TaxTMI 
TaxTMI 
2025 (3) TMI 1669
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....on 19-07-2018. The assessee declared income of Rs. 258.34 Lacs. On the basis of material found during search, it was alleged by Ld. AO that the assessee carried out certain out-of-books transactions and accordingly, show-caused the assessee. In the notice, Ld. AO alleged that the document LP-2 (Page Nos. 22 & 23) contained transactions of Gold / Silver purchase and sale from different parties. The details were written quantity wise and amount wise. The names of the parties were mentioned in pencil. Total sale was made to 24 parties for quantity of 2153.840 Kg. The sale value of silver was worked out at Rs. 40000/- per Kg. The assessee failed to explain the document satisfactorily. The Ld. AO worked out out-of-book sales on the basis of these documents. 2.2 Thereafter, Ld. AO referred to survey on M/s Prashant Silver Handicrafts wherein incriminating material marked as LP-1 containing Pages 1 to 141 was found. These pages are alleged to be real cash book of the assessee. The physical stock was found to be much less in comparison to book stock. The Ld. AO, on the basis of these pages, also alleged that the assessee made out-of-books purchases. 2.3 The assessee contended that th....
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....63.36 Crores The assessee stated that average Net Profit of 7 years would be 0.25%. However, Ld. AO did not accept the same. Finally, Ld. AO added unaccounted sales to regular sales and arrived at revised turnover of Rs. 1163.36 Crores. The Ld. AO applied net profit rate of 0.38% and computed net profit of Rs. 447.86 Lacs. After adjusting profit as already shown by the assessee, the differential of Rs. 186.24 Lacs was further added to the income of the assessee. 2.6 The Ld. AO also made another addition of Rs. 510 Lacs. The same was nothing but cash deposited by M/s Prashant Silver Handicrafts during the course of search without informing / without taking permission of the Authorized officer of the searched team. The statement of assessee's son was recorded u/s 131(1A) on 15-11-2018. He stated that the same was sale proceeds of cash sales of bullion. It was noted by Ld. AO that M/s Prashant Silver handicraft made cash sale of Rs. 626.28 Lacs on single day selling about 1611.783 Kg of silver. The Ld. AO held that the sales bills were bogus and mere after-thought to accommodate the unaccounted money as cash sales. The assessee assailed the same on the ground that there was no p....
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.... No satisfactory explanation of the discrepancy in stock as per books and as found in physical verification could be given by the appellant. The AO concludes that the stock found in physical verification is much less than the stock as per books, therefore it is clear that out of books sales was done. 6.6 The AO has further placed reliance on LP-01 (containing pages 1 to 141) found and impounded during survey proceedings conducted u/s 133A of IT Act at Prashant Silver Handicrafts, Kinari Bazar, Namak Ki Mandi, Agra. In page no. 128 of this LP-01, cash payment of Rs. 20,00,000/- is shown to M/s. Akanksha Jewellers on 21.06.2018 and on the same date amount of Rs. 20,00,000/- is received from this concern in Bank account no. 46905. In page no. 125 of this LP-01 on 20.06.2018, cash payments to various persons are shown i.e. Balaji Jewellers (Rs. 12,61,754/-) Akanksha Jewellers (Rs. 10,00,000/-) and Rajjo MTR (Rs. 3,00,000/-) and same amounts have been received from these persons in the bank accounts. Thus the AO concluded that accommodation entries of Rs. 45,61,754/- (Rs. 20,00,000/- + Rs. 25,61,754/-) are taken. 6.7 In page no. 2 of LP-01 sale/ purchase of Bulli....
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....ounting to Rs. 6,26,28,177/- as was made on 18.07.2021. The AO observes that the cash sale of such a big magnitude cannot be made in a single day in a season which is neither a festive nor a marriage season. The AO further observes that it was found that all the sales invoices had the weight of silver bullion of 1.207205 Kg approximately and all invoices were unsigned. The AO observes that during the course of search proceedings without informing to the search team, cash amount of Rs. 5,10,00,000/- was deposited in the bank account clandestinely. And when the search was over, the assessee manipulated cash book and booked cash sales below Rs. 50,000/-. There was no marriage season or festive season due to which such a huge cash sales could be made in a single day. All the cash sale invoices were having weight of silver bullion as 1.207205 Kg. approximately and all the invoices were unsigned and were submitted during post search proceedings. The AO further observes that the assessee failed to produce cash book of that date to show that he had that much of cash in hand during the search proceedings. 6.10 Based on above observations, the AO made two additions. Out of books sal....
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....llant since he is in the business of silver bullion. To rebut this presumption, the appellant was required to furnish cogent evidences which may prove that the contents of pages belong to Smt. Shashi Devi Agrawal and not to the appellant. The appellant deals in purchase and sale of silver bullion and the quantities mentioned in the seized papers indicate the same. There is no mention of any percentage of commission amount. The names and quantity of silver is clearly mentioned and the quantity of silver sums to 2153.840 Kg. The same has been rightly valued by taking rate of Rs. 40,000/- per Kg at Rs. 8,61,53,600/-. And since the appellant could not show the same as credited in his books, the AO has concluded the same as out of books sale. In this regard it is noteworthy that the AO has taxed NP @0.38% which is almost in accordance to alternative submission of the appellant, in which he submitted to tax the same at the NP rate of 0.31% in his submission dt. 22.06.2021. 6.12 In the matter of difference in the stock as per books and as physically found during survey proceedings, in case of prop. concern of the appellant i.e. M/s. Prashant Silver Handicraft, (i) as per books, G....
