TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 640
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....f total addition of Rs. 1,55,50,000/-made by A.O on account of cash deposited in bank of appellant during demonetization period treating it to be unexplained money invoking sec. 69A. Addition made by A.O and confirmed by Ld. CIT(A) is illegal, arbitrary and not justified. 3. Ld. CIT(A) erred in confirming addition of Rs. 85,08,297/- made by AO on account of certain credit purchases made by appellant treating it to be unexplained money invoking sec. 69A. Addition made by AO and confirmed by Ld. CIT(A) is illegal, arbitrary and not justified. 4. Without prejudice to above grounds, Ld. CIT(A) erred in confirming various additions without appreciating that provisions of sec. 69A are not applicable to additions made by AO. 5. In the facts and circumstances of the case, Ld. CIT (A) erred in facts and in law in rejecting the application for admission of additional evidences filed by appellant u/r 46A of Income Tax Rules. Ld. CIT(A) erred in holding that there is no reason or ground which prevented the appellant from producing explanation before AO. 6. Ld. CIT(A) erred in confirming addition and passing order by violating principles of natural justice an....
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....and immediately transferred to the appellant's account in the guise of unsecured loans. On further verification of the income details of the loans creditors, it is revealed that the no individual person had a prudent business activities and the income claimed to have been earned was also very meagre so as to substantiate the creditworthiness. The details of income as shown to have been earned by the above entities has been analyzed and observations were also recorded as under: SI. No Name of the lender Loan given amount (Rs. ) Gross total Income as per ITR (A.Y.2017-18) Observation 1. Laxmi Devi Lalwani 9,00,000 290762 In this case, the lender shown to have disbursed loan amount out of her total receipts from the business and other incomes. The total turnover of her business as per the computation was at Rs. 7,88,700/- and sale consideration of Gold and Diamonds to the tune of Rs. 3,23,271/- was shown to have been earned. 2. Padam Chand Lalwani and Sons (HUF) 12,00,000 248867 In this case, the lender shown to have disbursed loan amount out of its total receipts from the business and other incomes. The total turnover as per the comput....
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.... prove his claim of unsecured loans from the different entities, I found it is absurd and very illogical where the entire money was earned by the entities to support the appellant in the form of Unsecured Loans without retaining funds for their livelihood expenses. The amount which was shown to have been earned in the form of receipts in business activities and same was claimed to have been deposited into bank accounts of the loan creditors. Even it is illogical, where a salaried employee (loan lender) has given entire amount to the appellant and the said person has got all his salary in one go during the demonetization in cash. 6.3. Though, the appellant has provided all the relevant details of loan creditors to prove the identity, genuineness and creditworthiness of the above loan creditors, from the facts of the case, it is unambiguous to state that the claim of discharging onus of creditworthiness by the appellant is not correct and unacceptable after perusing the evidence on which the appellant relied upon. By relying on a spirt of a judgement given by the Hon'ble High Court, Kerala in the case of CIT vs Universal Empire Educational Society [393 ITR 502 (2017)], w....
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.....11.2016 to 05.12.2016 Non SBN 5 lacs On 31.12.2016 Bank of Baroda (037411023988) SBN notes 105.50 lacs From 13.11.2016 to 01.12.2016 Total cash deposits 155.50 lacs The appellant has claimed that there was a cash balance of Rs. 1,08,62,903/- in his hands as on 01.11.2016 and during the months of November and December, further cash of Rs. 49,59,361/- was generated on subsequent sales. However, the appellant has deposited the cash on different dates starting from 13.11.2016 in the Bank of Baroda and on 22.11.2016 into the Bandhan Bank. When, the appellant claimed to have held such huge cash of Rs. 1,08,62,903/- on 01.11.2016, prior to the demonetization, what compelled him to stay away from the depositing the demonetized cash in one go and why he had chosen to deposit the money after six days of announcement of demonetization by the Govt. The conduct and the claim of the assessee is incongruous and against human preponderance, as why he had not deposited the entire cash available with him as on the date of demonetization. The appellant either deposited its undisclosed amount or otherwise helped undisclosed, unanimous and unidentifiable p....
