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Shri Champalal S. Shah Versus Income Tax Officer 16 (2) (3) , Mumbai And Vice-Versa

2017 (10) TMI 240 - ITAT MUMBAI

Addition u/s 69C - assessee has allegedly made sales of gold bars during the impugned assessment year wherein sale proceeds have been stated to have been received in cash from undisclosed buyers which has been deposited by the assessee in the bank account of the assessee and hence sources of these cash deposit could not be satisfactorily explained by the assessee - Held that:- The assessee in the instant case as we have seen could not satisfactorily explain the sources of cash deposit of huge ma .....

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and onus cast u/s 69C was not satisfied which will make amount covered 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 u .....

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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(A) for the first time in his appellate order which has led to enhancement of the assessment. The assessee had contended that the assessee was never show caused by learned CIT(A) before such enhancement of income and the princi .....

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2415/Mum/2014 - Dated:- 3-10-2017 - SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Assessee : Shri Rushabh Mehta For The Revenue : Shri P.R. Ghosh, CIT D.R. ORDER PER RAMIT KOCHAR, Accountant Member These are cross appeals filed by the assessee and the Revenue with the Income-tax Appellate Tribunal, Mumbai (Hereinafter called the tribunal ). These cross appeals are heard together and are disposed of by this common order for the sake of convenience and brevit .....

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o. 1295/Mum/2014, A.Y. 2006-07) in the memo of appeal filed with the tribunal read as under:- I. The learned Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)]erred in estimating higher Gross Profit @ 5 % on sales shown in the books without appreciating the submissions made by the assessee and ignoring the facts of the case. [hereinafter referred to as the Act ] II. The learned CIT (A) ] erred in enhancing the income by way of addition of Rs.l,35,516/- being the differe .....

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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 purch .....

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ch additions has been upheld by the ld. CIT(A) by estimating GP ratio of 5% on sales as against GP ratio of 0.17% declared by the assessee. The assessee is aggrieved with the decision of learned CIT(A) upholding of GP ratio of 5% on sales, while on the other hand the Revenue is aggrieved by the decision of learned CIT(A) in deletion of the entire addition of ₹ 49,17,69,925/- as undisclosed income of the assessee with respect to the cash sales which was deposited in the bank as held by the .....

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of April, 2005 shows that the assessee had made huge purchase to the tune of ₹ 48.78 crores and sales of ₹ 49.17 crores, which stood credited to P&L account. The A.O. observed that the assessee did not have any antecedents in dealing in gold bars/bullion whereby the AO sought details of party-wise sales and purchases of each and every transaction from the assessee in assessment proceedings u/s 143(3) r.w.s. 143(2) of the 1961 Act. In response, the assessee submitted the followin .....

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,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 10 kg 61,96,200 -do- 13 -do- 27.4.2005 75 kg 4,64,68,125 -do- 14 -do- 28.4.2005 55 kg 3,46,89,200 -do- 15 M/s Kuber Ahmedabad Bullion, 21.7.2005 3 kg 18,47,940 -do- The A.O. observed that these alleged purchases have been covered in fifteen transactions mainly in a single month i.e. April, 2005 and the payments were stated to be made by chequ .....

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ication, however, the assessee did not produce the said party. As per the information received from the ADI (lnv.) Ahmedabad, the following two partners of the Ahmedabad based firm, M/s. Padmavati Bullion, from whom the assessee claimed to have made purchases of gold were summoned by the AO by issue of summons u/s. 131 of the Act. (1) Shri Rajesh Kumar Khimchand Bafna, C/2, 703- Ganjawala Building, Near Shag un Hotel,Dr. D. B. Marg, Bombay Central, Mumbai 400 008. 2) Shri Champalal Bhhormalji Sa .....

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substantiated. Thus, the A.O. observed that the purchases were nothing but an eye wash and the assessee arranged fabricated transactions. The assessee during the course of assessment proceedings 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 .....

