TaxTMI 
TaxTMI 
2025 (2) TMI 598
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....21 do hereby declare on oath as under: - 1. That I am aged 52 years, engaged in jewellery business in Jaipur. 2. That I have given my email address on the portal of the Income Tax Department. However, being not conversant with technology, I normally do not check my emails. All my correspondences are through my mobile phone or in physical manner only. I seldom use my email ID. 3. That during the course of first appellate proceedings, apart from getting emails of the notices issued, I also used to get SMS on my mobile phone the number of which was also given by me on the Income Tax portal. 4. That upon receiving such messages from the Income Tax Department during the appellate proceedings, I immediately used to intimate my Chartered Accountant who was handling my case before NFAC. 5. That the present order passed by the Id. CIT(A) was not intimated to me on my mobile number by way of SMS. As a result, I was not aware of such order having been passed in my case by the CIT(A)/NFAC. 6. That while preparing to file my return of income for FY 2023-24, when my Chartered Accountant logged on to the Income Tax Portal, he came to know of the order having already been passed by Id.....
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.... illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the invocation of Section 115BBE, as being not in accordance with the relevant law. 3. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing." 7. Succinctly, the facts as culled out from the records are that the assessee is engaged in the business of trading of manufacturing and trading of gold and diamond jewellery in the name and style of M/s Jai Jagdish Jewellers. Assessee filed return showing total loss at Rs. 4,93,455/- on 28.09.2017, which was processed u/s 143(1) of the IT Act. Subsequently, the case was selected for complete scrutiny manually to examine the issue of abnormal increase in cash deposits during demonetization period from 09.11.2016 to 30.12.2016. Accordingly statutory notice u/s 143(2) was issued on 29.09.2018 which was duly served upon the assessee through ITBA portal. Notice u/s 142(1) along with questionnaire dated 11.11.2019 was issued to the assessee electronically for filling the reply/details on 15.11.2019. In response to the notice so issued, the assessee filed all the details on the ITBA portal wh....
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....,48,173/- 65,000/- 19/10/2016 9,75,353 1,27,000/- 31/10/2016 14,43,326/- 2/11/2016 20,99,220/- 1,35,000/- 3/11/2016 25,72,205/- 1,50,000/- 5/11/2016 29,76,815/- 5,90,000/- 7/11/2016 26,71,165/- 1,10,000/- 8/11/2016 53,10,622/- - 13/11/2016 53,10,622/- 50,00,000/- Ld. AO from the above chart observed that despite having a considerable amount of cash in hand on different dates, assessee had deposited a meager amount in comparison to what was claimed to be available cash on hand; that the assessee had hardly made any cash purchases; that this fact further gets momentum from the fact that during the AY 2016-17, the average cash in hand was Rs. 2.78 lac and during AY 2017-18, up to September 2016 the average cash on hand was Rs. 3.03 lac while alleged cash in hand on 31.10.2016, it was 14.43 Lac which rose as high as up to Rs. 53,10,622/- on 08.11.2016 (evening); that in morning of 07.11.2016, it was Rs. 26.71 Lac, but the assessee deposited only Rs. 1.10 lac out of cash claimed to be available on that date which apparently looks unreasonable considering the fact that the assessee had been maintaining average cash balance of approximately Rs. 3 lac. Ther....
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....declared by the assessee was not considered for verification and thereby he invoked the provision of section 145(3) of the Act and rejected the book results. As regards the contention of the assessee for verification of the sales by invoking the provision of section 133(6) [calling for any information from any person or any officer] , section 131 [Summons enforcing attendance of any person or any officer and examine him on oath] and Section 131(1)(d) [Issuing commission to any authority to conduct any investigation] not considered as the assessee failed to discharged the initial onus by providing the name, complete address, contact number / mobile number / landline number, PAN etc., the genuineness of the sales made to parties to whom goods were claimed to have been sold, were not considered. But, at the same time, ld. AO also noted that the assessee was engaged in the regular business of jewellery and hence, the cash deposited during the demonetization period, being a peculiar period, must be inclusive of his genuine sale proceeds as well. Therefore, he considered that cash sale shown during October and till 8th November, 2015 as this period of Year 2015 and 2016 covered most of....