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....have no reason based on the material available with the AO, as well as submission brought in before me, to differ from him making addition of Rs. 85,08,297/- u/s. 69A of the Act and the action of the- AO is upheld. Therefore, the ground no.3 of appeal is hereby dismissed." 5. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 6. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by him to drive home his contentions. 7. At the threshold, we may observe that the assessee has filed before us an application dated 01.10.2024 seeking admission of certain documents as additional evidence under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963, viz. (i) confirmation from "karigar" in respect of "Galai charges" (melting charges), Page No.275 of APB; and (ii) confirmation of creditors in respect of addition u/s.69A of the Act of Rs. 85,08,297/-, Page 276 to 294 of APB. 8. The A.O vide his letter dated 03.10.2024 had objected to the s....
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....s 6. Keshar Gidiya 11,00,000 Yes except ITR 7. Kishan Gidiya & Sons 7,80,000 Yes 8. Dhanesh Fin. & Leasing (M/s. Accredit Distributors Pvt. Ltd.) (as per the bank statement) 65,30,000 yes The assessee in order to discharge the onus that was cast upon him to prove the identity, creditworthiness of the lenders as well as genuineness of the respective loan transactions had filed before the A.O supporting documentary evidence, viz. (i) confirmations of lenders; (ii) copies of returns of income a/w. computation of income of the lenders; (iii) balance sheets of the lenders (wherever available); and (iv) PAN & complete addresses of all the lenders. The A.O on a perusal of the details filed by the assessee, observed that in the cases of all the lenders except for one, viz. Smt. Khushboo Lalwani cash was deposited in their bank accounts prior to advancing of the respective amounts by them to the assessee. The A.O culled out the details as regards the cash deposits in the bank accounts of the lenders in the assessment order, as under: S. No. Date Name of Lender Amount Received Cash deposit details during demonetization as per lender's....
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....ver of her business as per the computation was at Rs. 7,88,700/- and sale consideration of Gold and Diamonds to the tune of Rs. 3,23,271/- was shown to have been earned. 2. Padam Chand Lalwani and Sons (HUF) 12,00,000 248867 In this case, the lender shown to have disbursed loan amount out its total receipts from the business and other incomes. The total turnover as per the computation was at Rs. 9,10,500/- and sale consideration of Gold and Diamonds to the tune of Rs. 3,08,205/- was shown to have been earned. 3. Pravin Lalwani 4,00,000 415952 In this case, the lender shown to have disbursed loan amount out of its total receipts from the salary and other incomes. The salary of Rs. 3,00,000/- and interest income on unsecured loans t to the tune of Rs. 1,15,952/- was shown to have been earned by the lender during the financial year under consideration. 4. Khushboo Lalwani 5,00,000 320963 In this case, the lender shown to have disbursed loan amount out of her total receipts from business and other incomes. In this case, the lender shown to have received a turnover of Rs. 7,10,522/- from business and other interest incomes of Rs. 1,47,443/- ....
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....e, viz. (i) confirmations of the lenders; (ii) copies of the returns of income a/w. computation of income of the lenders; (iii) balance sheets of the lenders (wherever available); and (iv) PAN & complete addresses of all the lenders. Although the A.O had observed that as the advancing of the impugned loans by the respective landers to the assessee was preceded by cash deposits in their respective bank accounts either on the same day or in the immediately previous period and, thus, primarily for the said reason had concluded, that it was the assessee's unexplained money that was routed back to his coffers in the garb of the loan transactions, but we are afraid that he had while so observing lost sight of the documentary evidences which were filed by the assessee to discharge the primary onus that was cast upon him to prove the authenticity of the subject loan transactions. Although, at the first blush, the observation of the A.O that as the loans received by the assessee from the aforementioned parties were sourced from the cash deposits made in their bank accounts, i.e. either on the same day or during the immediately previous period raises serious doubts regarding the authenti....
