TaxTMI 
TaxTMI 
2025 (4) TMI 2081
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....e in a special software which is used by the traders throughout the Surajpole Mandi, and since the accountant was not present on the date of Survey, the Survey team did not take the electronic books in their possession and only the Rokad-Bahi (Red Books) along with receipt books which were used to keep the memory of the Assessee refreshed were impounded and the whole case has been made out on the basis of such diaries and sheets of papers which were used by the Assessee only because of his lack of technical knowhow and the inability to go through the software and electronic books in the absence of accountant. The addition of Rs. 92,76,406/- which has been made under section 40A(3) has been done by taking the Red Books on face value. 2. Books of Accounts were not considered: That Proper and Audited books of Accounts were made available to the CIT but the same was not considered by citing the reason that they were self-made, whereas these books of accounts are Audited and the Balance Sheet and Profit & Loss statement can be verified by the department from its portal but the same was not considered while passing the order. Furthermore, as per the facts and circumstan....
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.... of section 133 A of the Act was conducted on 15.02.2018 at the business premises of the assessee at CHA-5.Surajpole Anaj Mandi, Jaipur. The survey team impounded books of accounts for 2016-17 and 2017-18(1.4.2017 to 15.02 2018). Based on survey reports and documents impounded, a detailed show cause notice was issued to the assessee on 03.12.2019 through ITBA portal and the case was fixed for hearing on 09.12.2019 by the ld. AO. On the date of the hearing the assessee has not filed any information / documents / evidences in support of queries raised through show cause. Therefore, it is presumed that the assessee has nothing to say in this regard. As it was a time barring matter the assessment of the total income was considered to the best of his judgment and determined the sum payable by the assessee based on such assessment by the ld. AO. While survey proceedings and post survey proceedings on being asked about source of cash deposit during demonization period, the assessee had stated that he had received approximately Rs. 55.00.000/- from sundry debtors and approx Rs. 12,00,000/- received against cash sales. During survey proceedings and post survey proceedings, on being as....
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....t year up to 15.02.2018 and recovery booklets had also been impounded for further verification. As per physical verification, stock worth of Rs. 15,47,060/ - was found and the assessee did not maintain any stock register hence stock as per books could not be derived and verification could not be made. As requested by the assessee, on 16.02.2018, photocopies of impounded books of accounts being provided on dated 20.02.2018 to the assessee which was duly acknowledged by the assessee. On perusal of the cash book, it has been noticed that the assessee has made cash payment more than Rs. 20,000/- per day to various parties. The assessee had deposited amount of Rs. 67,11,000/- during demonetization period (09.11.2016 to 31.12.2016.) but despite various opportunities provided to him during survey as well as assessment proceedings, he has not submitted any supporting documents to prove that the money of Rs. 67,11,000/- was deposited by his disclosed sources. Therefore, amount of Rs. 67,11,000/- is money which was deposited out of undisclosed sources of Income of the assessee and added to the total income of the assessee u/s section 68 of the IT Act. Ld. AO based on the cash book and ....
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....etails of sundry debtors as well as cash sales, the assessee had not submitted details of sundry debtors like address and ledgers as well as details of cash sales. The survey was conducted for the purpose of verification of cash deposit during demonetization period. The learned Assessing Officer added the unexplained cash as unexplained income as the appellant failed to explain the same. It is beyond doubt that the attitude of the appellant was non-cooperative not only during the survey proceedings but also during the assessment proceedings. Even after many opportunities given to explain the source of cash deposits, the same were not explained neither during the assessment proceedings nor during the present appellate proceedings. The appellant stated that cash deposits were out of cash recovery from sundry debtors amounting to Rs. 55,00,000/- and cash sales Rs. 12,00,000/-, however, no evidence was submitted in support of the same. The appellant has not furnished any details and the evidences regarding the source of such deposit of cash in the bank account. Where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is....
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....First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Co. v. CIT [2000] 241 ITR 497 (Ker). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in CIT v 1. Mohankala [2007] 291 IIR 278/161 Taxman 169. A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be in entry in such books of account. The law is wellsettled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The p....
