TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1164
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....inafter referred to as "CIT(A)"]. The details of the assessment and appellate proceedings for both years are summarised as under: Particulars A.Y. 2013-14 A.Y. 2014-15 Date of Original Return Filed 08.10.2013 26.11.2014 Returned Income in Original Return in Rs. 14,55,840/- 22,29,210/- Assessment Order u/s 143(3) in Rs. Dated 16,11,950/- 22.03.2016 9,14,030/- 06.12.2016 Date of Return Filed in response to u/s 148 21.04.2021 21.04.2021 Returned Income in response to notice u/s 148 in Rs. 14,55,840/- 8,76,030/- Date of Assessment Order u/s 147 r.w.s. 144B of the Act 26.03.2022 26.03.2022 Assessed Income in Rs. 97,67,63,690/- 88,75,24,230/- Addition Made by AO invoking provisions of section 68 /69A in Rs. 97,53,07,845/- 88,66,48,200/- Date of CIT(A)'s Common Order 25.04.2022 25.04.2022 Additions Confirmed by CIT(A) in Rs. 19,46,57,904/- 19,51,73,450/- Additions Deleted by CIT(A) in Rs. 78,06,49,941/- 69,14,74,750/- Facts of the Case 2. The assessee is an individual engaged in the business of trading in paper in the name and style of "Dinesh Paper Traders". The original returns for both the assessment years were filed, processed under sectio....
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....ere made in a structured manner to give a colour of genuineness to the underlying entries. The AO highlighted that the modus operandi adopted by the assessee was similar to other cases involving accommodation entries where cash is routed through the books and banks to camouflage unaccounted income. 5. The AO also noted that the assessee had claimed that part of the amount represented temporary loans from various parties. However, no confirmations or source details were furnished to substantiate the identity, creditworthiness, and genuineness of the said loans. The AO observed that while the ledger accounts and books reflected the inflow and outflow, the underlying nature and source of the amounts remained unverified. The AO relied upon the provisions of section 68/69A and concluded that the assessee had failed to satisfactorily explain the nature and source of the deposits. Further, it was specifically held that the genuineness of the explanation offered was not acceptable and the attempt was merely to provide a façade of documentation without actual substance. The AO held that the assessee had wilfully concealed the particulars of income and failed to disclose the said dep....
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....ough written submissions filed during appellate proceedings. 9. The learned CIT(A), after considering the reassessment orders, written submissions of the assessee, and judicial precedents, rejected the assessee's challenge to the validity of reassessment. It was held that the Assessing Officer had received credible information from DGIT (System), New Delhi in the form of a dissemination note, and had formed a belief that income had escaped assessment based on such information. The CIT(A) found that the reopening was done after due application of mind and proper satisfaction, and the procedure prescribed under the Act was duly followed, including issuance of notices under sections 148 and 143(2) and granting of opportunity of hearing. The CIT(A) also noted that although the assessee had placed reliance on the decision of the Hon'ble Mumbai ITAT in the case of the Society in ITA Nos. 1721 to 1724/Mum/2023, order dated 31.01.2024, the said decision, in the opinion of the CIT(A), did not render the reassessment in the case of the assessee invalid. The CIT(A) held that the said decision recognised that the documents found during search at the Society's premises could constitute incrimi....
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....sit was held to be explained and the addition to that extent was deleted. (iv) Balance Cash Deposits - Rs. 19,46,57,904/- With respect to the remaining balance, the assessee contended that it represented cash redeposited from earlier withdrawals of Rs. 19,73,11,355/-. The learned CIT(A) considered in detail the assessee's submission that out of the total cash deposit of Rs. 51,21,21,090/-, a sum of Rs. 31,74,63,186/- was out of cash sales offered to tax, and the balance Rs. 19,46,57,904/- was out of earlier cash withdrawals of Rs. 19,73,11,355/-. However, the CIT(A) rejected the explanation regarding the alleged withdrawal-redeposit theory for the following reasons: * The assessee failed to provide a rational business explanation for frequent large cash withdrawals and deposits. * The assessee's business did not involve significant cash expenditure, and most purchases were through cheque. * No prudent person, the CIT(A noted, would frequently withdraw and redeposit cash without purpose. * The AO pointed to abnormal and unexplained patterns of cash withdrawals and deposits, especially in August 2012 and March 2013. * The AO also observed that the assessee did not carry....