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/-do- The assessee although was based at Mumbai but has shown the following address in the sales bills raised by it: Flat No. 3, 1st floor, Aakash Ganga Flats, Aakash Seth Kuvani Pole, Madan Gopal Haveli, Manek Chowk, Ahmedabad - 380 001. A perusal of the assessee s sale bills reflected that no sale bill bears the name of so called purchaser and all the sales were made in cash. The assessee was asked to disclose the identity of the purchaser, however, the assessee expressed his inability under t .....

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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 .....

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#8377; 27.54 crores has been deposited after 28-04-2005 , which were later transferred to Padmavati Bullion, Ahmedabad through cheque. Thus, it was observed by the AO that the assessee was keeping such huge cash with him in the intervening period which was also not invested elsewhere by the assessee which is strange and unbelievable behavior and is not possible from the prudent businessman like assessee. Thus, the A.O. inferred that the assessee was having huge cash in his possession and under t .....

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undisclosed income and accumulated cash in the business. Thus, the A.O. brought to tax in the assessee's hands as undisclosed income without giving any deduction on account of purchases amounting to ₹ 49,l7,69,925/- , vide assessment order dated 29-12-2008 passed by the AO u/s 143(3) of the 1961 Act. 5. Aggrieved by the assessment order dated 29-12-2008 passed by the A.O. u/s 143(3) of the 1961 Act, the assessee carried the matter in appeal before the ld. CIT(A). 6. Before the ld. CIT( .....

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on the ground that the supplier should personally come and file the details , which has led to the denial of natural justice to the assessee. It was submitted that the said evidences were not considered by the AO while the same were sent by speed post after the AO refused to accept the same from the assessee. The assessee submitted before learned CIT(A) that the Maharashtra VAT is applicable on Bullion transaction , while in Gujarat there is no VAT on bullion. It was submitted by assessee that t .....

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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 .....

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AO summoned the parties and these parties did not comply with the summons but later the AO did not exercise his powers to enforce the attendance of the parties. The confirmations from parties were submitted by sending through speed post but the same were not considered by the AO. In nutshell, the assessee submitted that these are genuine transactions of purchases. The assessee also explained before learned CIT(A) that the sales are genuine and when the purchaser is not a regular dealer whose fin .....

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rs who want to buy gold without revealing identity. The assessee submitted that there is no rule or law which stipulate that the identity of the purchaser should be established by the seller on cash memos and sales are genuine and the assessee as prudent business man wanted to make maximum profits and hence sold gold against cash. The assessee submitted before learned CIT(A) that the assessee has maintained regular books of accounts which are subjected to audit. It was submitted that the transac .....

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inancial 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. T .....

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avi 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 Bhurmalji Sanghavi and it was accepted that they did not maintain any record in respect of delivery of goods. The A.O. also raised doubts on the genuineness of the transactions as the identity of the person to whom the sales were made were not provided and no documentary evidences in support of the delivery of goods .....

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(Appeals) in the letter dated I7.12.2010, summons u/s 131 were issued by the undersigned on 01.02.2013 to Shri Champaklal Sanghvi, partner of M/s Padmavathii Bullion and the assessee fixing the case to 12.2.2013 for recording of statement. On the appointed day, Shri Champaklal Sanghvi did not attend. Instead, a letter was received from the representative to adjourn the case by 8 to 10 days and the case was fixed for hearing on 12.2.2013 at 11.30 AM. On that day, there was no compliance. The asse .....

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the plight of the assessee, the representative told me that the assessee will have to be taken to a hospital. The representative explained that the assessee after recovery of health will make himself available in next few days. In these circumstances they were allowed to leave the office. Later, 1 briefed the Addl.CIT about the developments, who instructed me to issue a letter to the assesseee if he failed to turn up within couple of days. However, the representative, Shri Manjunath Gowda CA att .....

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old 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 d .....

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the basis of material on record. M/s Shankeshwar Bullion:- The assessee was proprietor of this concern which is said to have commenced business of trading in gold bars in March, 2005 as stated by the assessee in his sworn statement on 5.11.2008. The address of the business premises was Akash Ganga, Flat No-3,Madan Gopal Haveli, Manek Chowk, Ahmedabad, while the address for the purpose of filing of Returns of income was given as: A/8 Bharat Nagar,Grant Road.Mumbai 400 007. The assessee has state .....

