkata which the Assessee has deposited during the demonetization period. 5.8 While making the above observations, the AO failed It appreciate that all the purchases of the Appellant are properly vouched for which required details have been submitted. Further, the Appellant has given quantitative detail such as opening stock, purchased, sales and closing stock for the year under consideration. The closing stock as reflected in books of accounts has not been disturbed and the same has been adopted as opening stock in the following year. In light of these facts, the AO mis-directed himself while calculating the total sales of the Appellant as the total sales declared by the appellant less cash deposited during the demonetization period. Actually, if the sales are reduced by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....above, the addition made of Rs. 6,89,67,208/- u/s 69A of the Act is hereby deleted and accordingly ground 3 is allowed. 5.10. In ground 4, the appellant tends to challenge the computational errors committed by the AO. During the appellant proceedings, this ground is not pressed by the appellant and accordingly is dismissed. 5.11. In ground 5 the appellant craves for the right to add, delete or amend any ground of appeal before the disposal This option was not exercised by the appellant during the appellate proceedings hence this ground is dismissed." 6. During the proceedings before us, the ld. DR vehemently argued that the ld. CIT(A) considered the addition of Rs. 1,58,607/- on the basis of increase of GP rate from 3.18% to 3.43%. The ld. DR argued that the act of the Assessing Officer was based on scientific and statistical analysis of the figures and facts given by the Assessee during the assessment proceedings, therefore, the deletion of amount of Rs. 1,58,607/- was not justified. 7 On the second Ground of appeal, the ld. DR vehemently argued against the deletion of Rs. 6,89,67,208/- which was added by the Assessing Officer in the assessment order in respect of cash depos....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The detail of cash sales were there at the 'Ludhiana Unit' during financial year 2015-16 and though, retail outlet at Kolkata was new during the year under consideration and such sales were out of available stocks and the only doubt of Assessing Officer was about the names and addresses of the parties to whom the cash sales have been made by the assessee and, thus, no adverse view can be drawn. 4 It was vehemently argued that the commodity wise details of opening and closing stock and quantitative details of all types of finished goods and raw material month wise in quantity and value have been furnished and confirmed copies of accounts of majority of the creditors have also been filed and regarding the cash sales, reliance was placed upon the judgment of different High Courts, including Punjab & Haryana High Court in the case of Sh. Rajiv Aggarwal in ITA No. 35/2020, wherein, it was held that the cash sales, cannot be doubted only on account of the fact, that the name and address of the purchaser had not been mentioned and the same have been upheld by the Hon'ble Bombay High Court in the case of "R.B. Jassaram Fateh Chand" reported in 741 ITR 33 (Bom.) and the said....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Zone Vs JCIT in ITA No. 331/Chd/2023 is being reproduced:- "We have heard the rival submissions and perused the material available on record. The assessee has deposited a sum of Rs 48 lacs on 13/11/2016 and a sum of Rs. 2 lacs on 22/02117 in its bank account maintained with Axis Bank. The source of such cash deposits has been explained by the assessee as out of its cash sales so undertaken and it has also been explained that such cash sales are subject to VAT where VAT has been collected and deposited with the government treasury. In support of its explanation, the assessee has furnished the cash book containing the entries towards the cash sales, bank statement for the relevant period, VAT returns, copy of trading nid profit I loss account and balance sheet which are duly audited. No defect t as been pointed out by the AO in terms of availability of stock or in any of the documentation so submitted by the assessee or in the books of accounts. Therefore, merely the fact that certain cash deposits have been made by the assessee during the period of demonization such deposits are on a higher side considering the past year figures cannot be basis to hold the explanation so made by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... thereby, making the enhancement of G.P. rate by the Assessing Officer. It was brought to our notice that each and every allegation as made by the Assessing Officer for rejection of books of accounts u/s 145(3) have been extensively dealt in the written submissions, dated 21.03.2023 and for the sake of brevity, the same is being reproduced as under:- i) So called high cash sales in October and November At the outset it is submitted that the assessee has been regularly making cash sales of the Blankets and knitted cloth in the normal course of its