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....6,57,904 78,06,49,941 2014-15 88,66,48,200 19,51,73,450 69,14,74,750 17. The CIT(A) also directed the AO to verify the exact quantum of deposits considered in assessment versus deposits actually made with the Society in both years and rectify any computational errors accordingly. 18. Aggrieved by the common order of the CIT(A) both Revenue and assessee are in appeal before us raising following grounds: In Revenue's appeal - ITA No. 864/Ahd/2024 - A.Y. 2013-14 1) In the facts and on the circumstances of the case and in law, the ld, CIT(A) has erred in deleting the addition of Rs. 47,43,27,036/- made on account of unexplained transaction u/s 69A of the Act, without appreciating the fact that, assessee didn't disclose the transaction in ITR and also failed to corroborate the actual nature and genuineness of the transactions. 2) In the facts and on the circumstances of the case and in law, the ld.ClT(A) has erred in deleting the addition of Rs. l5, 14,78,000/- by accepting the claim of the assessee that the same represented temporary loans from various parties. In Revenue's appeal - ITA No. 864/Ahd/2024 - A.Y. 2014-15 1) In the facts and on the circumstances of the....
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....ained by the learned CIT(A) may kindly be deleted. In Assessee's appeal- ITA No. 830/Ahd/2024 - A.Y. 2014-15 1.1 The order passed under section 250 of the Income-tax Act, 1961 by the learned Commissioner of Income-tax (Appeals)-11, Ahmedabad, dated 27.02.2024, upholding the addition towards credits in the account of M/s. Shri Renukamata Multi-State Urban Co-operative Credit Society Ltd. to the extent of Rs. 19,51,73,450/- made by the Assessing Officer, is wholly illegal, arbitrary, and contrary to the principles of natural justice. 1.2 The learned CIT(A) has erred in law and on facts in not properly and comprehensively considering the explanation and evidence produced by the appellant, thereby resulting in gross violation of the principles of natural justice. 2.1 The learned CIT(A)-11 has grievously erred in law and on facts in sustaining the addition made by the Assessing Officer by treating the credits in the account of M/s. Shri Renukamata Multi-State Urban Co-operative Credit Society Ltd. to the extent of Rs. 19,51,73,450/- as unexplained money assessable under section 69A of the Act. 2.2 In the facts and circumstances of the case, the learned CIT(A) ought not to have....
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....terns, source and destination of funds, and the conduct of the assessee as noted during the proceedings. 20. Additionally, the learned DR drew attention to the balance sheet of the assessee as on 31.03.2013, and pointed out that it disclosed only one trade creditor (Dhananjau Trade Link Pvt. Ltd.) of Rs. 34,51,78,742/- and deposits amounting to Rs. 51,55,30,810/-, which were not reconciled or co-related with the credits in the assessee's account with the credit society. It was submitted that these amounts correspond to the accommodation entries unearthed by the Assessing Officer and raise serious doubts about the actual nature of transactions recorded in the books of account. The DR contended that the CIT(A) has failed to examine this aspect of the case from the perspective of the Assessing Officer's suspicion and has granted relief without considering the implications of these large unexplained liabilities shown in the balance sheet. It was thus submitted that the action of the CIT(A) in deleting the additions without dealing with this core issue amounts to nonapplication of mind, and the appellate order deserves to be set aside. The DR accordingly pleaded for restoration of....
