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TMI Blog2021 (9) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts had not been disclosed to the department and the modus operandi of the assessee was that he used to purchase 'Rubber Chemicals' and which was sold to various parties and the sale proceeds was received on account of such sales through banking channel and deposited in the above said bank accounts in various years. It is also a fact as borne out from the copies of the bank account, which has been placed in the paper book for all the years that immediately after the sale proceeds are credited in the bank account of the assessee, the amount is withdrawn by self and that cash was utilized for making further purchases and, corresponding sales again were credited in the bank account in all the three years. It is also a fact that bank account, where there is a credit, the name of the parties is invariably mentioned in the bank account which were in the possession of the Assessing Officer and copies of the same are placed in the paper book. 3. The Assessing Officer based on such bank accounts and the various credit entries recorded the 'identical reasons' for reopening of case u/s 148 for the Assessment Year 2009-10, 2010-11 & 2011-12 and the reasons for the Assessment Year 2009-10 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss has not he disclosed in the return of income. " 5. During assessment proceedings, the assessee reiterated that he had been carrying on the business of retail trading of 'Rubber Chemicals' and, though, he had not disclosed the income from such business in his original return of income, but in the return filed in response to notice u/s 148, he had declared the following income on estimation basis from such business of trading of 'Rubber Chemicals' as under: Sr. No. Assessment Year Income declared from the trading of Rubber Chemicals Relevant page no of the paper book 1 2009-10 1,20,000 3-4 2 2010-11 6,00,000 4-5 3 2011-12 6,00,000 4-5 6. During the course of assessment proceedings, the Assessing Officer asked the assessee to justify the said credit entries in the bank account and the assessee replied that he is in the business of sale of 'Rubber Chemicals' and such receipts are business receipts and no record is available with the assessee and further the assessee has no VAT number and he had been carrying on the business as proprietor of M/s. Aggarwal Chemical Industries and neither he has any books of accounts. 7. The assessing Ofc wide show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived cannot be considered as income from undisclosed sources as these are not cash entries. In fact, all the credits are against sale of rubber chemicals and photocopies of the certain bills as available with the assessee are attached herewith for your good self-perusal. It is again submitted that to meet the end of justice and settlement the assessee is ready to offer additional tax subject to no penalty. " 9. However the assessing officer was not convinced with the explanation given by the assessee, the assessing officer had issued the notices under section 133 (6) of the Act, at the address given in the bills however of, as no reply was received by the assessing officer till date passing of the assessment order, the assessing officer had treated the entire deposit in the Bank as unexplained cash deposit and had made the additions of Rs. 2, 55, 18, 858/-( for AY 2009-10 ), 3,54,20,958( for AY 2010-11) and Rs. 3,51,92,970/-( for AY 2011-12) in the hands of the assessee, however the AO had accepted the returned income disclosed by the assessee in pursuance to notice under section 148 of the ACT. The assessing officer is mentioned in paragraph 4. 2 as under 4. 2 In the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire Bank deposit as the income of the assessee. 12. The assessee had filed two separate set of appeals against the order passed by the CIT(A) on 20 June 2019 as well as the rectification order passed by the CIT(A) on 25 September 2019. 13. The assessee is in appeal against the confirmation of the total addition as made by the CIT(A). Beside the above assessee had filled amended/ revised grounds of appeal filed on 12. 07. 2021. the revised grounds filled by the assessee on 12. 7. 2021 are admitted, being legal in nature. SUBMISSIONS ON MERITS 14. The Ld. AR for the assessee had submitted that assessee is in the retail trading of 'Rubber Chemicals' and which fact has been mentioned by the Assessing Officer in the reasons recorded for all the years as mentioned below: "In KYC forms filed with the banks the assessee has declared himself as proprietor of M/s. Aggarwal Chemical Industries, 173, Industrial Area, Phase-2, Chandigarh, whereas no business income has been shown by him in the return of income filed for the assessment year 2009-10. In the return, the assessee has declared income under the head "Salaries" only. The transactions in the aforesaid bank accounts clearly indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the bank accounts of the assessee. Please refer to page no. 125, 126 & 127 of the paper book. The entries are self-explanatory. 20. Having verified such transactions, coupled with the other facts as mentioned above, and further, the assessee had made purchases from his sister concern which is a partnership concern and such payments have been made to the M/s. Aggarwal Chemical Industries for purchases, for which a chart has been placed at paper book page no. 125 to 127 for all the years, submitted on 12. 07. 2021 and, thus, purchase & sale transaction are proved, beyond any iota of doubt and for that, the assessee had declared the income on 'estimated basis' as stated above and, thus, the addition of the total 'sale proceeds' in the bank account of the assessee u/s 68 is totally uncalled for, as only resultant profit could be charged to tax and which is not much is this trade. The chart at pages 125 to 127 is self-explanatory and, therefore, the addition of the total deposits cannot be made and the CIT(A) has wrongly mentioned at page no. 8 of the order, that these are cash deposits, which are incorrect finding. 