TaxTMI 
TaxTMI 
2025 (5) TMI 116
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....sed on addition of Rs. 7000000/-u/s 68 of IT Act 1961. (b). Acquiring valid justification (c). Without appreciating the facts that assessee maintenance regular book of accounts and day to day stock records (d). Without doubting opening stock, purchases and sales (e). On mistaken belief of quantum of cash deposits and cash sales made during demonetisation, Which is highly unjustified, illegal and liable to be quashed entirely. 2. Assessee deserves right to amend, alter, delete and modify any ground of appeal on or before the date of hearing of appeal." 3. Succinctly, the fact as culled out from the records is that the assessee filed return showing total income at Rs. 19,63,760/- on 04.08.2017, which was processed u/s 143(1) of the I.T. Act. Subsequently, the case was selected for Limited Scrutiny under computer assisted selection for scrutiny (CASS) to examine of the cash deposited during the year. Accordingly statutory notice u/s 143(2) was issued on 08.08.2018 which was duly served upon the assessee through ITBA portal. The assessee is engaged in the business of manufacturing of Jewellery. 3.1 Ld. AO from the records noted that th....
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....or supporting evidence hence, unacceptable to ld. AO. Based on these discrepancy/mismatch in sale and the cash deposited in bank account and for the deficiencies pointed out the cash deposited was not considered as supported by cash sales declared by the assessee and therefore a show cause notice dated 05.07.2019 and 26.11.2019 were issued to the assessee requiring explanation as to why the unexplained cash of Rs. 3,88,57,665/- should not be added back in his income for taxation. The assessee furnished reply of the show cause notice on ITBA portal on 13.07.2019. The assessee contended that Rs 70,00,000/- were deposited just after demonetization on dated 11.11.2016. Assessee was a registered firm doing retail trade in gold ornaments wherein most of the sales were made to customers in cash. Assessee being in the eligible business and had turnover below Rs 2 crore opted for presumptive taxation u/s 44AD. Although he was not required to maintain regular books of accounts but since he was also registered with RVAT Act 2003, he maintained cash book, ledger day to day stock register, invoices bills etc. Entire payments to suppliers were made through banking channel and sales were made to ....
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....ery which has also been introduced by way of capital in the firm was also declared in IDS 2016. To support the claim of deduction under IDS 2016 assessee has submitted copies of form no.4 (Certificate of IDS2016) of all the partners naming Soniya Agarwal, Anandita Agarwal and Pallavi Agarwal. Ld. AO considered that explanation and considered the Rs. 2,60,00,000/- as explained. As the assessee has also deposited cash of Rs. 70,00,000/- on 11.11.2016 in his bank account with ICICI Bank and the source of which has been stated to be the cash sale made by the assessee. However, on verification of the details ld. AO noted that the assessee has claimed to be received the cash on sale from 77 persons from whom claimed to made sale Rs. 66,85,647/- in November 2016 just before depositing the cash in the bank account on 11.11.2016 and which is the source of cash deposited in a single day of Rs. 70,00,000/- in his bank account with ICICI Bank. From the scrutiny of the list ld. AO noted that the date of payment received against the sale from these persons. Further, the sale bill produced by the assessee are incomplete and appears fabricated issued just to cover up the unaccounted cash deposited....
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.... language of provision of section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they are entered in the Books. The section has applicability in the cases of search as well being section 68 is provision of general application and there is nothing in section 68 of the Act or elsewhere excludes the application of this general provision. Even the presumption under section 132(4A) of the Act does not override or exclude section 68 of the Act, i.e. it does not prevent the necessity to establish by independent evidence the genuineness of the cash credits u/s 68 of the Act nor does it do away with the burden which is on the appellant to establish the requisites of the cash credit. It is fact that the postal address and the identity are not provided by the appellant which could be substantiated the sales. 8.2 In Khandelwal Constructions v. CIT 227 ITR 900 (Gau.) it has been held by the Hon'ble Guwahati High Court that Section 68 of Act, empowers the Assessing officer to make enquiry regarding cash credit and If satisfied that these entries are not genuine, Assessing Officer has every right to add these as income from other sources. B....