business. The assessee has been making such retail cash sales from the past many years and the details of the same has also been filed during the course of the assessment proceedings. The assessee has been making such retail cash sales both in Ludhiana and Kolkata for which the assessee has filed the complete cash book of the Ludhiana Unit and the imprest account of Kolkata Branch along with the same the assessee has filed the copies of the entire cash sale invoices. The assessee has also filed the Details of sales of goods made in West Bengal depicting the nature and the amount of the goods sold and the details of the parties to whom ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... proceeds of the sale made by the assessee. iv). It is also submitted herewith that the case of the assessee was also selected for scrutiny by the VAT department also and the books of accounts including the cash sales made by the assessee. Further, the assessee has also filed the quantity wise details of the purchases made by the assessee and the said details also stands accepted by the AO. Apart from the same, the assessee has filed the confirmed copies of accounts of the majority of the creditors further substantiating our claim that when the purchases made by the assessee has been accepted, the quantity purchased have been accepted, no adverse inference against the confirmed copies of accounts or the ledger account of the suppliers have been drawn and moreover, the cash sales bills filed by the assessee has also been accepted then how the cash sales made during the relevant assessment year can be rejected and that too merely due to the some vague and unnatural allegations and thus, it is humbly requested that the sales made by the assessee deserves to be accepted. v) The Counsel has further submitted that the case of the assessee is squarely covered by the latest judgment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s unexplained cash credit u/s 68 of the Income Tax Act. This addition was confirmed by the Ld. CIT(A). The matter was carried by the assessee before the Hon'ble ITAT and the Hon'ble ITAT deleted the addition vii). Further, it is submitted that whatever cash deposits were made by the assessee during the year under consideration and during the demonetization period were made out of the regular cash sales of the assessee which were duly recorded in the books of accounts including cash book and corresponding entries on account of deposit of cash were reflecting in the bank statement. The copy of cash book along with connected bank statements were also filed with the AO during the course of assessment proceedings and therefore, the entries of cash deposits appearing in the bank statements were fully explainable and out of the tax paid source of income of the assessee duly recorded in the books of accounts. Therefore, the cash sales made by the assessee are genuine and it does not matter whether the same has increased or decreased in a particular period when the same has duly been recorded in the books of accounts of the assessee and moreover, when the same has been substantiat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arious Hon'ble Courts that the person is not bound to give details of its customers in case of cash sales. Reliance in this regard is being placed upon the following case laws: a) The judgment of Hon'ble High Court of Bombay in the case of R.B. Jessaram Fatehchand (Sugar Dept.) v. CIT reported at [1970] 75 ITR 33 (BOM.) "There is no necessity for assessee to maintain the addresses of customers and failure to maintain the same or to supply them as and when called for cannot give rise to suspicion with regard to genuineness of transactions" b) The Hon'ble High Court of Kerala reported at [1972] 83 ITR 484 (Kerala): M. Durai Raj v. CIT. c) M/s Asian Consolidated Industries Limited vs ITO in ITA No. 4873/Del/1998 order dated 05.10.2018 (Del Bench) d) ITO vs M/s Sunny Jewellery House in ITA No. 196/Chd/2014 order dated 06.05.2016. e) ACIT vs M/s Kewal Singh in ITA No. 664/Chd/2016 order dated 08.02.2017. f). The judgement of Hon'ble Delhi ITAT in the case of ITO v. Jethu Ram Prem Chand reported at [2001] 114 Taxman 219 (Delhi)(Mag.), g) NITISHA SILK MILLS (P.) LTD. v. ITO [IT Apped No. 896 (Ahd.) of 2011, dated 20-7-2012] h) M/s Singhal Exim Pvt. Ltd. v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usiness cycle of the assessee has been running. Furthermore, it is also submitted that the unsecured loans are majorly taken from relatives and close friends and there is no compulsion of repayment of the same and thus, the assessee can very well utilize the said funds without any adverse effect on its CIBIL or any other ratings. Therefore, the cash in hand has been utilized to make the payments in the regular course of the assessee's business. Further it is also submitted that a business concern takes or increases the credit limit as per the regular business requirement and for the daily working capital requirements and as mentioned earlier the cash deposited has been utilized for the payment of the creditors. Moreover, the cash withdrawn from the bank accounts of the assessee is again an individual and business decision and the same can depend on various factors such a requirement of cash at such point of time and the AO cannot state that the same should not be withdrawn by the assessee. Moreover, what business would take irrational decisions and increase its financial cost burden and a business would only increase the secured loans when the same is required for the busines....