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the same was conveyed to the buyer. Subsequently the buyer was asked to deposit cash in my bank account at Mumbai/Ahmedabad wherever convenient. After confirming the cash deposit I used to issue cheque to purchaser mainly Padmavati Bullion, Ahmedabad. On submission of the cheque, I used to take delivery of gold bar from Padmavati jwellers and delivered the same to the buyer at my bussiness address at Ahmedabad However, the facts on record do not support this. For example; the sales by M/s Padma .....

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ither at Mumbai or Ahmedabad as was convenient to them. This is not convincing. For example, if a customer, '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 .....

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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 like earthquake, fire, bank robbery etc. can happen the next moment. Thus, in view of the time lag, the assesses theory of 'cash and carry; explained before your goodself is not .....

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ank (Annexure-c) Information received vide letter dated 10.10.2008 and copies of Cash-deposit slips enclosed. As could be seen from the cash-deposit-slips, there is no signature of depositors (eg. 20.4.2005,29.4.2005) Thirdly, M/s Padmavati Bullion got sales tax registration on 14.2.2005. The assessee also claims to have started business in March, 2005. The commencement of both the business are simultaneous. Further, according to the details the assesse carried on the newly started business main .....

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0.07% 2006-07 Rs. 49,17,69,925 0.18% 0.03% Thus, when the business was commenced i.e. in the very first month (March,2005) the assessee's sales are to the tune of ₹ 6.85 Crores. In a new business that too at a new place particularly in this type of business in precious metal, the assessee cannot (on his own) attract customers having large amounts of hard cash who follow 'cash and carry method' as claimed by the assessee. Assuming but not accepting for a moment (for the sake of .....

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td, 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 hi .....

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; the assessee could have done business if he received cash in advance in all cases as per his claim of cash and carry method. That apart, the cash on hand, of ₹ 49,76,987/- as on 31.03.2007 is by any standard, a huge amount particularly in view of the modus operandi of business claimed by the assessee. The cash flow statement submitted by the representative also does not support this in clear terms. The theory of cash on hand is not convincing for the following reasons also. The assessee .....

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06, his bank a/c with ICICI Bank show Debit balance of ₹ 78,254/- debit balance. As on 06.04.2005 M/s Padmavati Bullions sold goods worth ₹ 6,09,03,300/- but received ₹ 1,35,00,000/- only. This is against the modus operandi claimed by the assessee that his purchases were against orders after receipt of full amount in cash from parties and that he did not accept cheques as he needed instant money/profit. Sales Tax Returns:- The assessee has filed a letter dated 17.11.2008 enclos .....

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i 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 tha .....

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ative of the assessee has stated that the date of dissolution was not available. Afterwards, ADIT (Inv.), Ahmedabad was requested to conduct inquires about this firm. It has been reported by the ADIT(Inv) Ahmedabad about the non existence of the firm at the given address. However, the landlord informed the ADIT (Inv) that for some months there was some business activity: Here again, the capital account of both the partners as on 31.3.2005 itself showed debit balances totaling 2,74,702/- and the .....

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of ₹ 136.92 Cr which is abnormally high especially in a business commenced a few months earlier. If this was indeed a phenomenal growth, what was the reason (or closing down the business within few months of commencement. There is no plausible answer which could be guessed stepping into shoes of an ordinary prudent business person. 2. Even now, summons were issued to Champalal Sanghvi who has not complied with it. Besides all these, partner of M/s Padamavati Bullion in an earlier sworn st .....

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h the assessee and the parner of M/s Padmavati Bullion have given totally identical statements on oath question No 8. Meenakshi Enterprises:- (started in April 2002 and continued till February, 2005) This is a proprietary concern of the assesse, engaged in trading in Bright Bar. But no details have been brought out in the scrutiny assessment order u/s 143(3) dated 29.12.2008. In the return of Income, the. assessee has shown loss of ₹ 38,248/- from the above firm. However, the details of tu .....

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n 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 receive .....

