TMI Blog2022 (10) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... ns the appeal of the revenue stands dismissed. Rejection of books of account on the basis of insignificant defects - estimation of income by applying NP rate - Whether Rejection of books of account u/s 145(3) was not given by the AO and the assessment completed in the manner provided u/s 144 - HELD THAT:- It is apparent from records that all the amounts realized from debtors and received as advance from customers during the period 03-11-2016 to 8-112016 was genuine and verifiable from the accounts then there is no cogent reason by the lower authorities to treat the same as nongenuine. Hence, looking into the entirety of the facts, circumstances of the case and the case laws cited by the AR of the assessee (supra), we allow the appeal of the assessee by holding that the rejection of books of account on the basis of insignificant defects in all respect, is not justified and books of account deserves to be accepted. Before invoking the provisions of Section 145(3) of the Act, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the sham transaction of Rs. 12,17,48,500/-, deleting the addition of Rs. 12,17,48,500/-, deposited during the period of demonetization, and spoil the sole purpose of curbing out black money under tax bracket. 4. Brief facts of the case are that the assessee company e-filed its return of income for the previous year 2016-17 relevant to Assessment Year 2017-18 on 31.10.2017 declaring an income of Rs. 4,37,53,418/-. The case of the assessee was taken up for complete scrutiny u/s 143(3) of the Income Tax Act, 1961 (in short Act ) on the basis of computer assisted selection for scrutiny (CASS) and statutory notice u/s 143(2) of the Act, dated 09.08.2018 was issued. Information u/s 142(1) of the Act was called for vide questionnaire through ITBA. In compliance of the said notices, the assessee submitted details/information through eproceedings. The ld. AO has examined the details so filed by the assessee. The assessee company is engaged in the business of Jewellery. 5. During the course of assessment proceedings, it was noticed that the assessee has deposited cash aggregating to Rs. 12,17,48,500/- in the bank account of assessee having no. 911020053773688 and account no. 91603 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 260005971 3rd 376741818 991231791 4th 41629068 --- The revision of the VAT return related to the pre demonetarization period further strengthen the fact that the assessee company has booked bogus cash sale for the period before demonetarization which subsequently increase the sale of the assessee and to show the sale as genuine the assessee revised its VAT return for First 3 quarters. The assessee also revised the VAT return of 4 quarter however the turnover was not disturbed which shows that the assessee has revised the Return to duped the Department. The whole excise made by the assessee indicate that the assessee has been indulged in booking of bogus cash sales. f) The assessee has shown purchase from various concerns during the period before demonetarization. To verify the genuineness of the purchase an enquiry was conducted u/s 133(6) of the Act and notice were issued on test check basis which includes entity Shri Mahesh Soni Prop of M/s Paras Gems Jewellers from whom the assesee has shown purchase of Rs 110561454/ during month of October and N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.12.2019 time 5.45 PM 5 8218 04.11.2016 Asmita Ji 99820760 35 10000 No response by debtor call dated 15.12.2019 time 5.47PM 6 8267 05.11.2016 Asha Singh 94140623 55 42413 Debtor not remember that s she has purchased any item In the above verification genuineness of the cash receipt from debtors not found substantiated which further reveals that the assessee has booked bogus debtor to accommodate his unaccounted income under grab of receipt from debtors. In view of the above, it is evident that, assessee has fabricated the whole transaction to make it look real, however, when the trends of cash sales and series of transactions are considered, it beyond any shadow of doubt that the whole transaction is fabricated and the assessee has deposited its undisclosed income under the grab of cash sales. 7. Based on these observations the ld. AO issued a show cause notice to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and purchase gold jewellery item in a similar way as they purchase vegetables. d) The assessee has justified the abnormal sale by correlating with incident with Diwali Festival and marriage ceremonies stating that people were having budget for marriage ceremonies and when demonetarization declared they consumed the same. However, same is not acceptable considering the fact that all the sale invoice are below 2 lakhs and it cannot be believe that the person who has budget for the marriage ceremonies will purchase all the items below 2 lakhs. e) The argument of the assessee that sale of the jewellery business depends on occasion such as Diwali and Marriages not found convincing considering the fact that the purchase made on these occasion are not a purchase like walking person come to the showroom of the assessee and purchase anything as he has to has purchase which is also evident from the methodology of issuance of invoices wherein no detail such as address, full name has been noted. f) Further, the argument of the assessee is contrary itself. As per logic of the assessee when demonetarization was declared people rushed to jewellery shop than there should be extr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be provided as the assessee has not furnished full name, address and PAN of such persons and summon u/s 131 of the Act can be issued to these persons on the basis of telephone no. k) Further in respect of the enquiry conducted u/s 133(6) of the Act in case of one of the purchaser M/s Paras Gems Jewellery. The assessee has claimed that the letter was issued on a wrong address. The same also not as acceptable since the notice was sent at the address mentioned in PAN so provided by the assessee. Further the notice was issued through ITBA which was also served to the assessee at his registered e-mail: However, no reply to the notice was received. Hence the claim of the assessee does not have any substance, Further, as assessee has claimed bogus purchase is from M/s Paras Gems Jewellery amounting to Rs. 110561454/-. Therefore, Penalty proceedings u/s 270A of the Act is initiated separately for under reporting of the income and misrepresent of the fact. l) Furthermore, in the confirmation so furnished the name of proprietor Shri Mahesh has been duly written as signature authority for Paras Gems Jewellery whereas the assessee has claimed that he is not known to Shri Mahe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... months. Further, from perusal of the purchase bill issued by M/s Girdhar Jewllers Pvt. Ltd. it is noticed that in the said bills in the description part only 'gold ornament' has been written and from such details nature of gold ornament cannot be determined whether it is chain, Neckless or some other item. Further, from the bill it cannot be determined that jewellery item so purchase is 14 krt or 18krt or 22 krt gold item. In these circumstances the said purchase cannot be verified from stock register. q) Further, it is found that the cash so deposited in the bank account of assessee having no 911020053773688 and account no. 916030041790950 held in the Axis Bank during the period of demonetarization subsequently transferred to Girdhar