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....ness of transaction and Credit worthiness of person who has given the money. It is for the assessee to prove the genuineness of the creditors in the books of account. The assessee has to prove the identity of the creditors with complete address, his credit worthiness or capacity to pay the amount in question, PAN, Copy of his computation of income. Only when these things are proved prima facie by the appellant and only after this appellant has adduced evidence to establish the aforesaid facts then only the onus shift on to the Department. Merely proving identification and showing movement of money through banking channels was not sufficient to establish that transaction was genuine. In this case the appellant has taken the advance against the future sales, thus onus was on the appellant to prove the identity and creditworthiness of the persons who have made the advances and also genuineness of transactions but the appellant failed to prove all the three limbs of section 68 of the Act. 8.6 It is responsibility of person who has received the money provide the name of the lender, genuineness of transaction and creditworthiness of the lender. However in this case nothing has b....
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....issued and sent through registered post for verification of genuineness of transaction. Further certain inquiries have been made through Income Tax Inspectors, however letters were written by the postal authorities and the Inspectors were unable to locate the addresses of persons. Since amount which was received in cash against the future sale on 08.11.2016 were not verifiable, the Assessing Officer has added Rs. 5.66 crore as unexplained credit under section 68 of the Act. 8.10 In the cases where credit entry has been made in the books of the assessee, the ambit of Section 68 is wide and inclusive. Provision applies to all credit entries. In the case of Gumani Ram Siri Ram v. CIT [1975] 98 ITR 337 (Punj. &Har.), it was held that the language of Section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they may stand, that is, whether in the name of the assessee or a third party. 8.11 The Assessing Officer when starts enquiry, specifically to satisfy himself/ herself of the source of such credit, and if during the enquiry, he/she is satisfied that the entries are not genuine, then he/she has every right to add the said sum ....
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....there is no satisfactory explanation as to the said entries, he would be entitled to regard them as representing the undisclosed income of the assessee." 8.15 The expression "nature and source" in Section 68 has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. The Law on the subject has been illustrated in a number of decisions prior to 1968. Hon. Supreme Court, in Kale Khan Mohd. Hanif Vs. CIT (supra), pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. The law after Section 68 is not different. 8.16 Even the particulars from assessment records, where the creditor is assessed, may not be sufficient as observed in CIT vs. Korlay Trading Co. Ltd. (1998) 238 ITR 820 (Cal). Further, in the case of Kamal Motors v. CIT [2003] 131 Taxman 155 (Raj.) it was held that the responsibility is on the assessee to discharge the onus that the cash creditor is a man of means to allow the cash credit. The burden to prove the source of receipt is in respect of each entry as held ....
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....and creditworthiness then Assessing Officer must do some inquiry to call for more details to invoke Section 68. 8.19 Merely proving the identity of the creditor does not discharge the onus of the assessee if the capacity or creditworthiness of the creditors is not proved. The assessee also has to prove the capacity to give credit of the creditor. 8.20 In the case of Shankar Ghosh v ITO [1985] 23 TTJ (Cal.), the assessee failed to prove the capacity of the person from whom he had allegedly taken loan. Further the assessee could not explain the need for the loan and the manner in which the loan amount was spent. The creditor issued two letters demanding repayment but did nothing on non-compliance therewith; such letters did not therefore carry any conviction about the explanation of the assessee. Loan amount was rightly held as assessee's own undisclosed income. 8.21 In the cases of Shankar Industries Vs CIT (Cal) 114 ITR 689, Hari Chand Virender Paul Vs CIT (P&H) 140 ITR 148, CIT Vs Biju Patnaik (SC) 160 ITR 674 CIT Vs Precision Finance P. Ltd. (Cal) 208 ITR 465 Dhanalakshmi Steel Re-rolling Mills Vs CIT (AP) 228 ITR 780 and in the case of Sanil K.M.P.....
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.... the effect the neither the credit worthiness nor the genuineness of the parties has been established by the assessee. The detailed investigation carried out by the Assessing Officer establish the position that the contributions to share capital were persons of insignificant means and their credit worthiness to have made the contributions has not established. The assessing authority had put the result of his enquiries to the assessee granting him opportunity to after its explanations. The appellant however failed to establish the genuineness of the cash contributions as well as the capacity of the persons to have made such contribution in the first place." 8.26 In the case of Commissioner of Income Tax Vs. N.R. Portfolio (P)Ltd, (Delhi) (2014), the Hon'ble High Court of Delhi held that, "what we perceive and regard as correct position of law is that the court or Tribunal should be convinced about the identity, credit worthiness and convinced about the identify, credit worthiness and genuineness of transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee knowledge. Mere production of incorporation details, PAN Nos. or the f....