21. Another submission is that no addition could be made u/s 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . D. R. submitted that the notices were issued to various persons under section 133(6) of the act, were return unserved, except one person. It was also submitted that the assessee had categorically admitted during the assessment proceedings that the assessee was not subjected to any VAT return and had wrongly filed the invoices showing the VAT No. of another concern. It was also submitted that the reopening made by the assessing officer and the sanction given by the appropriate authority as per law. It was submitted that the Bank passbook is akin to the books of account therefore the addition made by the lower authorities is by law. Findings 24. We have considered the rival contention of the parties and perused the material available on record, including the judgments cited at bar during the hearing by both parties. Duringthe argument, by the Ld. AR for the assessee, the only emphasis laid down by the Ld. AR was that the assessing officer/the CIT(A) took the entire Bank deposits as income of the assessee. He submitted that the assessing officer had provided "reasons for reopening", wherein AO categorically admitted that the assessee was carrying out the business activities. The d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s by drawing the trading account based on bank entries and compute profit of the assessee or treat the entire bank deposits as turnover of the assessee and apply gross profit over that. 28. The AR had drawn attention to trading account prepared for the assessee for all the three assessment years, which are as under Trading Ac/ as on 31. 03. 2009 Particulars Amount Particulars Amount To Purchase (As Per Bank) 24648355. 00 By total Sales (as Per bank) 25518858. 00 To purchase Aggarwal chemical (as per Submmission) 2678597. 00 aggarwal che 205869. 00 To Purchase others 21969758. 00 Azam Rubber (as per Submmission) 1828933. 00 Chaddha Rubber 377684. 00 Navyug India 364027. 00 Thakar Dass& CO. 350085. 00 Other Sales through Bank 22392260. 00 Gross Profit 870503. 00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... physical receipt of income (credit entry in Bank ), but by also giving the benefit/ adjustment of debit entry ( in the bank account ), the difference would solely represent the income of the assessee, in the present case. 30. It may be for the relevant to mention here that provisions of section 115BBE of the Act was inserted in the Statute with effect from 1 April 2013, whereas the assessment years under consideration are 2009-10 to 2011-12. Therefore the said provision cannot invoke by the Revenue to deny the debit entries in the past book. 31. However, the above said fact, being the amount paid were on account of business connections, required to be verified by the lower authorities either from the bank account or from the bank authorities or from the beneficiaries. Further assessee had failed to produce various persons with whom he had the financial transactions for the purchases/sale of goods. Nothing had been brought on record to substantiate that invoices produced by the assessee were not genuine or that the assessee had not made business transactions from the above noted seven entities. 32. In the light of the above, we have only left the second recourse, whereby the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 1159648. 50 Total 4806639. 30 1320000 3486639. 30 35. From the perusal of the Chart, it is a clear that the assessee had applied 5% rate by relying upon section 44AF of the Act. Section 44AF for the relevant year 44AF. (1) Notwithstanding anything to the contrary contained in sections 28 to 43C, in the case of an assessee engaged in retail trade in any goods or merchandise, a sum equal to five per cent of the total turnover in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that nothing contained in this sub-section shall apply in respect of an assessee whose total turnover exceeds an amount of forty lakh rupees in the previous year. (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of subsection (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed : Provided that where the assessee is a firm, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) aggregate cash deposits in the said bank account is only of Rs. 21,23,800/-. The AO, on the other hand, observed that the cash deposits was of Rs. 50,48,055/-. The ld. CIT(A) thereafter made reference to other materials produced before the AO to point out that this bank account was used for the purpose of business and sale proceeds were deposited in this bank account. On the other hand, the ld. AO did not make any such investigation. He simply treated the deposits made in the bank account as unexplained cash credits. Contrary to this, the Revenue has not brought any evidence on record to demonstrate the fact that opinion formed by the ld. CIT(A) is with contrary to the details available on record. In words, it has not brought to our notice that inference drawn by the ld. CIT(A) are factually incorrect. The ld. CIT(A) has right observed that total amount appearing as a deposit in the account was not cash credits, rather sale proceeds of the assessee. Turnover of the assessee is to be computed on the basis of all these details and at the most, an estimated net profit can be computed as an income of the assessee. Accordingly, the ld. CIT(A) has confirmed an addition of Rs. 3,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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