TMI Blog2016 (4) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been audited by the Chartered Accountant and submitted the tax audit report in appropriate form and the Assessing Officer has not disturbed the financial results. The sales and purchase invoices were produced before the AO, but he did not reject any single paper and accepted the same. He issued notice u/s. 133(6) to the creditors, bankers and all have responded to the AO. The major part of the purchases was from Anshika jewellers, the sister concern and payments were made directly to the MMTC Ltd., which is a government organization. Therefore, no interference is called for in the well reasoned order passed by the ld. CIT(A). - Decided against revenue - ITA No. 4583/Del./2011 - - - Dated:- 25-2-2016 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Appellant : Sh. K.K. Jaiswal, DR For The Respondent : None ORDER Per L.P. Sahu, Accountant Member: This is an appeal filed by the Revenue against the order of ld. CIT(A)- XXVI, New Delhi dated 11.07.2011 on the following grounds : 1) On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting addition of ₹ 23,95,000/- made by AO by treating so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding year. The AO asked the assessee for the reasons for decrease in profit margin rate. The assessee could not offer any satisfactory explanation. The assessee provided the details of purchases and sales before the AO which is as under : Sales: Gagan Jewellers Rs.26,76,790/- SR Chains Jewellers Rs.4,50,495/- Kundan Mal Roop Chand Jewellers Pvt. Ltd. Rs.8,70,297/- Uni Gold Jewel Craft Rs.26,74,554/- Gollu Chain House Rs.3,96,040/- Kangan Jewellers Rs.99,010/- Others including cash sales Rs.105,94,67,328/- Purchases: S.K. Impex Rs.13,39,77,226/- Kalyan Lakshmi Overseas Rs.2,31,19,421/- N K Gold Medallion Pvt. Ltd. Rs.3,37,42,654/- Anishka Jewellers Rs.87,10,43,943/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and ₹ 3,00,000/- given to Sh. Gulshan. Again Sh. Milik received ₹ 10,00,000/- from ? (not verifiable) out of which ₹ 5,00,000/- shown as capital introduced and ₹ 5,00,000/- given to OSYRUS. No further details or evidence on nature of transactions of the partners with these persons have been given. Hence, the source of addition to capital by Sh. A. S. Malik and utilization of capital were held to be doubtful. However, considering the details and explanation given by the AR of the assessee, an amount of ₹ 12,05,000/- (Rs.5000 + ₹ 7,00,000 + ₹ 5,00,000) which remained with the assessee out of the loans received by the partner, was treated as capital introduction by Sh. A. K.. Malik and the remaining amount of ₹ 23,95,000/- (Rs.36,00,000 - ₹ 12,05,000) was treated as unexplained income of the firm routed through its partner Sh. A. S. Malik. Accordingly, the same was added to the income of the assessee. 5. Aggrieved by the order of ld. AO, the assessee preferred appeal before the ld.CIT(A).the assessee submitted before the CIT(A), confirmation of loans and evidences of creditworthiness of the creditors and genuineness of the tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Person from whom received Remarks 700000/- 28.04.2007 83888 PRJ Automobiles P. Ltd. PAN:AAACP8091K Bank statement and confirmation were placed on record. 700000/- 30.04.2007 482364 BNT Associates Ltd. PAN:AABCB1103F Bank statement and confirmation were placed on record. 700000/- 30.04.2007 438726 Kunth Properties P. Ltd. PAN:AACCK0499A Bank statement and confirmation were placed on record. 1000000/- 03.08.2007 660042 VijayTrehan PAN:AADPT7340M Bank statement and confirmation were placed on record. 1000000/- 22.11.2007 660051 Vijay Trehan PAN:AADPT7340M d) It is, however, not understood why the details of these entries were required. Some of these are not even related to the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Services Pvt. Ltd. (2008) 307 ITR 334(Del), the Hon'ble High Court of Delhi has held that: There was an additional burden cast on the revenue to prove that the investment made by the applicant actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income . In the instant case, the Ld. A,0. did not bring any material to prove that the payments received by the appellant for addition in capital actually emanated from the coffers of the appellant so as to enable it to be treated as undisclosed income of the appellant. 8.4. In view of the above discussion, it is hereby held that the Assessing Officer was not justified in making addition in the hands of the firm on account of capital introduced by the partner as above. The addition of ₹ 23,95, OOO/- made on this count is, accordingly, hereby deleted. 9. After going through the aforesaid facts and findings on the issue in dispute, the ld. First appellate authority has passed the well reasoned order on the basis of documentary evidence and as per law. The appellant has filed paper book on 11.03.2013 containing pages 1 to 163. He placed reliance on the following case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be taken as a ground, let alone a sufficient one, for making such addition in the absence of any cogent reasons or evidence to the contrary brought on record. It is also a well settled position of law that the AO cannot proceed to make an arbitrary addition and base his conclusion purely on conjecture and surmises. It is also observed that the Assessing Officer has no evidence or material whatsoever on record to support any such theory. 