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.... has held that bank passbook is also the books of the assessee within the meaning of section 2(12A) and, therefore, addition u/s 68 can also be made, irrespective of whether credit entries are made in the books of account of the assessee or not. Further, without prejudice, alternatively, such unexplained cash is taxable as unexplained money u/s 69A of the Act and it is held accordingly. Furthermore, cash book (rokad bahi) and ledger accounts maintained by the appellant were impounded during survey proceedings on the appellant as is also mentioned on page 4 of the assessment order and this fact is undisputed in the appeal. Thus the appellant has wrongly stated that he has not maintained the books of accounts at all. It is stated in the assessment order that "During the course of survey proceedings, it has been notices that the assessee had not maintained complete books of accounts for the FY 2016-17. The assessee has not explained the reason of incompleteness of the books of accounts. Books of accounts consisting cash book and ledgers impounded for want of verification and it was noticed that the assessee was not maintaining proper books of accounts.". The learned Assessing....
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....prove that even if the cash credit represents income it is income from a source which has already been taxed" As per the headnotes "Section 145 of the Income tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922) Method of accounting -System of accounting Assessment year 1946-47-Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source Held, yes". As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further ....
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....nt as income from undisclosed sources. 11. In the instant case, the consistent plea of the assessee was that the sundry creditors are genuine but at any point of time the assessee take the stand that the sundry creditors are referable to the income of the business which has been determined on estimate basis. Hence, the assessee must be held to have failed to establish that the unexplained sundry creditors were referable to the business income. The addition of the unexplained sundry creditors as income from other sources by the AO, therefore, was held valid 12. Further, the Hon'ble Apex Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 observed that where there is an unexplained credit, it is open to the AO to hold that it is income of the assessee, and no further burden lies on the AO to show that the income is from any particular source. It is for the assessee to prove that, even if the sundry creditors represents income, it is income from a source which has already been taxed. There is nothing in law which prevents the AO in an appropriate case in taxing both the sundry credit, the source and nature of which is not satisfactorily ex....
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.... on the next day after the survey the appellant had produced the books of accounts before the survey authorities. This was not the stand of the appellant even during the assessment proceedings. The appellant has been non-compliant and non cooperative during the survey as well as during the assessment proceedings. In the appeal proceedings the appellant has filed some computer printed pages with the claim that these are the books of accounts however the appellant has not proved beyond doubt that these are the books of accounts which existed on the date of survey. The appellant is required to prove this beyond doubt in view of the facts and circumstances of the case as discussed in this paragraph and in above paragraphs. The appellant made an attempt to file some self made details in the form of ledger but that too without filing any application under Rule 46A of the Income-tax Rules, 1962, for admission of addition evidence. Surprisingly, even no confirmation from the recipient of cash expenditure was filed by the appellant even during the present appellate proceedings. In this regard, merely stating that books of account seized by the income tax department during survey we....
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....nce made by the learned Assessing Officer is correct and is hereby confirmed. Accordingly this ground of appeal is hereby dismissed." 8. Feeling aggrieved from the order of the ld. CIT(A), the assessee is before this appellate tribunal challenging that finding of the lower authority on the grounds as reiterated herein above. To support the various grounds raised by the assessee, ld. AR of the assessee, has filed the written submissions and the same is reproduced herein below: "The Assessee had filed his income tax return on 19/03/2018 u/s 139(4) declaring his total income of Rs. 5,54,770/-. The case was selected for scrutiny and notice was served to the Assessee. During the demonetization period, the Assessee had deposited cash of Rs. 67,11,000/- in his bank account. Since the return of income was not submitted within the due date, a Survey u/s 133A of the Income Tax Act was conducted on 15/02/2018 at the business premises of the Assessee. During the course of Survey certain documents were impounded. The Appellant filed his return of income for AY 2017-18 on 19.03.2018, declaring total income of Rs. 5,54,770/-. The case was selected for scrutiny, and a....
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....on money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: [Provided further] that nothing contained in the first proviso 81[or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." This section makes it imperative for the Assessing Officer to be in the possession of the books of accounts of the Assessee. The penalty under Section 271A for non-maintenance of books of accounts was imposed, which itself negates the application of Section 68. The Ld. CIT(A) erred in ignoring the Appellant's explanation without disproving its veracity. The absence of debtors' addresses does not negate the exist....
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....d as: a) The payments made were well within the threshold limit as can be substantiated by the "Receipt Books" impounded by the department during Survey. The cash book and ledger as were maintained in the software by the assessee were supplied to the Ld. CIT but he treated them as "Self-made" and rejected them even though these were the same books on the basis of which Tax Audit for the relevant Assessment Year was carried out. b) The Appellant is engaged in the business of dealing with small farmers and commission agents, where cash transactions are industry practice. c) The reliance on diary notings and 'Red Books' instead of actual books of accounts is improper. The Appellant maintained primary records in electronic format (specialized mandi software). The impounded "Rokad Bahi" was merely a supplementary record. The Ld. AO failed to consider Rule 6DD exceptions for business expediency. The Ld. CIT(A) ignored the Appellant's reliance on electronic books and misapplied Section 292C, which cannot override substantive evidence of genuine transactions. Thus, the disallowance of Rs. 92,76,406 should be deleted. 3. DISALLOWANCE OF ....
