TaxTMI 
TaxTMI 
2025 (5) TMI 748
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....ed Representatives. The case was selected for scrutiny after survey proceedings initiated u/s 133A of the Act for the following reasons :- (a) The assessee has reported lesser amount of disallowable u/s 40(a)(ia) of the Act in the return of income based on the audit report in Form 3CD. (b) Undisclosed income has been reported on the ITBA AIMS portal after the online verification of the cash deposits during the demonetisation period. (c) Higher turnover reported in the service tax return compared to the ITR. 3. During the assessment proceedings, the AO observed that the assessee regularly disclosed the loss returns during the AYs 2013-14, 2014-15 and 2016-17 respectively. Further he observed that the auditor has reported the collection of TDS and non-deposits of the same in the Central Government Account. He further observed that the assessee has declared turnover and claimed huge expenses, the auditor has also found various discrepancies in the books as the assessee does not maintain regular books, the same was also found during the survey report. By relying on the above reports, he proceeded to reject the books of account u/s 145(3) of the Act. In ord....
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....diture as per the DSRs maintained in the computer. The AO further observed that the assessee company had made sales on account of delivery orders, bulk orders, corporate sales and catering etc. which were not reflecting in the DSRs of restaurants and no separate account was maintained for such activities carried-out by the appellant. Director of the company in his statement under oath had admitted that the details of such sales are not maintained and no records of bills and vouchers in respect of these sales were available. The mode of receipt of such sales is mostly in cash. The Assessing Officer has also observed that the auditor of the assessee company has remarked adversely regarding the maintenance of regular books of account. The Assessing Officer has accordingly rejected the books of account of the appellant and estimated profit at the rate of 8 per cent of the total turn-over reported by the appellant in its books. ............. 10.3 In view of the above facts, I find that the books of account of the appellant are neither correct nor complete. Therefore; the decision of the AO to reject the books of account is correct. As the findings of the Ld. AO is main....
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....not available for deposit during the demonetization period. The appellant has submitted that the money was withdrawn for the purposes of purchase of agricultural land and that the deal could not be materialized which has resulted into cash in hand of Rs. 1,34,82,685/- as worked out by the appellant. I find that the gap of few months (around 3-4 months in this case) between the cash withdrawn and cash deposited cannot be the sole reason for the rejection of appellant's explanation. The decisions of the jurisdictional High Court in the cases of Kulwant Rai (supra) and Jaya Aggarwal (ITA 315/2005/ 13th March, 2018) are also in support of these findings. In the case of Kulwant Rai, the assessee had cited withdrawal of a sum of Rs. 2 lakhs from his bank account as the source for cash found during search and the same was not accepted by the AO on the assumption that such withdrawn amount may have been spent for some other purposes. The court held that in the absence of any material in support of the view that withdrawals were spent for some other purpose, the Tribunal was right in treating the withdrawals as source of cash found. Similar is the case of the assessee where cash withdra....
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....made u/s 68 of the IT, Act, without appreciating the finding of the AO as assessee failed to produce the supporting documents in support of its claim for cash deposits during demonetization period during assessment proceedings." 8. At the time of hearing Ld AR submitted as under: 1. The appellant filed the Return of Income on 30.10.2017 u/s 139(1) declaring the loss of Rs. 2,90,19,970/-. The Ld. A.O competed the assessment vide order Section 143(3) dated 26.12.2019 by making the following disallowances/additions: i) Declared loss of Rs. 2,90,19,970/- was disallowed u/s 145 of the IT Act,1961. ii) Addition of Rs. 48,36,336/- u/s 44AD by rejecting the books of accounts. iii) Addition of Rs. 1,28,30,720/- on account of cash deposited in the bank. 2. Survey u/s 133A of the Act was done on the premises of the appellant on 15.03.2017. During the year, the appellant was running restaurants on a franchise basis and was also engaged in providing consultancy in hospitality services. The appellant was maintaining regular books of accounts which were duly audited. Ground No 1, 2 & 4: Rejection of Books of Accounts and Disallowan....
