TMI Blog2022 (4) TMI 1382X X X X Extracts X X X X X X X X Extracts X X X X ..... posit in the bank account cannot be made in the instant case especially when the purchases have been made through banking channel and sales have been made in cash and at the end of the year all the shares purchased have been sold leaving no balance. The assessee in the instant case in our opinion has typically acted as broker/mediator/commission agent. The various Coordinate Benches of the Tribunal under such type of bogus purchases/sales are estimating the profit ranging from 0.25% to 3% of the purchases/sales as the case may be. Considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that adoption of profit @ 2.5% of the total cash deposit of ₹ 1,84,45,000/- in the instant case as against entire addition of ₹ 1,84,45,000/- will meet the ends of justice. We hold and direct accordingly. The order of the Ld. CIT(A) is accordingly modified and the grounds raised by the assessee are partly allowed. - ITA No.1350/DEL/2021 - - - Dated:- 27-4-2022 - Shri R. K. Panda, Accountant Member And Shri Kul Bharat, Judicial Member For the Assessee : Sh. V.K. Tulsian, CA For the Revenue : Sh. Parikshit Singh, Sr. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee and decide the same afresh, as per law, after giving adequate opportunity of being heard to the assessee. 6. In the result, the appeal filed by the assessee stands allowed for statistical purposes. 3. Accordingly, the AO issued show-cause notice u/s 254/143(3) of the Act to the assessee to furnish the documentary evidence in respect of cash deposit of ₹ 1,84,45,000/- and bank deposit of ₹ 44,78,400/- deposited through various cheques in Indusind Bank, Preet Vihar Branch, Delhi. The assessee filed the details as called for by the AO from time to time and explained that the assessee had purchased the unquoted shares of private domestic companies. In respect of the same, the assessee also produced the books of accounts before the AO, which were test checked. The assessee before the AO inter alia submitted as under:- It is relevant to mention here on behalf of the assessee that the brief details about the WIP - for purchase of company is that 1. That the company had purchased the shares of a number of private domestic companies in the interest of its business for taking them over either by becoming a director or by making an investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is noticed that assessee has intentionally concealed the bank account bearing no. 0031-230588-050 with Indus Bank Preet Vihar Branch Delhi - 110092 in which the assessee has deposited the cash of ₹ 1,84,45,000/- is not shown in the Income Tax Return. ii) On perusal of the balance sheet and ITR it is seens that the assessee has not shown of the share transactions and no short term/long term capital gain has been shown in the return of the income. iii) On perusal of the details/copy of the sales voucher of the shares filed by the assessee on 12.12.2017 20.12.2017. It is noticed that there is neither the name of buryer, nor the no . of shares sold, name of the company and rate at which shares have been sold is mentioned. iv) Assessee was asked to submit the documentary evidence in regard to the cash deposited of ₹ 1,84,45,000/-. Assessee has intentionally not produced the any documentary evidence of cash deposit during the original assessment proceedings, before the ld. CIT(A) and Hon ble ITAT and till date. v) The assessee has not submitted required information inspite of enough opportunities given it to do so, vi) The assessee claimed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... added the entire amount u/s 68 of the Act. 3.5. Before proceedings further it appears to me that true import of section 68 of the Act is in question in the present circumstances. The aforesaid section warrants an assessee to prove the credit in his books as to the nature and source of such amount credited so that if explanation is not satisfactory, the AO could treat it as income of the assessee (as done in the present case) but whether an inference as to explanation is satisfactory in a particular case is essentially one of fact. It is not open to the tax payer for avoiding the burden of the proof regarding the genuineness of the credit in his books by merely introducing an intermediary. It is an admitted fact that repeated opportunities were allowed by the AO/by this office. 3.6. in order to decide as to whether the impugned deposit in the bank account was explained or not, one has to look not only at the documents produced but also at the surrounding circumstances. In this connection, it is worth while to reproduce the following observations made by the Hon ble Supreme court in CIT v. Durga Prasad More [1971] 82 ITR 540: It is true that an apparent must be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards the bonafides of the transaction, in our opinion, there is nothing to suspect the same.' The Tribunal says, 'there is a transparency about the entire transaction which nullifies any attempt to make out the transaction as something unusual and out of the ordinary. That diamonds are not transparent, that they dazzle with a brilliance that blinds the eye, seems to have escaped the notice of the Tribunal. It un-discerningly accepted the glib explanation of the assessee, though seeming with improbabilities and strenuous on credulity. 3.10. The aforesaid observations emphasize the importance that a glib explanation tendered by the assessee, teeming with improbabilities and strenuous on credulity cannot be accepted. 3.11. In the case of Indus Vaily Promoters (P) Ltd Vs CIT 305 ITR 202, Hon bie Delhi High Court observed as under:- ....It is well settled that the assessee must discharge the burden of proving the identity of the creditors and also to give the source of the deposits. In other words, the creditworthiness of the depositors must be established to the satisfaction of the AO. Where there is an unexplained cash credits, it is open to the AO to hold th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that they purchased the shares on hit and trial basis to the extent of ₹ 2.2.9 crores is without any basis. Moreover, it is seen that the entire trading in cloth was done in the last quarter of financial year. The appellant had shown total purchase of ₹ 9,93,745/- from one single party M/s. R.K. Enterprises from 18.01.2006 to 02.03.2006 and entire sales of ₹ 11,25,600/- to a single party M/s Insat Commercial Pvt. Ltd. from 18.02.2006 to 15.03.2006. 