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....unexplained under section 69A, being re-deposit of cash withdrawals allegedly not substantiated by sufficient source documentation. The AR contended that the said cash withdrawals and re-deposits were recorded in the books, the cash book was not found defective by the AO, and a chart showing classification of sources of cash was also furnished (paper book page No.113 for the A.Y. 2013- 14). It was therefore submitted that the residual addition of Rs. 19.46 crore also deserves to be deleted. 23. We have carefully considered the rival submissions, perused the orders of the Assessing Officer and the learned CIT(A), and examined the material available on record including the paper book filed by the assessee. The core issue in these appeals pertains to the addition made by the Assessing Officer under sections 68 and 69A of the Act in respect of large deposits aggregating to Rs. 97.53 crore for A.Y. 2013-14 and Rs. 88.66 crore for A.Y. 2014-15 in the assessee's bank account maintained with Shri Renukamata Multi-State Urban Cooperative Credit Society Ltd. ("the Society"). The Assessing Officer treated the entire deposits as unexplained, whereas the learned CIT(A) granted partial relief a....
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....850/- 26. We first deal with the component of Rs. 3,64,53,850/- claimed to be business receipts deposited in the account held by the assessee with Shri Renukamata Multi-State Urban Co-operative Credit Society Ltd. The assessee submitted before the CIT(A) that this amount represents sales proceeds received by cheque from various parties, and such sales are duly recorded in the books of account and offered to tax. It is further submitted that ledger copies and the sales register reflecting the said transactions were also produced before the CIT(A) for verification, along with a party-wise list of cheque receipts aggregating to Rs. 3,64,53,850/-. As noted earlier, no such bifurcation or documentary support was furnished before the Assessing Officer at the reassessment stage. The AO, therefore, made the addition under section 68 on a wholesale basis, treating the totality of the credits in the society's account as unexplained cash credit, without opportunity to verify or examine the source-wise explanation. The said cheque receipts, ledger copies, and sales register were placed for the first time before the CIT(A) during the appellate proceedings vide submissions dated 05.02.2024. 27....
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....letion of Rs. 3,64,53,850/- by the CIT(A) cannot be sustained without independent verification. The matter is therefore restored to the file of the Assessing Officer for limited purpose of examining the genuineness of these business receipts afresh in light of the documents furnished before the CIT(A), after giving due opportunity to the assessee. The assessee shall cooperate and produce all necessary documents, including confirmations from parties, VAT returns (if any), bank statements, and invoices with quantitative details, to establish the identity of the parties, nature of transactions, and genuineness of the receipts. Inter-bank transfers amounting to Rs. 12,04,10,000/-: 31. We now deal with the component of Rs. 12,04,10,000/- claimed to represent inter-bank transfers between the assessee's own accounts. The assessee submitted a detailed bifurcation of these transactions before the CIT(A) vide page 114 of the paper book, supported by date-wise entries drawn from the Axis Bank statement, clearly identifying them as internal fund movements between current and savings accounts held by the assessee in the same bank. The CIT(A), in para 5.6 of the appellate order, has accepted t....
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.... to independent verification, third-party cross-check, or reconciliation with stock records or VAT returns. 34. At the outset, we note that the explanation regarding cash deposits is based entirely on internal documents such as the cash book and bank statements. No primary evidence has been placed on record to prove that actual sales took place against which cash was received. The supporting invoices are VAT-free and no VAT returns or sales tax records were submitted either before the AO or the CIT(A). Further, no stock register or inventory movement summary has been filed to establish that there was actual movement of goods justifying such cash sales. It is also not demonstrated whether the goods sold were exempt under VAT laws, or if any exemption certificate was filed. 35. Furthermore, we also observe that while the sample invoices and purchase bills submitted by the assessee contain quantitative details of goods sold or purchased, no verification of such quantitative particulars was carried out either by the Assessing Officer or by the CIT(A). The movement of goods, which is intrinsic to the claim of genuine trading activity, remains unverified. We also noted from the auditor....