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veal any investments in immovable properties, equity shares etc which could otherwise be evidence of the assesse's earnings/income in earlier years' business. 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 addition on acco .....

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scrutinized On going through the assessment order, it is seen that the assessee's business income from M/s Meenakshi Enterprises which shows discrepancy in the capital balance has not been verified. The assessee has declared a loss of ₹ 38,248/- from the firm which trades in Bright Bars. The capital account of the assessee for the year ending 31.3.2006, as shown in the computation of income, filed with the return of income, shows capital of ₹ 5,13,241/- with Meenakshi enterprise .....

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avati 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 an .....

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admavati Bullion are 1. M/s Kuber Bullion 2. M/s Chokshi Tejalkumar Pradipkumar & company 3. M/s Sanjay Agencies 4. M/s Kuber Bullion 5. Mr Punit K Mehta 4. What is the sale price charged by M/s Padmavati Bullion to the Appellant vis-avis other customers during April/May 2005 on the given dates and whether any abnormality is noticed in such transactions. • No abnormal variation is noticed in the sale pricing noticed in respect of the Assessee viz-a-viz other parties. The variation notic .....

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s with Appellant. Summons were issued to Partner Champalal B Sanghvi for which there was no compliance. 8. To collect data relating to profit margins in bullion trade during the F.Y. 2005-06 with specific emphasis on April/May 2005 and if any major deviations are noticed in comparison to the trade results of the Appellant to call for the clarifications and examine the same. • Information U/S 133(6) was sought from The Secretary M/s Shree Choksi Mahajan Associates who is associated Bullion M .....

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o such assets are found in the Balance Sheet of subsequent years. (Return of Income filed only upto 2008-09). The assessee in rejoinder vide letter dated 12.4.2013, as under:- The appellant thankfully acknowledges a copy of remand report dated 28.03.2013 submitted by the Income-tax Officer-16(2)(3) through Postal Authorities on 12.04.2013. 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 se .....

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urchases 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's ac .....

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any assessee, in any proceedings. Yet, there was a consistent systematic and oppressive technique adopted by the AO is issuing summons to the appellant, harassing him beyond tolerance by use of all oppressive techniques, because the appellant is penniless, suffering from various illnesses. 4.3 It is regrettable that the appellant having totally discharged onus cast on him, the Assessing Officer; did not do anything to fulfill obligation cast on him, by law. Every Assessing Officer has only ende .....

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onour to note that at the time when First remand report was called for, my Assessing Officer was a different Assessing Officer and yet the Assessing Officer who originally completed the assessment was preferred to prepare remand report and the fact is placed by me on record. 4.6 The appellant had specifically brought to the notice of the CIT (Appeals) that the' Assessing Officer who completed the assessment was prejudiced against me and was acting vindictively, but thus grievance of mine ass .....

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ime' 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 rema .....

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tten in only an inference and surmises. The appellant has maintained regular books of accounts, which are duly audited and all entries therein are accepted without a murmur and the A.O. submitting the remand report, without reference to the books or other data, made imaginary inference, which are not relevant as appellant has proves to the hilt all his transactions, The A.O. completing the assessment was satisfied and only disbelieved purchases which are now proved. On page 5 caption sales tax r .....

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after that I used to confirm the availability from the purchaser. After getting confirmation form the purchaser the same was conveyed to the buyer. Subsequently the buyer has asked to deposit cash in my bank account at Mumbai/Ahmedabad wherever convenient. After confirming the cash deposit I used to issue cheque to purchaser mainly Padmavati Bullion, Ahmedabad. On submission of the cheque,. I used to take delivery of gold bar from Padmavati Jewellers and delivered the same to the buyer at my bus .....

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ot bound to appear again and again for same matter and if the Department feel that it has a right to do so let them take any action against us. Why did the A.O. did not insist on their attendance? (b) M/s Padmavati Bullion is too big a party to collude with a small fry like me. The have 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 .....

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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 page 6 under caption 'Meenakshi Enterprise.& .....

