AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 854
X X X X Extracts X X X X
X X X X Extracts X X X X
....ounds of appeal either before or at the time of hearing of appeal. 3. The fact as culled out from the record is that the assessee is an Individual. The assessee filed e-return of income on 31.03.2018 declaring total income of Rs. 8,98,600/-. The case was selected for scrutiny and thus, notice under sec. 143(2) of the I.T. Act, 1961 was issued on 21.09.2018, which was duly served upon the assessee through speed post as well as e-mail. During e-assessment proceedings, Notices were issued under sec.142(1) of the Income-tax Act, 1961 thereby calling the relevant details from time to time. In compliance with the notices issued assessee e-filed, the necessary details / information, as required, during e-assessment proceedings, which were examined by the AO. During the assessment proceedings, the assessee produced Books of Accounts along with supporting vouchers and Bank Statement which were examined on test check basis by the AO. 3.1 As is evident from the record that the assessee engaged in the business of manufacturing and trading of Gold & Silver jewellery under the name & style M/s DPD Jewellers. Assessee has declared total Sales / Turnover from the said business activiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable. Section 14 of the Income-tax Act, 1961 Heads of income Assessment year 1984- 85-Whether opening words of section 14, 'save as otherwise provided by this Act. clearly leave scope for 'deemed income' of nature covered under scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' Held, yes. [Fakir Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat) [10-08-2000]]. In the judgements referred by the appellant, the above referred judgements of honourable Supreme Court have not been considered. Further the facts of the case of the appellant are different as these pertain to the deposit of cash during the demonetisation period wherein it is a known fact that those who were having earlier accumulated unaccounted cash tried different means to somehow deposit su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... only to the chapter of business income. Accordingly the additional ground raised by the appellant is hereby dismissed." "Ground No. 1 that Ld. AO had erred in making addition u/s 68 on account of unexplained cash credit on the basis of suspicion and surmises. Decision:- (v) The appellant deposited Rs. 58,00,000 in the old currency in his bank account during the period of demonetisation. The appellant has submitted that the source of the same is from the sales made by him in the pre-demonetisation period. From the sales history of the appellant himself, it is seen that the appellant has shown sudden spike in sales in the period close to the announcement of demonetisation. Further the appellant has not deposited the cash in the bank account on a matching basis as on the one hand the appellant has claimed huge cash sales however on the other hand such cash receipt from the sales have not been deposited in the bank account. (vi) It is to be noted that each entry must be separately explained by assessee to prove the genuineness of the transaction, While explaining the various credits and investments, it is possible that the assessee may be s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was a receipt of an income nature. The very words 'an undisclosed source' show that the disclosure must come from the assessee and not from the department." (emphasis supplied) It is further observed in this case by the Hon'ble Supreme Court as under- "In the present case, the assessee claimed that the high denomination notes were a part of the cash balance at the head-office. The Income-tax Office found that at first the cash on hand was said to be Rs. 1,62,022, but on scrutiny, it was found to be wrong. Indeed, the assessee himself corrected it before the Appellate Assistant Commissioner and stated there that the balance was Rs. 1,21,875. Ordinarily, this would have prima facie proved that the assessee might have kept a portion of this balance in high denomination notes. But the assessee failed to prove this balance, as books of the assessee did not contain entries in respect of banks. Though cash used to be received from banks and sent to the various places where works were carried on and vice versa, no central account of such transfers was disclosed. There was also no account of personal expenses of the assessee and he had failed to prove....