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....hat since the appellant is engaged in regular business of jewellery and hence cash deposited during the demonization period, being a peculiar period must be inclusive of his genuine sales proceeds. Accordingly in order to ascertain the cash earned on account of genuine cash sale, the AO has taken into account cash sale shown during October and till 8th November 2015, at this period of year 2015 and 2016 covered most of big festivals/ auspicious occasions like Dipawali, Merriages etc. during these months. Further AO has also given weightage on account of overall inflation, changes in price of Gold & diamond etc. at the rate of 5%. The AO has given his finding that sale shown 2015 during October was Rs. 2313210/- and from 1st November to 8th November 2016 was Rs. 256354/- totalling Rs. 2369564. Hence AO has concluded that in this way cash earned by the appellant out of genuine cash sale is worked out at Rs. 2428042/- after giving weightage 5% over last year turn over shown during this period. Based on his cash sale over the last 2 years, the appellant has concluded that an amount of Rs. 3795560/- is held to be undisclosed income available with appellant in the form of cash prior to d....
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....eriod. On the proper examination of the present case in the light of findings of the AO contained in his assessment order and explanation submitted by the appellant, I am inclined to concur with the findings of AO with regard to addition u/s 68 amounting to Rs. 3795560/- as unexplained income of the appellant for the assessment year 2017- 18. Hence I hereby confirmed the addition of Rs. 3795560/-. Therefore this ground of appeal is dismissed. 5.5 Ground no. 2: vide this ground of appeal the appellant has challenged the imposition of interest u/s 234B of IT Act. In view of the findings contained in the paragraph 5.4 above, there is no need to separate adjudication. 6.0 In the result, the appeal is dismissed." 9. Feeling dissatisfied the assessee preferred present appeal on the grounds as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, has filed the written submission in respect of the grounds raised by the assessee. The written submission so filed reads as under: I. The assessee engaged in the business of manufacturing and trading gold and diamond jewellery under the name and style of M/s Jai Jagdish Jewelers, filed return of in....
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....ing the relevant previous year. These submissions included complete address of the buyers involved in the cash transactions, as recorded in the sales bills. Despite the submission of these comprehensive details and supporting evidence, the lower authorities failed to point out any specific discrepancy or irregularity in the information provided by the assessee. 2.5. Ld. AO erred in stating that identity of persons from whom cash payment have been received has not been proven by the assessee. Ld. AO did not invoke Section 131 (summoning purchasers) or Section 133(6) (calling for information) to substantiate the allegation that sales were fabricated or non-genuine. 2.6. Ld. AO simply stated that the assessee did not provide the phone numbers of the person to whom sales were made. Also, that no confirmation was received of the sales having been made. It is submitted that there was no requirement for the assessee to collect the phone number of the buyers and also to take a confirmation from them. The same practice had been followed by the assessee in the proceeding years as well, which had not been accepted by the department in the past. 2.7. Initial onus with respect to the tran....
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....ing some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact, the AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account Similar observations were made by ITAT, Jaipur Bench, in the case of Raj Kumar Nowal, ITA No. 165/JP/2022, Jaipur Bench, 2.13. Attention is drawn towards Hon'ble ITAT, Vishakhapatnam Bench in the case of Hirapanna Jewellers, I.T.A. No. 253/Viz/2020. The facts in this case are that the assessee firm was engaged in the business of trading of jewellery. During the period of post demonetisation period, it had deposited Rs. 5.72 crores (SBN) in its bank account. Out of above Rs. 4.72 crores pertained to sales before demonetisation period. The AO, treated the sales as unexplained cash credits, as no details of sales were provided, and made addition of Rs. 4.72 crores u/s 68 r.w.s. 115BBE. Hon'ble Bench held that where assessee has admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE ag....