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....ions only by placing on record documentary evidence/material dislodging the authenticity of the aforesaid claim of the assessee. Our aforesaid view that in a case where the A.O without making any independent enquiry to disprove the creditworthiness of the creditors, had without dislodging the documentary evidences filed by the assessee in support thereof made additions contrary to confirmations filed by the lenders, then the addition so made by him is liable to be deleted is supported by the judgment of the Hon'ble High Court of Chhattisgarh in the case of CIT Vs. Abdul Aziz (2012) 20 taxmann.com.137 (Chhattisgarh). As the A.O. in the case before the Hon'ble High Court had not made any independent verification to disprove the creditworthiness of the creditors, as was established by affidavits and statements of the creditors disclosing their respective sources of income, therefore, on appeal, the said addition was vacated by the CIT(Appeals) and the Tribunal, which view was thereafter upheld by the Hon'ble High Court. Also, a similar view had been taken by the Hon'ble High Court of Chhattisgarh in the case of Pawan Kumar Agrawal Vs. Income Tax Officer, TAX Case No.24....
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....TO, ITA No. 136/RPR/2029, dated 21.09.2022 and Amit Kumar Bansal Vs. ITO, ITA No.130/RPR/2013, dated 02.05.2017. 17. At this stage, we may herein observe that though the A.O had held the loans as bogus, but interestingly, no adverse inference as regards the interest paid by the assessee to the respective lenders (after deduction of tax at source) had been drawn by him. Be that as it may, we are of a firm conviction that as there is no whisper in the assessment order as to why the aforesaid documents that were filed by the assessee in discharge of the primary onus that was cast upon him to prove the identity, creditworthiness of the creditors as well as genuineness of the loan transactions were not to be acted upon; or there was any infirmity emerging therefrom which dissuaded the A.O from relying on the same, therefore, the drawing of adverse inferences as regards the authenticity of the loan transactions in question by summarily rejecting the said documentary evidence can by no means be held to be justified. 18. Also, it would be relevant to point out that though the lower authorities had drawn adverse inferences as regards the genuineness of the loan transactions for the re....
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....nces could have been drawn in the hands of the assessee. On a perusal of the records, we find that the assessee had rebutted the aforesaid observation of the A.O, claiming that as it was in need of funds for other business purposes, therefore, he had raised loans from the aforementioned parties. The Ld. AR to substantiate the aforesaid factual position had taken us through the details of utilization of cash deposits/unsecured loans credited in the assessee's bank account with Bandhan Bank, Page No. 109 of APB. We find substance in the Ld. AR's claim that independent of the fact that the loans were raised by the assessee to meet out his business requirements, the A.O could not have stepped into the shoes of the assessee and guided him as to how his business is to be run. 21. We, thus, in terms of our aforesaid observations are unable to concur with the view taken by the A.O, who without disproving and dislodging the documentary evidence that was filed by the assessee in discharge of the primary onus that was cast upon him for proving the authenticity of the subject loan transactions, had summarily re-characterized the same as the assessee's unexplained money u/s.69A o....
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....ed by the assessee over the period 03.07.2016 to 08.11.2026, i.e. during the pre-demonetization period, was unlike the prevailing trade practice of sale of gold bullion. Accordingly, the A.O held a conviction that the assessee had split his post-demonetization cash sales (in SBN's) into bills of small denomination to evade TCS provision, and in fact, had been accepting demonetized currency after the denomination date. Further, the A.O observed that it was incomprehensible that the assessee despite having five bank accounts would have for many months held cash in hand amounting to Rs. 1,52,69,341/-. 23. The A.O further observed that a perusal of the assessee's books of accounts, revealed that there was no stock of gold bullion available with him on 31.03.2016. It was observed by him that the assessee had started making purchases of gold bullion only during the post-demonetization period i.e. w.e.f. 16.11.2016 onwards. Referring to the details before him, the A.O observed that it was difficult to fathom that the assessee without being in possession of any stock of gold bullion before demonetization had claimed to have sold gold bullion vide sale voucher No.75, dated 03.07.....
