TMI Blog2017 (10) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... by such expenditure represented by purchases of gold bars to be deemed income of the assessee under the deeming fiction of Section 69C. The said Section 69C is further controlled by proviso which has an overriding effect and provides that notwithstanding anything contained in any other provision of the 1961 Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income. Thus , Section 69C read with proviso makes it abundantly clear that the amount represented by expenditure incurred by the assessee towards purchases of gold bars constitute income within deeming fiction of 69C of the 1961 Act. Thus, we set aside the order of learned CIT(A) and confirm the addition to the tune of ₹ 49,17,69,925/- (Rs Forty nine crores seventeen lacs sixty nine thousand nine hundred and twenty five only ) for detailed reasons as cited above - Decided against assessee. Addition in respect of difference in closing capital of Meenakshi Enterprises (proprietary concern of the assessee) - addition proposed by learned CIT(A) based on remand report of the AO - Held that:- The said additions has been made by learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of appeal are raised by the Revenue in ITA No. 2415/Mum/2014 for the assessment year 2006-07 in the memo of appeal filed with tribunal which reads as under:- 1. Whether on the facts and circumstances and in law, the Ld CIT(A) has erred in deleting undisclosed income which was added to the total income of assessee as the assessee could not produce any evidences of purchase and sale transactions? 2. Whether on the facts and circumstances and in law, the Ld CIT(A) has erred in not taking cognizance of Hon. Supreme Court in case of Sumati Dayal v/s CIT;214 ITR 801 (1995) wherein the Hon'ble Court has agreed that the question of source of money had to be considered in the light of human probabilities, as in the case under consideration, the assessee used colorable device to prove purchase and sale transactions as genuine ones by submitting the facts that the purchasers used to deposit money in the form of cash in his( assessee's) bank account and after that he used to place purchase orders of gold bars and there after sold these gold bars to such parties (purchasers) which he finally failed to prove as genuine ones. 4. The issue involved in these appeals is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -do- 4 -do- 7.4.2005 20 kg 1,22,16,168 -do- 5 -do- 8.4.2005 120 kg 7,34,25,360 -do- 6 -do- 11.4.2005 40 kg 2,43,06,720 -do- 7 -do- 12.4.2005 45 kg 2,63,60,677 -do- 8 -do- 14.4.2005 125 kg 7,60,21,300 -do- 9 -do- 18.4.2005 60 kg 3,65,61,000 -do- 10 -do- 20.4.2005 20 kg 1,21,70,300 -do- 11 -do- 22.4.2005 25 kg 1,54,52,125 -do- 12 -do- 25.4.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted the sales bills, the details of which are as under:- S No. Bill/Invoice No. Date Name of the party Quantity Amount Mode of receipt 1 1 1.4.2005 Cash 5 kg 30,95,000 Cash 2 2 -do- -do- 45 kg 2,76,05,250 -do- 3 3 4.4.2005 -do- 56 kg 3,36,60,000 -do- 4 4 6.4.2005 -do- 100 kg 6,10,90,000 -do- 5 5 7.4.2005 -do- 20 kg 1,22,40,000 -do- 6 6 8.4.2005 -do- 120 kg 7,35,24,000 -do- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded of the assessee u/s 131 of the Act on 05-11-2008, the assessee had stated that the sale in this business of gold was done on cash and carry basis wherein the customer either deposits the cash directly into bank or pay cash to the dealer against the delivery of gold and the delivery was effected only after the full payment for the gold was received and this was the general prevailing practice of the business. The A.O. inferred that there was no genuine sales made by the asessee. The AO also observed several irregularities in the bank account wherein the AO observed that the assessee had deposited cash in bank account as per his whims and to cover such cash deposits, the sales bills for making cash sales are prepared by the assessee with no details of purchaser available. The AO observed that cash deposits on a particular day were made on three to four occasions in respect of a single sale bill and the reasons for depositing the cash in installments were unknown. Further, on examination of assessee's bank accounts and sales bills, the AO observed that cash sales to the tune of ₹ 49 crores(approx) has been made till 28-04-2005 while the cash to the tune of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Bullion transaction , while in Gujarat there is no VAT on bullion. It was submitted by assessee that the profits are negligible in this trade of gold bullion by reasons of publication of daily rates and due to VAT in Maharashtra it deters persons from doing business in Maharashtra. It was submitted by the assessee before learned CIT(A) that after cash is deposited in the bank account by the buyers which in some instances is deposited in installments , the assessee issues instructions to the supplier to deliver the gold. The assessee submitted that then the assessee issues account payee cheque in favour of supplier of the assessee which is reflected in the assessee s bank account as well bank account of the suppliers. The assessee submitted that