TaxTMI 
TaxTMI 
2023 (12) TMI 1392
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave moved an application for consolidation of cases before the CIT (A) and request for consolidated hearing in all these cases. Shri Madan Lal Aggarwal, the Karta of the HUF who looks after the cases was suffering from gangrene and finally died on 9-8-2022 after prolonged illness. That no manual copy of ld CIT (A) order was received and the order uploaded by the office of the ld CIT (A) on portal could not be noticed under the impression that appeal is pending. All other 22 cases are still pending with ld CIT (A) for orders. In the month of January 2023, while checking the portal, it was noticed that order of ld CIT (A) was passed in the case of assessee and immediately thereafter, the appeal was filed. There is a delay of 350 days in filing of appeal caused due to facts narrated above which may please be condoned in the interest of substantial justice. In this regard it was further submitted that the assessee has not make any benefit in late filing of the appeal and is keenly interested to pursue the appeal filed on merits and in support reliance was placed on the following decisions: * Improvement Trust Ludhiana Vs. Ujagar Singh & Ors Civil Appeal No. 2395 of 2008 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er contra, the Ld. DR objected to the condonation of delay application filed by the assessee. It was submitted that there was substantial delay of 350 days as rightly pointed out by the Registry and the assessee has failed to submit reasonable cause which has caused the delay in filing the present appeal except the fact that the Karta of the HUF had died in the interim on 09/08/2022. It was submitted that even if the period of ill health and the expiry of the Karta of the HUF is excluded still there is delay which has happened in filing the present appeal and therefore the delay so happened in filing the present appeal should not be condoned. 5. We have heard the rival contentions and pursued the material available on record. We find that the assessee has reasonably explained the reasons for the delay in filing the present appeal due to non-receipt of the appellate order, prolonged illness and death of the Karta of the family and thereafter, time taken by the new Karta to take stock and file the present appeal. Given the facts and circumstances of the case, we are satisfied that there was reasonable cause for the delay in filing the present appeal and in the interest of substant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w cause was issued to the assessee and in response, the assessee filed its submission which were considered but not found acceptable to the AO. 7.3 As per the AO, the onus is on the assessee to prove the source of cash deposits post demonetization in its various bank accounts and the assessee has tried to explain the source of cash deposits post demonetization as its sales receipts for the period just preceding demonetization, however the said explanation is found not satisfactory. 7.4 It was further held by the AO that every day sales are deposited on day to day basis in the bank account and the same is evident from the bank account statement of the assessee in which the sales are credited from time to time. Therefore, it is not possible that the source of cash deposits post demonetization are out of sales proceeds of the assessee. Further the AO carried out the comparison of cash sales for the month of October and November for the year under consideration with the last two years and came to conclusion that the sales shown by the assessee during the year under consideration are unreasonably high and therefore bogus and not genuine as they are incomparable to previous year sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ried the matter in appeal before the Ld. CIT (A) who has since confirmed the said additions. 9. Against the said findings and the direction of the Ld. CIT(A), the assessee is in appeal before us. 10. During the course of hearing, the Ld. AR reiterated the submissions made before the Ld. CIT (A) and it was submitted that the Ld. CIT (A) has failed to appreciate the submission so made and the legal authorities so submitted in right perspective and the contents of the submission so made read as under: "2. The above grounds of appeal are inter-related and as such are taken up together and to explain / present the submissions to support the above grounds. FACTS IN BRIEF A. That during the year in question post demonetization period assessee has deposited cash of Rs. 21,00,000/- in between 9-11-2016 to 31-12-2016 in bank and copy of cash book was filed before AO and copy attached at page 2-35. That cash was deposited out of cash sales made to various parties against sales Bills and relevant evidences supporting such sales were also produced for verification of the AO. B. That AO did not accept the explanations of assessee and held that Rs.