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....mission Balance as per cashbook submitted earlier Difference 30/06/2016 85,147.00 78,147.00 7,000.00 31/07/2016 4,46,499.00 4,39,499.00 7,000.00 30/08/2016 8,12,531.00 7,95,531.00 17,000.00 31/10/2016 1,08,64,358.00 1,08,63,078.00 1,280.00 30/11/2016 8,05,586.00 8,07,136.00 -1,550.00 31/12/2016 1,59,084.00 1,60,144.00 -1,060.00 On being queried, it was the assessee's claim that as certain entries had remained omitted to be passed in the books of account, which, inter alia, included payments towards "galai" charges (melting charges) of gold diamond jewellery i.e. (i) dated 15.04.2016 : Rs. 3,000/-; (ii) dated 20.10.2016 : Rs. 9000/-; and (iii) dated 28.10.2016 : 9,550/-, which, were thereafter entered into the cash book, thus, the same had resulted to the variance/difference in the aforesaid cash balances. The A.O based on the aforesaid facts observed that the assessee by making antedated entries of "galai" charges in his "cash book" (i.e. after closure of the year i.e. 31.03.2017) had manipulated his books of accounts, which, thus, were not reliable. It was further observed by him that the assessee had....
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....wo occasions. The books are manipulated. Galai charges included in cash book just to show melting of gold jewellery into gold bullion. * There was different explanation in respect of method of stock valuation, at different stages. * Average bullion sale rate is Rs. 3,313.43 per gm. Even if 2,183 gms was sold, its value would be Rs. 72,33,248/- whereas appellant has shown total bullion sales of Rs. 3,23,55,643/-. Therefore, bullion sales of Rs. 1,63,26,056/- shown up to 16.11.2016 was not possible. * Each of the above observation of AO is explained below." 28. We find that on appeal, the CIT(Appeals) had though vide his exhaustive deliberations not found favor with the contentions advanced by the assessee and approved the view taken by the A.O, but at the same time, taking cognizance of the fact that cash amounting to Rs. 5 lacs was deposited on 30.12.2016 by the assessee in his bank account with Bandhan Bank was in new currency, therefore, was of the view that the same could safely be held to have been sourced from his regular sales and, thus, scaled down the addition made by the A.O from Rs. 155.50 lacs to Rs. 150.50 lacs. 29. Although the assessee....
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....een categorically explained in the assessment order and the appellant has not brought any substantial evidence in contrary to the finding of the AO in the impugned order. Further, the appellant has claimed that there was a mistake in the 3CD report submitted for the A.Y. 2017-18. However, no such confirmation was found to have been filed either before the AO or before me during the appeal proceedings. After going through the impugned order, I am of the considerable opinion that there was no substantial stock of bullion for subsequent cash sales as claimed by the appellant. As far as the claim of cash in the appellant's hand as on the date of demonetization i.e. 08.11.2016 is concerned, the details of cash deposits into the appellant's accounts were gone though, the details are tabulated as under: Bank accounts Cash deposited (Rs. ) Period of deposits Bandhan Bank (10160005842279) SBN notes 45 lacs From 22.11.2016 to 05.12.2016 Non SBN 5 lacs On 31.12.2016 Bank of Baroda (037411023988) SBN notes 105.50 lacs From 13.11.2016 to 01.12.2016 Total cash deposits 155.50 lacs The appellant has claimed that there was ....
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.... the appellant on 30.12.2016 in his Bandhan Bank account shall be treated as amount received against sale proceeds. Therefore, the appellant get the relief of Rs. 5 lacs from the entire addition of Rs. 155.50 lacs. The Ground no.2 is partly allowed." 31. We have thoughtfully considered the contentions advanced by the Ld. Authorized Representatives for both the parties on the aforesaid issue, i.e. maintainability of the assessee's claim that the cash deposits in SBN's of Rs. 150.50 lacs (supra) made in his bank accounts during the demonetization period were sourced out of the cash in hand available with him as on 08.11.2016 i.e prior to the start of the demonetization period, which in turn was generated out of the cash sales of gold bullion during the pre-demonetization period i.e. 03.07.2016 to 08.11.2016. 32. Ostensibly, a perusal of the order of the CIT(Appeals), reveals that certain serious infirmities in the aforesaid explanation of the assessee regarding the source of cash deposits made in his bank accounts during the demonetization period had surfaced, which are being dealt with as under: A. No stock of gold bullion available with the assessee until 16.11.201....