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ss and malafide allegation, devoid of any truth and in blatant violation of all rules of natural justice. The concluding remarks that Book result may not be acceptable and provision of section 145(3) may be invoked to make addition on account of low gross profit. Looking to the circumstances of case addition on account of low gross profit may be considered at the rate of about 4% to 5%. The appellant resist these remark and submits as follows: (a) The suggestion, argument, contention, advise of .....

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report has admitted yield of gross profit in bullion is shown by the Principle Supplier 0.02%. POINT WISE DISCUSSION: Before dealing with point wise report, the appellant emphasis is that the entire exercise made in page I to 7 (part) are exercise in futility, irrelevant and is not worth its value, of paper on which is printed. POINTS: POINT NO. 1 Annexure 8 attached shows that M/s. Padmavati Bullion had sufficient stock of bullion to sell the same to the appellant and as such, no comment is of .....

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ny 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 clarifica .....

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ers, and examined individually their gross profit ratio, if she really wanted to adhere to scope of remand. This is purposely avoided. In view of above the appellant has proved his purchases (which only are doubted) to the hilt. A separate quantity account was not necessary as the commitment for purchase (after enquiry was made only after confirmed sale. The yield of gross profit shown in absolutely reasonable in the line of business. The appellant therefore prays that addition made to the incom .....

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sessee and the finances/capital of the assessee. It was observed by learned CIT(A) that it is quite not believable that the sales of ₹ 49 crores were made by the assessee in 16 transactions, each averaging over ₹ 3 crores and were made to persons only on telephone and the assessee does not know/remember the names of even a single person to whom sales of gold bar was made. It was observed by learned CIT(A) that it was abundantly clear that there is much more to the whole issues than w .....

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avati Bullion. Once purchases were established there has to be corresponding sales, as it is no where alleged that the entire gold purchased was kept in stock by the assessee. The contention of the assesse that such substantial quantity of gold was sold in 16 transactions 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 .....

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ser 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 addition on account of low Gross Profit. Lo .....

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it as under: 1. The appellant has maintained proper books of accounts and accounts have been duly audited uls.44AB of the Income Tax Act, 1961. This said facts have been duly accepted by your honour and AO also. 2. The appellant duly co-operated with AO by providing required/necessary information and documents. 3. The gross profit @10% in this bullion business is much higher than normal industry gross profit. 4. Considering the above facts and circumstances, the gross profit declared in income t .....

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in the months of May, June, July and August 2005 as well. Thus the claim of the assessee that gold were delivered only after full payment was received by the assessee in cash or deposited by the customers in his bank accounts is factually incorrect. It was observed that almost ₹ 27.55 crores was deposited by the assessee in the bank account after 28.4.2005, which meant that the sale proceeds were received in cash which were kept with the assessee and deposited in the bank account later or .....

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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 .....

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y treating the cash sales as un-accounted cash of the assessee was directed by learned CIT(A) to be deleted, vide appellate orders dated 10-01-2014. 7. Aggrieved by the appellate order dated 10-01-2014 passed by the ld. CIT(A) both the assessee and the Revenue are in appeal before us. The assessee is aggrieved with the decision of learned CIT(A) upholding of GP ratio of 5% on sales , while on the other hand the Revenue is aggrieved by the decision of learned CIT(A) in deletion of the entire addi .....

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that the A.O. denied proper opportunity to the assessee and the evidences filed by the assessee were not been taken note of by the AO. It is submitted that the assessee opened a proprietary concern in Ahmedabad as there is no VAT in Gujarat for the relevant period while there was VAT on gold bar in the State of Maharashtra. The learned counsel for the assessee submitted that the assessee was dealing in gold bars since March, 2005. It is submitted that the assessee had made purchases of gold fro .....

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so drew our attention to paper book page 158 wherein remand report by the AO to learned CIT(A) is placed. Our attention was also drawn to page 226/paper book wherein the remand report dated 28.3.2013 was placed. The ld. counsel also drew our attention to paper book page 3 wherein the balance sheet of the assessee is placed. The ld. counsel contended that the assesse has own capital invested in the proprietary concern of meager amount of ₹ 87,113/- and huge addition has been made i.e approx .....

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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 .....