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the closing stock of the Finished Goods. c. Apart from the same the assessee has also filed the month-wise details of the raw materials depicting the quantity purchased, its value and the value of the closing stock and the same has been filed vide reply dated 23.10.2019. d. Apart from the same the assessee has also filed the quantitative details of the purchases made during the year and the same has also been accepted by the A.O. during the assessment proceedings. xiv) Firstly the allegation of the AO that the assessee has not filed the month-wise details of the quantity purchased in incorrect and the same has been filed by the assessee and the explained as above and moreover, the allegation of the AO that the assessee has not filed the valuation of the opening and closing stock is again incorrect as the same has also been filed by>the assessee. therefore, the allegations are again falsely made up by the AO merely to reject the books of accounts and without even considering the materials and documents already on record. xv). It is also submitted that the nature of the business of the assessee is in the nature of manufacturing of Mink Blanket, knitted cloth and T-shirt and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Mills, Amritsar in ITA No. ITA No.764/(Asr)/2014, Assessment Year 2011-12, PAN: AAPFS6697G dated 26/05/2017 Therefore, the rejection of books of accounts on the basis of the allegations made by the Ld. AO is invalid as per the above explanation. xvii). Non-maintenance of bills regarding purchase of wood With regard to this ground of appeal it is submitted that the assessee had incurred power and fuel expenses of Rs 2.71 crs for purchasing pet coke and fire wood from the market. The bifurcation of the expenses are as under: Pet Coke with all the bills Rs 2.00 crs Fire wood (Cash) Rs 0.71 crs xviii). Regarding purchase of firewood in cash, it is submitted that the assessee is engaged in the business of dyeing of cloth from the past many years and in the dyeing processing business the major fuel is generated from the Firewood itself. The firewood is used in the boiler to fuel up the water in the boiler itself and in turn the steam generated from the boiler is utilized in the dyeing machines for the purpose of heating up of the dyeing machines to 130 degrees Celsius for the dyeing of polyester fabrics. It is a standard business process of dyeing industry and such process ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....anch as the assessee could not run the Kolkata Branch directly, so the whole operations of Kolkata Branch was handed over to the above mentioned person. It was agreed between the assessee and the said person that the assessee would sell the goods to the said person at a predetermined price and realize the proceeds from the said person irrespective of "he price realized by him. Meaning thereby that, the assessee would send the goods to the said person and as soon as the said person sells those goods from the Kolkata Office, the proceeds which he would realize from the sales of the said goods would be deposited in the bank account of the assessee. The profit margin at which the said person sells those goods to the subsequent parties would only be earned by the said person only and the said profit would not be transferred to the assessee. Therefore, the assessee has recorded the sales as soon as the goods are sent to the Kolkata Office managed by Ashish Kumar Kundu and for which the assessee has duly filed the copies of the retail invoices issued by the assessee to the Kolkata Office. Therefore, the assessee has been operating with the same modus operandi in the entire year and the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tted by the AO himself that said persons generates his profit and said loss and the same also has been disclosed by the said person in his return of income wherein he has shown income from business of Rs. 2,55,420/-. Therefore, apart from earning a regular salary of Rs. 60,000/- annually the said person is earned profit of Rs. 2,55,420/ - which depicts the operations being carried out by the person independently at Kolkata Office. Therefore, the allegation of the AO is totally false. xxiii). The AO reproduced the salary sheets for the month of April, 2016 to November, 2016 and on the basis of which he alleged that the person Ashish Kumar Kundu is getting meager salary of Rs. 5000/- then how can he manage the affairs of branch in such meager salary. The AO also alleged that the assessee has not deducted the TDS on the commission earned by the said persons against