TaxTMI 
TaxTMI 
2025 (2) TMI 598
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.... at 24, Khatipura Road, Vaishali Nagar, Jaipur, 302021 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 logg....
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....ming the action of the Id. AO, in invoking provisions of Section 115BBE of the Income Tax Act, 1961. The action of the Id. CIT(A)/NFAC is 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 electr....
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....ber and November, 2016, as listed herein below : Date Cash in hand (in Rs.) Cash deposited (in Rs.) 12.10.2016 11,38,953/- 2,00,000/- 17/10/2016 9,48,173/- 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 depo....
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....he cash balance he used to maintain in hand during FY 2015-16 and earlier months of FY 2016-17. Considering that enormous factors as discussed by AO, he had considered sales as unverifiable alleged sale, the trading results 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 pe....
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....r. Considering that appellant is a businessman engaged in jewellery business where cash/ cheque sales are norms of the business, has given his detailed analysis of the sale proceeds corresponding to cash deposit in his bank account. The AO has noted that 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 weighta....
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....en properly examined by the AO. It is seen that a proper scientific method has been employed by the AO for proper evolution of the cash deposits and business proceeds by the appellant. The AO has given due benefit to the appellant for genuine cash sale during the period. 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 writte....
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.....26 crores. The fact is undisputed and noted by the ld. AO at Page 5 of his order. Accordingly, it is not that the assessee only on account of demonetization deposited the amount. 2.4. During the course of proceedings before the lower authorities, assessee submitted all requisite details and supporting documents pertaining to the cash sales made during 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 re....
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.... duly supported by the entries passed in the books of account and part of the sale accepted by the AO. • ACIT Central Circle-1 vs. Shri Mahendra Kumar Agarwal ITA No. 172/JP/2022 We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving 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 perio....
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....d before the tax auditor, such quantitative records are certified by tax audit and no questions have been raised by the assessing officer. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details." The said decision has also been upheld by Hon'ble Delhi High Court in Agson Global (P.) Ltd [2022] 134 taxmann.com 256 (Delhi). 2.15. Attention is also invited towards the decision of the Hon'ble Bombay High Court in the case 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 ....
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....he Hon'ble ITAT, Mumbai bench in the case of R.S. Diamonds India Private Limited vs ACIT, Mumbai, ITA No 2017/Mum/2021 wherein it was held as under: "The facts that the deposit made into the bank account is from out of the books of accounts and the said deposits have been duly recorded in the books of account are not disputed. It is the submission of the assessee that it had received advance money from walk in customers for sale of jewellery over the counter and the amount so received was duly recorded in the books of account. The said amount 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 bo....
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....e at Nawgachia had been cancelled for the accounting year for its failure to keep proper stock accounts and that the appellant was prosecuted under the Defence of India Rules but had been acquitted having been given the benefit of doubt. The Income-tax Officer also had regard to the fact that the appellant was a speculator and that as a speculator the appellant could easily have earned amounts fair in excess of the value of the high denomination notes encashed. He considered that even in the disclosed volume of business in the year under consideration in the head office 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 smuggl....
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....nd, therefore, the amount was to be treated as cash credit u/s. 68. The Delhi High Court held that section 68 did not apply, as the assessee had disclosed such donations as its income. 2.22. If the contention of the lower authorities is accepted that the same income would be taxed twice, once when being offered for tax by the assessee as part of cash sales and subsequently as addition under Section 68, which is impermissible in law. 2.23. Reliance is placed on the below mentioned judicial pronouncements, wherein, under identical set of facts, as in the present case, additions made under 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.....
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....f Section 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P & L account. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act..." • ITAT, Chandigarh Bench in the case of Roop Square Pvt Ltd ITA No. 198 and 249/Chand/2021 • ITAT, Kolkata Bench in the case of Senco Alankar, ITA No. 10/Kol/2021 2.24. In view of the above, since Section 68 is not applicable in the instant case, the very invoking of the provisions of section 115BBE is illegal and deserves to be quashed. 2.25. Ld. AO has erroneously 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 ....
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....sited cash during demonetization period and therefore, the sales made by the assessee are required to be seen from the angle and the purpose of demonetization. As further submitted the assessee deposited a huge sum of money into the bank account and ld. AO given the due benefit to the assessee and invoked the provision of section 145(3) of the Act. Even the ld. CIT(A) noted that the ld. AO has given the benefit of doubt to the assessee by scientific method and therefore, ld. DR relied upon the orders of the lower authorities. 13. We have heard the rival contentions and perused the material placed on record. In this appeal vide ground no. 1 assessee challenged finding of the National Faceless Appeal Centre (NFAC) while confirming the addition 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 p....
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....r completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144. Thus, it is clear from the above provision of the Act that the ld. AO or ld. CIT(A) may proceed under Section 145(3) under any of the following circumstances : • • Where he is not satisfied about the correctness or completeness of the accounts; or • Where method of accounting cash or mercantile has not been regularly followed by the assessee; or • Accounting Standards as notified by the Central Government have 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 no....
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....t any difect in our explanation. The assessee has also filed before the AO following documents/publications to support the wastage declared by the assessee is reasonable and according to the standard practice adopted in the country as under:- 1. C.G.C.R.I., Khurja (PB No.13 to 1) 2. Publication of Articles in while wares (P.B. No.18) 3. Photocopy of Hand book of Ceramics-Volume 2 (Editor S. Kumar) showing typical composition of Bone china. 4. Photocopy of the Chapter 5 of stoneware in the books published by the Institute of Materials (P.B. No.21 to 22). In the report of CGCRI, Khurja, (refer P.B. No.17), the waste worked out to 28.31% to 38.7% interest he bone china crockery and in the case of stoneware crockery it worked out to 24% to 34.8% We agree with the 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, h....
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....Department. 10.1 It is made clear that we have only decided the matter which is pending before this court but for the next year, it will be open for AO or the Department to look into improvement of industries, machinery and assesss the same every year loss. 11. All the appeals are dismissed. Having held so that the books results cannot be rejected based on the surmises and conjectures. Now coming to the sales recorded in the books of account, the bench notes that the assessee furnished all the invoices with complete year cash book, names, addresses and telephone numbers of the person to whom the cash sales was made. On this information Ld. AO has not made any independent inquiry. He considered part of the sales as genuine and on the same set of records, part of the sales were not considered as genuine. This pick & chose approach was not correct on same set of 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.....