TMI Blog2020 (9) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... . accounted, unaccounted on MCX portal in said Hazir software as is evident from assessment order itself. A.O. also accepted the purchases, sales, op. stock closing stock resulted from the transactions recorded therein as such in Hazir software without pointing out any defect or deficiency therein and so also in law even those accounts cannot be rejected by invoking section 145 (3). The A.O. while accepting all transaction in Hazir software in toto is just not accepting the profit resulted from said details which is not correct in law and so cannot be a ground for invoking section 145 (3). G.P. rate of 1% applied by the A.O. on the sales found recorded in Hajir software is thus wrong, unwarranted and uncalled for. CIT(A) is also wrong and bad in law in sustaining the lump sum addition in the hands of assessee as against the addition made by the AO. Undisclosed profit from undisclosed transaction with MCX - HELD THAT:- AO in the assessment order made lump sum addition of ₹ 1000000/- to the income of the assessee on account of alleged profit on unaccounted transactions at MCX. That the profit from transaction with MCX is computable from record found in Haz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur held that amended provisions are applicable from 01-04-2017 only and cannot be applied retrospectively. The issue in this case is thus being exactly the same and is covered by the said judgement of ITAT, Jaipur Bench, Jaipur. The CIT (A) thus is wrong and has erred in law in not allowing the set off of net unaccounted loss from the accounted income of assessee. Unexplained investment purchase of Gold - HELD THAT:- CIT(A) is correct in deleting the addition made by the AO on account of alleged undisclosed investment in purchase of Gold. - ITA No. 1256, 1257, & 1258/JP/2019, ITA No. 1307, 1308, & 1309/JP/2019 - - - Dated:- 15-9-2020 - Shri Ramesh C Sharma, AM And Shri Sandeep Gosain, JM For the Assessee : Shri S.R. Sharma , CA And Shri Rajni Kant Bhatra, CA For the Revenue : Shri Ambrish Bedi, CIT DR ORDER PER: SANDEEP GOSAIN, J.M. These are the cross appeals filed by the assessee and Revenue against three different orders of ld. CIT(A)-4, Jaipur dated 03.09.2019 for the Assessment Years 2015-16 to 2017-18 in the matter of orders passed by the A.O. u/s 143(3) r.w.s. 153C of the Income Tax Act, 1961 (in short, the Act). The assessee and the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transition recorded in the Johri Bazar software, seized by the Department, are undisclosed transition. 2. On the facts and in the circumstances of the case in law the ld. CIT(A) grossly erred in holding that addition of ₹ 10.00 lacs is without any reason being undisclosed profit from undisclosed transactions with MCX detected during the search by ignoring the fact of being part Johri software which record undisclosed transition only. 3. On the facts and in the circumstances of the case in law the ld. CIT(A) erred in incorrectly restricting the addition of ₹ 59,17,397/- to ₹ 15,74,496/- while agreeing with the AO on the basis of addition w.r.t. capital ITA No.1308/JP/2019 A.Y. 2016-17- Revenue 1. On the facts and in the circumstances of the case in law the ld. CIT(A) erred right in deleting the addition of ₹ 2,76,61,034/- by ignoring the admission of the assessee that transition recorded in the Johri Bazar software, seized by the Department, are undisclosed transition. 2. On the facts and in the circumstances of the case in law the ld. CIT(A) grossly erred in holding that addition of ₹ 10.00 lacs i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore allegedly showing in the name of Babulal Lawat. Thereafter survey u/s 133A of the Act was also carried out at the business premises of assessee. In course of survey cash of ₹ 8,13,139/- was found short, which assessee surrendered to tax, stock on physical verification was found short by ₹ 83,47,544/- which survey party treated it as sale by assessee out of books of accounts and estimated G.P. @ 1% thereon which assessee agreed in course of survey and thus surrendered ₹ 83,475/- to tax. Further the assessee admitted undeclared profit in purchase and sale of gold in cash amounting to ₹ 45,00,000/- which was also surrendered to tax by him. In survey a computer was found at the business premises of assessee which had a software Hajir in which transaction from 24-11-2014 to 23-11-2016 of physical purchase and sale of gold as well as transaction carried out in gold and silver on MCX Portal were found which included transactions recorded in regular books of accounts as well as which were not recorded in regular books of accounts. The assessee owned those transactions as of his and also agreed to prepare therefrom and submit the details of income/loss on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition by working out capital at ₹ 59,17,397/- being amount involved in transaction so entered by the assessee. By the impugned order, the ld. CIT(A) restricted the addition to the extent of ₹ 15,74,496/- out of total addition of ₹ 59,17,397/-. 