the goods sold by him. With regard to the same, it is reiterated that the said person is not only earning meager wages of Rs. 5,000/-, but rather he also earning a great amount of profits which has also been disclosed by him in the return of income amounting to Rs. 2,55,420/- and the same has also been mentioned at page 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing channels. Therefore, there is no iota of doubt left that the assessee has been regularly receiving the cash from the Kolkata Office and the same is being regularly deposited in the bank account of the assessee. The AO has time and time again, failed to see these facts which are already part of the departmental record and it seems the AO was so adamantly stuck with his own assumptions and presumptions that he did not even consider the record which was already in his possession or in the possession of the Income Tax Department. xxvi). The AO has alleged that why there is an Imprest Account in the books of the assessee and with regard to the same, it is submitted that the said account has been maintained in order to keep up with the position of cash in hand in the said unit. It is further submitted that the same cannot be taken into the cash book since it has not been realized by * the assessee yet and as per the general principle of accountancy an amount is only debited to the cash book only when the same is realized by an assessee. However, in the current case, the cash proceeds have only been realized at Kolkata Office by Ashish Kumar Kundu and has not been transferred to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on what has not been filed by the assessee which shows the specific mindset of the AO and his fixation on ejecting the books of accounts of the assessee. It is reiterated that the documents filed by the assessee were sufficient evidences to prove the transportation of goods and thus, the allegation of the AO is incorrect and against the facts of the case. xxviii). Allegation regarding non-receipt of confirmation from creditors u/s 133(6) At the outset it is submitted that the assessee in order to prove the genuineness of the purchases has filed various details as under:- (i) The complete purchase register, (ii) The party-wise details of purchases, (iii) The details of the creditors, (iv) Confirmed copies of accounts of majority of the creditors, (v) Quantitative details of purchases, (vi) Ledger account of purchases (vii) Quantitative details of Opening and closing stock xxix). It is submitted that the above documents also form part of the paper book being filed herewith and your kind attention is also invited towards the fact that no adverse inference regarding the above documents filed by the assessee have been noticed by the AO during the assessment proceedi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f business to the said parties and against which no adverse remarks have been given by the AO. Therefore, the allegation made by the AO is totally incorrect and baseless. xxx). Allegation in respect of variation in expenses vis a vis previous year. The AO alleged that there have been variation in the Power and Fuel Expenses in the relevant assessment year vis a vis previous year and with regard to the same we have already filed detailed submissions in para above. Further, the AO has also alleged that the wages and salaries have increased vis a vis and it has also been alleged that the assessee has been keeping bogus names in the salary register. With regard to the same it is submitted that the assessee has duly filed the salary and wages register during the assessment proceedings and it is very much common that labour does not have Adhaar Cards, however, due to the business requirements the assessee is bound to employ even such labour due to the needs of the productions. Furthermore, it is also submitted that the payment made to these labour or employees have not been doubted by the AO and when the payment made to the said persons are debated then how the existence of such labo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of accounts without assigning any reason, whatsoever and in view of the detailed reply rebutting all the allegation made for rejection of books of accounts have not seen considered and then in para 5.5, the G.P. rate has been applied on the basis of last year G.P. rate of 3.27% instead of 3.43% as applied by the Ld. Assessing Officer. 