Associate in significant amount which is sister concern of Girdhar Jeweller Pvt. Ltd. having same address at C-114, Lal Kothi C-Scheme, Jaipur and same director which is further strengthen the fact that no actual purchase was made from Girdhar Jeweller Pvt. Ltd. as purported by the assessee and only book entry of purported purchase was made to show high stock before demonetarization so that bogus sale can be substantiated by such high stoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Average NP 2.59% Therefore, N.P at 2.59% is applied for AY 2017-18 against the declared NP at 2.36%. Further, looking to the fact during AY 201718 assessee has induced his undisclosed income in books under the grab of cash sale, cash advance, receipt from debtor as discussed in above Para, out of the total turnover of Rs. 2,09,09,94,399/- the bogus turnover to the extent of Rs. 12,17,48,500/- is deducted and on balance turnover of Rs. 1,96,92,45,899/- Net profit is recomputed at average NP rate of 2.59% as tabulated above @ 2.59% which computed at Rs. 5,10,03,468/- as against Rs. 5,19,80,398/- declared by the assessee in the retun and the same is considered for total income of the assessee. Since, the assessee deposited amount of Rs. 12,17,48,500/- in the demonetized currency which the AO treated the same as unexplained cash credit of the assessee and by applying the provisions of section 68 of the Act the same was added as income of the assessee and the same taxed as per the provisions of section 115BBE of the Act. The assessment of the assessee was completed by ld. AO vide his order dated 29.12.2019 wherein the total income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made telephonic verification from some of the debtors and found that they denied to recognize any such purchase on credit and also the fact that the appellant could not furnish full name, address and PAN of such persons on the basis of which summons u/s 131 could be issued to these parties the sales made to these persons remains unverified. Thus apart from the amount of Rs. 25,96,480/- realized from debtors, further advance of Rs. 11,86,250/- received by the appellant from its customers was also not found verifiable by the AO in absence of complete details. Accordingly, I find that the AO is justified in rejecting the books of accounts of the appellant by invoking the provisions of section 145(3) of the Act. It is also observed that the AO has applied Net Profit rate at 2.59% for the year under consideration as against 2.36% declared by the appellant. However, while applying the aforesaid rate, the AO has treated the amount of Rs. 12,17,48,500/- as bogus turnover and taxed the same u/s 68 of the Act. Since in the above paras, I have held Rs. 12,17,48,500/- to be part of total sales and deleted the addition made by the AO u/s 68 of the Act, accordingly, the Net Profit rate of 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases from that party. The ld. AO has also recorded his detailed findings on the amount realised from the debtor for an amount of Rs. 25 lacs which is also not found correct based on the findings by the assessing officer by calling the respective parties and they have not confirmed to have made purchases from the assessee. Even the assessee has recorded the purchases on credit before the demonetization from M/s Girdhar Jewellers Pvt. Ltd, on credit before demonetization period from 19.07.2016 to 15.10.2016 amounting Rs 18,83,64,457/-. Based on all these defects noted by the ld. AO, he has rejected the book results of the assessee u/s. 145(3) of the Act and proceeded to considered the cash sales to the extent of Rs. 12,17,48,500/- as unexplained cash credit u/s. 68 of the Act and also proceeded to estimate the profit as per last three-year profit declared by the assessee as arrived at 2.59 % and applied that the same on the remaining part of the sales after reducing the cash sales added separately which is correct action based on the detailed findings recorded by the ld. Assessing Officer and based on these reasoning he supported the order of the assessing officer and submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ld. AO vide his order dated 29.12.2019 wherein the total income of the assessee was assessed at Rs.16,45,24,988/- as against the return income of Rs. 4,37,53,418/-. In the assessment order the ld. AO made the following additions/disallowances: - i) The ld. AO rejected the books of the accounts of the assessee by applying the provisions of section 145(3) of the Act. After rejecting the books of accounts of the assessee the ld. AO estimated the net profit rate of assessee 2.59%, being average NP of last three years and applied the same on the sales of Rs. 1,96,92,45,899/-(Rs. 209,09,94,399/- (Sales as per Books) 12,17,48,500/- (cash deposited in bank) computed by the ld. AO at his own. The ld. AO reduced the amount of Rs. 12,17,48,500/- deposited in the demonetized currency, which was against sales, realization from debtors and advance against sales, out of total sales of Rs. 2,09,09,94,399/- declared by the assessee. Thus the ld. AO computed the net profit of the assessee Rs. 5,10,03,468/- as against Rs. 5,19,80,398/- declared by the assessee. ii) Further the assessee deposited amount of Rs. 12,17,48,500/- in the demonetized currency which was out of cash balance available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same as part of turnover and apply NP rate of 2.59% on the whole transaction including the sham transaction of Rs. 12,17,48,500/-, deleting the addition of Rs. 12,17,48,500/- deposited during the period of demonetization, and spoil the sole purpose of curbing our black money under tax bracket. 3.2 The grounds in appeal raised by the assessee, as per modified form-36 filed on 28.07.2022, are as under: - 1. On the facts and under the circumstances of the case and in law the ld. AO erred in rejecting the books of account of the Appellant by invoking the provision of section 145(3) of the Income Tax Act, 1961 and CIT (A) further erred in sustaining the rejection of books of accounts for the sole reason that amount received from debtors and advance from customers, which deposited into bank in demonetized currency, was not found verifiable. 2. On the facts and the circumstances of the case and in law the ld. CIT (A) erred in estimating the net profit of Appellant Rs. 5,41,56,755/- by applying the net profit rate @ 2.59% on declared turnover of Rs 2,09,09,94,399/- and thereby confirming the addition of Rs. 47,72,297/- 3. The Appellant prays for leave to Add, to amend, to de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was received against cash sales, realized from debtors and advance received from customers during the period from 03.11.2016 to 08.11.2016. 