&n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee could not prove that huge cash deposits in the bank accounts post demonetization are from sales only (Para 5.5.1) This is a strange finding of AO as cash deposit was duly recorded in the books of accounts which are duly audited and accepted by AO and there is no justification of accepting a document in parts and casting suspicion without any evidence. B. Comparative Cash Sales of October and November of last 2 years as detailed at page 4 of the Assessment order. The finding of AO was that cash sales are not comparable to previous year. All sales are subject to VAT @ 12%. Sales has been accepted by VAT department and applicable VAT was paid to department. There is no justification of suspicion without any evidence. Moreover, learned AO has applied the deeming provision contained in s.68 and there can not be any deeming within deeming. C. AO has further observed that Number of Cash Sales vouchers are on higher side in October and November. D. The cash in hand on 8-11-2016 was Rs. 20,63,712/- whereas cash in hand on 8-11-14 was Rs. 7,22,554/-. E. Cash Deposit in October and November 2016 is Rs. 24,50,000/- where....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ain incriminating facts and in case he fails to provide a credible information. It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. C. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions. It would also be necessary to reiterate that it is not perceptions but concrete facts that underline quasi judicial determinations and where concrete facts are not available, relevant facts, as would raise a credible inference of culpability requiring an assessee to rebut the inference so raised. D. In the case in hand the question is whether Cash Sale recorded as Income can be alleged to be Cash Credit u/s 68 without any evidence on record. It is a settled judicial preposition of law that "If deeming within deeming provision is allowed then it may lead to absurdity." E. It is submitted that such proposed actions based upon suspicion and doubts in absence of any evidence on record are not va....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inference. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions." F. This view is also supported by the decision of the jurisdictional ITAT in the case of Lal Chand Naresh Chand HUF vs DCIT, ITA 537/Chd/2015 wherein the ITAT has clearly held that in absence of any evidences to reject the explanations of the assessee, additions u/s 68 could not be made by the AO. Relevant extracts of the decision are as under: "The assessee having discharged his onus by providing a credible explanation, the onus to prove the falsity in the assessees explanation now rested with the AO. Having failed to do so and having not availed of the opportunity to examine the witnesses, which was presented to him by the assessee himself, the Revenue now cannot make the addition under section 68 of the Act. The Hon'ble Punjab and Haryana High Court has dealt at length on the issue of onus under the deeming provisions of the Act such as section 69A, in the case of CIT (c) Ludhiana vs Sh. Jawahar Lal Oswal in GTA No. 5/Chandi/99 dated 29.1.2016. The Hon'ble High....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Books of accounts have been accepted by AO. The purchases have been accepted sales are doubted. All goods sold are subject to VAT @12% and sales has been accepted by VAT authorities. There is no justification in treating sales realization as undisclosed Income u/s 68. B. Your attention is invited to the following judicial pronouncements where it is held that Cash deposited in bank out of cashsales is out of the purview of section 68 of the Income Tax Act. No addition for cash sales if stock is available C. Kishore Jeram Bhai Khaniya Vs ITO (ITAT Delhi) (ITANO. 1220/Del/2011) as long as stock is available and nothing adverese against the cash memo is found then cash sale con not be doubted. Cash sale is offered as Income hence same can not be added u/s 68 "6. There is another dimension to this issue. The AO made addition of Rs. 22.06 lacs u/s 68 of the Act, which contemplates the making of addition where any sum found credited in the books of the assessee is not proved to the satisfaction of the AO. It is only when such a sum is not proved that AO proceeds to make addition u/s 68 of the Act. We are dealing with a situation in which the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon'ble High Court dismissed the appeal filed by the Department. Para 2 of the judgment reads as "....On examination of the orders passed by the Assessing Officer, the Commissioner of Income-tax (Appeals) and the impugned order passed by the Tribunal, we find that both the appellate authorities below have disagreed with the Assessing Officer and have deleted the said addition on the ground that the cash sales were duly recorded in the books and that they had found place in the profit and loss account." Para 3 reads as "The Commission....