X X X X Extracts X X X X
X X X X Extracts X X X X
....plication of mind about their reliability. A conscious call is to be taken, in a fair and objective but a realistic, manner about reliability of such evidence. As observed by Hon'ble Supreme Court, in the case of CIT Vs Durga Prasad More [(1971) 82 ITR 540 (SC)], " Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". As Hon'ble Supreme Court has observed, in this case, "..it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make selfserving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... present kind a party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents." 13. According to section 3 of the Evidence Act, a fact is said to be proved when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that the prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists. Section 114 of the Evidence Act provides that the Court may presume the existence of any fact which ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....through the process of banking transaction but that itself is of no consequence'. [CIT v. P. Mohankala [2007] 291 ITR 278 1 (SC)] (xi) In the case of Konathala Nooku Naidu v. Income-tax Officer, Ward- 1 [2024] 160 taxmann.com 758 (Visakhapatnam Trib.) [18-03-2024] [L.T.A. No.269 Viz/2023], Hon'ble ITAT upheld the addition and found the explanation as unacceptable when the source of cash deposited in the bank on 13-11-2016 was stated to be the loan which was further withdrawn in cash on 29-09-2016 in view of the fact that the assessee has not properly explained as to why the loan was availed by the assessee and for what purpose he has withdrawn the amount on 29- 09-2016 and deposited the same after one and half months. "6. Insofar as the loan of Rs. 2,60,000/- is concerned, the contention of the assessee is that he has availed a loan and withdrawn the amount and redeposited the same in his bank account. On perusal of this transaction of the assessee, I find that the assessee has availed a loan on 26/9/2016 and withdrawn the same on 29/9/2016. But, the assessee has deposited the said amount on 13/11/2016. The assessee has not properly explained as to why the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) Credit Sale (Rs.) October 2016 4,84,162 6,10,407 November 2016 32,22,668 5,81,653 The Id. AR during the hearing on 27.02.2024 sought time till 06-03- 2024 to file the original and revised VAT Returns. However such details have not been filed. Adverse inference is drawn against the appellant in this regard as it cannot be verified whether the VAT returns were revised to accommodate increase of retail sales in cash to accommodate the unaccounted cash in hand. Further the appellant has not given any plausible or cogent reasoning for the sudden spike in sales as noted in the assessment order. The appellant is also silent on the aspect of the sharply rising cash in hand which was just kept in hand and was not deposited in the bank account as against the regular business practices of the appellant himself. Month Sale in cash during FY 2016-17 Cash deposited during 2016-17 Cash deposit as % of cash sales Sales in cash during FY 2015-16 Cash deposited during 2015-16 Cash deposit as % of cash sales A B C D April 162452 77500 47.71 115500 50,000 43.29 May 56804 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ursed on 24/11/2016 for Rs. 22,22,213/-. As people start taking delivery 7 to 10 days before Dev Uthani Gyaras and sales occurred in first week of November 2016 and the whole amount was utilized to purchase raw material. On the one hand the assessee appellant was taking a loan from PNB Housing Finance, on the other hand he was having huge cash in hand which is lying idle and was not been deposited in the bank account and the appellant waited for several days(from September onwards) and a relatively smaller portion of Rs. 18 lacs was deposited in bank on 11/11/2016 and and the larger portion of Rs. 40 lacs was deposited only on 16/11/2016. The appellant has not explained issue and has maintained a complete silence. The explanations of the appellant are contradictory to the facts of his own case. It shows creation of back dated non- genuine sales bills to introduce cash in books. Further the learned AO has done a detailed analysis of the facts and reasoning which are referred to. In view of the above discussion the books of accounts of the appellant are not reliable and do not present a correct and fair view and the correct taxable income cannot be deduced therefrom. Learned....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s maintained the books of accounts. Section 68 is applicable as bank passbook can also be considered as the books of accounts for the purposes of section 68. There are judicial precedents as per which addition under section 68 of the Act can be made w.r.t. cash deposit in bank account. Hon'ble ITAT Delhi Bench in the case of Jagdish Prasad Sharma v. ITO [IT Appeal No. 104 (Delhi) of 2015, dated 13-1-2020), following the later decision of the Bombay High Court in Arunkumar J. Muchhala v. CIT [2017] 85 taxmann.com 306/250 Taxman 362/399 ITR 256 (Bom.), has held that bank passbook is also the books of the assessee within the meaning of section 2(12A) and, therefore, addition u/s 68 can also be made, irrespective of whether credit entries are made in the books of account of the assessee or not. Further alternatively such amount Rs. 12,90,178 having found its place in the bank account is also taxable as unexplained investment u/s 69 of the Act. Accordingly this ground of appeal is hereby dismissed." 