2) The summary of cash book of the assessee for the period from 03.11.2016 to 08.11.2016 is as under: - Particulars Amount (In Rs.) Opening Balance as on 03.11.2016 3,96,75,854 Add: - Sales made during 03.11.2016 to 08.11.2016 11,98,09,806 Add: - Amount realized from debtors from 03.11.2016 to 08.11.2016 25,96,480 Add: - Amount received as advance from customers during 03.11.2016 to 08.11.2016 11,86,250 Less: - Cash Deposited in bank during 03.11.2016 to 08.11.2016 (i.e.before demonetization) 4,11,00,000 Less: - Cash Expenses/payments during 03.11.2016 to 08.11.2016 70,000 Closing Balance as on 08.11.2016 12,20,98,390 Out of closing cash balance as on 08.11.2016 the amount of Rs. 3,49,890/- was in non-demonetized currency i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from old debtors Rs. 4,29,800/- iii) Cash sales Rs. 52,52,562/- 08-11-2016 9,83,62,654 i) Advance from customers Rs. 2,62,600/- ii) Realization from old debtors Rs. 7,76,330/- iii) Cash sales Rs. 9,73,23,724/- 4.3.3 Relevant documents were submitted to substantiate the source of cash in hand as on 08.11.2016 During the course of assessment proceedings, the assessee submitted the following documents to substantiate its claim: - 1) Bill wise detail in respect of cash sale and receipt No. wise detail in case cash received from parties during the period from 03.11.2016 to 08.11.2016 were submitted along with submission dated 11.03.2019 (Copy of the same is at PB Page 148 to 160). Copies of sales bills for the period from 29.10.2016 to 08.11.2016submitted along with submission dated 15.10.2019 (The copy of submission dated 15.10.2019 is at PB Page 75 to 79). The sales bills for the complete year were submitted in the office of AO. 2) Monthly summary of stock registerwere submitted along with submission dated 11.03.2019 (Copy of the same is at PB Page 166 to 177). Day to day stock register s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g.monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year.It also suggested that abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Therefore, it is important to examine whether the case of the assessee falls into these parameters are not. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,77,06,758.20 December 3,14,68,972.00 5,80,74,865.00 54,92,119.00 1,05,75,842.61 January 7,21,58,597.00 4,19,00,226.00 1,81,26,979.16 5,85,13,192.35 February 63,45,458.00 4,45,60,529.00 2,82,83,791.26 1,30,23,634.37 March 3,61,32,491.00 77,53,595.00 2,37,80,394.37 2,25,61,424.71 b) Comparison of Cash sales and % to total sales in last three years:- The month wise cash sales of the assessee for the three financial years as submitted to ld. AO in submission dated 11.03.2019 (Copy of such submission is at PB Page 63 to 71)is as under: - Year FY 2014-2015 FY 2015-2016 FY 2016-2017 Month Amount of Cash Sales(Rs.) % to Total Sales Amount of Cash Sales(Rs.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 Thus, the cash sales corresponding cash deposits into the bank accounts of the assessee have been a regular feature of the assessee s business since the past several years. The same is clearly borne out from the details of cash sales and cash deposits made by the assessee in the past Financial Years viz. F.Ys 2014-15 2015-16 filed before the A.O. c) Comparison of Cash sales in the month Nov and % to total sales in last three years:- Year FY 2014-2015 FY 2015-2016 FY 2016-2017 Month Amount of Cash Sales(Rs.) % to Total Sales Amount of Cash Sales(Rs.) % to Total Sales Amount of Cash Sales(Rs.) % to Total Sales November 15,50,86,535.00 12% 19,17,28,186.00 17% 13,55,23,909. 00 13% In Nov 2014 total cash sales were of Rs. 15.51 crores and in Nov 2015 the cash sales of the assessee were of Rs. 19.17 crores whereas the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So far as heavy cash sales of Rs. 9,73,23,724/- as on 08.11.2016 i.e.the day on which the demonetization was announcedthe appellant submits that, with the announcement of the Hon ble Prime Minister in respect of demonetization of currency notes of denomination Rs. 500/- and Rs. 1000/-, there was frenzy amongst people who wanted to convert their SBN into gold. The jewellery stores had remained opened till midnight on 8th of November 2016, in order to top the high demand from customers. The appellant too had met with the high demand of the customers and had made sales amounting to Rs. 9,73,23,724/- on 08/11/2016 and this cash sales includes the regular sales of 08.11.2015 i.e.sale made prior to announcement of demonetization. Further it was relevant to mention here that there was no overall increase in cash sales of assessee during the month Nov 2016 but the sale of a particular date i.e.8/11/2016 was increased which shows the shifting of regular cash sales of other dates of Nov 2016 to a particular date 08/11/2016 because there was frenzy amongst the customers who wanted to convert their SBN into Gold. Since the demonetization was ordered to be effective from the mid night of 08.11- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ps, medicines shops to buy things with old currency. There was huge increase in sale of jewellery, petrol medicines etc. in the month of November-2016 . . Thus, in the remand report ld. AO also accepted that after demonetization the peoples rushed to Jewellery shop. The sale of ornaments had subsequently for the rest of the month of November and December 2016 had seen a dry spell as the people had purchased jewellery in demonetized currency during the closing hours of 8th November itself not only for the wedding in immediate vicinity but also for weddings and functions in late November or December and also even otherwise for future use. This fact can be seen from the amounts of cash sales of October to December of last three years which is as under: - Year FY 2014-2015 FY 2015-2016 FY 2016-2017 Month Amount of Cash Sales(Rs.) Amount of Cash Sales(Rs.) Amount of Cash Sales(Rs.) October 17,60,14,563.00 11,66,19,434.00 18,81,89,611.00 November ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee merely for the reasons that the same is of abnormal amount and the not commensurate with the past trends more so when the same is duly supported with sale bill and the assessee was having the sufficient stock for that much of sales. 4.3.6 Purchases made from M/s Paras Gems Jewellers and M/s Girdhar Jewellers Pvt Ltd are not genuine:- 1) The purchases made from both these parties are genuine and the same is apparent from the following: - i) The purchases are duly supported by the purchase bill and the copy of purchases bills were also submitted to ld. AO during the course of assessment proceedings. ii) The payment of purchases consideration was made through banking channels. iii) The assessee submitted the confirmation of M/s Paras Gems Jewellers (Copy at PB Page 186) iv) The ld. AO issued the notice u/s 133(6) of the Act to several parties from whom the assessee made the purchases. Girdhar Jewellers Private Limited is one of them and this party has made compliance to notice and submitted the all requisite documents to ld. AO. The ld. AO did not point out any defects in such documents. v) The assessment of both these parties was completed by thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the delivery person could not locate the address etc. Thus merely for the single reason that the notice issued to the party returned back the purchases cannot be treated as non-genuine. Rameshwar Sirkar Vs- Income Tax Officer reported in (1973) 88 ITR 374 (Copy at Case Law PB Page No. 1-5) wherein the following views were expressed:- The mere fact that the serving officer did not find the assessee to be served with the notice at his address is not sufficient to establish that he could not be found. It must be shown not only that the serving officer went to that place at a reasonable time when the assessee was expected to be present, but also that if he was not found, proper and reasonable attempts had been made to find him either at that address or elsewhere. A notice by affixture without reasonable attempts to find the assessee is not a proper notice. iv) The assessee has substantiated the purchases by providing the documents such as purchase invoice, confirmation of accounts, payment made through banking channels, VAT No. of the party. The copies of purchases bills of the party and confirmation of account is at PB Page 186 to 191.Thus