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....the case of CIT v. P. Mohanakala 291 ITR 278 (SC), it was held that- "A bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by assessee; that such credit has to be of a sum during the previous year; and that the assessee offer no explanation about the nature and source of such credit found in the books or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory. It is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression 'the assessee offer no explanation' means where the assessee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. ....Section 68 itself provides that where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assessee of the previous year, if the explanation offered by the assessee, about the nature and source of such sums found credited in the books of the assessee, is in the opinion of the Assessing Officer not satisfa....
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....SBNs worth Rs. 5.67 crores in its bank account as mentioned above and declared in return of income. To explain the source of the said cash, the assessee has furnished receipts for advance. However, when required to produce the persons who made advances, it has failed to do so. Even, no written submission was filed explaining the source supported by evidences. Never such cash has been deposited in bank accounts prior to demonetization period. The appellant has never deposited the substantial cash during the year except demonetization period. 8.33 It is in this context that the issue of circumstantial evidences and preponderance of probabilities as emphasized for the purposes of Income Tax Act, 1961 by various courts gain importance. In this regard, the following observations of the Hon'ble Apex Court in the case of Sumati Dayal vs CIT 214 ITR 801 (SC), are worth noting: "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket which was surrendered to the....
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....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." 8.34 It is therefore obligatory on the part of the appellant that it explains the nature and source of cash credits to its books of accounts. However, in the instant case, the appellant has failed to discharge its legal obligation by furnishing any explanation, which is found satisfactory. 8.35 The reliance is being placed in the case of Vaishnavi Bullion (P.) Ltd. v. ACIT, the Hon'ble ITAT HYDERABAD BENCH 'B', [2022] 145 taxmann.com 197 (Hyderabad Trib.) A.Y. 2017-18 vide order dated November 28,2022wherein....
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....ned amount credited in books of assessee shall be deemed to be of assessee if explanation of assessee was not satisfactory or was against preponderance of probabilty and evidence on record and hence, Assessing Officer was justified in making additions under section 68 treatings deposits of SBNs found in its bank account as unexplained credit in hands of assessee Held, yes [Paras 70 to 77] [In favour of revenue]" The relevant paras from the order are as under:- "72. Furthermore, the conduct of the assessee was abnormal and it had caused immense harm to well intention notification and the Act. The withdrawal of legal tender character was one of the significant steps in weeding out the fake currency and to curb the black money in the country. The persons like assessee have given a setback to well-intended and well-thought policy of Government of India and they have used this as an opportunity to convert their or others' ill-gotten money into bullions. In the present case the bank account. The above said act of the assessee is not only against the law but also against the interests of the nation. In the present case, the bank account with the AXIS Bank was only op....
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....as replied by you that cash receipts were issued to all the customers on receipt of advances on 8-11-2016 Please confirm the same? Ans. After generation of cash receipts on 8th and 9th of Nov.2016 simultaneously the cash receipts were issued to the respective seven customers. 20. To sum up, you are confirming that you have received cash advances of Rs. 57,75,35,000/- from six customers (against 3100 customers stated earlier m the statement recorded on 01 12 2016) in the case of M/s MGJPL on 8-11-2016 after 9.00 PM, entered the cash advances. In your books on the same day, generated. cash receipts on the same day from the systems available in your premises in tally software and issued to all the customers. Likewise, in the case of M/s VBPL, you have received Rs. 40,11,50,000/-as cash advances from one customer (2100 customers earlier) and followed the same procedure as was done in the case of M/s MGJPL? Ans. Yes. I confirm that in M/s MGJPL, I have received approximately Rs. 57 crores from six customers and Rs. 40 crores from one customer in M/s VBPL. Entered the details of cash advances bifurcating all below Rs. 2 lakhs in the name of various per....