X X X X Extracts X X X X
X X X X Extracts X X X X
....are arising out of the trading entries i.e., cash sales made by the assessee which are unproved. Our view is supported by the decision of Hon'ble Andhra Pradesh High Court in the case of CIT Vs. Maduri Rajaiah gari Kistaiah - (1979) 120 ITR 294 (AP) and of Hon'ble Allahabad High Court in the case of CIT Vs. Neema Ram Badlu Ram - (1980) 122 ITR 68 (All). Accordingly, we delete the addition of bank deposits treated by the Assessing Officer as cash credits being trade creditors and sustained the addition of gross profit applied by the Assessing Officer after rejecting the gross profit addition but only at the rate of 5%. The Assessing Officer will recompute the income accordingly. No additions u/s 68 on account of Cash Sales out of Stock O. ITAT DELHI in the case of AKSHIT KUMAR VERSUS ACIT, CIRCLE-59 (1), NEW DELHI, ITANo:-6527/Del/2017 The assessee is engaged in the business of trading in fabric. The AO has made an addition of Rs. 4,20,62,550 u/s 68 on account of cash deposit representing in the bank account of assessee's as unaccounted income which has been claimed as sale of opening stock by the assessee. The additions made by the AO was sustained b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the other hand amounts received from above parties has also been added u/s. 68 of the Act.' Para 6.13 'Appellant had supplied the goods to the parties after receiving advance payments, which were credited in the core banking account through cheques/DD/Pay orders/RTGS and after verification of receipt of payments, the appellant had delivered the refined oil to the party through the tanker arranged by him. The appellant is making necessary entries in its regular books of accounts and in the stock register. Appellant has furnished the evidences in support of its contentions and established the genuineness of the transaction and nature and source of the receipts. Thus application of section 68 by the A.O. on those receipts is not justified." In view of the above uncontroverted finding more specifically when the Assessing Officer has not doubted the genuineness of the purchases and when the stocks tally has been accepted by the Assessing Officer then there is no reason to doubt the sales. The broker from Gwalior who arranged the sales with the said party also confirmed in his statement recorded by the department confirming that he made the dealing with M/s A.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ok of the appellants. The cash book of the appellants was accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the Appellate Assistant Commissioner, nor the Income-tax Officer, who was present at the hearing of the appeal before the Appellate Assistant Commissioner, considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits. The Tribunal also fell into the same error. It could not negative the possibility of the appellant being in possession of a substantial number of these high denomination currency notes. It, however, considered that it was impossible for the appellants to have had 61 such notes in the cash balance in their hands on 12th January, 1946, and then it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to treat the sum of Rs. 32,000 as income from undisclosed sources only if there was some other material from which such inference could have been drawn. No other material has been mentioned by the Tribunal in their appellate judgment or in the statement of the case." AO can not reject the explanation of Assessee without any contra material E. CIT v Ramkrishna Nursing Home 313 ITR 290, Where the assessee gives a credible explanation that is found to be satisfactory, no additions can be made to his income. "7. The enquiry under the Income-tax Act unlike before the civil court is not adversarial in nature. The assessing authority has power to adopt inquisitorial enquiry. When the assessee has given the joint statement of all the visiting specialists, wherein they categorically said that they have collected their fee directly from the patients and that the amount collected by them is not charged to the accounts of the assessee. The said statement gets prima facie credibility. Merely because the assessee has examined some of the specialists is not a ground to reject the statement of other specialists who are not examined. In the joint statement, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....planation the AO can draw inference against the assessee, but if the assessee gives a credible explanation and discharges the onus cast upon it under the deeming provisions, the onus reverts to the Revenue to prove the falsity in the facts and without doing so it cannot draw inference merely on suspicions and doubts." 7. Gr.3: Additions made without rejection of Books of Accounts. A. A complete books of accounts cash book, ledger, stock register is maintained and same are not doubted u/s 145 of the Act and stated cash deposits are duly accounted for in books of accounts and are explained to be from cash sales, it is not open to Assessing officer to make additions in respect of certain entries in books of accounts with rejecting such books of accounts. B. That before resorting to disregard the disclosed results in books of account an appropriate satisfaction on part of assessing officer as required and stipulated in section 145 is essential to claim that books are incorrect and incomplete etc. So where cash deposits are validly supported by regular & audited books of accounts then same carry huge relevance and cant be brushed aside lightly. C. The....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the income or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time. Thus, the so-called findings of fact by the Tribunal were based upon placing a wrong onus of proof and applying not the correct principles of law governing such cases. On the facts, no tangible material had been brought on the record to take the shape of any legal evidence for the purpose of recording a finding that the assessee's explanation was not worthy of acceptance. This by itself was a question of law arising from the Tribunal's decision. Therefore, the Tribunal erred in coming to the conclusion that the cash balance did not include 140 high denomination notes when they were presented to the bank for encashment." Sales credited against cash deposit - books not rejected - no additions u/s 68 G. ITAT INDORE in the case of ACIT 1 (2) INDORE VERSUS M/S S.S.P. ENTERPRISES PV....
