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TMI Blog2017 (12) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... 17 (Ground of Assessee's appeal):- "1) The ld. CIT(Appeals)-5 has grossly erred in sustaining the assessment as initial notice issued by the ITO is illegal and required to be quashed or set aside. 2) The ld. CIT(Appeals)-5 has grossly erred in taking sales at Rs. 3,52,40,960/- instead of Rs. 3,40,35,960/- as shown in audit report. 3) The ld. CIT(Appeals)-5 has grossly erred in taking net profit at 5% of sales whereas net profit declared as per audit report is 1.75% and all the documents regarding purchase and expenses were provided to ld. CIT. 4) The ld. CIT(Appeals)-5 has wrongly considered agriculture income of Rs. 1,92,350/- and interest income of Rs. 51,215 as income from other sources as no evidence regarding agriculture income were demanded and interest income is already considered in business income. 5) The ld.CIT(Appeals)-05 has grossly erred in disallowing deduction u/s 80C of Rs. 51,215." 2. Firstly, we take up the sole ground taken by the revenue in its appeal wherein it has challenged the action of ld CIT(A) in deleting the addition of Rs. 4,39,72,094/- of unexplained bank deposit under section 68 of the Act and instead applying net profit rate of 5% on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Liability 15,59,892/- Contra Entries Net Effect 21,12,378/- Total 96,71,902/- 4.5 The reasons cited for the difference of Rs. 96,71,902 have been examined during the appellate proceedings. It is seen that the claim of inter-transfer entries of Rs. 41,31,632/- are correct. Out of such inter-transfer entries, the AO had verified entries to the extent of Rs. 26,29,818. However there are 3 more entries which have not been considered by the AO which are amounts of Rs. 14,49,000 and Rs. 50,000 being amounts given for purchases but returned back. The third entry of Rs. 2,184 is related to credit of interest in the bank account which has been separately considered. In this manner, the claim of inter-transfer entries of Rs. 41,31,632 are verified and found to be correct. Similarly, the claim of return of amount of Rs. 4 lakh on account of RTGS/NEFT failure, Rs. 2,63,000 on account of Return of advance from Maulana Poultry, increase in loan/liability of Rs. 15,59,892 and net effect of other contra entries of Rs. 21,12,378 are verifiable and allowed. However, the claim of opening cash of Rs. 3,80,000 and opening debtors of Rs. 8,25,000 are not verifiable since no books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignored his quasi-judicial position and worked hypothetically to inflate the income/assessment. The Ld. AO gone through the credit/receipt side of bank statement only and intentionally ignored debit side i.e. payment/expense side completely. This clearly established that he was not acting as quasi-judicial authority. The Ld. AO fails to establish/explain that: (a) How section 68 is applicable when no books of accounts were available to AO. In CIT Vs. Bhaichand H. Gandhi 141 ITR 67 (Bom), it was held that pass book supplied by the bank to the assessee cannot be regarded as the books of the assessee; (b) how a sale can be done without any purchase; (c) how 100% sale proceed can be income in case of any trading/business activity; (d) The AO assessed the income under the head other source applying section 68 of I.T Act and imposed the penalty u/s 271A, 271B without having any books of accounts. (e) After making all the additions/credit entry as income, the Ld. AO again added the income as declared by the assessee. Simultaneously using his quasi-judicial skill, he again ignored the expenses as claimed by the assessee and assessed the income for the year at Rs. 4,50,50,380. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipt/Kanta/Parchi/weighment receipt and debit vouchers were presented before ld. CIT(A). As per the practice of industry, these are sufficient/reasonable proof to ensure the genuineness of the transaction. Further, regarding the observation of the ld CIT(A) that no stock register has been maintained by the assessee, the ld AR submitted that mere non maintenance of stock register cannot form the basis of rejection of books of accounts. This is against the spirit of law and this fact is also confirmed by following judicial pronouncements: * Haridas Parikh V ITO [2009] 29 SOT 13 (JODH)(URO) * Ashok Kumar & Co. v. ITO [2004] 2 SOT 518 (Asr.) (SMC) * Imran Ahmed v. CIT [1982] Tax LR (NOC) 111 (All.) * Hemraj Nebhomal & Sons v. CIT [2005] 146 Taxman 345 (M.P) * Asstt. CIT v. L.M.P. Tractors (P.) Ltd. [2005] 148 Taxman 52 (Mag.) * Malani Ramjivan Jagannath v. Asstt. CIT (Rajasthan-HC) * Income Tax Officer vs. Girish M. Mehta [2008] 296 ITR (AT) 125 (Rajkot) 8. Regarding estimation of net profit rate of 5% by the ld CIT(A) instead of 1.5% as disclosed by the assessee, the ld. AR submitted that:- (1) The assessee was engaged in the business of sale and purchase of ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a material defect liable to reject books of accounts therefore the humble assessee wants to submit that there is no basis of accepting imaginary profit in place of profit which is arrived from the audited books of accounts. 9. The ld DR is heard who has vehemently argued the matter and relied upon the order of the AO. He submitted that inspite of repeated opportunities, the assessee didn't submit the details so called for by the AO to verify the bank credits and accordingly, in absence of necessary explanation, the AO has added the same as unexplained cash credit in the hands of the assessee. 10. We have heard the rival contentions and perused the material available on record. We find that the AO has brought to tax the credit entries appearing in the assessee's bank accounts in absence of necessary explanation on the part of the assessee. During the appellate proceedings before the ld CIT(A), the assessee has submitted the audited financial statements, which, as pointed out by the ld CIT(A) as well as by ld DR during the course of hearing, have been audited subsequent to completion of assessment proceedings and other details in terms of bank reconciliation statements and ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. In this regard, the ld AR has contended that most of the purchases are through RTGS payments and only a part of the purchases are made in cash for which cash receipt and kanta parchi, etc were submitted before the ld CIT(A). We thus find that there are contrary claims of cash purchases - substantial as per ld CIT(A) and only a part of total purchases as per the ld AR which are equally vague and doesn't throw any light on the extent of purchases made during the year in cash and which remains unverified. At the same time, given the inherent nature of the assessee's business, where purchases are also made from farmers, cash transactions cannot be ruled out. Further, regarding non-maintenance of stock register, the ld AR submitted that there are no opening and closing stock during the year and what has been purchased during the year, the same has been sold during the year, hence, there was no necessity to maintain the stock register and the same cannot be a basis for rejection of books of accounts. We find that the assessee is in the business of purchase and sale of chicks and poultry feed. Sales are made to farmers and Butchers. The assessee purchase broilers from hatcheries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income was produced for verification before the Assessing Officer. Accordingly he considered the same as income from other sources. Even during the appellate proceedings, ld. CIT(A) observed that the same position is continuing as no explanation or evidence in support of such receipt has been furnished by the assessee. During the course of hearing, the ld. AR submitted that the necessary evidence regarding agriculture income were never demanded by the either AO or by the ld. CIT(A). However, the same are being submitted now in form of copy of jamabandi and proof of agriculture income and the same may kindly be admitted. The ld DR fairly submitted that the matter may be remanded to the AO for verification. In light of the same, the evidence in support of agriculture income is admitted and the matter is remanded back to the file of the AO to examine the same a fresh after providing reasonable opportunity to the assessee. The ground is thus allowed for statistical purposes. 16. In ground No. 4, the assessee has also challenged the action of ld. CIT (A) in considering the interest income of Rs. 48,231 as income from other sources. In this regard, the ld. AR has submitted that interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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