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....illegal, as opined by the AO, the income needs to be taxed, as the Income-tax Act does not differentiate between legal and illegal incomes". In this regard we may mention that much water had flown on this count. Recently Hon'ble Supreme court was faced with identical situation and had repelled the argument of the assessee in the case of Apex Laboratories (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 135 taxmann.com 286/286 Taxman 200/442 ITR 1 as under :- '22. This Court is of the opinion that such a narrow interpretation of Explanation 1 to section 37(1) defeats the purpose for which it was inserted, i.e., to disallow an assessee from claiming a tax benefit for its participation in an illegal activity. Though the memorandum to the Finance Bill, 1998 elucidated the ambit of Explanation 1 to include "protection money, extortion, hafta, bribes, etc.", yet, ipso facto, by no means is the embargo envisaged restricted to those examples. It is but logical that when acceptance of freebies is punishable by the MCI (the range of penalties and sanction extending to ban imposed on the medical practitioner), pharmaceutical companies cannot be granted the tax benefit fo....
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....n. So viewed the law has birthed various ideas such as implied conditions, unspelt but entirely logical and reasonable obligations, implied limitations etc. The process of continuing evolution, refinement and assimilation of these concepts into binding norms (within the body of law as is understood and enforced) injects vitality and dynamism to statutory provisions. Without this dynamism and contextualization, laws become irrelevant and stale. 35. In Biharilal Jaiswal v. CIT [1995] Supp (5) SCR 285, the issue of what is "prohibited by law" was considered by this Court, in the context of interpretation of a condition in a statutory license (for vending liquor) which prohibited transfer of the license by way of sub-letting or entering into a partnership agreement. While dealing with the recognition of such a partnership under the IT Act, this Court held that allowing the same would attract the very mischief sought to be avoided: avoided: "This object will be defeated if the licencee is permitted to bring in strangers into the business, which would mean that instead of the licencee carrying on the business, it would be carried on by others - a situation not conducive....
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....dly prohibited by law in that the first Defendant was there under to deliver title to the site and prevented from acting upon the clear obligation under law. This is a clear case at any rate wherein enforcing the agreement unambiguously results in defeating the dictate of the law. The 'sublime' object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of nonalienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned." 78. Going by the recital in the agreement entered into between the Plaintiff and the first Defendant, possession is handed over by the first Defendant to the Plaintiff. The original Possession Certificate is also said to be handed over to the Plaintiff. The agreement, even according to the Plaintiff, contemplated that within three months of conveyance of the site in favour of the first Defendant, the first Defendant was to convey her rights in the site to the Plaintiff. It is quite clear that the parties contemplated a state of affairs ....
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.... Textiles Industries Limited v/s DCIT (Ahmedabad ITAT), ITA No. 1166/ADD/2014 wherein it has been held that- "9.6. We also note that the provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only. 9.7. We are also aware of the fact that there is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence / finding. In view of the above we are not convinced with the finding of the learned CIT(A) and accordingly we set aside the same with the direction to the AO to delete the addition made by him." 8.37 The appellant has placed its reliance in the case of Smt. Harshil Chordia v. ITO (Rajasthan High Court) 2008 298 ITR 349 Raj wherein it has been held that- "23. 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 cust....
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.... Ld. CIT (A). The order of appeal was made on 06.06.2023 in which surprisingly, the facts and figures of another assessee belonging to the Banglore was copies and pasted. (Original order of appeal is place on page no 1 to 8 of PB) Assessee then, filed a rectification application and against such application the order was passed in section 154 of the Income Tax Act, 1961 technically. However, the order is in fact the original order of appeal not rectification order. No relief was given to assessee and hence this appeal was filed. The ground of appeal is as under:- 1. On the facts and in the circumnutates of the case as well as law ld AO erred in making addition u/s 68 of I.T. Act,1961 amounting to Rs. 700000/- and simultaneously Ld CIT(A) erred in sustaining the addition without (a). Assessee denies the liablity to be assessed on addition of Rs. 7000000/- u/s 68 of I.T Act 1961. (b). Acquiring valid justification (c). Without appreciating the facts that assessee maintenance regular book of accounts and day to day stock records (d). Without doubting opening stock, purchases and sales (e). On mistaken belief of quantum of cash deposits and cash sales made during demo....