the initial burden cast on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32-43) i) ITO vs. Super Chemicals Distributors (2005) 1 SOT 102 (Del.) Held(Copy at Case Law PB Page No. 44-47)- j) CIT v/s. Winstral Petrochemicals (P) Ltd. (2010) 41 DTR (Del)139 (Copy at Case Law PB Page No. 48-52) k) CIT v/s. Samir Bio-tech (P) Ltd. (2009) 17 DTR (Del) 224. (Copy at Case Law PB Page No. 53-55) l) 2020 (8) TMI 235 ITAT Delhi Silburn Papers Pvt Ltd v/s ITO, WARD-23 (4), New Delhi. (Copy at Case Law PB Page No. 56-60 ) m) Hon ble High Court of Bombay in the case of CIT Vs Nikunj Exim Pvt. Ltd. 2013 TIOL 04. (Copy at Case Law PB Page No. 61) n) Anis Ahmed and sons V/s CIT (A) and Anr(2008) 297ITR441(SC)(Copy at Case Law PB Page No. 62-66) o) ITO v/s Emperor International LtdITA no. 2038 [Delhi] 2009 (Copy at Case Law PB Page No. 67-73) p) Rohini Builder V/s DCIT(2001) 117 Taxman 25 (Ahd)(Copy at Case Law PB Page No. 74-75) vi) It is further submitted that in the written submission dated 21.12.2019 it was requested to ld. AO to provide the copy of notice issued by him and the assessee will try to get the same complied by the party. The confirmation of the party was filed before ld AO wherein the party has confirmed the sales made to asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same letter the assessee submitted the stock position of the items purchased from M/s Paras Gems Jewellers which are Silver Articles 92.5 and Silver Article 97. The stock position was submitted from 07.10.2016 i.e. (the day when first purchase was made from the party) to 08.11.2016 i.e. (the day when demonetization announced).In such summary the assessee submitted the chart including the qty.of goods purchased from this party and excluding the goods purchased from this party. Such chart is as under:- a) Stock position (from 07.10.2016 to 08.11.2016) by including the goods purchased from Paras Gems Jewellers in Stock quantity : - Name of Item Unit Opening Stock (+) Purchase (+) Mfg(Net) (+) Sales (-) Closing Stock (=) Silver Article 92.5 Gms 5,17,190.53 7,85,800.80 1,49,999.40 3,39,287.80 11,13,702.93 Silver Article 97 Gms 44,237.58 2,80,839.29 2,81,301.30 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from M/s Girdhar Jewellers Private Ltd as well as M/s Girdhar Associates were accepted as genuine. The purchases by the assessee from both these parties during AY 2015-16 and AY 2016-17 were as under:- i) AY 2015-16: - a) GirdharJewellers Private Limited Rs.40,40,65,708/- b) GirdharAssociates Rs.6,51,69,466/- ii) AY 2016-17: - a) GirdharJewellers Private Limited Rs.23,06,73,484/- b) Girdhar Associates Rs. 5,69,76,842/- What the new development had occurred this year to justifiably held the purchases from M/s Girdhar Jewellers Private Ltd as not genuine, the ld AO has not addressed anything on this vital aspect. ii) During the course of assessment proceedings the ld. AO issued the notice u/s 133(6) of the Act to this party and in compliance to that the party submitted the requisite documents and also confirmed the sales made to the assessee. The ld. AO did not point out any specific defects in such documents. iii) Assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of Rs. 5,55,87,688/- was only outstanding, majorly of which was for the purchases made after 22.09.2016 i.e.the same remained outstanding for above 1.5 month only,as against 3-4 months alleged by ld. AO and this is the normal credit cycle. It is further relevant to mention here that as on 01.04.2016 the payment of Rs. 8,34,53,390/- was payable to this party, which was majorly paid upto 28.06.2016. The outstanding credit balance as on 31-03-2016 in this party has been accepted by the AO in assessment framed u/s 143(3) for AY 2016-17. It is normal practice of the trade to allow credit purchases to the reputed parties. The outstanding credit balance against the goods supplies were as under:- Sundry Creditors for goods: - AY 2015-16: - Rs. 25,95,65,700- AY 2016-17: - Rs. 24,10,17,228/- The ld AO has accepted these credit purchases and outstanding in the assessment framed u/s 143(3) for the relevant assessment year. This also shows that the credit purchases for the period from 1 to 3 month is normal feature in the trade of the assessee. Thus the finding of ld. AO on this footing is pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ister, concern of M/s Girdhar Jewellers Pvt Ltd, than how the purchases made from Girdhar Jewellers Pvt Ltd can be treated as non-genuine. It is further relevant to mention here that the genuineness of purchases made from Girdhar Associates had not doubted by the ld. AO and the same is treated as genuine. Therefore, it is not correct on part of ld. AO to treat some payments made to Girdhar Associates for such purchases as non-genuine by linking the same from other transactions of other concern and giving totally irrelevant findings. e) So far as regarding to the allegation of ld. AO in the second last para at page 21 of the assessment order that ---no actual purchase was made from Girdhar Jeweller Private Ltd. as purported by the assessee and only book entry of purported purchase was made to show high stock before demonetarization so that bogus sale can be substantiated by such high stock in hand. This fact is also shows that no actual delivery of such stock was received before the demonetarization period and not actual stock was sold on the day of demonetarization and all the adjustment has been made after the demonetarization. Though in view of our submission in forgoing p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apparent that the purchases made from the above named partiesare genuine and payment of purchase consideration was made banking channels. There was no moto of the assessee to introduce the alleged non-genuine purchases in books of accounts.Therefore, the purchases of the assessee cannot be treated as non-genuine. The reliance is placed on the following decisions: - a) Bhagatram, Hyderabad Vs ACIT (ITAT Hyderabad)Appeal Number :ITA No. 1753/Hyd/2018 dated 28/07/2020(Copy at Case Law PB Page No. 76-80) it is evident that the assessee had made purchases apparently from his accounted money as the payments have made through banking channels. Further it is also a fact that the Gold/Jewellery purchased are either sold by the assessee or remains with the assessee as his closing stock, since there are no other contrary findings by the Revenue. Therefore, I hereby set aside the order of the Ld. CIT (A) and confirm the order of the Ld. AO. b) 2017 (10) TMI 729 - GUJARAT HIGH COURT PCITSurat-1 v/s Tejua Rohit Kumar Kapadia (Copy at Case Law PB Page No. 81-82) Bogus purchase - Held that:-The appellate authority as well as the Tribunal came to concurrent conclusion that the purchases a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onth of November-2016 was received through banking channels. The copy of stock ledger of pure gold for the period from 01.11.2016 to 30.11.2016 is enclosed at PB Page 184 to 185 and fact narrated above is duly verifiable from such ledger. Thus, the finding of ld. AO have no bearing on the cash deposit in the demonetized currency. The ld. AO himself accepted such sales as genuine. From the stock summary it is apparent that the opening stock of pure Gold as on 01-11-2016 was 13385.100 grams + 746.330 grams = 14,131.43 grams. There was no purchase or sale of pure Gold in between 01-11-2016 to 10-11-2016. The first sale is to M/s S.K. Jewellers 4000 gram on 11/11/2016 over which the AO has no objection or dispute. Further this sale is through banking channel. Thereafter, the