TMI Blog2017 (7) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... he evidences go to prove that the bunch of seized documents belonged to Mr. Ram Chauhan and the assessee has nothing to do with it. Therefore, the addition made by the AO and sustained by the CIT(A) was not justified. Unexplained payment - Held that:- AO wrongly considered the said payments as unexplained in the hands of the assessee, particularly when the name of other persons of the assessee’s family were also mentioned in the same document and nowhere it was stated that those cash payments were made by the assessee. Moreover, in the ledger account maintained by Mrs. Kumkum Kanodia, the said payments were reflected in the account of Haryana Aukaf Board and the explanation of the assessee was also that the said payments had been made by Mrs. Kumkum Kanodia. - ITA No. 3670/Del/2014, ITA No. 3671/Del/2014, ITA No . 3672/Del/2014, ITA No. 4241/Del/2014, ITA No. 4242/Del/2014 , ITA No. 4243/Del/2014 , - - - Dated:- 28-7-2017 - Sh. N. K. Saini, AM and Smt. Beena A. Pillai, JM Assessee by : Sh. Ved Jian, Adv. Sh. Ashish Goel, CA Revenue by : Smt. Paramita Tripathy, CIT DR ORDER Per Bench: These Cross appeals by the department and the assessee are di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plained earlier, the assessee is mainly engaged in the business of Manufacturing, fabricate, import, export, trading and otherwise dealing in Silver, Gold and Diamond Jewellery, precious and semi precious stones. Due to the nature of items and its significant valuation, the turnover and consequently the cash deposit runs in hundreds of crores of rupees. At this stage, it is worthwhile to mention that we have already placed on record documents such as VA T Returns, bank statements, day wise sale details etc which are sufficient to substantiate the figures of cash sales and its genuineness, however, in order to further co-operate in the assessment proceedings, we have made an effort to provide you the assessee wise, year wise and bank wise details in such a manner that your goodself feels satisfied about the explanation of voucher seized. Though proper care has been taken to place on record the information and the manner in which they are desired, however, on account of paucity of time and volume involved, the possibility of certain clerical mistakes cannot be ruled out, therefore such clerical mistakes be read as such and no adverse inference thereof be taken. Apart from that we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord read with material on record as an outcome of search on the business and other premises. In this connection reference is respectfully drawn to followings:- i) The Search proceedings u/s 132 of IT Act, 1961; ii) Genuineness evident from material already on record; In continuation thereof as desired by your goodself in connection with mode and manner trading activities of sale and purchase of gold, bullions etc made by us, it is respectfully submitted as under:- Purchases As communicated earlier read with documentary evidences on record, it is evident that:- (a) The entire purchases have been made from suppliers on national and international repute and big organization like MMTC etc; (b) That entire such purchases are made for account payee cheques; (c) That the purchases so made is duly supported with bills issued by the suppliers; (d) That the bills so issued by the suppliers clearly state the quantity, quality and amounts charged by them, that II such bills are duly recorded in books of accounts and stock maintained in normal course. (e) Even during the course of search: 1. Not even a single purchase was found to be made in cash; 2. Not even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies being traded in are subjected to stiff completions from all quarters like persons business houses having big names likes MMTC, Bank and other big investment companies selling gold and gold bonds etc. once the authorized agencies (banks) have started selling gold to retailers and consumers, the gap between the wholesale and retail level has narrowed down, a tough competition has already lead to substantial drop in margins and prices benefiting consumers and as such sometimes we have forced to even constrained to sell the goods at cost or below so as to retain our share in the market and competitions. (d) Sales prices subjected to bargain The prices are subjected to huge bargain and negotiation at all levels. There can be as such no benchmark/yardstick, criteria, scientific/commercial method to fix prices. (e) Customers prefer cash sales only For reasons prevalent in the market that the customers prefer cash sales only. This is one of prime reasons of even existence of gold and bullions dealers like us. It is not a secret in the market that the commodities sold is normally purchased from big business houses and government merchandize organizations. These primary suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of M/s Vasudeva Jewellers Pvt. Ltd. (supra). 