Padmavti Bullion from whom the gold was purchased informed the assessee that it has purchased entire gold sold to the assessee from banks and entire payment received from the assessee is passed on to banks. It was submitted that the A.O. had made the entire addition on the sale value deposited in the bank without considering the payments made by the assessee for purchasing gold. It was submitted that all the documents were submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llion in financial year 2004-05 (AY 2005-06). It was submitted that the A.O. had made high-pitch assessment as the assessee capital is merely ₹ 87,114/- while additions have been made to the tune of ₹ 49,17,69,925/- as black money component available with the assessee. It was submitted that the assessee did not have any asset, investment or bank balances which could reflect that the assessee earned income to that magnitude of Rs. Forty nine crores while the capital is less than Rs. One lakh. The ld. CIT(A) called for remand report from A.O. and the matter was referred to the A.O. for verification. The AO in his first remand report on 25th January, 2010 stated that one of the partner of M/s Padmavati Bullion, Ahmadabad Shri Champalal Bhurmalji Sanghavi was produced by the assessee and his statement was recorded on oath u/s.131of the Act whereby it was stated that the assessee was one of his client and the assessee made purchases from them. In support said Sh. Champalal Bhurmalji Sanghavi produced copies of account of the assessee in books of accounts of Padmavati Bullions. However, no books of accounts of Padmavati Bullions were produced by the said Sh. Champalal Bhur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as asked for in the annexure enclosed with the summons issued to the assessee. On.4.3.2013 1 was telephonically informed by the representative of the assessee that the assessee will attend on that day in the next half an hour. 4. The assessee attended before me at 12-15.PM on 4.3.2013. Once again, he expressed that he was unwell and that he would not be in a position to have his statement recorded on oath. Further, he also told me that his earlier statement on record should be taken as a complete statement. After some time, his daughter came in, with some tablets. He submitted a letter dated 4.3.2013 (Annexure-I) stating that he is not in position to record a statement and his earlier statement dated 5.11.2008 may be taken on record. (Annexure-2). In the circumstances, after apprising the ITO (HQ) of the situation, I allowed him to leave the office. It is pertinent to mention here that as per your goodself letter dated 17-12-2010 (in the copy endorsed to the assessee), the assessee has been asked by your goodself to cooperate with the AO as and when called for, in preparation of various workings/comparative results from the books and to furnish any other relevant data ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Ahmedabad goes to assessee's Ahmedabad premises and inquires about availability of gold bars, price etc, it is not clear how he places orders without seeing the product or knowing its purity. Be that as it may, then if some one say 'Y' deposits cash on behalf of 'X' in assessee's bank account in Mumbai, 'Y' has to fill in name of Mr 'X; in the pay-inslip before depositing cash with bank. This is all the more important in a situation where more than one customer of the assessee go to bank to deposit cash in his bank account After confirming receipt of the full sale consideration in cash from each customer, the assessee issues cheque to M/s Padmavati Bullion for purchasing gold bars. Padmavati Bullion in turn, issues cheque to ICICI Bank. After the cheque is honoured, ICICI Bank will release the gold bars which will be delivered to the assessee at his business premises. Thereafter, the assessee delivers the gold bars to his customers. No doubt, all these procedural steps involve considerable time. Not only that, when crores of rupees are deposited, the party's cannot simply deposit without giving name, identity since any untoward incident li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd carry method' as claimed by the assessee. Assuming but not accepting for a moment (for the sake of argument) that the assessee's name/goodwill in the new area as such that his customers base developed overnight, it is not understandable how that business was closed down in infant stage itself i.e. within a period of two months or so. Also it is not known whether the leave licence agreement with land-lord remained in force for the entire period for which it was entered into by the assessee for the business premises. It is also not clear how the banks like The Akola Urban Co-Op Bank Ltd, Centurion Bank did not insist on PAN/identity of depositors of cash particularly when the cash deposits on each occasion (3-4 occasions in a day) were indisputably large. That apart, there were only 16 customers during period of about 2 months. The moot point for consideration is whether, the customer or his nominee did not indicate his name while taking delivery or affixing signature on delivery note/book. In all probability, assessee developed acquaintances and contacts with the help of his friends/ relatives etc. to attract customers in the new business he stared at a new place. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of bullion by Padmavati Bullion. However, it appears the same has not been included while fixing the sales price comprising cost of gold bar, sales tax and profit margin. Since a business man will not bear the sales-tax burden himself. Yet another vital factor is that in the Tax Audit report u/s 44AB for A. Y. 2006-07 in the case of the assesse, the Auditors have put the remarks as follows against Column no. 28(a) of Form No. 3CD: Stock record is not maintained. This is a self serving remark for the simple reason that in this case, being a trading concern involving a particular item there should not be any difficulty for furnishing this information. But, the Auditor for reasons best known to him has chosen not to furnish the information. M/s Padmavati Bullion 1. As stated by the representative of the assesse, this partnership-firm was constituted vide a deed of partnership dated 14.02.2005 with 2 partners viz Sri Champalal Sanghvi and Sri Rakesh Bafna. Regarding dissolution of this partnership the representative of the assessee has stated that the date of dissolution was not available. Afterwards, ADIT (Inv.), Ahmedabad was requested to conduct inquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test for two assessment years are as follows. A.Y. Total turnover G.P. Rate 2004-05 ₹ 1,91,59,822 6.15% 2005-06 ₹ 1,70,32,424 11.28% Even though, the G.P rate showed upward trend in A. Y 2005-06 , the assessee closed down this business in Mumbai in February, 2005 and moved to Ahmedabad, with a calculated design after developing acquaintance/business relationship mainly with partners of M/s Padmavati Bullion. In regard to this Business under this proprietary concern in his sworn statement has stated that the business was closed down on in February, 2005 and in the Month of March, 2005 started trading in Gold Bullion at Ahmedabad. Thus, there was no business liable for assessment after assessment year 2005-06.However the assessee has shown loss of ₹ 38,248/- in respect of Meenakshi Enterprises for A.Y 2006-07. This loss in respect of discontinued business is not allowable. From the details on record, it is apparent that on one hand, the assessee rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on taken on directions given by CIT (A) are as below (point wise) : I. To call for and examine the books of accounts of M/s Padmavati Bullion and prepare a stock statement of the said party with the help of books and to ascertain whether M/s Padmavati Bullion had sufficient stocks to supply Bullion to the Appellant on the given dates. The stock statement has been prepared with details received from ICICI Bank in collaboration with the details of sales made to Shankeshwar Bullion ( Annexure-B) What is the normal practice of M/s Padmavati Bullion in maintaining primary documentation for purchase and sale of goods and whether any deviation is observed from such practice while dealing with the Appellant. This party failed to comply with the summons issued dated 1.2.2013 and hence the issue could not be examined. 3. Who were the other major customers of M/s Padmavati Bullion during the year under consideration and during the year under consideration and during April/May 2005 in specific and what is the trade practice followed in respect of such other customers. The other major Customers of M/s Padmavati Bullion are 1. M/s Kube ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. I, before dealing with the contents of remand report, most respectfully submit that report submitted deals casually and in a routine matter, without any serious compliance. The lengthy part of the report deals with irrelevant details, to make it ornamental and has no relevance to the issue on the subject matter. 3. Your honour will appreciate that all the Courts including the Apex Court have in very clear, defined as to what onus is cast on an assessee. 4. The appellant has completely discharged onus cast on him as can be seen from the following:- ( a) The appellant has filed confirmation from the supplier of M/s. Padmavati Bullion confirming the purchases made by the appellant. ( b) The appellant has filed bank account of supplier to show that all the payments as made by the appellant, by payees account cheque, have gone into the bank account of supplier. The bank account also shows, utilization of funds by the supplier for payment of its purchases. ( c) The supplier has purchased goods, sold to the appellant, from ICICI Bank and the details thereof are placed on record. ( d) The turnover of supplier is very large and the appellant&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered in the assessment and by the learned CIT(A) who partly heard the appeal. On page 3 observation that 'No doubt, all the procedural steps involve considerable time' is factually incorrect. The subsequent statements in the same para are only imaginary, presumptive and inferential without an iota of evidence. ICICI BANK No information is received - This is not appellant's fault. The A.O. in fairness should have dealt with bank or its ombudsman. AKOLA URBAN CORP