9. Now the revenue is in appeal against deletion the addition and the assessee is in appeal against giving part relief by the ld. CIT(A) before the ITAT. 10. We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that in the assessment order the A.O. estimated profits @ 1% on sales from 24-11-2014 to 31-3-2015 on transaction recorded in regular books of accounts as well as not recorded in regular books of accounts and for MCX portal transactions making a lump sum addition of ₹ 10,00,000/- without any basis while actual profit earned from those transactions was correctly worked out by assessee from record found in survey and submitted before A.O. The application of profit rate @ 1% on sales has been applied by the A.O. not because of any defect or deficiency in the accounts but by wrongly putting stress on that the assessee in course of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Software, we observe that the record found in Hajir software is correct and complete. The complete details of all transactions alongwith quantitative details are available in said record and trading A/c with the said record was prepared by assessee showing gross profit/gross loss resulted from those transaction not recorded in books of accounts. The A.O. found no mistake, defect or deficiency therein and accepted the purchase/sales as shown in said trading account but instead of accepting the declared profit arbitrarily putting stress that assessee accepted 1% G.P. rate which is wrong as explained above, otherwise also in accordance with section 292C of the Act the contents of documents found in course of survey are to be accepted as true and no subtraction/ addition/interpolation can be made in law without any corroborative and supportive material therefor and, therefore trading results i.e. gross profit arrived from the said documents found in course of survey which is correctly worked out deserves to be accepted. The Ld. CIT(A) gave his finding in para no.8 and 9 of appeal order, which is reproduced as under: 8. In this ground the Ld. A/R has contested the application of GP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete quantity details and said books of accounts are audited u/s 44AB of the Act. It has been held in various judicial pronouncements that unless there is a finding or opinion either that records maintained were incorrect or incomplete or that method of accounting employed was such that income could not be deduced from accounts maintained by assessee section 145 (3) cannot be invoked and books of accounts cannot be rejected. The A.O. has not pointed out any defect or discrepancy in account books maintained by assessee and, therefore there is no ground for rejection of books of accounts maintained by assessee. The A.O. has also accepted in assessment the purchases, sales, opening closing stock as well as declared profits in books of accounts maintained as she accepted and included the income declared by assessee in return on the basis of regular books of accounts. In such facts of the case the A.O. wrongly held that books of accounts are rejected invoking section 145 (3) which is uncalled for. As far as transactions found in Hazir software of computer it records all transactions whether recorded in regular books of accounts or not recorded in regular books of accounts includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition of ₹ 10,00,000/- in the hands of assessee as against the addition of 2,30,37,862/- made by the Assessing officer. 12. In ground No. 2 of the appeal, the revenue has alleged deletion of addition of ₹ 10.00 lacs made by the A.O. being undisclosed profit from undisclosed transaction with MCX. In this regard, we observe that the AO in the assessment order made lump sum addition of ₹ 1000000/- to the income of the assessee on account of alleged profit on unaccounted transactions at MCX. That the profit from transaction with MCX is computable from record found in Hazir software and assessee submitted before A.O. the resultant profit from MCX transaction being to ₹ 41,36,010/- which A.O. verified the same and found it correct and accepted it and added the same in income of assessee assessed by A.O. Besides that, the A.O. further made an lump sum addition of ₹ 10,00,000/- without any reason or basis or finding any shortcoming in resulted profit computed from transaction on MCX. Thus this lump sum addition is arbitrary being without any basis or reason cannot be sustained in law and deserves to be deleted. The Ld. CIT(A) in para no.17 of his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... calculated the unexplained investment as 15,74,496/- which is factually correct. That being so the Ld AO is directed to sustain the addition of ₹ 15,74,496/- out of ₹ 59,17,397/-. The appellant get consequential relief. 