purchases of 13000 gram are from M/s Girdhar Jewellers Pvt Ltd on 15-11-2016, which has no concerned with the SCN deposited by the assessee. Thereafter the following purchases are from the group assessee:- Date Name of Group assessee Quantity of pure gold purchased Amount 16/11/2016 Sanjay Chhabra HUF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod. The entries pertaining to cash sales and corresponding cash deposits in banks were duly reflected in the books of account of the assessee. The audited books of account and the tax audit report for the impugned F.Y. 2016- 17 were also filed before the AO in course of the assessment proceeding and the sale for the other periods was accepted by the department. Sales shown by the assessee are fully backed with the sales bills, duly recorded in books of accounts and also in the stock register while on the other hand the ld. AO has not brought any material on record to establish that these sales are bogus. It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer or not having the sufficient stock for making the sales. Even after eliminating the quantity from the stock, which enumerated in the purchases alleged by ld. AO as non- genuine, the assessee was having the sufficient stock to make the sale. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. The ld. AO did not make any enquiry on the material submitted by the assessee. He merely proceeded on statistical ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shi Farms (P.) Ltd. [2013] 218 Taxman 95 (Allahabad)(MAG.)(Copy at Case Law PB Page No. 143-146) 4.3.9 It is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address or/and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. 1. It is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. It is voluntary to the customer to provide their personal information to the assessee while goods being sold. The assessee cannot enforce or compel to their customer to give their personal information and if the assessee would do it ruined to the business of the assessee. 2. Further in the preceding financial year the same practice being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. In the preceding year the cash sales made by the assessee were accepted by the ld. AO while completing the assessment proceeding u/s 153A r.w.s 143(3) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law PB Page No. 153-156) held that:- Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income-Tax Act, 1922] - Method of accounting - Rejection of accounts - On assessee's inability to supply addresses of purchasers who purchased goods on cash, ITO rejected assessee's books of account showing result in respect of cash sale transactions, and made addition - AAC deleted additions but Tribunal restored ITO's orders - Whether there was no necessity whatsoever for assessee to maintain addresses of cash customers - Held, yes - Whether, therefore, rejection of book results of assessee was unjustified - Held, yes - Whether, consequently, additions made to assessee's income were liable to be deleted - Held, yes ii) Hon ble ITAT Jaipur Bench in the case of ACIT Circle-1 Jaipur Vs M/s Uttam Chand Deshraj(ITAT Jaipur Bench ITA No 419/JP/2010 Order dated 25/03/2011) (Copy at Case Law PB Page No. 157-158 )has made following findings as regard cash sales. Making some sales in cash is also no ground for rejecting the books of account. There should be some material that cash sales made by assessee either on account of sale on a lower price ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and creditworthiness of each buyer. But the law is not so and in case of sale below to certain limit the assessee was not required to prove all these ingredients of section 68 of the Act and even also in case of sale exceeding to certain limit the assessee is not required to prove the creditworthiness of buyer. Thus, this also strengthen the contention of the assessee that the provisions of section 68 are not applicable on the transaction which are already credited in the P L and the same can only made applicable on the cash credits such as loans, share application etc. It is an admitted fact that in the case of transactions of sales/purchases of goods/investments/assets the creditworthiness of the payee is not relevant for the receiver as the amount was received against the something sold to him, therefore such transactions cannot be examined with point of view of cash credits. Hon ble Rajasthan High Court in the case of Smt. Harshila Chordia vs Income-tax Officer Appeal No. 4 of 2002 NOVEMBER 7, 2006 [2008] 298 ITR 349 (Rajasthan) (Copy at Case Law PB Page No. 147152)held that no addition could be made in respect of the amount standing in the books of the assessee, which was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that the assessee did not made any composition sale in any of the quarter of a single amount which includes the sales made otherwise than cash also. Further in assessment order of VAT and CST, the revision of turnover has been accepted as genuine. Copy of VAT and CST assessment order is at PB 139-147. 4.3.12 Assessment was made on surmises, conjectures and with bias pre-set mind 1) In view of the submission of the assessee, as given in ongoing paras it is clear that the assessee duly explained the source of cash deposited in bank a/c in demonetized currency and such explanation was supported by the documents. However, the ld. AO did not considerto such submission and documents in right perspective and by brushing aside all the submission and settled principal of law made the huge additions. From the perusal of the assessment order it is explicit that the books of accounts were rejected and consequently impugned addition u/s 68, estimation of NP was made by the AO in the wake of demonetization and cash deposited in demonetized currency. Though the ld. AO was duty bound to examine the genuineness of purchases sales and source of cash deposited in bank in demonetized cur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned addition u/s 68 and rejecting the explanation offered by the Assessee with respect to the nature and source of the cash deposited in bank accounts during the demonetization period in demonetized currency and have acted merely on surmises, conjectures, suspicion, presumptions and assumptions. The humble submissions of the assessee highlighting the glaring internal inconsistencies in the orders of the ld. AO the repeated violations of the provisions of law by them are as under: i) The AO has treated the cash deposited in the banks during the demonetization period in demonetized currency as unexplained cash credits u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales etc. is patently evident from the entries in the audited books of account of the Assessee. ii) It is not the case of the Department that the cash deposited in the banks during the demonetization period was in excess of what was available in the cashbooks. The fact that the cash deposits in banks were sourced out of cash sales is evident from the entries in the cashbooks. iii) The books of account of the Assessee have been audited by an indepen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted money by taking advantage of the basic exemption limit. 