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....payment is made through bank after deducting tax at source as per law. Bill of job work was produced. No adverse comment was made by AO. Sales amounting to Rs. 19696770.35 1 Entire sales are supported by invoices. 2 Copies of invoices were also filed. 3 Detailed names and addresses to whom cash sales made are available to AO (Copy is enclosed at page no 54-56 of PB) 4 Comparative chart showing month-wise cash and credit sales for the year and preceding year was given, (Copy is enclosed at page no 57 of PB) 5 Sales were duly accounted for in regular books of accounts for which entire detail were placed on record of AO 6 Sales were duly accounted for in day to day stock records, which were available with AO. 7 Assessee is having show room, where customers visit for purchases regularly. 8 Assessee was registered under R VAT Act, 2003 and liable to file quarterly returns of sales and purchases. Copies of all quarterly returns were filed before AO. VAT returns are fully reconciled with books of accounts and financial declared before AO. (Copies of quarterly VAT returns are placed at page no 58 to 74 of PB) ....
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....e sale also does not support the sale to these persons. The list provided by you is self made without any basis or supporting evidence hence, unacceptable. 2.7 Your reply submitted in this regard on ITBA portal is found unconvincing, without any basis/evidence and therefore unacceptable. On verification of the sale ledger account and the details of sale and bank accounts submitted by you during the assessment proceedings, the discrepancies found in the cash sales shown by you month wise and the cash deposited for the same period in your bank accounts is as under: - 2.8 In your reply submitted on ITBA you have furnished the comparative chart of cash and credit sale for FY 2015-16 and 2016-17 relevant to AY 2016-17 and 2017-18. On verification of the chart it is noted that during the AY 2016-17 your total sale was Rs. 1,30,83,627/- (cash sale Rs. 77,59,808 + credit sale of Rs. 53,23,819) and during the AY 2017-18 under consideration you have shown the total sale of Rs. 1,98,99,241/- (cash sale of Rs. 1,23,88,953 + credit sale of Rs. 75,10,288). Further, in your reply you have also submitted that during the demonetization period total sales were Rs. 26,12,469/- only.....
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....opy of cash flow statement is enclosed. c) Cash of Rs26150000.00were received from partners. Confirmations of all the partners are attached herewith along 101 -106 of paper book with their copies of ITR V for the relevant period. Three partners had declared income in IDS-2016 for which the copies of certificate is enclosed. d) By filing of cash flow statement, cash book, confirmation along with ITR V and IDS certificates the cash deposits are well explained. It is emphasize to note that all the partners were in highest tax bracket. 3.3 I have already produced detailed list of cash sales and cash receipts from persons to whom credit sales were made. Copies of debtors from whom cash were received against credit sales made to them are also enclosed. After demonatisation period the sales was seriously affected due to non- availability of new currency. Further, just after one month the assessee firm was dissolved. Copy of dissolution deed is enclosed. (Copy of dissolution deed is enclosed at page no 107 to 109 of PB) 3.4 From the copy of cash book, cash flow statement, confirmations the excess cash deposited comparing sales are explained and proved. 3.5 We hav....
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....f Rs. 1,23,88,953/- and credit sales of Rs. 75,10,288/-. As per Assessing Officer the assessee could not explain such discrepancy in sales and deposit in bank account. The A.O. further noted that most of the bills are unsigned by seller and sale bill does not contain the address of the purchaser and mobile no. In the sale bill there is nothing mention of quantity, rate and weight of the gold and diamond. In these circumstances, the Assessing Officer held that sales bills are remain unexplained and identity, creditworthiness of purchaser and genuineness of transaction remains unexplained. Therefore, he held that cash sales are unexplained and therefore, he has not accepted the sale. Further, A.O. observed that in none of the sale bill there is no mention of date when cash payment has been received. The Assessing Officer held that the sales bill produced is self made being no details has been mentioned in the sale bill. Accordingly, he held that cash deposited in bank account is not supported by cash sales declared by the assessee. Submission Your honours, observation of Ld CIT (A) is the result of copy and paste from the show cause notice issued by Ld. AO ....