14. We also observe that the A.O. without any basis or material held that assessee would have made investment of capital for alleged unrecorded transactions of sales/purchases found recorded in Hazir software and worked out total investment for business at ₹ 9414362/- on the basis of alleged total turnover of ₹ 5,47,31,72,177/- which is worked out by him in proportion to actual capital of ₹ 3496965/- for declared turnover of ₹ 2,03,30,09,914/- and made addition of ₹ 59,17,397/-. The record found in Hazir software do not have any investment of capital by assessee nor there is any credit his name otherwise also the unrecorded transactions in gold/silver are on day to day basis. The modus operandi of the business as also evident and verifiable from the Hazir software that the transaction of purchases and sales are placed simultaneously and as such capital investment is required. The buyer first makes payment and asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of Ld. CIT(A) filed by department as well as by the assessee. 18. Ground No.1 of the departmental appeal as well as the assessee s appeal are interlinked, in this regard we observe that in the assessment order the A.O. arbitrarily estimated profits @ 1% on sales during the year on transaction recorded in regular books of accounts as well as not recorded in regular books of accounts and for MCX portal transactions making a lump sum addition of ₹ 10,00,000/- arbitrarily without any basis while actual profit earned from those transactions was correctly worked out by assessee from record found in survey and submitted before A.O. The application of profit rate @ 1% on sales has been applied by A.O. not because of any defect or deficiency in the accounts but by wrongly putting stress on that the assessee in course of survey proceedings in statement accepted 1% profit rate on deemed sales for stock found short in survey. The said admission by assessee was on different facts and in different context and because of no details were found for hypothetical estimated sale of stock which was found short in course of survey with the spirit to close survey proceedings to buy peace a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . gross profit arrived from the said documents found in course of survey which is correctly worked out deserves to be accepted. The ld. CIT(A) has dealt with the issue in para 8 of his appellate order, which is reproduced as under: I have already dealt with the issue in the appeal order for the A.Y. 2015- 16. The same may be referred to. However for sake of convenience and ready reference the said findings given in para no.8 and 9 of appeal order of A.Y. 2015-16 are reproduced herein below:- 8. In this ground the Ld. A/R has contested the application of GP rate of 1% on the entire sales (accounted and unaccounted in Hazir software) of gold and silver on the basis of admission by the appellant in statement recorded u/s 131 of the I.T. Act where in appellant admitted an application of GP rate of 1% on short stock of ₹ 8347544 The text of statement can be seen on page 9 of the Ld. AO order. 8.2 I have closely perused the Ld. AO order and the submissions made. I am of the view learned AO is not correct in apply in uniform GP rate of 1% to accounted and unaccounted sale. The portion of statement relied upon by the Ld. AO in is on page 9 same is reproduced below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted in assessment the purchases, sales, opening closing stock as well as declared profits in books of accounts maintained as she accepted and included the income declared by assessee in return on the basis of regular books of accounts. In such facts of the case the A.O. wrongly held that books of accounts are rejected invoking section 145 (3) which is uncalled for. As far as transactions found in Hazir software of computer it records all transactions whether recorded in regular books of accounts or not recorded in regular books of accounts including transaction made by assessee on MCX Portal which are also found correct and completely maintained from which income could have been properly deduced and assessee has submitted complete account of transactions i.e. purchases, sales and profit resulting from those transactions alongwith complete quantitative details separately i.e. accounted, unaccounted on MCX portal in said Hazir software as is evident from assessment order itself. The A.O. also accepted the purchases, sales, op. stock closing stock resulted from the transactions recorded therein as such in Hazir software without pointing out any defect or deficiency ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly deleted the same. Accordingly, finding of Ld. CIT(A) is upheld. 