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....rting system is designed in such a way that the same provide the required details of sell, expenses, stocks etc as per their requirement. The books will be made as per the required format immediately after 31st March with the all informations and bank statements. Q.17 With regard to M/s South Asian Hospitality Services Pvt. Ltd. please state whether all the sales from your various restaurants outlets are recorded in the daily sales report (DSR)? Ans. As per our present format the sales done in the restaurant premises are reflected in the DSR. Sales of delivery, Bulk Ordering, Corporate Sales, Catering etc. are not reflected there. However, the same into account while making the final P & L A/c and Balance Sheet. Q.18 Please state if you are maintaining any separate account for the sales other than those reflected in the DSR as stated by you in response to Q.17 above? Ans. We are not maintaining any separate account for the same however we are aware about the sales figures not reflected in DSR offhand as routine. Q 21 Regarding sales of delivery, bulk ordering, corporate sales, catering you have stated no response to Q.18, above ....
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....ation received from the CBI. It is an undisputed fact that AO did not supply those materials to the assessee and also did not confront them with the assessee. Hence, we are of the view that there is clear violation of Principles of Natural Justice. It is well settled proposition of law that the assessing officer is not entitled to rely upon the materials, which were not confronted with the assessee. The decision rendered by Jaipur bench of Tribunal in the case of Smt. Sunita Dhadda (supra) supports the case of the assessee on the above said ground. We have already noticed that the above said decision of the Tribunal has since been upheld by the Hon'ble Supreme Court in the very same case. Hence, on this ground alone, the additions made by the assessing officer in the hands of both the assessee's in the years under consideration are liable to be deleted......." 7. Therefore, the first and second observation of the Ld. AO as well as survey officer that the assessee does not maintain regular books is completely incorrect. 8. The Ld. AO mentioned that the auditor has mentioned following discrepancies in the books. The pointwise reply of each observation is as under (p....
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....ot been computed in accordance with the standards notified under sub-section (2). 12. The Ld. A.O has nowhere held: i) That he is not satisfied about the correctness or completeness of the accounts of the appellant, ii) That the method of accounting as laid down in Section 145(1) has not been regularly followed by the appellant. iii) That the income has not been computed in accordance with the standards laid down in Section 145(2). 13. Since Ld. A.O has not found any violation of the three conditions mentioned in Section 145(3), the books of accounts could not be rejected. Hence, the disallowance of loss of Rs. 2,90,19,970/-declared by the appellant is ex-facie illegal and arbitrary. Disallowance is based purely on surmises and conjectures. Therefore, it is very humbly requested that the loss of Rs. 2,90,19,970/- may kindly be allowed. Ground No.3: Addition u/s 44AD of the Act: 14. After rejecting the books of accounts, the Ld. A.O applied Sec 44AB and estimated the income at Rs. 48,36,336/- @ 8% on the total turnover of Rs. 6,04,54,198/-. Once the accounts have wrongly been rejected, income cannot be determine....
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....he bank statement. 18. From the above chart it is clear that during demonetization, cash was deposited in bank account is out of opening cash and withdrawal form bank which is evident from the cash book itself. Hence, it is clear that the source of cash deposit during demonetization is withdrawals from bank and opening cash in hand. 19. As regards cash withdrawals it is submitted that such cash was withdrawn for purchase of agriculture land in village Dautana Garhi. However, the deal could not be materialized. Thereafter, the appellant company kept the cash with it and started searching for another land. However, in the meantime, demonetization happened, and the assessee had to deposit the cash in bank. 20. The Ld. AO made the addition just on the basis of two grounds: i) There is a gap of few months between the withdrawal and deposit in bank accounts (July to Nov) ii) No supporting document has been provided to prove that some property transaction was entered into between the assessee and other party. 21. From perusal of the observations of the Ld. AO, it is clear that it is an admitted fact that the cash was deposited out of t....