5. Aggrieved from the order of the ld. CIT(A) the assessee has preferred this appeal on the grounds as reiterated in para 2 above. In support of the grounds so raised ld. AR ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for the proposition that if the profits reported by the assessee are not accepted on the basis of the supporting accounts, the ITO can process such profits by estimation after rejecting the books. That was not a case where interpretation of section 68 was called for. It is one thing to say that for separate heads of income such as profits, capital gains, etc, which would involve reporting of accounts maintained on an elaborate basis and also detailing expenditure etc, the Assessing officer may have the discretion to reject accounts and arrive at the income on the basis of estimation. However, in the case of section 68, there cannot be any estimate even if for the rest of the accounts, such an exercise is validly undertaken. This is for the simple reasons that the expression "any sum" refers to any specific amount and nothing more". In view of above, addition of Rs. 12,90,178/- deserves to be deleted. Ground No. 1: That addition u/s 68 is not possible if no books of accounts are maintained: As per Sec. 68 of the income tax act, 1961, Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offe....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee or under his instructions. In our view, the tribunal was justified in the conclusions at which it arrived. In the case of Anandram Ratinani, the Hon'ble Guwahati High Court has also held that a perusal of section 68 of the Act shows that in relation to expression "books" the emphasis is on the word 'Assessee' meaning thereby that such books have to be books of the assessee himself and not of any other assessee. It is correct that since no books of accounts are maintained in the ordinary course of business of the assessee, no such addition u/s 68 of the Act is tenable. b. ITO Barabanki v. Kamal Kumar Mishra [2013] 33 taxmann.com 610 (Lucknow Trib.) c. Roopak Jain vs. ITO Ward-48(3), New Delhi, 2016 (10) TMI 692-ITAT DELHI d. Sh. Satbir Singh Bhullar Vs. ITO [ITA 258/ASR/2022] [ITAT AMRITSAR] Further, it has been held in various judgements that Bank pass book cannot be considered as Books of accounts for the purpose of section 68: a. Rameshbhai somabhai patel v. ITO [ITA NO. 1864/AHD/2014] b. Smt. Manasi Mahendra Pitkar v. ITO [2016] 73 taxmann.com 68/160 ITD 605 (Mum. - Trib.) c. Smt. Ramilabe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....p is in the mid of the city i.e., just near to Johari Bazar and due to unexpected announcement of demonetization on the evening of 08.11.2016, the public largely purchased the jewellery as alternative for exchange of currency hence, Ld. AO's contention that no reason of sudden hike is not justified. ● During the assessment proceedings Ld. AO demanded details of day-wise opening stock, day-wise purchases, day-wise sales and day-wise closing stock along with other details like Comparative Chart of Cash Sale and Credit sale, Cash deposit in bank account in two different years and cash work done in two different years along with cash work done month-wise in two different years and the same was submitted to the Ld AO as and when demanded. ● Ld. AO never dissatisfied with the data supplied, Copy of Sales and Purchases Bills, Copy of Bank account and Narration of transactions, Copy of Purchases, Sales and Job Work account, Monthly Cash Account. However, issued SCN no. 1023025187 (1) on 24-12-2019 regarding justification of cash deposit and the same was replied as follows: - 1. Assessee is a manufacturer and work very marginally. As marriage season st....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hase gold from reputed firms and having a turnover of crores of rupees. Further, purchase and sales details were provided to Ld AO along with details of closing stock. When, neither the purchase nor stock have been objected by the Ld AO and Assessment for the A.Y. 2018-19 have been completed u/s 143(3) [PB 22-25] where the stock was never objected leading to double verification/ satisfaction of the financials in the Balance sheet as on 31.03.2017, therefore, the addition deserves to be deleted as held in ACIT vs. M/s Hirapanna Jewellers [ITA 253/VIZ/2020]. Findings of the Tribunal in above judgement is as follows: [PB 26-43] [Page No. 10-12] In the instant case, the assessee has admitted the receipts as sales and offered for taxation. The assessing officer made the addition u/s 68 as unexplained cash credit of the same amount which was accounted in the books as sales. In this regard, it is worthwhile to look into section 68 which reads as under: 68. Where any sum is found credited in the books of an assessee.......................... From the perusal of section 68, the sum found credited in the books of accounts for which the assessee offers no explanatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5/JPR/2022] VII. Roop Square Pvt Ltd [ITA 198 and 249/Chand/2021] The assessee had submitted his contentions before Ld AO that cash has been received out of cash sales, Bills do not contain KYC and Mobile numbers as assessee is a small jewellery manufacturer and do not insist for mobile numbers or addresses of customers or KYC since it was not mandatory and Department of revenue has specifically issued clarification in this regard also in the case of sales below Rs. 2 lakhs and complete details are maintained wherever the sales to a single person exceed Rs. 2 lakhs. Here we would like to state that most of the sales were below Rs. 2 lakhs. However, Ld AO did not raise any specified defects/ reasons for rejection of contention of the assessee and made addition of Rs. 12,90,178/- on the basis of suspicion and surmises which is illegal, bad in law and deserves to be deleted. In view of above submissions, whole of the addition deserves to be deleted. Ground No. 3: That the appellant craves the right to add, amend or alter any grounds of appeal before or at the time of disposal of this appeal: Not Pressed 5.1 To support the variou....