BANK HDFC BANK: The appellant cannot be asked to explain bank procedure. This observation is intentionally and with a purpose to deviate from the 'terms of reference' of remand sought. How can banks procedure affect the appellant? What is the sanctity of such fulfill observation. On page 3 itself, the A.O. refers to sales tax No my business. The entire observation is out of place. It was explained in the assessment that in Bullion Trade there was a sales tax chargeable in Mumbai while no sales tax was chargeable in Gujarat. This benefit of sales tax prompted Bullion Dealers to do gold business in Ahmedabad, as it would be more viable. On page 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traded in very huge quantity of Bullion. (The A.O. has admitted that the business of M/s Padmavati Bullion was 136.92 crores!). ( c) M/s Padmavati Bullion claims that their assessments are completed accepting the return. Not only that but assessments of several other of its parties (excepting the appellant) are completed accepting the income. ( d) In sub-para 2 according to the Assessing Officer, the sworn statement of M/s. Padmavati Bullion is not supported by facts, . How can the appellant be asked to explain it or how can that be used against the appellant? The observation of the A.O. is irrelevant and to weightage to it should be given while considering the appellant s submission. It is impossible for appellant to explain, third party's accounts. In sub-para 3 the observation of A.O. that modus operandi of the business by both the assessee and the partner of M/s Padmavati Bullion have given totally identical statement on oath question No. 8, actually supports the case of the appellant because in any genuine set of transactions, the statement of parties are bound to be identical; only' contradiction would result in adverse inference. On pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all primary records before AO who submitted the first remand report. POINT No. 3 The AO has listed the major customer of M/s. Padmavati Bullion and stopped there. The AO hot the information and must have verified the same. In absence of any adverse finding, the transactions of M/s. Padmavati Bullion, with all other major parties stand fully explained. POINTNo.4 The AO has admitted that no abnormality is seen between sale price charged to appellant and all other purchasers again prove the genuineness and bonafides of the appellant. POINT No. 5 The AO admits that the principal M/s. Padmavati Bullion have shown gross profit of 0.02% POINT No. 6 There was no discrepancy found of any kind by the AO and therefore question of clarification did not arise. In view of this the issue relating compliance by partner Champaklal B. Sanghvi is of no relevance. POINT No. 7 The AO had erroneously approached the Choksi Mahajan Association as they cannot give any information on issue of gross profit of various different dealers who are its members. Their members do retail and wholesale business, some manufacture ornaments, som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions over telephone entirely in cash for which the payments have been deposited in the bank account much later upto August 2005 while sales were conducted by 28-04-2005 clearly reveals that the assessee is not coming out with truth and is hiding facts. The learned CIT(A) observed that the theory of cash sales has to be adopted to work out the profits in the hands of the assessee, for the purposes of taxation. The ld. CIT(A) observed that the theory of cash sales in 16 transactions of unaccounted funds which needs to be added in their respective hands u/s.69 or u/s 40A(3) of the Act i.e. disallowance of 20% of the amount of cash purchases. The learned CIT(A) observed that the assessee is not revealing the identity of purchaser and is shielding the purchaser of gold. The ld. CIT(A) referred to the second remand report of the A.O. wherein AO commented as under:- In view of the foregoing discussion it is apparent that the assessee by colluding with the M/s Padmavati Bullion and also with connivance of Banks, carried on an activity of trading in Bullion. In the case of the assessee, the Book result may not be acceptable and provisions of section 145(3) may be invoked to make addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. ratio of 5% would be more appropriate under the facts of the case considering that the assessee is shielding the purchasers of gold in cash. The ld. CIT(A) observed that immediately prior to the starting of this gold business, the assessee was doing trading business in bright bars under the name M/s. Meenakshi Enterprise and in the immediately preceding financial year, the assessee achieved a turnover of ₹ 1.70 Cr. and the G.P. ratio shown was 11.28%. Thereafter , the assessee closed down this business and jumped into the trading in gold in the current financial year. The sudden switch to the gold business by the assessee must have been made keeping in view potential profits bring higher in gold business than what the assessee was earning earlier in bright bar business because he would not leave a business giving him GP ratio of 11.28% for a business that gives him G.P. ratio of 0.17%. Thus, the