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....eposits on dt. 14th June, 1996 Rs. 31,000; 21st July, 1997 Rs. 1,27,000; 18th Sept., 1997 Rs. 22,000; 4th Oct., 1997 Rs. 26,000 and on 7th Nov., 1997 Rs. 52,000 there were sufficient cash withdrawals from AWI and from SBI, Mayapuri, but this addition has been confirmed by learned CIT(A) on the basis that there is time gap between the assessee's withdrawals from his own partnership M/s AWI or from his own bank. There is finding recorded by the learned AO or by learned CIT(A) that apart from depositing these cash into bank as explained by the assessee, there was any other user by the assessee of these amounts and in the absence of that, simply because there was a time gap, the explanation of the assessee cannot be rejected and hence the addition confirmed by the learned CIT(A) is not correct. We, therefore, delete the same. This ground of the assessee is allowed." * Anupama Chaudhary Vs ITO; ITA No. 4155(Del)/2009; dt. 27/12/2010 "6.2 We have considered the facts of the case and submissions made before us............. Other deposits stand explained by earlier withdrawals. Therefore, nothing further can be added to the total income in respect of such deposits. In thi....
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....ere was no transaction entered into by the assessee company and the owner of the land as the transaction could not be materialized. Therefore, the question of preparing any agreement to sell or any legal document does not arise. 24. Further, the assessee has duly submitted the correspondences with the land owner Mr. Mansingh Saini before the Ld. AO during the course of assessment proceedings which was ignored by the Ld. AO. From perusal of the correspondences it is clear that vide letter dt. 03/06/2016, the assessee has shown its interest in purchase of agriculture land situated in village Dautana Garhi, Tehsil Chhata, District Mathura, UP. The owner replied the letter of the assessee vide letter dt. 18/06/2016 wherein he has accepted the interest of the assessee and asked for the immediate payment. Accordingly, the assessee withdrew the cash from bank. However, on 11/07/2016, the assessee requested the owner to provide the copy of the documents so that the same could be vetted by the lawyer. However, without giving any reason, he refused to give the same. Accordingly, the deal could not be materialized. 25. Therefore, the basis of addition made by the Ld. AO that....
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....clusion that cash deposits were from some other source of income which is not disclosed to the Revenue. Assessing Officer nowhere in his order has brought out any material on record to show that assessee is having any additional source of income other than that disclosed in the return nor Assessing Officer could spell out in his order that cash deposits made by the assessee was from some undisclosed source. All throughout Assessing Officer has raised suspicion on the behavioral pattern of frequent withdrawal and deposits by the assessee. There is no law in the country which prevents citizens to frequently withdraw and deposit his own money. Documentary evidences furnished before the Revenue clearly clarifies that on each occasion at the time of deposit in her bank account, assessee had sufficient availability of cash which is also not disputed by the Revenue. .......... We have also examined the order of ld. CIT(A) and we find that his decision is based on facts on record and is supported by adequate reasoning and, therefore, we do not want to interfere with the order of ld. CIT(A) and accordingly we uphold the findings of the ld. CIT(A) sustaining relief granted to the assessee. ....
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.... auditor's report, without bringing on record how the same are complicated. He has proceeded to accept the sales/turnover declared by the assessee and only rejected the expenses claimed by the assessee. We also observed that the auditor also declared the discrepancies of not maintaining the regular books of account and on the other hand, certified the result declared by the assessee. 12. At this stage, let us accept the findings of Revenue authorities be right, on the aspect of rejecting the expenses claimed by the assessee as excessive, however, they proceeded to keep the benchmark as per the provisions of section 44AD at 8%, without bringing on record rationale of adopting of such percentage. It is fact on record that the assessee was declaring losses over the years. This cannot be reason to reject the books of accounts. It is also fact on record that the statutory auditor no doubt qualified the non-maintenance of the regular books of accounts however he accepted the expenses claimed by the assessee and the result. In our view, without bringing on record the rationale to reject the books of accounts u/s 145(3) of the Act, the AO cannot reject the books of accounts merely on th....