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....ase of R.B. Jessaram Fatehchand v. CIT (1970) 75 ITR 33, wherein the Hon'ble High Court at Para 2 of the order held as under: "In these circumstances, the reason given by the Income-tax Officer for rejecting the book results shown by the assessee's accounts or for not accepting the cash transactions as genuine cannot be accepted as good and sufficient unless there was an obligation on the part of the assessee to keep a record of the addresses of the cash customers. It could not, therefore, be said that the failure on his part to maintain the addresses was a suspicious circumstance giving rise to a doubt the genuineness of the transactions entered into by the assessee." The Hon'ble High Court at Para 3 of the order further held as under: "In the case of a cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser." The Hon'ble High Court at Para 4 of the order finally held as under: "Since, having regard to the nature of the transaction and the manner in which they had been effected, there was no necessity whatsoever for the assessee to have maintained the addresses of ....
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....t alongwith other cash balance available with the assessee was deposited into the bank account after announcement of demonetization by the Government of India. He also submitted that the assessee has raised sale bills against the said advances in the name of respective customers. Since the transaction was less than Rs.2.00 lakhs, it was stated that the assessee did not collect complete details of the customers. Thus, it is seen that the advance amount collected from customers, the sales bill raised against them etc., have been duly recorded in the books of account. The impugned deposits have been made from cash balance available with books of account. I also notice that the Assessing Officer has not rejected the books of account. When cash deposits have been made from the cash balance available in the books of account, in my view, there is no question of treating the said deposits as unexplained cash deposit as opined by the Assessing Officer. 5. The Ld A.R relied on certain case laws which are relevant to the issue under consideration. In the case of Lakshmi Rice Mills (1974) 97 ITR 258 (Patna), it has been held that, when books of account of the assessee were R.S. Diamonds Ind....
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....e and in the branches, there was possibility of his earning a considerable sum as against which it showed a net loss of about Rs. 46,000. The Income- tax Officer also noticed that notwithstanding the fact that the period was very favourable to food grains dealers, the appellant had declared a loss for the assessment year 1944-45 up to 1946-47, though it had the benefit of a large capital on hand. The Income-tax Officer further took into consideration the circumstances that Nawgachia and Dhulian were very important business centres and Sahibganj the principal place of business had gained sufficient notoriety for smuggling foodgrains and other commodities to Bengal by country boats. Dhulian which was just on the Bengal-Behar border was also reported to be a great receiving centre for such commodities. Having regard to all these circumstances, the Income-tax Officer 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 appellant's secreted profits from business and included it in its total income and assessed the appellant for the said assessment year on the income of Rs. 1,39,117. Dealing with....
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....er Section 68 on account of alleged bogus cash sales were deleted: - * ITAT Chandigarh in the case of Smt. Charu Agarwal & M/s. Kalanidhi Jewellers Vs. DCIT ITA No. 310 & 311/Chd/2021 order dated 25/03/2022 The findings of Hon'ble ITAT is in para 10 of the order. Hon'ble ITAT after considering the decision of the Hon'ble Delhi High Court in the case of Pr. CIT (Central)-3 V/s. M/s. Agson Global Pvt. Ltd. In ITA No. 68-73/2021 and various other High Courts and decision of Hon'ble ITAT Vishakhapatnam Bench on identical issue in the case of ACIT v/s. Hirapanna Jewellers MANU/IV/0034/2021 : (2021) 128 Taxmann.com 29 held that the assessee was maintaining complete stock tally, the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was no justified. Sales made by the assessee to cover the cash deposited in the bank post demonetization, was sufficient source of the cash deposited i.e.; the sales from the existing stock available with the assessee and was well explained, therefore, the addition made by the AO and sustained b....