ld. CIT(A) accordingly directed the A.O. to work out the gross profit @5% on sales shown in the books of accounts and bring the resultant income to tax. The addition of ₹ 49,17,69,925/- made by the A.O. for the cash deposits in the bank account on cash sales by treating the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncern of meager amount of ₹ 87,113/- and huge addition has been made i.e approx. ₹ 49.17 crores by the AO. Our attention was also invited to paper book page 164 wherein the stock statements are placed. Our attention was also invited to paper book page 1 and submitted that capital of the assessee was only ₹ 7.89 lacs and there are no investments, assets etc to justify such a huge additions of approx. ₹ 49 crores. It was submitted that learned CIT(A) restricted additions by applying GP ratio of 5% on sales. Our attention was also drawn to page 22 of learned CIT(A) appellate orders wherein the assessee has submitted replies to remand report before learned CIT(A). Our attention was also drawn to paper book page 145 and 80 wherein the confirmation from M/s Padmavati Bullion and bank statement of Padmavati Bullion are placed and the learned counsel for the assessee contended that all the payments were made through cheque. Our attention was also invited to paper book page 156 wherein the reply dated 25-01-2010 filed by Padmavati Bullion to the A.O. is placed wherein said concern filed its audited Balance Sheet for financial year 2004-05 and 2005-06, bank statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT on Gold was issued on 29-03-2006 and the contention of the assessee that VAT registration was got cancelled due to imposition of VAT by Government of Gujarat was incorrect as the assessee VAT registration was manually cancelled by Gujarat VAT authorities on 30-09-2005 itself and Padmavati Bullion registration was cancelled by VAT authorities on 30-03-2005 as confirmed by ACST , Circle -3, Ahmedabad vide letter dated 31-01-2012(pb/page 261) while VAT was imposed in State of Gujarat on Gold Bar only w.e.f. 01-04-2006. These two concerns started their operations only in February/March 2005 itself and their registration was cancelled in short period itself and business got closed which raises serious concerns about genuineness of their transactions carried out in gold bar. The ld. D.R. drew our attention to the orders of the authorities below and submitted that the assessee has not declared the names of the persons to whom the gold bars were sold. It is submitted that no infrastructure has been maintained by the assessee and the assessee is not in a position to handle such a huge quantity of gold bars nor the assessee has infrastructure to handle and store cash of such a huge magni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /page 261). The proprietary concern of the assessee namely Shankheshwar Bullion made purchases of gold bars in the subject assessment year mainly from a partnership concern namely M/s Padmavati Bullion, Ahmedabad of huge magnitude to the tune of around 796 kg in the month of April, 2005 itself which was sold by it to undisclosed customers in cash whose identities have been withheld by the assessee and the said cash from undisclosed sources have been deposited in the bank accounts of the assessee. Similarly it is observed from material on record that in the case of Padmavati Bullion from whom the assessee made purchases also started its business in the month of February, 2005 by getting VAT registration at Ahmedabad, Gujarat and within a short span of time registration of the said concern also stood cancelled by VAT department on 30-03-2005 itself (TIN No. 24071301928 effective date of TIN registration is 14.2.2005). Despite the insistence of the authorities below requesting the assessee to reveal the identity of buyers of the gold bars from the assessee so that the genuineness of the transaction of cash sale of gold bars can be verified, the assessee did not reveal the identity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores was shown to have been made by the assessee in the month of April, 2005 while most of the cash proceeds against said stated sale of gold bars amounting to ₹ 27.54 crores was received post April, 2005 and was received in the month of May, June, July August, 2005 which was deposited in bank of the assessee. Perusal of material on record reveals that the assessee s capital introduction in the firm is a meager sum of ₹ 87,114/- and the total capital of the assessee stood at ₹ 7,89,578/- and against this paltry capital of the assessee , the assessee has stated to have entered into huge transaction in gold bars of more than ₹ 56 crores(approx.) in the month of March/April 2005 and has extended credit of around ₹ 27.55 crores to its undisclosed buyers whose identity were withheld by the assessee who have stated to have purchased gold bars in cash from the assessee and the whole theory of the assessee does not inspire confidence. It is also pertinent to mention that the assessee does not have any past experience of dealing in gold bars nor has maintained any infrastructure to handle,secure and store gold/cash of such magnitude as is emanating from the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s imported gold as is clearly reflected in the sale invoices and delivery challans issued by ICICI Bank in favour of Padmavati Bullion which are placed in paper book page 86-139. The said documents being invoices/challans raised by ICICI Bank in favour of Padmvati Bullion shows the prices of gold in US$(United States Dollars) and the suppliers from whom ICICI Bank imported gold bar/bullion is also clearly mentioned. The attention is drawn to the following few RBI Circulars/ guidelines/notification which regulated gold imports and its sale in India at relevant time:- 1.RBI/2004-05/30 A.P.