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....n regularly in piece meal in the amount of Rs. 20,000/- to Rs. 9,00,000/- and till 29.10.2016 has been regularly deposited but suddenly on 11.11.2016 the appellant had deposited Rs. 70,00,000/- which under no stretch of imagination can be said to be justifiable vis-à- vis sales. Submission Your honours, all these observations are wrong on facts. Assessee sales stood only for Rs. 2931605.00 on the date of demonetisation. This sale pertains to whole of the day. Total invoices made on the day were only 35, which was quite normal. Further, from the announcement of demonetisation, the old currency notes of denomination of Rs. 500/- and 1000/- were declared non legal tender. Entire Indian public were empty of legal tenders. Banks and ATMs were also lack of new currency. Further, the business of assessee was closed on dated 15.12.20216. That's why, the assessee could not make normal sale after demonetization. Ld CIT (A), relied upon various judgements of ITATs and upper courts. All the judgement have no applicability on the assessee's case. Khandelwal Constructions v. CIT 227 ITR 900 (Gau.) (Para 8.2 & 8.9 of CIT (A) order In the case of....
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.... No inquiry was made by AO in the case of assessee. The addition was based on assumptions and presumptions. Under para 8.17 & 8.18 CIT (A) relied upon Further, mere mention of income-tax file number of creditor will not suffice to discharge the onus as held in the case of CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), where in it was held that where, without filing confirmation letter from the creditor, the assessee merely mentioned the income-tax file number of the creditor (which was also not supported by any affidavit from the creditor), the genuineness of the cash credit cannot be said to have been proved by the assessee. In fact, the principle of onus, that the assessee is required to establish the identity, prove the genuineness of the transaction and establish the creditworthiness of the donor, has been reiterated in the decision of Hon. Delhi High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd., 333 ITR 119 (Delhi)(2011). In this case it was held by the Hon. Court that "The initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68. Those are: (i) identity of the investors;....
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.... parties has been established by the assessee. The detailed investigation carried out by the Assessing Officer establish the position that the contributions to share capital were persons of insignificant means and their credit worthiness to have made the contributions has not established. The assessing authority had put the result of his enquiries to the assessee granting him opportunity to after its explanations. The appellant however failed to establish the genuineness of the cash contributions as well as the capacity of the persons to have made such contribution in the first place." This was the case of share capital, where contributors were found with no means. Under para 8.28 In the case of Pr. CIT(Central)-1 Vs NRA Iran & Steel (P) Ltd. 412 ITR 161 (SC)(2019), the Hon'ble Apex Court allowed the Revenue Appeal. On the facts of the present case, clearly the assessee company failed to discharge the onus required under section 68 of the Act, the assessing officer was justified in adding the amounts to the assessee's income. In this case, the matter relates to bogus penny stocks. The brokers, mediators and companies whose shares were dealt with ....
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....ing the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence." In the case of Commissioner of Income-tax vs. Durga Prasad More 82 ITR 540 (SC), the Hon'ble SC observed as under: "...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 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 author....
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....oks of accounts. Ld AO should have added credits appeared in cash book for which assessee offers no explanations about nature and sources of the credit or explanations offered by assessee is not found satisfactory in the opinion of AO. The sales made in the year up to the demonetisation are as under:- Period Sales April to September 7732288 October 2642692 Nov 1 to 7 3561772 Nov 8 2931605 Your honours, the above sales and credit appeared in partners capital accounts were the cash credit. Ld AO should have disallowed out of above instead of invoking the section 68 on cash deposits into banking account. Thus ld AO exceeded his jurisdiction. 5.3 Assessee is required to prove the nature and sources of cash credit. Nature of credit Assessee is a retailer of gold and silver ornaments. He maintains a showroom. He is having opening stock and purchases which are accounted for value-wise and quantity-wise. He is registered dealer under state VAT law and Central VAT Law. He filed his returns under both VAT and Income tax law. From the entire evidences available with AO the nature of credit is proved as sales beyond dou....