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also invited to paper book page 265 and 266 wherein the dealer search report of Gujarat Vat Department is placed w.r.t the proprietary concern of the assessee and Padmavati Bullion. It is submitted that M/s Padmavati Bullion was registered with Gujarat VAT department on 14.2.2005 and the assessee was registered with Gujarat VAT department on 07.3.2005. It was submitted that there was no VAT chargeable on Gold Bar prior to 1st April 2006 in the State of Gujarat , hence, the assessee has not charg .....

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the assessee) has led to the enhancing of income by learned CIT(A) and no query has been raised by the ld. CIT(A) before enhancing income of the assessee which is not justifiable, it is submitted that the said difference is highlighted by the A.O. in the remand report only and the AO did not raise this issue while framing assessment u/s 143(3). Thus, it was submitted that no opportunity to rebut was granted by any authority below before prejudicing assessee and it is prayed that this matter may .....

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levying 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 .....

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tructure 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 magnitude. The assessee has no store/strong room to protect and hoard gold bars. The assessee was stated to be holding gold bars in stock as on 01-04-2005 to the tune of 5 Kg. as per its financial statements and it is wrong to say that the assessee did not have inventory of gold bars. It was subm .....

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and style of Shankheshwar Bullion , stated to be engaged in the business of purchase and sale of gold bars. The assessee started his proprietary concern only in the month of March, 2005 wherein registration was obtained vide TIN No. 24071301929 w.e.f. 07-03-2005 with Gujarat VAT authorities in the state of Gujarat at Ahmedabad(Gujarat) , although the assessee belonged to Mumbai (Maharashtra). The reasons for seeking VAT registration in the State of Gujarat is stated to be levying of VAT @0.25% a .....

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7-03-2005. The major transactions of cash sales of gold bar were to the tune of ₹ 6.85 crores in the month of March 2005 itself while the transactions of cash sales of gold bar were to the tune of ₹ 48.99 crores in the month of April, 2005. Thereafter , there was a solitary transactions of cash sale of gold bar of approx. ₹ 18.50 lacs in the month of July 2005 and thereafter said business of the assessee ceased to operate. The proprietary concern of the assessee namely Shankhes .....

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ssee 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 o .....

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of gold bar in majority of cases issued by the assessee is on an average exceeding ₹ 3,00,00,000/- in majority of cases. The assessee never revealed the identity of person who bought gold bars in such a huge quantity by paying cash. The assessee is stated to have purchased gold bars mainly from Padamavati Bullions. The partner of said firm Padmavati Bullion confirmed the sale of gold bars to the assessee in statement recorded u/s 131 but subsequently the said partner never appeared before .....

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d also there is no evidence of movement of gold bars starting from receipt of gold bars by the assessee from Padmavati Bullions at the time of stated purchases till the said gold bars are delivered to the so called buyers of the assessee whose identities are not revealed Thus, the assessee did not bring on record any proof of delivery of material received by him from Padmavati Bullion and further no proof of delivery of gold bar by the assessee to the buyers to whom the gold bar is stated to be .....

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bstantiate that the gold bars have been delivered to the undisclosed buyers only after the receipt of cash rather the records reveal opposite wherein cash sales of gold bar to the tune of ₹ 48.99 crores 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 deposit .....

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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 records. There is no evidence on record that security vaults or security personnel s were dep .....

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elivered to the buyer. There is also no material on record to suggest that any security vaults were hired or constructed or any security personnel were deployed by the assessee nor there is any insurance policy being taken by the assessee to secure gold bars of huge value. The material on record also clearly reveal that the capital of the M/s Padmavati Bullion from whom the assessee made purchases is in negative and is merely (-) ₹ 2.75 lacs as compared to the huge transactions in sale of .....

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the complete appreciation of the facts and also touchstone of human probabilities, the story of sale of gold bars appears to be a smoke screen while real objective is to introduce undisclosed income into banking system by way of deposit of cash in bank accounts. Reference is drawn to decision of Hon ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801(SC). India is one of the major importer of gold in the world. The sale and purchase of imported gold including its end use is r .....

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ts 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 0 .....