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....he Assessing Officer of an opportunity to verify the cash flow trail and reconcile it with stock and sales tax compliance. 37. In view of the foregoing, and considering the incomplete evidentiary backing, absence of bifurcation of cash flow, and lack of third-party validation, we hold that the claim of the assessee that the deposits of Rs. 31,74,63,176/- were sourced from genuine cash sales and re-deposits of withdrawals is not conclusively established on the basis of material available on record. The treatment of this amount as explained by the CIT(A), without requisite verification, is therefore unsustainable. 38. Accordingly, we set aside the finding of the CIT(A) in respect of this component and restore the matter to the file of the Assessing Officer for de novo verification. The assessee shall furnish complete details of cash sales, customer-wise invoice copies, quantitative stock movement, VAT returns, and the breakup of cash withdrawals and deposits with dates and purposes, to establish the claim. The Assessing Officer shall verify the same in accordance with law and decide the issue after giving due opportunity of being heard. Temporary loans from various parties amounti....
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....ese entities also appeared in the books of the assessee as customers or suppliers. This dual role of the same parties, as creditors and as trading counterparties, raises serious questions regarding the commercial substance and economic reality of these transactions. There is no discussion in the CIT(A)'s order about whether the funds advanced as loans originated from independent sources or were recycled business receipts routed to give the colour of loans. Additionally, the assessee's balance sheet as on 31.03.2013 discloses "Deposits" of Rs. 51,55,30,809.71, the nature of which remains unexplained. It is unclear whether these relate to the same loan creditors, and if so, why such balances remained outstanding. If not, the question arises as to the source and nature of such significant liabilities, and whether they involve overlapping entries or other structured layering. The Assessing Officer is entitled to examine the source of the source. Mere filing of PAN, bank statements, or ITRs by itself does not establish creditworthiness or genuineness. The AO is duty-bound to investigate the matter when a prima facie case of accommodation entry is made. In the present case, the transacti....
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....rdingly, the CIT(A) confirmed the addition under section 68/69A of the Act to the extent of Rs. 19,46,57,904/-. 46. We have considered the rival submissions and examined the materials placed on record. The explanation offered by the assessee- namely, that the deposits were sourced from earlier cash withdrawals-is prima facie plausible but requires substantive verification. The cash flow summary, reconciliation charts, and books of account may support the availability of funds, but that by itself does not discharge the assessee's burden under section 68/69A unless a clear and specific correlation between withdrawals and deposits is demonstrated. As observed earlier, the pattern of repeated large cash withdrawals and immediate or proximate redeposits, without identifiable business transactions or necessity, does give rise to doubts regarding the commercial substance of these movements. The nature of the assessee's business, which otherwise operates largely through banking channels, does not explain the need for such substantial and frequent cash circulation. We further note that the CIT(A), while rightly questioning the absence of nexus, did not call for a remand report or direct th....
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.... VAT returns, stock movement, or purchase trail. The outstanding deposits of Rs.51.55 crore as on 31.03.2013 also remained unexplained and potentially correlated with the same entries. Thus, in the absence of independent verification and in view of the complex factual setting involving significant cash transactions and potential circularity, we are of the view that the reliance placed by the CIT(A) on those decisions do not assist the assessee in the present case, as the foundational facts necessary to invoke their applicability are not comparable. Findings and Conclusion - A.Y. 2014-15: 50. The facts and issues involved in A.Y. 2014-15 are identical in material respects to those considered in A.Y. 2013-14. The Assessing Officer made an addition of Rs. 88,66,48,200/- under section 68 of the Act on account of deposits in the assessee's account with Shri Renukamata Multi-State Urban Co-operative Credit Society Ltd., treating the entire credits as unexplained. 51. During the course of appellate proceedings before the CIT(A), the assessee furnished a detailed source-wise bifurcation of the deposits aggregating to Rs. 77,23,98,233/-, comprising: * Business receipts of Rs. 7,10,50,0....