22. Ground No.2 of the assessee s appeal relate to the ld. CIT(A) s holding that loss of ₹ 17,45,527/- suffered by the assessee in respect of alleged unrecorded transactions is not eligible for set off against declared profit by wrongly invoking sec. 115BBE of the Act. 23. The profit/loss as results from the purchase/sale transactions recorded in software working of which is submitted before the AO and CIT(A) in Gold and Silver trading are as follows:- For Silver trading (01-04-2015 to 31-03-2016) -₹ 43,63,514/- For Gold Trading (01-04-2015 to 31-03-2016) ₹ 26,17,987/- Net unaccounted los ₹ 17,45,527/- The assessee during the course of appeal proceedings requested to Ld. CIT(A) for set off this loss with the accounted profit. But the Ld. CIT (A) denied to set off of said loss by invoking the provisions of Sec. 115BBE of the Act. In this connection we observe that Section 115BBE of the Act was introduced by Finance Act, 2012 w.e.f. 1-4-2013 i.e. from A.Y. 2013- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture or allowances in relation to income referred to in the said sections shall be allowable. 46.2 Currently, there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE of the Income-tax Act. The matter has been carried to judicial forums and courts in some cases has taken a view that losses shall not be allowed to be set off against income referred to in section 115BBE. However, the current language of section 115BE of the Income-tax Act does not convey the desired intention and as a result the matter is litigated. In order to avoid unnecessary litigation, the provision of sub-section (2) of section 115BBE of the Income-tax Act has been amended as to expressly provide that no set off of any loss shall be allowable in respect of income under the sections 68 or section 69 or section 69A or section 69B or section 69C or section 69D. 24. We observe that this amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. Accordingly, we hold that the assessee current loss is allowable to set off against the current year income. The Hon'ble Jaipur Bench of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal against the additions sustained by the ld. CIT(A). After considering the written submission of assessee the Ld. CIT(A) restricted the addition to ₹ 10,00,000/- by invoking the provisions of section 145(3) of the Act. The present appeal is against the order of Ld. CIT(A) filed by department as well as by the assessee. 28. Ground No.1 of departmental appeal as well as assessee s appeal are interlinked. In this regard, we observe that similar issue was involved in the appeals for the A.Y. 2015-16 and 2016-17 and the reasoning given by the A.O. for upholding addition and the reasoning given by the ld. CIT(A) for partly allowing are same, therefore, following the reasoning given hereinabove for the appeals of A.Y.2015-16 and 2016-17, we uphold the finding of the ld. CIT(A) in deleting the addition made by estimating 1% profit on sales. Similarly estimated addition upheld by the ld. CIT(A) is also deleted on the basis of very same reasoning given in the orders for the A.Y. 2015-16 and 2016-17. 29. At para no.8-page no. 7, the ld CIT(A) have observe that: I have already dealt with the issue in the appeal order for the A.Y. 2015-16. Since the facts are similar the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome as envisaged in the section 145 of the Act. Accordingly, the Ld. CIT(A) deleted the addition of ₹ 1,58,31,290/- and sustained the addition to ₹ 10,00,000/-. 30. In view of the above facts and circumstances made in the A.Y. 2015-16 and 2016-17, the G.P. rate of 1% applied by the A.O. on the sales found recorded in Hajir software is thus wrong, unwarranted and uncalled for. Further the ld. CIT(A) is also wrong and bad in law in sustaining the lump sum addition of ₹ 10,00,000/- in the hands of assessee as against the addition of 2,30,37,862/- made by the Assessing officer. 31. Ground No. 2 and 3 of the departmental appeal relate to deleting addition of ₹ 10.00 lacs in respect of undisclosed profit from undisclosed transactions with MCX. In this regard, we observe that similar issue has also been arisen in the A.Y. 2015-16 and 2016-17 and following the same reasoning, we uphold the order of the ld. CIT(A) in deleting addition of ₹ 10.00 lacs. 32. Ground No. 4 of the departmental appeal relates to deleting the addition of ₹ 2,57,00,000/- made by the AO on account of on account of unexplained investment purchase of Gold. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,47,95,000 The A.O. issued show cause notice dated 10-12-2018 taking above transactions totaling to ₹ 2,47,95,000/- and also taking one other entry found noted in said exhibit being deposit of ₹ 1,10,00,000/- in PNB (Punjab National Bank) in A/c of Ram Kumar Soni that why the said transactions totaling to ₹ 3,47,95,000/- be not treated his unexplained income. The assessee filed explanation to above show cause notice stating (A) The assessee purchased five kg. gold on the following dates:- Date Particulars Amount (Rs.) 19-11-2016 1 kg. 36,00,000.00 21-11-2016 4 kg. 1,44,00,000.00 1,80,00,000.00 The payment of the above gold purchased was made on the following dates:- 19-11-2016 ₹ 55,00,000.00 23-11-2016 ₹ 1,25,00,000.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount has been considered/taken twice at ₹ 3,57,95,000/- i.e. aggregate amount of debit and credit of transactions with Mr. Ram Kumar Soni. It is further submitted as the cash payment transaction of (₹ 55,00,000 + 1,25,00,000) = ₹ 1,80,00,000/- is verifiable from the impounded Johari Software and accordingly the source of payment of said amount is explained and as such no further addition by adding both the side i.e. Dr. and Cr. Of amount as mentioned in show cause notice deserves to be made as the said action would be adding the same amount twice. The violation of terms of the notification No.2652 of Ministry of Finance could not be basis of addition in income-tax assessment proceeding on account of trading transactions on which only margin of profit/income can be assessed to tax. As the assessee has already declared an income of ₹ 1,05,05,000/- on account of transaction not recorded in regular books include/transactions with Shri Ram Kumar Soni in his return of income(s). Further the assessee also opted the PMGKY and deposited the tax due as per provisions of said Scheme and also purchased the bonds. The documentary evidences in this regard has alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of gold is out of amount received from its sales and so it is to be treated as properly explained. It is only profit on sale of said purchased gold which is income of assessee which was undisclosed income of assessee and the same could only be subjected to tax. It is settled law that in case of unaccounted sales only profit therefrom could only be taxed as income of assessee. The assessee relies on the judgement of ITAT, Ahmedabad Bench in case of DCIT Vs. Brijvasi Developers P. Ltd. ITA No. 290/Ahd/2013 order dated 17-5-2017. The payment for purchase gold is not made by assessee from his own but the same is either settled by direct payment to seller by buyer and/or payment made from advance from customer or credit from sales as per normal trade practice. The assessee admitted such profit at ₹ 45,00,000/- and disclosed that income in PMGKY, 2016 and paid due tax thereon. The assessee has not noted name(s) of person(s) whom gold was sold by him. In unrecorded transactions neither the purchaser informs his name neither assessee require it as the dealing ins cash based and even if name and address is given the person will not be found there or will deny it. Thus when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3,02,00,000/- from Ram Kumar Soni which was sold by him took into consideration the amount of ₹ 3,02,00,000/-. The AO held that these transactions were through old demonetization currency which was barred transaction under demonetization scheme. The AO therefore required appellant to furnish details related to parties to whom gold was so sold and on failure of appellant to provide such details the AO made addition of ₹ 3,02,00,000/- in income of appellant u/s 68 r.w.s. 115BBE of the Act. 23.2 It is evident from entries found in cash book of Ram Kumar Soni and from statement recorded from appellant in course survey that appellant purchased gold in period of demonetization which was for sale to persons on receiving cash from them as the same is normal practice of gold trade. 23.3 I find that the Ld. AO also in assessment order has not held that the transaction of sale are not from purchases by appellant or it was out of unaccounted stock of appellant but on the inability to give the identity of purchasers of gold he made addition of total sale price of ₹ 3,02,00,000/- in the income of appellant. Further the payments to Ram Kumar Soni also app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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