X X X X Extracts X X X X
X X X X Extracts X X X X
....absolutely no explanation coming forth from the revenue as to why the Assessing Officer as also the appellate authorities including the Tribunal went on to substitute their own judgment for the actual figures of wastage emerging from stock register and from the books of accounts of the assessee? When the books of accounts including stock register etc. have neither been rejected nor are doubted, accounts could not be bye passed merely on the whims and fancies of the authorities. Almost the same view was taken in Madnani Construction Corporation P. Ltd. v. Commissioner of Income Tax, (2008) 296 ITR 45 (Gauhati )and Pyarelal Mittal v. Assistant Commissioner of Income Tax, (2007) 291 ITR 214 (Gauhati). Your attention is further invited to the decision of CIT v. Maharaja Shree Umed Mills Ltd. [1991] 192 ITR 565 (Raj), in which it was held in paragraph 3 as follows: "The assessee was asked to give reasons for the abrupt fall in the gross profit rate to which a reply was given that it was due to increase in expenditure on salaries and wages, fuel consumption and stores consumption. The assessee was directed to furnish the details of the percentage of consumption of the d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of books of accounts. Similarly, in the case of ACIT Vs. Ercon Composites[2014] 49 taxmann.com 489 (Jodhpur Tribunal) wherein it was held that without rejecting books of account addition on estimate basis was not justified. Similarly, the ld. Counsel also placed reliance in the case of Sky Jet 71 ITD 91 Ahmedabad Tribunal." M 2016 (3) TMI 184 - KARNATAKA HIGH COURT Other Citation: [2016] 386 ITR 702 THE COMMISSIONER OF INCOME TAX, THE INCOME TAX OFFICER VERSUS M/S ANIL KUMAR AND CO. Trading addition - non rejection of books of accounts - ITAT deleted the addition - Held that:- "Tribunal has rightly held that when the books of accounts of the assessee had not been rejected and assessment having not been framed under section 144 of the Income Tax Act the said authorities were in error in resorting to an estimation of income and such exercise undertaken by them was not sustainable. Section 145(3) of the Act lays down that the Assessing Officer can proceed to make assessment to the best of his judgment under section 144 of the Act only in the event of not being satisfied with the correctness of the accounts produced by the assessee. In the instant case the Assessin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 69B, section 69C or section 69D, if such income is not covered under clause(a),the income-tax payable shall be the aggregate of- i. the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and ii. the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause(i). (2) Notwithstanding anything contained in this Act, no deduction in respect of an expenditure or allowance [or set off of any loss]shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) [and clause (b)] of sub-section(1). C. On perusal of the above amended section 115BBE of the Act as applicable A.Y. 2017-18 onwards it is observed that the basic rate of tax has been doubled vide the said amendment with retrospective effect. This retrospective amendments create an unreasonable restriction on the fundamental rights guaranteed under Article 19(1)(g) of the Constitution of India, 1950 'right to practise any profession, or to carry on any occupation, trade or business' and t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n upon the faith of the then existing law." G. The Hon'ble Supreme Court while deciding the case of Karimtharuvi Tea Estate Ltd. vs.- State of Kerala 60 ITR 262 opined asunder: "10. Now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into, force after the first day of April of a financial year, would not apply to the assessment for that year, even if the assessment is actually made after the amendments come into force." H. CIT vs. Scindia Steam Navigation Co. Ltd.