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....ecurity, though the option of cheque of this amount could also have been exercised. From the nature of business of the appellant, it is clear that with such a large turn-over of around Rs. 1200 crores, no such instances of cash security could be found in the whole search from any other party, though the sales are made to so many other parties. The sale of goods does not require security in cash. Similar is the case with accommodation entries of Rs. 25,61,754/- taken from Balaji Jewellers, Akanksha Jewellers and Rajjo MTR on 20.06.2018 as per page no. 125 of LP- 01. The plea of the AR that the cash was taken as Amanat Money and returned after getting cheque is not convincing since taking cheque in lieu of exact amount of cash on the daily basis cannot be Amanat Money. In case of Akanksha Jewellers this is found that cash of Rs. 10,00,000/- is given and cheque taken on 20.06.2018 and further cash of Rs. 20,00,000/- is given and cheque taken on 21.06.2018. Further it is strange that cheque is not taken as security. Moreover the appellant failed to furnish any evidence to support the claim, that these were amounts of Amanat Money, hence such claim cannot be accepted. ....
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....he sales made by the assessee on these dates. The AR claims that the names written against the cash amounts are intermediaries, through whom sales are made in cash. In this regard it is observed that the intermediaries could not be produced, nor any evidences could be furnished which may prove beyond doubt that such persons were intermediaries to whom sales are made in cash which is above Rs. 50,000/-. It is clearly an after-thought that the appellant has taken recourse to justify his cash sales which is above limit of Rs. 50,000/- Infact PAN details were required to be taken in the cash sales above Rs. 2,00,000/- as per the provisions of Rule 114B of IT Rules. Thus provisions of law have been violated and to cover the same, the theory of intermediaries is taken recourse of. Therefore it is concluded that the AO has rightly considered these sales as out of book sales. 6.16 In the matter of addition of Rs. 5,10,00,000/- towards the cash deposited in the business bank account during the course of search proceedings without making any intimation to the search team, the AR submits that books of accounts were found during the course of search which show that cash sales....
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.... of the day could not be provided by the appellant to show that cash book found during the search and that produced in the post search proceedings matched. 6.17 The AO has made 2 additions, the first addition is of Rs. 1,86,24,196/- which has been computed by applying NP rate of 0.38%, which is best rate of the appellant himself in past 7 years i.e. in AY 2016-17 on the entire sales i.e. accounted turn-over of Rs. 1163,36,00,034/- and unaccounted sales of Rs. 15,24,08,544/-. It appears that AO has considered shortage of actual stock physically found during the survey/ search in comparison to books, to be taken care of in this NP rate estimation hence separate addition has not been made. Another addition of Rs. 5,10,00,000/- is made by concluding that this amount of Rs. 5,10,00,000/- was unaccounted income of the appellant which came to the notice after the search. After the search, it came to the notice that appellant was in possession of this cash amount of Rs. 5,10,00,000/- and the same was clandestinely deposited in Bank account and the search team was kept in dark, thus no verification of this amount could be done with the books. However later on the appellant claimed ....
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....nt, then it is hard to believe, the books shall tally with this amount without manipulating the same. How can later on appellant claim that the books are matching with this amount of Rs. 5,10,00,000/- as sale proceed, without manipulating the sales. Hence the source of this cash amount, which was deposited in the banks remained unexplained beyond doubt. Therefore, it is observed that the addition has been rightly made u/s 68 of IT Act. Now if we go back to the source of this cash amount of Rs. 5,10,00,000/-, as explained in the preceding paras the same might be generated from such unaccounted purchases of stock, evidences of which were found upto Rs. 3,64,85,327/- and further the accommodation entries were found upto Rs. 45,61,754/-. These findings of the search conclusively prove that the source of this cash amount of Rs. 5,10,00,000/- was out of unaccounted stocks and unaccounted income. 6.19 There is no basis of making a claim that these cash sales of Rs. 5,10,00,000/-were verified during the search, as is claimed by the appellant in a ground of appeal. No seized material could be produced which may show that such vouchers of 18.07.2018 were found and seized. R....
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....orrect and complete to that extent. The evidences have been found during the search and detailed discussion have been made regarding the same, therefore the objection of the appellant is not tenable. The AO has rightfully and very judiciously invoked the NP rate which was achieved by the appellant in his own business in AY 2016- 17. Therefore the decision of the AO to invoke the provisions of section 145(3) of IT Act is hereby upheld. The reliance of the appellant in the various judicial pronouncements in the matter of rejection of books of accounts and invocation of provisions of section 145(3) of IT Act is misplaced since in the search proceedings the evidences have been found and seized and they clearly indicate that the books do not incorporate out of books sales and the same are discussed in the foregoing paras. Further another addition of Rs. 5,10,00,000/- u/s 68 of IT Act can very well be made since alongwith the rejection of the books of accounts and estimation of NP on the disclosed turnover and unaccounted sales, emanates from such cash which was clandestinely deposited without informing to the search team and an attempt was made to bring the same into the books.....
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....t rate on entire sales including regular sales which were not in dispute, could not be held to be justified. There is no justifiable reason to tinker with the net profit rate as shown on regular sales since the same was not disputed by Ld. AO. 6. So far as the alleged out-of-books sales are concerned, it is quite clear that no plausible explanation could be furnished by the assessee to controvert the allegation of Ld. AO. Therefore, Ld. AO would have no option but to apply Net Profit Rate on these out-of-books sales. Since as per the audited statement, the assessee has reflected Net Profit Rate of 0.22% on regular sales, the profit on these unaccounted sales could be estimated at slightly higher value. We estimate the same at 0.30%. The Ld. AO would apply this rate on out-of-book sales and redetermine the profits of the assessee. The profit shown on regular sales would be accepted. It could be seen that Ld. AO has not made any separate addition of out of books purchases and alleged accommodation entries since Ld. AO has applied estimated Net Profit Rate on sales turnover. The accommodation entries are between the parties which have business dealing with the assessee. Therefore, ....