3) The reason and purpose of the provision was explained by the explanatory memorandum to the Finance Bill 2012 as under:- 1) Under the existing provisions of the Income-tax Act, certain unexplained amounts are deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate applicable to the assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption limit. Therefore, in these cases, no tax can be levied on these deemed income if the amount of such deemed income is less than the amount of basic exemption limit and even if it is higher, it is levied at the lower slab rate. 2) In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed to tax the unexplained credits, money, investment, expenditure, etc.,which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed to provide that no deduction in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive in operation and therefore not applicable to the cash deposited in the bank prior to 15.12.2016. The Tax laws as the Taxation (Second amendment) Act, 2016 was amended on 15.12.2016 and received the ascent of President of India on the said date. It was submitted that though the amendment was applicable for assessment year 2017-18 but only on income referred to in said section pertaining to the date after 15.12.2016. As in case of the assessee, the cash in demonetized currency was lastly deposited on 06.12.2016 and accordingly at the material time, old provisions of section 115BBE were applicable. The amendment provisions are not retrospective in operation and are not applicable in the present case and therefore the ld. AO has been wrongly taxed the addition made u/s 68 of the Act by applying the amended provisions. In support of this the reliance is place on decision of Hon ble Supreme Court in case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala [1966] 60 ITR 262 (SC). (Copy at Case Law PB Page No. 255-257) 10. Now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of announcement of demonetization with any previous data. The comparison can only be made when the situations are similar. Further we have compared the following data for which no adverse findings was made by the ldAO:- Para 4.3.4 (a) Comparison of month wise Cash in hand in last Four years. Para 4.3.4.(b) Comparison of Cash sales and % of total sales in last three years. Para 4.3.4 (c) Comparison of Cash sales in the month of Nov. and % of total sales. Para 4.3.4.(d) Comparison of Cash deposited in Bank in the month of Oct, Nov and Dec in last three years. 4.3.5 Comparison of Cash sales in the month of Oct Nov Dec in the last three years. Further, we have compared the data of cash sales of Nov 2016 with cash Sales in Nov 2014 and Nov 2015 and explained that cash sales in Nov 2016 was at lesser figure than in Nov 2014 and Nov 2015. The sales of particular day i.e.08/11/2016 has increased abnormally because of demonetization but this sales were also shifting of regular sales of other days on particular day because of demonetization. We have submitted detailed explanation in this regard in above paras. Para 4.6 (2) Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heavy demand with Jewellers and overcrowd on its showroom the customers were not provided much more options of selection of Jewellery. It was compulsion to the customers to choose finalized the items in very quick manner as there was heavy rush in showrooms. As stated earlier that as on the date of demonetization the manpower strength of the assessee was of 91 persons out of which 63 staff members were salespersons. Thus averagely to 9 to 10 customers were deal by each sale staff within the time span of about 3.5 hours (i.e. 210 minutes) i.e. average 20 to 22 minutes were available for each customer which is quite reasonable looking to the situation existed after the announcement of demonetization and limited time allowed to the customer to stay in the showroom. Para 4.6 (3) page 15 3. Further, the argument of the assessee is contrary itself. As per logic of the assessee when demonetarizatio n was declared people rushed to jewellery shop than there should be extra ordinary increase in the sale in the month of November as the date of demonetarizatio n dated 08-11- 2016 pertains to November. Whereas in actuality the assessee has shown 18% incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases of Jewellery consumed the same in the evening soon after announcement of demonetization. Therefore, due to this reason, the sale of 08.11.2016 was relatively higher but overall sales of November-2016 could not increase because due to announcement of demonetizations the major sales of other days in Nov 2016 shifted to 08/11/2016 on the day of such announcement and there was frenzy amongst people who wanted to convert their SBN into gold. The above contention of the appellant is supported by the news article of The Economic Times dated 08-12-2016, wherein the secretary of the India Bullion Jewellers Association mentioned that the jewelries had sold 15 tonnes of Gold ornaments and bars worth around Rs. 5000 crores on the intervening night of November 8 and 9, 2016 after the government demonetized the Rs. 500 and Rs. 1000 currency notes. (copy at PB page 268). The sale of ornaments had subsequently for the rest of the month of November and December 2016 had seen a dry spell as the people had purchased jewellery in demonetized currency during the closing hours of 8th November itself not only for the wedding in immediate vicinity but also for weddings and functions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es remained un-declared by the mistake of accountant who was looking after sales tax matter. If this allegation of the ld. AO is accepted to be correct than it will also lead to a presumption that the assessee did not made any composition sale in any of the quarter of a single amount which includes the sales made otherwise than cash also. The cash deposited in bank in demonetized currency was out of cash balance accumulated from cash sales and amount realized from customers during the period from 03.11.2016 to 08.11.2016. Thus, the cash realization against sales/from customers of the period prior to 03.11.2016 was already deposited into bank account prior to announcement of demonetization and corresponding sources of such deposited also accepted by the ld. AO as genuine. Therefore, revision of VAT returns for the period from 01.04.2016 to 30.09.2016 (i.e.first two quarters) was not because of any mala-fide intention but the same was for the bona-fide reasons and cash sales of this period was accepted genuine by the AO meaning thereby the Revision of Vat return was accepted by the ld. AO as genuine. Therefore, once the sales declared in such revised quarterly returns had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs. 43,51,73,448/- and export sales of Rs. 3,93,65,114/- was declared which remained un-declared in original return. The fact that additional sales declared in the revised return was genuine sales made on day to day basis and the same remained to be reported in original return for some bonafide reason is verifiable from the fact that all the taxes payable (VAT/CST) thereon was paid on due time i.e. all the taxes were paid prior to filing of Original return and not at the time of filing of revised return. Had the revision would have been made with the melafide intention as alleged by ld. AO than the additional tax liability would arouse in the revised return and the same would have been paid at the time of revision of the return but this is not the case of the assessee because no additional tax was paid while revising the return. This fact is duly verifiable from the date wise detail of taxes deposited on composition sales as available in the Vat returns and its assessment order submitted to ld. AO (Copy at PB Page 110 to 147). The finding of the ld. AO that the assessee has not furnished any challan of composition fees