AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 168
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....r books of account and AO had rejected books of account u/s 145(3) of the IT Act 1961. 3. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in allowing the appeal even though assessee did not discharge its onus of evidence related to lose diamond purchased of Rs. 3.6 crores from individuals. 4. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in allowing the appeal of the assessee against the findings of survey action dated 17.03.2017 that assessee had surrendered a sum of Rs. I crore on account of difference found in cash in hand on 08.11.2016 for an unexplained sum of Rs. 61.37 crores from RK Overseas. Further in the instant case, for the A.Y. 2017-18, the actual tax amounts to Rs. 6,61,95,908/- which is above the monetary limits prescribed in the Circular No. 17/2019 dated 8th of August 2019 (amendment to circular No. 3/2018 dated 11th of July, 2018) i.e. Rs. 50 Lakhs for appeal in ITAT. Therefore, further filing of appeal is recommended for A.Y. 2017-18. 3. Brief facts of the case are that, the Assessee filed return of income declaring income of Rs. 61,11,760/-. The return of the Assessee was processed by CPC, la....
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....fficer is being summarised as below:- 1. Purchases in the month of September 2016, out of which the case sales have been made in October 2016, are fictitious. 2. The stock register maintained by the Assessee is not proper. 3. Year on year cash deposits and cash sales have increased exponentially. 4. The cash deposit made was very late which is unusual for a business. 5. Bills for cash sales do not the particulars of the customer. All these are discussed in the subsequent paragraphs on the basis of the evidence, facts of the case and submissions of the Appellant, before me: - 1. Authenticity of the purchases out of which the cash sales have been made, as claimed by the Appellant; As for the purchases in the month of September 2016, it is seen that out of the total purchases of the month of Rs. 6,85,79,279/-, the AO has raised his suspicion over the purchases made from Sh. Bharat Kalra of Rs. 1,74,98,950/- and Sh. Ram Chand Kalra of Rs. 1,74,98,250/- and a meagre cash purchase of Rs. 17,377/-. From the submissions made by the appellant it is concluded that the Appellant produced the confirmations, ITRs, ....
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....The stock register and other summaries appear to be in order and no adverse inference can be drawn in respect of non-genuineness of the purchases or sales thereof in the case of the appellant. 1. Significant increase in cash deposit and cash sales when compared to the preceding year:- The cash deposited in bank has grown exponentially by 1349% from F.Y. 2015-16 to 2016-17, and cash sales have also increased by 1214% over F.Y. 2015-16. The cash sales made by the appellant during October, 2016 is more than the total cash sales of A.Y. 2016-17 as evident from the fact that total cash sales in F.Y.2015-16 was Rs. 85,22,634/- whereas sales in Oct, 2016 alone is claimed to be Rs. 10,35,32,989/-. The Appellant has explained the same, the major reason behind this increase has been stated to be the introduction of trading of loose diamonds during that time. To substantiate its claim, the appellant has filed the proof of purchase of such diamonds during the assessment proceedings. The Appellant has further substantiated that the increase in sales by almost Rs. 8.75 Crores when compared to preceding year and is marked by a corresponding increase in the expenses by R....
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....d thus, the question risk involved in keeping such huge cash in own locker rather than safety of a bank does not arise. The arguments of the Appellant do make a valid point to some extent, however, still these arguments made by the AO and Appellant are circumstantial and cannot be replaced with the evidence on record. 1. Genuineness of cash sales; The Ld. AO states that the bills raised for cash sales did not bear the proper details of the transaction and the purchaser. To this, the Appellant submits that the details are mentioned on the request of the customers as cash sale customers do want specific details. However, the details and description of the sale items were duly recorded in the books of the Appellant. These details have been submitted by the Appellant by way of sale, purchase and stock registers. The Ld. AO has not pointed out any flaw in the books of accounts and even the ones pointed out have failed the test of logic and facts. Further, no infirmities have been pointed out in the cash book of the Appellant either. All these facts cannot be ignored while deciding the present matter. Regardless, when the purchases so doubted by the AO have been accepte....
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....urchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& L account in page No. 7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts and trading acc....
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....S Diamonds India (P.) Ltd. v. ACIT [2022] 145 taxmann.com 545/[2023] 198 ITD 344 (Mum. - Trib.) the Income-tax Tribunal Bench at Mumbai has held as under:- "4. I have heard the parties and perused the record. The facts that the deposit made into the bank account is from out of the books of accounts and the said deposits have been duly recorded in the books of account are not disputed. It is the submission of the assessee that it had received advance money from walk in customers for sale of jewellery over the counter and the amount so received was duly recorded in the books of account. The said amount alongwith other cash balance available with the assessee was deposited into the bank account after announcement of demonetization by the Government of India. He also submitted that the assessee has raised sale bills against the said advances in the name of respective customers. Since the transaction was less than Rs. 2.00 lakhs, it was stated that the assessee did not collect complete details of the customers. Thus, it is seen that the advance amount collected from customers, the sales bill raised against them etc., have been duly recorded in the books of account. The impugned....
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.... meaning of the law." Thus, considering the above ratio, when the Assessee's books of account were not rejected, the Lower authorities ought not to have made additions. ......................................................................................................... ........ 22. In the case in hand the reason for disbelieving the cash deposit is that the assessee has been deposited below Rs. 2 lakh in every transactions that lead to the conclusion of the Assessing Officer that the same has been done to avoid the application of provision of section 285BA read with Rule 114E of the Act. The said observation made by the Assessing Officer without any material in his hand. There is no prohibition under law to make sale transaction below Rs. 2 lakhs as such the assessee had at liberty to manage his own affairs. From the action of the assessee in raising the sales bill below Rs. 2 lakhs the Assessing Officer cannot interpret as the sale are bogus only to give color to non-genuine transaction as genuine transaction. The evidence brought on record by the Assessing Officer are not enough to hold that sales were not genuine. More so, the other wing of the Govt ha....
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....ns, it is hereby held that the cash deposits made by the Appellant are duly explained out of the sale proceeds and I, direct the Ld. AO to kindly delete the addition of Rs. 8,30,51,490/-. Further, the appellant has raised the ground that he was not given an adequate opportunity to present the facts before the Ld. A.O. However, adequate opportunity has been provided to the appellant during the course of these proceedings. The Grounds of appeal 1 to 6 are hereby allowed." 7. As could be seen from the order of the Ld. CIT(A), the Ld. CIT(A) allowed the Appeal of the Assessee after going into the merits of the case in detail and found that the Assessee had disclosed all the purchases in VAT return for the quarter ending September 2016, which was filed on 27/10/2016, much before the announcement of demonization by the Government of India on 08/11/2016 and accordingly held that purchases made in the month of 2016 are genuine. Further observed that the Assessee has maintained proper stock register and on verification of the same, Ld. CIT(A) observed that more than 50% of cash sale made in the month of 2016 are out of opening stock for the month of 2016 i.e. purchases made befo....