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....eposits of Rs. 1,50,50,000/- in his bank accounts during the demonetization period. B). Rejection of the assessee's claim of conversion of 5457.879 gms of gold diamond jewellery in to 4661.410 gms gold bullion 34.(i). The assessee had claimed that his previous auditor in "Form 3CD" for the subject year, had wrongly mentioned that 2223 gms of gold jewellery was converted into 2183 gms of gold bullion. It was assessee's claim that during the subject year 5457.879 gms of gold diamond jewellery was converted into 4661.410 gms of gold bullion. Elaborating further, the assessee stated that though he had requested his previous auditor (who had conducted the audit for the subject year) to issue a fresh certificate, but as he was no more continuing as his auditor, therefore, he had not cooperated and provided a fresh certificate. As observed by us hereinabove, the assessee to fortify his aforesaid claim that 5457.879 gms of gold diamond jewellery was converted into 4661.410 gms of gold bullion i.e over a preriod of three days, viz. (i) 15.04.2016; (ii) 20.10.2016 and (iii) 28.10.2016, had sought liberty of the CIT(Appeals) to place on record a certificate of Shri. Om Prakash S....
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....he value of purchase coloumn is nil. in the month of Oct 2016 Diamond Gold Consumption Qty 4597.389 and Production Qty 3820.734 Grams, Hence the value of purchase coloumn is nil. Bardia Jewels Sadar Bazar, Rajnandgaon (C.G.) - 491441 F.Y. 2016-17 DIAMOND WITH GOLD ORNAMENTS STOCK Inwards Outwards Closing Quantity Value Quantity Value Quantity Value Opening Balance 3,144.289 Gm. 69,91,899.42 April 583.200 Gm. 14,20,675.00 650.000 Gm. 18,20,000.00 3,077.489 Gm. 69,45,588.62 May 3,077.489 Gm. 69,45,588.62 June 3,077.489 Gm. 69,45,588.62 July 137.780 Gm. 3,30,603.11 2,939.709 Gm. 66,34,632.77 August 105.160 Gm. 2,52,331.42 2,834.549 Gm. 63,97,297.04 September 617.550 Gm. 14,81,811.23 2,216.999 Gm. 50,03,547.70 October 2,380.390 Gm. 62,43,297.00....
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....ivered at Indore, but the assessee had raised a claim to the contrary that the gold bullion was delivered to him at his shop premises at Rajnandgaon. We are of the view that the A.O. based on his aforesaid observation had drawn adverse inferences qua the transactions of purchase of gold bullion by the assessee. However, we are of the view that as the addition of the cash deposits by the assessee in the present case is confined to the cash deposits of Rs. 150.50 lacs made by him in his bank accounts in Specified Bank Notes (SBN's/demonetized currency) during the demonetization period, therefore, in the backdrop of the fact that it is not the assessee's claim that he was in receipt of the sale proceeds of gold bullion subsequent to 16.11.2016 i.e. during the demonetization period in SBNs/demonetized currency, therefore, the aforesaid aspect will not have any bearing on the adjudication of the issue in hand. In other words, as it the assessee's claim that the cash deposits in SBN's of Rs. 150.50 lacs (supra) made in his bank accounts during the demonetization period were sourced from cash in hand (in SBN's) available with him on 08.11.2016 i.e. before start of the ....
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....d jewellery was converted into 2183 gms . Although, the assessee had, thereafter, claimed that the aforesaid quantitative details provided by the auditor were incorrect but he could not fortify his said claim by placing on record any certificate/confirmation of the auditor to the said effect. We are further of the view that the manipulation of the books of account by the assessee by making antedated entries of "galai" charges, viz. (i) dated 15.04.2016: Rs. 3000/- ; (ii) dated 20.10.2016: Rs. 9000/-; and (iii) dated 28.10.2016: Rs. 9550/-, which, thus, had resulted to the difference/variance in the cash balances in the "cash book" that was produced by him before the A.O, further fortifies the fact that the assessee had come forth with a concocted story and there was no actual conversion of gold diamond jewellery into gold bullion during the pre-demonetization period. 39. Apart from that, we find substance in the observation of the A.O that the very fact that all the 416 cash sale bills of gold bullion issued by the assessee during the pre-demonetization period i.e between Bill No.75, dated 03.07.2016 to Bill No.540, dated 08.11.2016 aggregating to Rs. 1,63,26,056/- are of an amo....