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e through the government nominated agencies including approved banks. The RBI has directed these agencies who are authorized by the RBI to do due diligence/KYC and other checks and verification of the ultimate buyers of the gold so that the end use of the imported gold can be tracked , controlled and monitored and gold is handled/ utilized/ consumed by only authorized concerns for specified approved purposes and in no case it was allowed to be diverted for un-authorized use or/and to unauthorize .....

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pressed unhappiness about misuse of import LC s by unauthorized agencies for importing gold and strict instructions are issued for complying with regulations/guidelines. Further stringning of regulatory norms for import of gold by RBI vide master circular of July 2005 onerous responsibilities have been placed on approved banks and nominated agencies to do due diligence/KYC/verification of suppliers, importers and user of the gold on a more tightened basis. On the perusal of the documents which a .....

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rs into the bank accounts of the assessee and its conversion into gold bars without disclosing their identity which also prevented end use of gold bars to be monitored. Reference is drawn to a recent decision of Hon ble Supreme Court in the case of Binoy Viswam v. UOI reported in (2017) 82 taxmann.com 211(SC) , wherein Lordships have held in no uncertain terms that menace of the black money which is deep rooted in the economy need to be tackled by taking multiple actions at the same time, by hol .....

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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 su .....

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ting to avail the benefit of the 'peak credit' has to make a clean breast of all the facts within his knowledge concerning the credit entries in the accounts. The tax-payer has to explain with sufficient detail the source of all the deposits in his accounts as well as the corresponding destination of all payments from the accounts. The tax-payer should be able to show that money has been transferred through banking channels from the bank account of creditors to the bank account of the as .....

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mpanies' only for that purpose. He also does not dispute the fact that he has not been able to explain the source of all the deposits in his accounts or the ultimate destination of all the outgo from his accounts. 16. The Assessee's plea that he should be taxed only on a composite 'peak credit' is based entirely on principles of accountancy. He questions the logic behind allowing peak credits for some of the credit entries by way of cheques and denying it for the other entries in .....

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judicating 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 en .....

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squared up accounts. In other words, where an Assessee was unable to explain the sources of deposits and the corresponding payments then he would not get the benefit of 'peak credit'. 19. The legal position in respect of an accommodation entry provider seeking the benefit of 'peak credit' appears to have been totally overlooked by the ITAT in the present case. Indeed, if the Assessee as a self-confessed accommodation entry provider wanted to avail the benefit of the 'peak cre .....

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ey paid from the accounts of the Assessee has returned to the bank accounts of the creditors. The Assessee has to discharge the primary onus of disclosure in this regard. 20. While the AO in the present case did not question the working out of the peak credit by the Assessee, he, at the same time, insisted that the additions made by him to the returned income of the Assessee should be sustained. The peak credit worked out by the Assessee was on the basis that the principle of peak credit would a .....

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under Section 68 of the Act. The question of law framed by this Court, is accordingly, answered in the negative i.e. in favour of the Revenue and against the Assessee. The impugned order of ITAT is, accordingly, set aside and the order of the AO is restored to file. Reference is also drawn to the decision of Hon ble Calcutta High Court in the case of Rajmandir Estates Private Limited v Pr. CIT (2016) 386 ITR 162(Cal. HC), wherein Lordships has discussed the concept of laundering of black money a .....

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ller 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 p .....

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etc. In some cases, the transfers may be disguised as payments for goods or services, thus giving them a legitimate appearance. 3. Integration This involves investment in the legitimate economy so that the money gets the colour of legitimacy. This is achieved by techniques such as lending the money through front companies etc. The money may be invested in real estates, business and etc. The stages at which money-laundering could be easily detected are those where cash enters into the domestic f .....

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acquire legitimate assets. Legal or illegal income which evades tax and illegal income that comes within the exempted taxation slab constitute the unreported Gross Domestic Product or black economy. Laundering the black money and laundering proceeds of crime are two different issues, although there is frequent overlap between the two. While laundering black money is to be handled through taxation laws or similar laws, the laundering of proceeds of crime is to be handled through special anti-mone .....