14. The Counsel argued that such observation of Ld. CIT(A) is very casual and he had not been able to rebut the detailed submissions of the assessee as submitted before the Ld. CIT (A) from pages 1 to 32, wherein, each and every issue has been thrashed and, as such, there is no justification in rejecting the books of accounts u/s 145(3) and prays for accepting of trading results as declared in view of the above said submissions. Discussion 10. We have considered the findings of the ld. CIT(A) in his order and the arguments of the ld. DR on different grounds during the proceedings before us. We find that the ld. CIT(A) has given a very clear findings on the addition on the basis of GP ratio. He has categorically stated in his order that since the GP rate of the year under consideration is less than the GP ratio of the previous year, therefore, incre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g stock as reflected in books of accounts has not been disturbed and the same has been adopted as opening stock in the following year. In light of these facts, the AO mis-directed himself while calculating the total sales of the Appellant as the total sales declared by the appellant less cash deposited during the demonetization period. Actually, if the sales are reduced by the amount of cash deposited during the demonetization period, there will be loss in the books of accounts as no other figure in the financial statement has been modified. This is contrary to the action of the AO in estimating profits, as well as observing that it appears that these are bogus sales which result in inflated gross profits" Accordingly, while estimating profits of the Appellant I have considered the total sales as declared by the Appellant and supported by VAT return. On the above observations, the following points/issues are made out as under A. Cash deposit is a part of sale proceeds and provision of section 69A of the Act cannot be applied in respect of income from a source which has already been taxed and which would amount to double taxation. B. No addition u/s 69A of Income Tax Act, 1961 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessing Officer. The Assessing Officer has accepted all the purchases along with opening and closing stock of the Assessee. Then on what basis sales out of such stock / purchases may be rejected without any proof brought on record. Thus, the above findings given by the ld. CIT(A) on this issue in his order is very much justified and needs no interference. Accordingly, Revenue's appeal on this Ground is hereby dismissed. 15. In the result, Revenue's appeal is dismissed. C.O. No.09/Chd/2024 - Assessee's Cross Objections. 16. The Assessee through its aforesaid Cross objections has raised following grounds: 1 That the Ld. CIT (Appeals) has erred in upholding the action of the assessing officer in rejecting the books of accounts u/s 145(3) of the Income Tax Act, 1961. 2. That the Ld. CIT(A) has failed to appreciate the details submissions filed on each and every issue with regard to rejection of books of accounts u/s 145(3). 3. That the adoption of gross profit by the CIT(A) @ 3.27% against the gross profit of 3.18% as declared by the assessee, is against the facts and circumstances of the case. 4. That the ground of appeal as taken by the department regarding reliance upon s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee :- "AFFIDAVIT I Raman Changotra S/o Shri. Satnam Singh R/c House No. 7491, Street No.1, Maya Puri, Tibba Road, Ludhiana do hereby solemnly state and affirm as under:- 1. That I am working as an Accountant with M/s Shree Balaji Processors, Ludhiana for the past few years. 2. That the firm had received the grounds of appeals as filed by the department for the Asstt. Year 2017-18 on 13.09.2023 and the same were handed over to me by the partner for taking appropriate action against that appeal filed by the department. 3. That I had kept the same in the file relating to the above said year and was under the bonafide impression that no action is to be done by us and it will be taken into consideration at the time of hearing only. 4. That it was only when the first hearing was fixed for 11.03.2024 before the Hon'ble Bench, that I approached counsel Sh. Sudhir Sehgal for the attending to the above said proceedings and there he asked about the cross objections and only then I became aware that cross objections had to be filed against the appeal filed by the department and, accordingly, I took immediate step in filing the cross objections and the appeal was filed on 06.0....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Despite being enough cash in hand, the unsecured Loans and Car loans are not set off. 8. Despite being enough cash in hand there is a withdrawal of cash in the month of October and November- 9. More cc Loan during 2016-17 despite having so much cash in hand. 10. The Appellant had manipulated his books of accounts and made back dated cash sales in order to adjust the demonetized cash. 11. There is a failure on the part of appellant to provide month-wise quantitative details in the said format. Farther no valuation and quantification of closing stock has been uploaded by the assessee. 12. There is no maintenance of stock register. 13. Further, it is clear that the Appellant is changing its stand again and again with respect to Kolkata Branch. It only leads to the conclusion that the neither there is any Kolkata Branch nor any person is appointed by the Appellant to manage the affairs of the branch. It is the unaccounted money of M/s. Shree Balaji processors lying somewhere in Kolkata which the Appellant had deposited during demonetization. Hence.it is a sufficient ground for rejection of books of accounts. In view of above discrepancies, the books of account of the Ap....