(DIR Series) Circular No. 2 dated 09-07-2004 2. RBI Circular A.D.(G.P. Series) Circular No. 7 dated 06-03-1998 3. Guidelines on Know Your Customer norms and cash transactions DBOD AML.BC.18/14.01.001/2002-03 dated 16-08-2002 4. Circular No. AP(DIR Series)Circular No. 25 dated 01-10-2003 4.Master Circular No RBI/2005-06/07 Master Circular No. 7/2005-06 dated 01-07-2005 The mandate of these circular/ guidelines/ notification issued by the RBI from time to time is that the import of gold and its end use in India is being regulated, controlled and monitored by RBI and imports were allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ack money which is deep rooted in the economy need to be tackled by taking multiple actions at the same time, by holding as under : 99. Unearthing black money or checking money laundering is to be achieved to whatever extent possible. Various measures can be taken in this behalf. If one of the measures is introduction of Aadhaar into the tax regime, it cannot be denounced only because of the reason that the purpose would not be achieved fully. Such kind of menace, which is deep rooted, needs to be tackled by taking multiple actions and those actions may be initiated at the same time. It is the combined effect of these actions which may yield results and each individual action considered in isolation may not be sufficient. Therefore, rationality of a particular measure cannot be challenged on the ground that it has no nexus with the objective to be achieved. Of course, there is a definite objective. For this purpose alone, individual measure cannot be ridiculed. We have already taken note of the recommendations of SIT on black money headed by Justice M.B. Shah. We have also reproduced the measures suggested by the committee headed by Chairman, CBDT on 'Measures to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the books of accounts. It was further held: For adjudicating upon the plea of peak credit the factual foundation has to be laid by the assessee. He has to own all cash credit entries in the books of account and only thereafter can the question of peak credit be raised. 18. In that case, it was held that as the amount of cash credits stood in the names of different persons which the Assessee had all along been claiming to be genuine deposits, withdrawals/payments to different persons during the previous years, the Assessee was, therefore, not entitled to claim the benefit of peak credit. Later in CIT v. Vijay Agricultural Industries (supra), it was reiterated that: The principle of peak credit is not applicable in case where the deposits remained unexplained under Section 68 of the Act. It cannot apply in a case of different depositors where there has been no transaction of deposits and repayment between a particular depositor and the assessee. On the facts of that case it was held that peak credit could be applied only in the case of squared up accounts. In other words, where an Assessee was unable to explain the sources of deposits and the corresponding p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck money as follows: In a commentary on the Prevention of Money Laundering Act, 2002 by Dr. M. C. Mehanathan published by Lexis Nexis, 2014, the steps of money laundering are described as follows:- STEPS OF MONEY-LAUNDERING Although money-laundering often involves a complex series of transactions, it generally includes the following three basic steps: 1. Placement It involves introduction of the proceeds of crime into the financial system. This is accomplished by breaking up large amounts of cash into smaller sums that are then deposited directly into a bank account, or by purchasing monetary instruments, transferring the cash overseas for deposit in banking/financial institutions, use for purchase of high value things such as gold, precious stones, art works etc. and reselling the same through cheques or bank transfers etc. 2. Layering This involves formation of complex layers of financial transactions which distance the illicit proceeds from their source and disguise the audit trail. In this process a series of conversions or transactions are involved for moving the funds to places such as offshore financial centres operating in a lib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be cash received on account of cash sales of gold bars to undisclosed buyers. Thus, if the story of the assessee is to be believed then he had acted in a manner to facilitate conversion of undisclosed money of undisclosed persons to enable them to convert their undisclosed money into safe havens of gold bar at his own perils which got