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2019 (6) TMI 389 - AT - Income TaxAssessment u/s 153A - income assessable and, thus, the tax impact, if any, for the current year, on the basis of the seized material relating to the said year - if the income assessable for this year would stand to be telescoped against the income assessed for the following year (i.e., AY 2014-15) in-as-much as the same is, again, based on the entire seized material, including that for the current year - HELD THAT:- The non-acceptance of the assessee’s claims, i.e., as to the nature of the transactions, as well as the results thereof, becomes quizzical; the Revenue admittedly not pointing out any defect therein. The assessee in fact nowhere admits these transactions to be regular purchase and sale transactions. In fact, even if he did, that would be of no consequence in view of the said working, based on seized material, showing complete details of the transactions, as well as the manner of their execution, i.e., as explained, including before us. Rather, the AO, though regards the same as purchase and sale transactions, yet admits them to be of whole-sale nature, i.e., different from the regular sales, in view of the quantities involved, justifying his non-application of the profit rate obtaining on the regular sales to the undisclosed turnover. He, in fact, admits to, albeit a part, of the transactions as being speculative (para 2.5 of the assessment order). There is also no mention of the parties to whom the sales, or from whom the purchases, are made, nor any evidence of any amount/s outstanding, i.e., receivable or, as the case may be, payable, qua these sale and purchase transactions respectively, which is again incomprehensible if the same are regarded as regular transactions of purchase and sale, particularly considering the large volumes. Revenue has wrongly not accepted the assessee’s claim with regard to the nature of the transactions as well as the manner in which the same are executed and settled, receiving or, as the case may be, paying, the net difference, rejecting the working made on the basis of, and evidenced by, the seized material, which though ought to have been placed on record by either side. Rate of profit or, rather, the profit or, as the case may be, loss, arising to the assessee on these transactions - HELD THAT:- The transactions (both debit and credit) being in cash, Sh. Mahajan would show that the said working, for the period up to 03/9/2013, i.e., immediately prior to the date of search, agrees, save for a minor difference of ₹ 2850, with the unaccounted cash found during search, i.e., ₹ 49.58 lacs, establishing the veracity of the said working. What better proof, then, could the assessee furnish, both as to the nature of the transactions as well as the income (loss) arising therefrom? On the Bench making an inquiry with Sh. Mahajan in this regard, as there is no mention of the said working, either in the assessment or the appellate order, he would make a categorical submission that the same forms part of the assessment and the appellate record, toward which in fact certification (in terms of Income Tax (Appellate Tribunal) Rules, 1963) stands made by him. We, accordingly, have no hesitation in accepting the assessee’s claim of having in fact incurred a trading loss of ₹ 16.91 lacs on the undisclosed turnover of gold (₹ 4570 lacs) and silver (₹ 194 lacs). Undisclosed transactions - HELD THAT:- If the assessee can ‘introduce’ cash (to that extent) on 31/3/2013, he could also, on the transactions yielding profit (which is in cash) in the following year, ‘withdraw’ the same. Further, it cannot be presumed that the cash depletion is met by the cash available, i.e., to the extent it is, from the assessee’s regular (disclosed) business. This, apart from being without evidence, would amount to falsifying the assessee’s regular books of account. Thus, while the assessee is not entitled to set off the admitted loss of ₹ 16.91 lacs – which is on account of it being of a speculative business as well as not returning the same, an addition to that extent on account of unexplained cash balance, which is proved by his own working for the relevant year, arises. We hold so. At the same time, the additional profit of ₹ 110 lacs on the undisclosed turnover, as estimated by the Revenue, is deleted. We decide accordingly. Addition on account of the estimated investment involved in the undisclosed business - HELD THAT:- As already found the assessee to have undisclosed cash of ₹ 16.91 lacs. The same, in the absence of any material suggesting otherwise, is regarded adequate for the purpose. This adequacy, though, without doubt, cannot be assessed to the last rupee, and can only be taken as broadly indicative. In fact, it may well be that the loss, at ₹ 16.91 lacs up to 31/3/2013, works to a higher sum for the intervening period – up to 28/2/2013 (say) – resulting in a larger shortfall in cash, and stands reduced on account of subsequent profit. It is even otherwise inconceivable that a concern found with an excess (unaccounted) cash of nearly ₹ 50 lacs (as on 04/9/2013), i.e., other than cash reflected in its’ regular books of account, has nil cash balance at any time. The same is accordingly taken at ₹ 3.09 lacs, i.e., by assessing the unaccounted cash at a total of ₹ 20 lacs, of which ₹ 16.91 lacs stands depleted as on 31/3/2013 on account of loss, so that the balance ₹ 3.09 was available. This is particularly so as the cash with the assessee, for which addition stands confirmed, may, for all we know, obtain from the beginning of the year. The addition of ₹ 50 lakhs is accordingly restricted to ₹ 20 lacs, i.e., including ₹ 16.91 lacs already confirmed, so that no separate addition to that extent shall arise. The import of what is being said is that the addition for capital of the undisclosed business is restricted to ₹ 20 lacs, of which ₹ 16.91 lacs in fact gets proved. The assessee, needless to add, shall be entitled to telescoping of this addition – to the extent of ₹ 3.09 lacs, against the asset-based additions for the following year. Telescoping of the addition - HELD THAT:- profit for the following year would in fact stand to increase by the amount of loss admittedly incurred for the current year in-as-much as that only would result in the total profit for the entire period amounting to that determined and assessed (₹ 100 in our example). True, the loss for the current year does not lead to, as found, a reduction in the cash balance to that extent. That, however, is as there can be no negative cash balance, so that cash to that extent is otherwise available to the assessee, and not because there is no cash depletion to that extent, which rather would be a contradiction in terms. The same ought not to be confused with the profit from trading operations. As such, rather than a reduction in profit for the following year as assessed, the same stands to be increased by the amount of loss incurred in the current year (₹ 16.91 lacs). No telescoping benefit qua the addition sustained, which is thus on account of unexplained cash, and not on account of profit – which only would translate into asset/s, would stand to arise. Assessee appeal is partly allowed.
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