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....ponding sales could not be disturbed without giving any conclusive evidence/finding. I may place reliance on the decision of Hon'ble Rajasthan High Court (Jurisdictional High Court) in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 in which it was held that "Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them". (Copy of judgment is enclosed page no 110 -115 pb) Reliance can also be placed on the decision of Hon'ble M.P. High Court in the case of Addl. CIT v. Ghai Lime Stone Co. [1983] 144 ITR 140. It is evident from these judicial rulings that trade advances or cash received against which goods is supplied subsequently is not a cash credit as contemplated by section 68. Identification of buyers So far as identification of buyers are concerned, assessee has furnished full detail of names and addresses along with their PIN code numbers. (Copy is placed here also) Since, assessee discharged his onus lay upon him by filing of the detail, AO observation that the details are incomplete and invoices are bogus was on account of surmises, whi....
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....rs, M/s. Girdhar Jewellers (P) Ltd. and M/s. Girdhar Jewellers and held the same as genuine on the basis of her detailed findings in para 6.2 (x) for which the Department has not challenged the findings of the ld. CIT(A) as to the issue of genuineness of the purchases and thus the books of account cannot be rejected on the ground of genuineness of purchases. It is essential to indicate that when all the purchases are genuine and correctly recorded in the books of account as well as stock register then the books of account should not be rejected u/s 145(3) of the Act. It is further noted from the record that the assessee claimed that out of total claim of Rs. 12,17,48,500/- deposited into bank account in demonetized currency, the amount of Rs. 25,96,480/-was realized from its debtors and Rs. 11,86,250/- was received as advance from the customers and the ld. CIT(A) in her order treated the entire cash sales and corresponding cash deposit as genuine. Thus the amount received from debtors/ advance from customers cannot be treated as unverifiable and this cannot be a ground for rejection of books of account. We noted from PB Page 163 of the paper book i.e. the list of debtors where tota....
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....he lower authorities to treat the same as non-genuine. Hence, looking into the entirety of the facts, circumstances of the case and the case laws cited by the AR of the assessee (supra), we allow the appeal of the assessee by holding that the rejection of books of account on the basis of insignificant defects in all respect, is not justified and books of account deserves to be accepted. Before invoking the provisions of Section 145(3) of the Act, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed by it. In the instant case, it was not the case that the assessee had not followed either cash or mercantile system of accounting. It was also not the case that the Central Government had notified any particular accounting standard not followed by assessee. Further the assessee maintains proper books of account audited by Chartered Accountant and the profit may be derived from the audited books of account therefore there is no justification in estimation of income by applying NP rate and accordingly the lower authorities are directed to ....
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....ash book 75-100 12. Partners ITR 101-106 13. Partnership Deed 107-109 14. Harshila Chordia case law 110-115 15. Sales Invoices 116-373 7. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the cash which is duly reflected in the cash book and considered out of the sales cannot be again added and it is duplication of the charging the one receipt as cash sales and another as unexplained receipt that cannot be done when the ld. AO has not disputed the turnover recorded. Ld. AR drawing our attention to the invoices placed on record submitted that the assessee mentioned the phone and address of the customer and therefore, the contention that the sales is not verifiable was incorrect fact and the ld. AO has not invoked the provision of section 133(6) on any of the customer and no enquiry was made by the ld. AO. As regards the details of the item sold the assessee has also mentioned that item. All the invoice are duly recorded in the VAT records and that turnover in the VAT assessment has been accepted and thus when the source of cash is duly accepted on those records there is no justification in....
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....7-18 under consideration he has shown the total sale of Rs. 1,98,99,241/- (cash sale of Rs. 1,23,88,953 + credit sale of Rs. 75,10,288). He also submitted that during the demonetization period total sales were Rs. 26,12,469/- only. Since, the total cash sales for the period from 01.04.2016 to 31.03.2017 has been declared at Rs. 1,23,88,953/- and during this period the assessee has deposited cash of Rs. 3,88,57,665/- in his bank accounts mentioned above, which does not match with the cash sales declared by him during the year hence, the assessee was required to explain the discrepancy of cash sale and cash deposited in his bank accounts. The assessee also submitted that the cash of Rs. 2,61,50,000/- were received from partners. Confirmations of all the partners were filed along with their copies of ITR V for the relevant period. Three partners had declared income in IDS-2016 for which the copies of certificate were also placed on record. Based on those submission the assessee submitted that the deposit of cash by the assessee stands explained. Thus, effectively cash of Rs. 1,27,07,665/- remained to be explained out of that cash Rs. 70,00,000/- was deposited in the bank account on 11....