(1961) 42 ITR 589 (SC): The learned judges held that as it was the Finance Act of 1946 that imposed the tax for the assessment year 1946-47, the total income had to be computed in accordance with the provisions of the Income-tax Act as on April 1, 1946; that as the amendments made by the Amendment Act of 1946 with effect from May 4, 1946, were not retrospective, they could not be taken into consideration merely because the assessee was assessed after that date; and that the assessee was not liable to pay tax on the sum because the fourth proviso to sec....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that that which is shown by the entries is not the real 'state of affairs. 11.2 Our attention was invited to decision of the Hon'ble Punjab and Haryana High Court in ITA No. 194 of 1999 dated February 21, 2014 in case of M/s S.V. Auto Industries, Phagwara v. Commissioner of Income Tax, Jalandhar and another wherein it was held that "Concededly, books of accounts including stock register maintained by the assessee in the course of manufacturing process and business operations, have neither been doubted in their correctness nor have been questioned much less rejected under Section 145 of the Act. Once the books of accounts have not been doubted in their correctness and much less are rejected, there is absolutely no explanation coming forth from the revenue as to why the Assessing Officer as also the appellate authorities including the Tribunal went on to substitute their own judgment for the actual figures of wastage emerging from stock register and from the books of accounts of the assessee? When the books of accounts including stock register etc. have neither been rejected nor are doubted, accounts could not be bye passed merely on the whims and fancies of the authoriti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....A No. 135/Chd/2021 Dated: - 13-6-2022 d. 2023 (4) TMI 529 - ITAT AMRITSAR RAJ KUMAR (M/S RADHIKA SALES CORP) DHAB WASTI RAM, AMRITSAR VERSUS ITO, WARD 3 (3), AMRITSAR. I.T.A. No. 195/Asr/2022, Dated: - 11-4-2023 e. 2023 (3) TMI 1196 - ITAT DELHI M/S. FINE GUJARANWALA JEWELLERS VERSUS INCOME TAX OFFICER, DELHI, I.T.A. No. 1540/DEL/2022 Dated: - 27-3-2023 f. 2022 ITAT Lucknow Subodh Chandra Seth ITA 352/Lkw/2020 dated 22/8/22 g. 2022 ITAT Lucknow SITA RAM RASTOGI ITA 23/LKW/2022 dated 8/9/2022 12. The Ld. DR has relied on the order of the AO as well as that of the Ld. CIT(A). We have already taken note of the findings of the AO, hence the same are not reproduced for the sake of brevity. As far as the findings of the Ld. CIT (A) is concerned, the same are contained at para 5 of the impugned order and the same reads as under: "5. The appellant submitted during the appellate proceedings that it is part of CM jewellers group and therefore it is covered by the declaration of Rs. 3,00,00,000/- made by the group under PMGKY. Further, it was submitted that the cash of Rs. 21,00,000/- was deposited out of day to day cash....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is found that the case laws relied upon by the appellant have no bearing on the instant case. Regarding the submission of the appellant that it's case is covered by declaration of Rs. 3,00,00,000/- made by M/s CM Jewellers group under PMGKY, it is held that the declaration was made in the case of M/s CM Jewellers and not the appellant. Therefore, no credit out of the same can be allowed to the appellant." 13. We have heard the rival contentions and purused the material available on record. The assessee has deposited a sum of Rs 20 lacs on 10/11/2016, Rs 50,000/- on 6/12/2016 and Rs 50,000/- on 20/12/2016 in its bank account maintained with SBI, Ambala City. The source of such cash deposits has been explained by the assessee as out of its cash sales so undertaken from time to time 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, cash deposits with bank, complete sale and purchase ledgers, sundry creditors, VAT returns, copy of trading and profit/loss account....