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....assessee submitted that the payments to the aforementioned parties were deferred as per mutual understanding. Elaborating further, it was submitted by the assessee that now when the aforementioned sellers had agreed to allow some time to the assessee to make the payments, therefore, being guided by his business prudence he had decided to defer the payments in the interest of his business. Apart from that, the assessee submitted that now when the goods were available to him on credit, therefore, he had chosen to avail the said opportunity as no additional payment towards interest on the delayed payment was chargeable. However, the aforesaid explanation of the assessee did not find favour with the A.O. The A.O was of the view that as the assessee had with him a substantial amount of cash-in-hand of Rs. 1,52,89,341/- on 08.11.2016, therefore, it was incomprehensible that he would have not cleared the accounts of the aforesaid purchasers from whom gold diamond ornaments were purchased. Further, the A.O was of the view that the assessee had come up with a claim of having made the alleged credit purchases immediately before the demonetization period only with a purpose to facilitate the ....
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....arch, 2017 i.e after a lapse of a period of 5 months from the date of the respective purchases remains undisputed. Ostensibly, the A.O was of the view that as the assessee who had made purchases of gold ornaments in the month of April, 2016, had immediately made the payment to the sellers, therefore, it was difficult to fathom that he would have deferred the payments to the aforementioned 19 parties. Although the assessee had tried to impress upon the A.O that as the deferment of the payments to the aforementioned parties was pursuant to their mutual understanding but he did not find favour with the same. 44. We have thoughtfully considered the aforesaid issue and are unable to persuade ourselves to concur with the view taken by the A.O, i.e, as the assessee had made payments to the aforementioned 19 parties for purchase of gold diamond ornaments after a lapse of 5 months in March, 2017, therefore, it was to be inferred that not made any genuine purchases from them. We find that purchases made by the assessee from the aforementioned 19 parties are duly accounted for in the books of account of the assessee for the year under consideration, Page 172 of APB. Also, there is no denyi....
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....ne reason that the assessee had deferred the payments to the aforementioned parties by a period of 5 months. Although, the aforesaid purchase transactions which were not found by the A.O. to be in conformity with the consistent trade practice of the assessee, i.e making the payments to the sellers at the time of the transaction itself, undeniably could have raised some doubts, but in absence of anything having been brought on record by him to dislodge the authenticity of the said purchase transactions, we are afraid that no adverse inferences qua the same could have validly arrived at based on assumptions and presumptions drawn by the A.O. 46. As is discernible from the record, the A.O, inter alia, was of the view that the assessee in the garb of the purchases made from the 19 parties (supra) in October, 2016, had tried to create stock of gold jewellery in his books of accounts. Accordingly, the A.O was of the view that the assessee based on the aforesaid availability of the gold diamond jewellery with him in October, 2016, had sought to justify the availability of gold bullion (received on conversion of the gold jewellery) during the pre-demonetization period and, thus, relate ....
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....made by the assessee in his bank accounts i.e. Rs. 150.50 lacs (supra) had been held by the A.O as the assessee's unexplained money u/s. 69A of the Act, therefore, there could have been no justification for him to have separately made an addition based on the rejection of the assessee's claim of having purchased gold diamond jewellery from the aforementioned 19 parties of Rs. 85,08,297/- (supra) in October, 2016. As the aforesaid purchases of Rs. 85,08,297/- (supra) made by the assessee from 19 parties in the month of October, 2016 formed part of the gold diamond jewellery that was claimed by him to have been converted into gold bullion and sold during the pre-demonetization period, which sale proceeds were thereafter utilized for making the cash deposits (in SBN's) in his bank accounts during the demonetization period, therefore, we are of the view that there could have been no justification for the A.O. to have separately made an addition u/s 69A of the amount of the aforesaid purchases of gold jewellery of Rs. 85,08,297/- (supra). Accordingly, the adverse inferences drawn by the A.O. regarding the claim of the assessee of having made purchases of Rs. 85,08,297/- (supra) from the....