7.2. It has been submitted by the Ld. Counsel in this regard that the facts of the case are that the appellant is a partnership firm conducting the business of trading in gold bullion having its principal place of business at 161, Gaffar market, Karol Bagh, New Delhi-110005. The appellant, for the year under appeal, had filed its return of income u/s 139(1) of the Act declaring the income at ₹ 2,56,020/-. The assessment has, however, been completed u/s 143(3) of the Act vide order dated 28.12.2010 at a total income of ₹ 1,30,94,740/-. The Ld. A.O. while framing the assessment has erred on facts and in law in: Holding, without rejecting the books of account, that the transactions of purchases and sales of gold bullion/jewel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority of sales is in cash, and in cash sales, the identity of the customer cannot be known to the appellant, as the goods are delivered on receipt of cash. Invariably in all cash sales of jewellery or bullion, be it banks, MMTC or any other big jeweller, more than 95% of the sale is in cash and so is the case of the appellant. The following facts prove beyond doubt that the appellant has made cash sales, which are all genuine: The firm is established since more than last 30 years and doing same business on cash sale basis since inception. Sale bills were produced before the Ld. AO and he has himself mentioned that there are more than 1500 customers, which he never doubted. The appellant has banker's cash credit limit of more than ₹ 5 Crore and bank officials visit the premises of the appellant's premises on regular basis for inspection etc. and the stocks are also hypothecated to the bankers. Regular sales statements are verified by the bankers to enable the CC limits. VAT returns evidencing the sales were produced before the Ld. AO and required VAT was duly paid by the appellant on regular basis, which the AO never held in doubt. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which he never doubted and even sent enquiries u/s 133(6) to all and most of them responded to the same. The appellant has banker's cash credit limit of more than ₹ 5 Crore and bank officials visit the premises of the appellant's premises on regular basis for inspection etc. and the stocks are hypothecated to the bankers. If purchases are held bogus as stated by the Ld. AO, then how are the bankers hypothecating the stocks, as the stocks are there as a result of purchases only. Enquiries were made by the AO from the bankers and nothing adverse was found. All payments were made by A/c payee cheques to the creditors from whom purchases were made, which the AO has taken on record. Major purchases of ₹ 87 Crore approx. were made from M/s Anishka Jewellers, Prop. Pankaj Malik, (a related concern), as they are registered with MMTC Ltd. for purchase of bullion. In fact, most of the payment was made to MMTC by the appellant itself. The Ld. AO has stated that .purchase from MMTC (a government concern) made through a/c payee cheques is bogus, which is totally baseless. Enquiries were made by the AO from MMTC Ltd. and nothing adverse was found. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi, and found no business activities. The inspector is correct that there was no business activity at the 1st Floor, as the business activities of the appellant are not at 1st floor but are at the 2nd floor. Hence, the total report of the inspector is factually wrong as he did not visit the premises of the appellant at all and gave a wrong report. Recently taken photographs of the premises of the appellant are enclosed to substantiate that business is being carried at second floor. Photographs of the related concern (M/s Anishka Jewellers) at ground floor are also enclosed to substantiate that it is a separate entity doing separate business. The firm is established since last more than 30 years and doing the same business from the said premises since 1987. The appellant has banker's cash credit limit of more than ₹ 5 Crore and bank officials visit the premises of the appellant's premises on regular basis for inspection etc. If the bankers can see the business premises and advance huge monies, how come the inspector could not see it? VAT audit was conducted by the VAT department at the appellant's premises and they found the business done, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of gold. The payments have invariably been made through account payee cheques only. Income Tax department in the case of M/s Anishka Jewellers, Prop. Pankaj Malik, has accepted its sales, vide its assessment order u/s 143(3) for A.Y. 2008-09. If its sales are held genuine by IT department, how can the corresponding purchases be held as non-genuine? Copy of the assessment order passed u/s 143(3) in case of M/s Anishka Jewellers is enclosed to substantiate the same. It has, thus, been submitted that in view of the above facts, all the purchases from M/s Anishka Jewellers are genuine. Expenses to run the business. The Ld. AO is of the opinion that the appellant did not incur certain essential expenses to run the business, hence the firm is bogus. The appellant's submissions in this regard are as below: Furniture fixture and its maintenance - The AO has stated that value of furniture and its maintenance cost is very low. It is submitted that the appellant firm is very old and operating from this premises since 1987. The value of furniture in balance sheet is at WDV of ₹ 9144/-. This is not the cost but WDV after so many years. Further, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has further been submitted that the Ld. AO relied on the inspector's report which was factually incorrect as he had visited wrong premises, as brought out earlier. Further, the Ld. AO has not even mentioned any provision of law under which the income was estimated by him. The Ld. AO estimated income at 1% of the purchases/ though almost all purchases were made by a/c payee cheques and virtually all of them have confirmed their transactions with the appellant, and major payments were made to MMTC Ltd., a government undertaking. 7.4. It has, thus, been submitted that the addition has been made purely on estimate basis, based on conjecture and surmises, without there being any material or evidence to substantiate the conclusion that the business is sham and that the appellant is providing bogus accommodation entries. The subsequent action of estimating the net commission thereof @ 1% of the total purchases at Rs.l,06,99,740/- as taxable income of the appellant is, thus, wholly against the facts and bad in law. 7.5. In view of the above discussion, it is hereby held that the Assessing Officer was not justified in making addition as above. The addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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