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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 d .....

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e 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 important to refer to provisions of Section 106 and 114(g) of the Indian Evidence Act,1872. Section 106 of the 1872 Act stipulates that burden of proving fact which is especially within the knowledge of any person is on that person. Similarly Section 114(g) of the 1872 Act stipulates that the eviden .....

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rather the assessee is deliberately withholding such details at his own peril and is clearly hit by Section 106 and 114(g) of the 1872 Act and presumption is drawn against the assessee that either the assessee has introduced his own undisclosed income into the bank accounts of the assessee or if the story of the assessee is believed has facilitated introduction of undisclosed money of the undisclosed buyers of gold and its conversion into gold without revealing identity of the buyers. It is stat .....

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cepted viz. identity of the creditors, credit worthiness of the creditors and genuineness of the cash credits. Thus, to say that no burden lay on the assessee to fulfill all the three ingredient requirements sated above before its accepted wherein one of the ingredient requirement is to establish identity of the creditor. Thus, these so called proceeds of cash sales deposited in bank accounts of the assessee are cash credits appearing in the books of accounts of the assessee sources of which are .....

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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 ca .....

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acilities maintained by the assessee as well no experience in this field itself cast serious shadow of doubt on the genuineness of said business carried on by the assessee. The onus was on the assessee to prove genuineness of the business of gold bars conducted by the assessee. Reference is drawn to decision of Hon ble Supreme Court in the case of Sumati Dayal(Supra). Provisions of Section 68 of the Act is a special provisions and is a deeming provision which cast obligation on the assessee to s .....

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ee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The assessee failed to satisfactorily explain the sources of these cash deposits in bank accounts of the assessee which are in the nature of cash credits in the books of accounts /bank ac .....

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68 of the 1961 Act, which in the instant case we hold this issue against the assessee and in favour of Revenue based on factual matrix of the case detailed above. Reference 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 shar .....

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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 fact especially within knowledge.-When any fact is especially within the knowledge of any person, the burden of proving that fact is upon him . 6. In .....

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uld have applied for issuance of summons for examining the debtor who had allegedly repaid the money in cash and it could have been said that the assessee did whatever was within his power, but the assessee did not discharge his burden. Law requires the assessee to satisfy the Assessing Officer. Satisfaction of the Assessing Officer cannot be of a higher or lower level than the satisfaction of any person of ordinary prudence. If the assessee has taken steps to satisfy a person of ordinary pruden .....

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ble because in a search and survey, a sum of rupees ten lakhs were found which the Revenue thought was unaccounted money, but it transpired that it had duly been reflected in the books of accounts. Double taxation could not have been permitted and that was not also a case of Section68. Section 68 is squarely applicable in this case because the money was found credited in the books of accounts of the assessee and the assessee was unable to satisfy the Assessing Officer by adducing proper evidence .....

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e 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. .....

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d no substance in the argument that, since the AO has not rejected the books of account, the provisions of section 68 have no application. There is no requirement in law that books should be rejected before invoking the provisions of Section 68. In view of the above, I am of the opinion that the AO has rightly held that the appellant has failed to explain the source of the cash deposits totalling to ₹ 32,17,784/-. The addition made by the AO is confirmed. The grounds raised by the appellan .....

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ds it; 9. For the reasons aforesaid, we are of the opinion that the judgement under challenge cannot be sustained and, therefore, judgement of the Tribunal is set aside. The judgement of the CIT(A) is restored. Reference is also drawn to the decision of Hon ble Karnataka High Court in the case of P M Abdulla v. ITO ( 2015) 60 taxmann.com 52(Kar.) , decision of Hon ble Punjab and Haryana High Court in the case of Self Knitting Works v. CIT (2014) 27 Taxman 253(P&H HC) and decision of Hon ble .....

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payments for these purchases are stated to be made out of cash deposited in bank accounts out of so called cash sales of gold made by the assessee of which identity of the buyers is not revealed by the assessee. Provisions of Section 69C as were applicable for impugned assessment year are 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 .....

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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 by way of purchases claimed by the assessee in it .....

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ained 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 la .....

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