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....d that once the books result not relied or available separate addition u/s. 40A(3) cannot be made. To service this aspect of the matter he relied upon the decision of Deepak Mittal Vs. ACIT in ITA no. 4709/Del/2017 where in the co-ordinate bench held that when the books results are not relied the addition u/s. 40A(3) cannot be made. As regards the deposit of cash into the bank account he assured that he will submit a certificate of the bank so as to justify that SBN deposited into the bank account of the assessee for which the assessee applied to the bank. 11. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). She also submitted that in spite of sufficient opportunity given to the assessee the assessee has not submitted the details. As it is evident that the assessee, even though deposited substantial amount in the bank account in cash and has not filed the ITR and revenue has surveyed his premises. As regards the disallowance u/s. 40A(3) the revenue observed clear violation of section 40A(3) of the Act and therefore, the addition is required to be sustained. 1....
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.... After discussion and examination, income of the assessee for the A.Y. 2017-18 is assessed u/s 144 of the I.T. Act in the status of Individual at a total income Rs. 1,68,57,133/-. Penalty u/s 270A, u/s 271AAC. u/s 270A(9)(c), initiated separately for misreporting/under reporting the facts as discussed above. Penalty u/s 272A(1)(d) for non-compliance of statutory notices. Penalty initiation for violation of section 269SS & 269T of the IT Act. Levied tax and charged interest u/s 234 B & 234 C as per separate tax calculation sheet forming part of this order. Issue ITNS-150 forming part of this order, Notice of Demand, Challan. As is evident, on the one hand ld. AO did not believe that rough cash book is proper books of account and on the other hand he made reliance while making the addition. Once those books which were audited not rejected the separate addition on the rough cash book no addition can be made. With that factual back ground we start with the first issue raised by the assessee objecting to the disallowance of the alleged cash payment exceeding Rs. 20,000/- as per provision of section 40A(3) of the Act. On this issue the bench noted that the assessee has maint....
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....nce as per provision of section 40A(3) of the Act and therefore, we direct the ld. AO to delete that addition. 13. As regards the second issue of deposit of cash during the demonization period cash of Rs. 67,11,000/- was deposited into the bank account of the assessee. Ld. AO did not made any effort to determine as to what is the actual amount in specified bank note and what is the regular currency note. The assessee after the hearing as committed on bench to provide a certificate which is placed on record reveals that the assessee has deposited Rs. 28,32,500/- from 11.11.2016 to 03.12.2016. The relevant statement of the bank filed by the assessee reads as under : Thus, it is clear that the out of Rs. 67,11,000/- the specified bank note was for Rs. 28,32,500/- only and the assessee's cash book as on 09.11.2016 for an amount of Rs. 69,48,887/-. The relevant extract reads as under: Thus, the source of cash deposited by the assessee is duly recorded in the books of accounts and that income on account of business activities has already been taxed there is no reason to make any separate addition in the hands of the assessee. The bench noted that the explanation rendered by he a....
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....ing material E has been concealed or falsely stated. Signed and verified at Jaipur this 16th day of September, 2024. ATTESTED 20-9-2024 DEPONENT Document 2 40 Details regarding turnover, gross profit, cie., for the previous year and preceding previous year: No Particulars Previous Year Preceding previous Year 0 Total turnover of the assessee 88913967 87255933 b Gross profit Turnover 3859888 88913967 4.34% 3738738 87255933 4.28% C Net profit J Turnover 591973 88913967 0.67% 581262 87255933 0.67% d Stock-in- Trade 1 Turnover 10968956 88913967 12.34% 7072428 87255933 8.11% C Material consumed. Finished goods produced 0 0 0% 0 0 0% (The details required to be furnished for principal items of goods traded or manufactured or services rendered) . II III Cd and mirad or refund issued during the previous year under any tax laws other than Income- Document 3 (d) Disallowance/deemed income under section 40A(3): (A) On the basis of the examination of books of account and other relevant documents/evidence. whether the Yes expenditure covered under section 40A(3) read with rule 6DD were made by account payee cheque drawn on a bank or account payee bank d....