3.15. It should be noted that in the return of income, the appellant has shown the place of the business at 1313, Kunde Walan, Ajrrieri Gate, Delhi- 6. During the assessment proceedings, the AO deputed the inspector of Income Tax (ITI) to make on the spot enquiries. The ITI in his report dated 18.12.2008 submitted to the AO has reported that the address is a residence and no office works from the above place. He further submitted that the letters in the name of Prime Quality Consultant are being received by the relatives who are living there and all correspondence has been made by Mr. Mahesh Grover living in Geeta Colony and his office is located in Laxmi Nagar. 3.16. Without prejudice to the above discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory' puts an onus on the assessee to offer a lucid, reasonable and acceptable explanation before the Assessing Officer and thereupon the Assessing Officer should form an opinion accepting or rejecting the explanation based upon appreciation of facts/materials and other attending circumstances. Section 68 of the Act was examined in A. Govindarajulu Mudaliar v. CIT, [19581 34 ITR 807 (SC) observing that there were ample authorities for the proposition that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during an accounting year, the Assessing Officer is entitled to draw inference that the receipts are of an assessable nature. Whether explanation should be accepted or not is not to be examined factually but having regard to test of human probabilities and normal course of conduct. Reference can be made to CIT v. Durga Prasad More 11971182 ITR 540 (SC). CIT v. Dau/at Ram Rawatmull, [1973187 ITR 349 CSC) and other cases referred to in CIT v. Nova Promoters Finlease (P.) Ltd. 120121 342 ITR 169/206 Taxman 207/18 taxmann.com 217 (Delhi). In these cases, it has been observed that what is apparent must be considered real unti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly establish creditworthiness of the shareholders. 30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 3.20. The Hon'ble High Court in the case of CIT - II vs. MAF Academy (P) Ltd. held as under: 23. The contention that the Revenue must have evidence to show circulation of money from the assessee to the third ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how that a paper trail is sought to be created to camouflage the entire transaction. 3.22. Under these circumstances, I hold that the appellant has failed to explain the source of deposit in the bank account and the AO was justified in making the addition of ₹ 2,29,23,400/. I, therefore, confirm the addition made by the AO. The ground of appeal is rejected. 4. In the result, the appeal is dismissed. 7. Aggrieved with such order, the assessee is in appeal before the Tribunal by raising the following grounds:- 1. Whether the Ld. CIT (A) was justified by passing the Ex-parte order dt.11.10.18 without providing an opportunity / reasonable opportunity for hearing as appeared from order itself. 2. Whether the Ld. CIT (A) was justified by upholding the Ld. A.O. order dt.28.12.2017, without disputing the explanations and evidence on record before A.O., in a mechanical/hurried manner as appeared from the record to the effect that details have been filed in comprehensive with available evidences which was neither considered at all nor without proper apprising the details and explanations filed time to time , suffers from patient illegally and deserve for cancell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the AO and sustained in the original assessment. Relying on various decisions, he submitted that the Ld. CIT(A) without giving enhancement notice cannot make any addition or go on to a make an addition which was not the case of the AO. Relying on various decisions, he submitted that the First Appellate Authority cannot enhance the income of the assessee on altogether new facts. 9. So far as the cash deposit of ₹ 1,84,45,000/- made by the AO and sustained by the Ld. CIT(A) is concerned, he submitted that the premises on which the AO made the addition is that the bank account was an undisclosed bank account and it was never disclosed to the Income Tax Department. Referring to the copy of the balance sheet for the year ending 31st March, 2005, he submitted that the said bank account was very much disclosed in the balance sheet where an amount of ₹ 11,940/- was shown in the name of Indusind Bank under the head balance with scheduled banks. He submitted that during the year ending on 31.03.2006 the balance was Nil and accordingly Nil balance was shown disclosing the said bank account in the balance sheet. Therefore, the very basis on which the addition has been ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -aside by the Tribunal to the file of the AO, he accepted the cheque deposits but sustained addition of ₹ 1,84,45,000/- being cash deposit in the bank account of the assessee treating the same as unexplained vide order dated 28.12.2017 passed u/s 254/143(3). We find the Ld. CIT(A) vide order dated 11.10.2018 sustained the addition of ₹ 2,29,23,402/-, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel for the assessee that the ld. CIT(A) has repeated the original order passed by his predecessor. Further, the Ld. CIT(A), without issuing any enhancement notice, has travelled beyond the subject matter of the assessment and directed the AO to make the addition of ₹ 44,78,400/- being cheque deposit which the AO had accepted in the order passed u/s 254/143(3) as explained. So far as the addition of ₹ 1,84,45,000/- is concerned, it is the submission of the ld. Counsel for the assessee that the assessee had filed full details in respect of cash so deposited in the bank account, which is not an undisclosed bank account and therefore, such addition is uncalled for. It is his alternate contention that at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) shall not enhance the assessment without giving a reasonable opportunity to the assessee to show-cause against such enhancement, which is a mandatory requirement. However, the Ld. CIT(A) in the instant case has not followed the mandatory requirement of law. Therefore, we find merit in the argument of the ld. counsel for the assessee that the addition of ₹ 44,78,400/- deposited through various cheques, which was accepted by the AO as no addition has been made on this issue has to be deleted. We accordingly direct the AO to delete the addition of ₹ 44,78,400/- out of the addition of ₹ 2,29,23,402/- sustained by the ld. CIT(A). 14. So far as the remaining addition of ₹ 1,84,45,000/- being unexplained cash deposit in the bank account is concerned, we find, it was the submission of the ld. counsel for the assessee before the AO that the assessee was purchasing the shares of different companies in cheque and selling such investment in cash. It is an admitted fact that the AO has not disputed the purchase and sale of shares/investments as mentioned earlier. Further, the account maintained with Indusind Bank is very much disclosed and not a hidden account. We f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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