12. Now the department is in appeal. The ld. DR reiterated the observations made by the AO and strongly supported the assessment order dated 28.03.2013. 13. In his rival submissions the ld. Counsel for the assessee submitted that no incriminating material belonging to the assessee was found during the course of search and the AO applied the GP rate of 0.2% without being any adverse material and without pointing out any error in the books of accounts and even without rejecting the books of accounts. It was further submitted that the AO made the trading addition without rejecting books of accounts of the assessee and that he had not tinker with the purchases, stock and expenses incurred by the assessee, he had only doubted the sales figures but had not been able to point out any inflated figure and suppressed sales. It was further submitted that there was no basis of estimation of the rate taken by the AO for enhancing the gross profit declared by the assessee and the addition had been made by indulging into surmises and conjectures. 14. The ld. Counsel for the assessee referred to page nos. 265 to 286 of the assessee s paper b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record wherein such a profit was earned. We, therefore, considering the totality of the facts as discussed hereinabove are of the view that the ld. CIT(A) rightly deleted the addition made by the AO by following his own order for the assessment year 2005-06 in the case of M/s Vasudeva Jewellers Pvt. Ltd. (supra), against which an appeal was filed by the department before the ITAT in ITA No. 4245/Del/2014 which has been dismissed vide order dated 12.07.2016. In that view of the matter, we do not see any merit in this appeal of the department. 17. In another appeals of the department for the assessment years 2006-07 and 2007-08, similar issues are involved having identical facts, the only difference is there in the amount involved. Therefore, our findings given in former part of this order in respect of assessment year 2005-06 shall apply with the same force for the assessment years 2006-07 and 2007-08. Accordingly, the appeals of the department are dismissed. 18. Now we will deal with the appeal of the assessee in ITA No. 3670/Del/2014 for the assessment year 2005-06. The assessee has raised the following grounds: 1. On the facts and circumstances of the case, the order pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of search operation documents marked as Annexure A-1 page 77 78 was found and seized from the residential premises of the assessee on 28.03.2011. The AO alleged that the description given on the said documents indicated that the assessee had deposited cash to the tune of ₹ 26,75,000/- on different dates (28.02.04 ₹ 6,00,000/-, 17.02.04 ₹ 9,35,000/- and 23.06.04 ₹ 11,40,000/-). The AO also persumed that the interest on the said amount had been charged @ 17% which worked out to ₹ 14,28,460/-. The AO asked the assessee to furnish the explanation regarding the cash deposit of ₹ 26,75,000/- and interest of ₹ 14,28,460/-, total amounting to ₹ 41,03,460/-. In response, the assessee submitted as under: We are in receipt of a notice from your goodself requiring us to furnish source of cash deposit of ₹ 26,75,000/-, payment of ₹ 20,00,000/- on interest to Mr. Malik, payment of ₹ 15,00,000/-, ₹ 3,50,000/-, ₹ 10,00,000/- on interest to Mr. Badani and other interest received mentioned in the documents seized during the course of search vide annexure A page 77 and 78. In this regard, it is submitted that none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate Bank of Mysore whereby the car loan had been sanctioned in the name of M/s Universal Ornaments, a proprietary concern of Mr. Ram Chauhan. It was stated that the AO had drawn adverse inference on the basis of seized documents i.e. pages 77-78 but did not consider the pages 75 and 76 of the seized documents which were a car loan installment amount paid to State Bank of Mysore, on page 73 of the seized document was garment exports account whereby various details of the business of the garment export were mentioned and the said business pertained to the said person, Mr. Ram Chauhan. Therefore, the AO was not justified in drawing an adverse inference against the assessee merely on the basis of only those two papers i.e. page nos. 77-78 but without considering other papers which were part of the seized documents and threw light about the nature of the transactions. It was further submitted that the presumption u/s 132(4A) of the Act was to be drawn firstly on the entire reading of document seized and not in isolation and secondly it was a rebuttable presumption. It was stated that if the entire seized documents were read it would be clear that those transactions were not that of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies of the account of M/s Universal Ornaments and the entries mentioned at page no. 46 tallied to the entries at page no. 76 of Annexure A-1, which proved that the account and the seized paper were related to Mr. Ram Chauhan. It was submitted that entries at page no. 47 onwards of the assessee s paper book are the copies of bank statement of M/s Universal Ornaments in Allahabad Bank which can be tallied with the entries at page 76 of Annexure A-1. Therefore, all the evidences go to prove that the bunch of seized documents belonged to Mr. Ram Chauhan and the assessee has nothing to do with it. Therefore, the addition made by the AO and sustained by the ld. CIT(A) was not justified. 