further aggravated by a consistent adamant and unacceptable stand of the assessee in not revealing the names of buyers of the gold bars by stating that the details of these buyers who have paid in cash for gold bar are not known to the assessee which stand of the assessee also prevented authorities below to make enquiry against these holders of undisclosed money leading to escapement of income in the hands of such undisclosed buyers due to the adamant stand of the assessee in not revealing the identities of the said undisclosed buyers , and the assessee is acting in a manner to shield these un-identified persons for which the assessee itself is to be blame for his own agonies. It is settled proposition that the Court will assist those who come to Court with clean hands and Court will not help those whose own hands are dirty. At this stage it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed by us in preceding para s of this order and mandate and onus cast under Section 68 on the assessee is not fulfilled. The genuineness of these cash receipts could not be satisfactorily proved by the assessee as there is no third party evidences to substantiate the authenticity of these cash deposits as no details of the said persons to whom cash sales were allegedly made by the assessee was revealed by the assessee. It is incomprehensible and unacceptable that the assessee having issued cash sales invoices of average value of around ₹ 3 crores per single invoice in majority of case and at the same time the assessee is claiming that the name of the said alleged buyers of gold bars is not known to the assessee rather it is the assessee who is actively concealing the identity of these so called buyers of gold bars. It is incomprehensible keeping in view factual matrix of the case that the assessee have extended credit of ₹ 27.55 crores to its so called buyers of gold bars out of sale of gold bars of ₹ 48.99 crores concluded in April 2005 as the said amount of ₹ 27.55 crores was realized in the months of May,June,July and August 2005 which does not ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce is made to the decision of Hon ble Calcutta High Court in the case of CIT v. Sanjay Jain (2015) 55 taxmann.com 512(Calcutta), wherein Lordships held as under: 5. The judgements cited by Mr. Bagaria, according to us, have no application to the facts and circumstances of the case. It is not in dispute that alleged sale of share by the assessee was through the broker M/s. M.L. Dhingra Asociates that in fact is the case of the assessee as would appear from the order of the Tribunal. The name of the person to whom the shares were, in fact, sold has not been disclosed. The sale proceeds were admittedly received in cash. In case of sale of shares by a broker a sold note and bought note is issued in the usual course of business. But, no such sold note issued by the broker was issued by the assessee. Both the sale of shares and recovery of the alleged existing dues are in the special knowledge of the assessee and the alleged buyer and the alleged debtor. During the assessment the assessee was present. He could have adduced evidence which was in his special knowledge which is also the requirement of law in Section 106 of the Evidence Act. 106. Burden of proving fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,834.44 and from sale of shares amounting to ₹ 21,55950/-. In course of hearing A/R of the assessee as well as the assessee was requested to produce the documentary evidence in support of his claim regarding receipt of above cash but no documentary evidence has been filed. Neither any one from M/s. M.L. Dhingra Associates was produced nor any confirmation filed. No request to issue summon made. 7. The Commissioner of Income Tax rejected an appeal preferred by the assessee agreeing with the views of the Assessing Officer opined as follows: I have perused the assessment order and considered the submission of the appellant. The AO has mentioned in the assessment order that the appellant could produce no evidence in support of his contentions. This fact has not been disputed by the appellant. There is no material on record to show that cash of ₹ 21,55,950/-was received on sale of share. Similarly, there is no evidence on record to show that cash of ₹ 10,61,834/- was received from M/s. M L Dhingra Associates. Confirmation from the said party was not filed before the AO. Even during the course of appellate proceedings, the appellant could bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re reproduced below:- [ Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year :] [ Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.] The assessee in the instant case as we have seen could not satisfactorily explain the sources of cash deposit of huge magnitude of more than ₹ 49 crores in his bank account which he claimed to be from cash sales from gold bars to the persons wherein the identity of the buyers are not revealed by the assessee. Thus, the assessee could not satisfactorily explain the sources of cash deposit in the bank account and consequently sources of incurring expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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