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....neously relied upon judicial pronouncements mentioned on Pages 7 and 8 of the order, which are not relevant to the facts of the present case. It is reiterated that the assessee had provided the complete addresses of the buyers who purchased jewellery from him, accordingly, the onus on the part of the assessee stood completely discharged. As far as the applicability of Section 68 is concerned, it has been submitted that the section is inapplicable to the present case, as per the legal position already set out above. Further, reliance on the case laws cited by the ld. AO is misplaced, as they do not align with the facts of the present case. 2.26. NFAC has also disregarded the submissions filed by the assessee, and without any cogent basis, has passed upheld the order of the ld. AO. In view of the above, application of Section 68, read with Section 115BBE, by the ld. AO, to the amount of Rs. 37,95,560 accounted for sales by the assessee, is illegal and deserves to be quashed." 10. To support the contention so raised in the written submission reliance was placed on the following evidence and records: Sr. No. Particulars Page No. 1. Copy of Vat return for the period FY 2016-17....
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....ion of Rs.37,95,560/- made by the ld. AO as unexplained cash deposits u/s 68. As the brief facts of the case have already been discussed herein the above paras and therefore, the same are not being repeated. The broad issue raised before this Tribunal is as to whether the cash sales recorded and supported by the sale invoice be considered as unexplained money and that too when the profit derived from those sales proceeds is already taxed as part of sales. The bench notes that on 13.11.2016 i.e. after the five days of the demonetization, the assessee deposited a sum of Rs. 50,00,000/- in the bank account. The assessee claimed before the lower authority that the said cash deposit was derived from the sale proceeds i.e., received on account of the sales made by the assessee. In support of the sales so made, the assessee submitted all the invoice with complete year cash book, names, addresses and telephone numbers of the person to whom the cash sales was made and that cash collected from them had been deposited into the bank account [page 3 of the order of the AO]. The assessee also submitted the comparison of sales and cash deposited into the bank account with last year for each mon....
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.... not been regularly followed by the assessee. Based on the facts, as discussed above, it is not a case of the Revenue based on second and third reason, but based on the first reason as ld. AO was not satisfied about the correctness of completeness of the accounts. But the situation would not be same when the assessee has produced all the records that was required by the AO. The bench notes that before the ld. CIT(A), the assessee made a submission to explain as to why the provision of section 145(3) could not be invoked in the case of the assessee. The assessee submitted that AO cannot reject the books of accounts and apply the provisions of section 145(3) of the Act unless any material record has been brought on record to hold that books are not reliable, when those are maintained, and audited by an independent Chartered Accountant. In the audit report, no adverse observations were made by the lower authorities. The ld.AO has not given required notice before rejection of book results, as required under law. Even the ld. CIT(A) has simply supported finding of the ld. AO without dealing with said contention of the assessee. Therefore, in such circumstances and facts of the case, th....
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....arguments of the ld. AR that the main objection raised by the AO was that input/output ratio in various months has the inconsistency which has been duly explained by the assessee vide letter dated 26.03.2004 and the second objection by the AO was that the sister concern M/s. Bharat Potteries Ltd. has declared more yield and more gross profit, has also been explained by the assessee vide the same letter dated 26.03.2004. Therefore, the inconsistency in the input/out ratio in various months the reasons for which has been explained by the assessee, cannot be the basis for rejection of books of account. The yield and gross profit rate declared by the assessee can also not be the basis for rejection of books of account since M/s. Bharat Potteries Ltd. is manufacturing maximum of stoneware crockery and for many other reasons which were explained by the assessee vide its letter dated 26.03.04 which was ignored by the AO and the AO has not pointed out any specific defects in the purchases, sales, opening stock and closing stock of the assessee and the AO has not brought on record any cogent material to prove that the assessee has sold the under- production out of the books of account. Ther....
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....f evidence. Once ld. AO accepted part of the sales as genuine, why not the other part, on the same set of evidence placed on record. The bench notes that to drive home to this contention ld. AR of the assessee relied upon the decision of our own Jurisdictional Hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia Vs. ITO [298 ITR 349] wherein it has 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 customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise. We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them. Question No. 2 relate....