25. As regards to the addition in respect of interest on the advances amounting to ₹ 2,27,010/-, the ld. Counsel for the assessee stated that since the entries did not belong to the assessee, the interest in relation to those advances could not have been added in the hands of the assessee. The reliance was placed on the following case laws: M/s Habitat Royale Projects Pvt. Ltd. Vs ACIT, CC- 22, (2016) 11 TMI 1365 (ITAT Del.) Vatika Landbase Pvt. Ltd. in ITA No. 670/2014 dated 26.02.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ram Chauhan and the assessee provided his address and requested the AO to call Sh. Ram Chauhan, however, the AO opted not to call Mr. Ram Chauhan. In the present case, it is not in dispute that the loan repayment had been made to State Bank of Mysore and that during the course of search a sanction letter of car loan was found (copy of which is placed at page no. 41 of the assessee s paper book), the said letter dated 1st May, 2003 had been written to M/s Universal Ornaments, Kailash Colony, New Delhi stating therein that credit facilities has been sanctioned. The contention of the assessee that the said firm M/s Universal Ornaments is a proprietorship concern of Sh. Ram Chauhan has not been rebutted. Therefore, the explanation of the assessee that the repayment of loan as mentioned at page no. 34 was made by Mr. Ram Chauhan and not by the assessee is plausible. It is also noticed that the entries mentioned at page 34 tallies with the statement of account of M/s Universal Ornaments, cash deposits of ₹ 11,40,000/- on 23.06.2004 is also mentioned at page no. 45 which is the copy of statement of account of M/s Universal Ornament with State Bank of Mysore and the same amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y accounted for in her records. In support, copy of ledger account of Haryana Aukaf Board in the records of Kumkum Kanodia. 32. The AO after considering the submissions of the assessee observed that the balance sheet of Mrs. Kumkum Kanodia for the assessment year 2007-08 revealed that she had made payment of ₹ 1,75,000/- only and in the said document, the following payments were mentioned: 01.03.2007 Cash Rs.4,00,000/- Sh. Rajesh Kumar Kanodia Rs.1,75,000/- Cheque no. 75565 Nitika Kanodia Rs.1,75,000/- Cheque no. 088537 Rajat Kanodia Rs.1,75,000/- Cheque no. 088497 Kumkum Kanodia Rs.1,75,000/- Cheque no. 088106 31.03.2007 Cash Rs.7,00,000/- 33. The AO on the basis of above entries observed that the family members who had made payment of ₹ 1,75,000/- each through cheques had duly disclosed in their respective balance sheet but the cash payment of ₹ 11,00,000/- had not been shown in the balance sheet of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst this, in the seized document there is no mention of any amount being received back. On the contrary there are two payments of ₹ 4,00,000/- and ₹ 7,00,000/-. That the assessee received the payment back of ₹ 4,00,000/- as is stated in the account filed by the assessee on 5th March, 2007, the same fact would have been stated in the seized document also. It is highly improbable that the amount of ₹ 7,00,000/- has been paid on 31s March, 2007 and has been received back on 31sl March, 2007. 4.4.4 In view of these I am of the view that the explanation given by the assessee is not proper and hence I uphold the action of the AO in making the addition of Rs.l1,00,000/- and this ground of appeal is rejected. 36. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the impugned payment was made by Mrs. Kumkum Kanodia who had accounted for the same in her record. A reference was made to page no. 137 of the assessee s paper book which is the copy of account of M/s Haryana Aukaf Board in the books of Mrs. Kumkum Kanodia wherein payments amounting to ₹ 11,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.3.2007 By Cash Receipt 4,00,000.00 31.3.2007 To Cash Payment 7,00,000.00 By Cash Receipt 7,00,000.00 12,75,000.00 11,00,000.00 By Closing Balance 1,75,000.00 12,75,000.00 12,75,000.00 39. The aforesaid account of Haryana Aukaf Board from 01.04.2006 to 31.03.2007 was in the books of Mrs. Kumkum Kanodia which is assessed to tax and filing the return of income which is evident from page nos. 134 to 136 of the assessee s paper book which are the copies of acknowledgment of return of income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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