paid as stated in reply it is submitted thatthe detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided as and when the Jewellery is finalized and the invoice is generated. Allowing the credit to party is matter of understanding in between the assessee and customers. Further, out of total amount of Rs. 12,17,48,500/- the cash realized from debtors was of Rs. 25,96,480/- which is meager amount looking to the quantum of sales of the assessee. It is further relevant to mention here that the total sales to the parties from whom this amount was realized was Rs. 41,75,995/- (Relevant chart submitted during assessment is at PB Page 163) against which Rs. 13,30,000/- was received immediately at the time of sales i.e.on or prior to 03.11.2016, Rs. 25,96,480/- received during the period from 03.11.2016 to 08.11.2016 and balance Rs. 2,49,515/- after 08.11.2016. The ld. AO treated the part cash received from same parties against same sale prior to 03.11.2016 and after 08.11.2016 as genuine and only treated the amount realized during period from 03.11.2016 to 08.11.2016. It is relevant to mention here that when the amount realized from sundry debtors in other period having same set of details are being treated as genuine than there remains no reason to treat the amount realized from debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from customers was of Rs. 11,86,250/- which is very meager amount looking to the quantum of sales of the assessee. The details of advances received viz a viz sales made to such parties, in which the advances were adjusted are as under: - Date of Advance Advance amount Name of Party Date of sale made and bill No. Amount of sales(after discount) 03.11.2016 10,000 Anil Ji Mehta 07.01.2017Bill No. MG10852 55,000 03.11.2016 1,00,00 0 Asha Ji Bakliwal 30.11.2016 Bill No. MG-9291 1,00,000 03.11.2016 10,000 Prahlad Meena 29.11.2016 Bill No. MG-9238 70,000 03.11.2016 50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 Namita Ji Garg 14.11.2016 Bill No. MG-8842 16,500 06.11.2016 25,000 Chandrakala Ji 08.11.2016 Bill No. MG-8785 90,000 06.11.2016 1,00,00 0 Gurpreet Kaur 05.12.2016 Bill No. MG-9492 2,08,900 06.11.2016 1,00,00 0 Maya Devi Ji 05.12.2016 Bill No. MG-9490 1,90,750 06.11.2016 1,00,00 0 Norat Mal Ji 05.12.2016 Bill No. MG-9488 1,35,000 06.11.2016 50,000 Pankaj Ji 13.12.2016 Bill No. MG-9826 68,000 06.11.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,000 Puneet Ji 09.11.2016 Bill No. MG-8813 1,35,700 08.11.2016 1,100 Anil Ji Bhilwara 02.01.2018 Bill No. MG-13719 3,420 Total 11,86,250 28,33,573 From the perusal of the above chart it is apparent that subsequently the assessee made the total sales to above named parties of amounting of total Rs. 28,33,573/- and after adjustment of advance payment of Rs. 11,86,250/- the balance payment of Rs. 16,47,323/- was received through parties in cash as well as banking channels. The sales of this balance amount is treated by the ld. AO as genuine, therefore there should not be any reason to amount received as advance during period 03.11.2016 to 08.11.2016 as non-genuine. The single transaction is assessed by ld. AO by dual analogy i.e.part amount realized during period 03.11.2016 to 08.11.2016 as nongenuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut of the sale proceeds, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. Sales made by the assessee to cover the cash deposited in the bank post demonetization, was sufficient source of the cash deposited i.e; the sales from the existing stock available with the assessee and was well explained, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. - Decided in favour of assessee. 2) ITAT Hyderabad in the case of Shri Lateef Abdul Mohd, Vs ITO ITA No 501/Hyd/2021 order dated 10/06/2022 Held as under:- 20. I find sufficient force in above arguments made by the learned Counsel for the assessee. The month-wise cash sales and cash deposits made by the assessee in the Bank A/c are already reproduced in the preceding paragraphs. A perusal of the same shows that the cash sales made by the assessee during every month is substantial. Similarly, the cash deposit made by the assessee in the Bank A/c from April, 2015 to Nov.2015 and thereafter is also commensurate with the regular trend. It is not a case where the assessee in this particular period has made substantial cash deposits in the Bank A/c. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cities consequent to declaration of demonetization of ₹ 1000 and ₹ 500 notes on 08.11.2016. As cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon ble Delhi High Court in the case of Kailash Jewellery House [2010 (4) TMI 1070 - DELHI HIGH COURT] and Vishal Exports Overseas Ltd. [2012 (7) TMI 1110 - AHMEDABAD HIGH COURT] 4) ITAT Delhi in Argon Global Pvt Ltd vs ACIT CC-28, Delhi ITA No 3741-3746/Del/2019 order dated 31/10/2019 case Law Paper Book Page No 258-321. Finding of ITAT 1. Firstly, ITAT observed that both the Assessing Officer and Ld. CIT (A) erred in deeming the total cash deposits during the demonetization period (9th Nov 2016 to 30th Dec 2016) as Rs. 180.53 Cr instead of the actual deposits of Rs. 175.28 cr during the said period. While arrivin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In appeal by the Revenue, the Hon'ble High Court Pr. CIT (Central)-3 V/s M/s Agson Global Pvt. Ltd. In ITA No. 6873/2021 order dated 19-01-22 dismissed the bunch of appeals filed by the Revenue by observing in para 17.6 as under: 17.6. Having regard to the extensive material which has been examined by the Tribunal, in particular, the trend of cash sales and corresponding cash deposited by the assessee with earlier years, we are of the view that there was nothing placed on record-which could have persuaded the Tribunal to conclude that the assessee had, in fact, earned unaccounted income i.e., made cash deposits which were not represented by cash sales. Therefore, in our opinion, the Tribunal correctly found in favour of the assessee and deleted the addition made by CIT(A) of Rs.73.13 crores, under Section 68 of the Act. 5) 2021 (1) TMI 837 - ITAT GAUHATINURUL ISLAM VERSUS ITO, WARD-2, NAGAON) (Copy at Case Law PB Page No. 185-186) Addition u/s 68 - Cash deposits of special Bank notes of ₹ 500/- and ₹ 1000/- made during the demonetization period - According to Ld. A.R, a perusal of bank statement would reveal that there were regular bank deposits of cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE - See M/S HIRAPANNA JEWELLERS AND (VICE-VERSA) [2021 (5) TMI 447 - ITAT VISAKHAPATNAM] - thus the addition made is not sustainable and the same is directed to be deleted. Appeal of the assessee is allowed. 7) 2021 (2) TMI 737 - ITAT GauhatiNilkanthaSaha Versus ITO, Ward-Morigaon Unexplained cash credit u/s 68 - cash deposited during the demonetization period - AO acknowledges that the assessee has filed audited accounts and produced copy of the ledger of the sales and purchases along with copy of the books related to the purchase and sales made by the assessee without supporting bills and invoices - HELD THAT: -As brought to notice by the Ld. A.R that assessee is into dry fish business and his accounts are audited for the last seven (7) years. - the profit embedded in sales amount has been accepted by the AO, so, question is whether separate addition is justified and whether this action of AO amounts to double addition of the same trading receipt. No doubt in such a factual scenario, it amounts to double addition. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee depositing invalid notes to the tune of ₹ 12,41,704/- cannot be dis-believed as from any tainted source or termed as black money. So taking into consideration the peculiar over all facts and circumstances discussed supra, it is directed that the addition of ₹ 12,41,704/- be deleted - Appeal of the assessee is allowed. 8) Lalchand Bhagat Ambica Ram Vs. CIT (1959) 37 ITR 288 (SC)) (Copy at Case Law PB Page No. 187-199) which is set in somewhat similar back drop in connection with treatment of the encashment of high denomination notes by the assessee therein on the promulgation of High Denomination Bank Notes (Demonetization) Ordinance, 1946as unexplained money on mere conjecture and surmise of the Revenue Authorities. The relevant facts of the said case are that the ITO in the course of the assessment noticed that the appellant therein had encashed high denomination notes of the value of ₹ 2,91,000. The ITO asked for an explanation, which the appellant gave stating that these notes formed part of its cash balances including cash balance in the Almirah account. The appellant sought to prove the fact that the high denomination notes encashed by it form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 out of the value of high denomination notes of the value of ₹ 2,91,000 and treated the balance ₹ 1,41,000 as income from undisclosed sources. It was held that in doing so, The Tribunal had indulged in conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained. The relevant excerpts from the order of the Hon ble Apex Court are reproduced hereunder: If the entries in the books of account in regard to the balance in Rokar and the balance in Almirah were held to be genuine, logically enough there was no escape from the conclusion that the appellant had offered reasonable explanation as to the source of the 291 high denomination notes of ₹ 1,000 each which it encashed on 19th Jan., 1946. It was not open to the Tribunal to accept the genuineness of these books of account and accept the explanation of the appellant in part as to ₹ 1,50,000 and reject the same in regard to the sum of ₹ 1,41,000.Consistently enough, the Tribunal ought to have accepted the explanation of the appellant in regard to the whole of the sum of ₹ 2,91,000 and held that the appellant had satisfactorily explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb came to the conclusion that the possession of 150 high denomination notes of ₹ 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of ₹ 1,000 each.[para 20] Therefore, the Tribunal in arriving at the conclusion in the present case indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and the Court is entitled to interfere. [para 23] 9) Hon ble Supreme Court in the case of Mehta Parikh Co. V/s. CIT (1956) 30 ITR 181 held as under:) (Copy at Case Law PB Page No. 200-207) The finding of the Tribunal that high denomination notes of the value of ₹ 30,000 represented the concealed profits of the appellant is not supported by any evidence, and is, in consequence, erroneous in point of law and liable to be set aside. The accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no justification in the circumstances of the case for making an estimate at all. The assessee had a large cash balance which could very conveniently include the 45 high denomination notes encashed by him. The explanation offered by the assessee was not unreasonable and nothing has been said which could justify its being rejected as unreasonable. On the other hand the so-called estimate by the Tribunal is based on no reason and is purely arbitrary and cannot be upheld as legal. 12) Hon ble Allahabad High Court in the case of Kanpur Steel Co. Ltd. Vs. CIT (1957) 32 ITR 56 (All)opined as under:(Copy at Case Law PB Page No. 217-219) when the assessee-company had given an explanation which was reasonable, the IT authorities could have been entitled to treat the sum of ₹ 32,000 as income from undisclosed sources only if there was some other material from which such inference could have been drawn. No other material has been mentioned by the Tribunal in their appellate judgment or in the statement of the case. It further appears that the Tribunal, in holding that seven high denomination currency notes of the value of ₹ 7,000 only could form part of the cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature in the accounting year or in prior years. In these circumstances, a finding that the sum of Rs. 60,518 found with the assesseemust be its income from undisclosed sources during a period of about seven and a half months prior to August 17, 1950, appears a little preposterous. Whatever it may be, the explanation offered by the assessee was not on the face of it improbable, though it is entirely a matter for the fact-finding authority to accept it or not. But if the Appellate Tribunal rejects the explanation without considering its acceptability in the light of the facts and circumstances of the case, or it rejects the explanation without stating any grounds whatsoever, or upon a view of facts which could not reasonably be entertained by any person acting judicially, the case would fall within the principle laid down by the Supreme Court in Mehta Parikh Co.'scase (supra), and the finding of the Tribunal would not be valid. In our view, the same is the position in this case; the addition of Rs. 60,813 as the income of the assessee from undisclosed sources was not valid or justified. 15) Hon'ble Supreme Court in the case of CIT vs Devi Prasad Vishwnath Prasad (1969 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te about source of money nor about fact that there was sufficient balance on date of deposit - Assessing Officer, however, made additions of part of amount for want of details of receipts of some of high denomination notes - Whether there was no justification for adding a portion of amount tendered by assessee for encashment of high denomination notes as income of assessee from undisclosed sources for alleged failure of assessee to furnish source of acquisition of amount in such notes - Held, yes 18) CIT v. Vishal Exports Overseas Ltd., Tax Appeal No. 2471 of 2009 decided by Gujarat High Court on 03.07.2012(Copy at Case Law PB Page No. 238) In the facts of above case the assessee was an exporter. The issue was regarding sale of Rs.70 lacs included in turn-over which was more than 500 crores. The assessee had claimed deduction u/s 80HHC of the Act. On the basis of information received by the Assessing Officer from investigation he considered the entry for export of 70 lacs as bogus. He denied benefit u/s 80HHC of the Act. Further, he made addition of Rs. 70 lacs in the income u/s 68 of the Act. It was held that once the assessee has already included the amount of sale of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e about the source of cash deposits cannot be brushed aside without there being any evidence to the contrary.- Decided in favour of assessee. 21) 2021 (9) TMI 1192 - ITAT VISAKHAPATNAM DY. Commissioner Of Income Tax Circle-3 (1) Visakhapatnam Versus Sri Jaya Prakash Babu Valluri And (Vice-Versa) Cash deposits made during demonetization period, which was added back to income u/s 69A - HELD THAT:- CIT(A) observed that the assessee is maintaining regular books of accounts and the deposits were made out of the book balances and therefore, following the decision of Karthik Constructions [2018 (3) TMI 39 - ITAT MUMBAI] the Ld. CIT(A) held that there is no case for making the addition, accordingly deleted the addition. 22) 2021 (9) TMI 627 - ITAT DELHI Muon Computing P. Ltd., Versus Ito, Ward-17 (2) , New Delhi. Addition of high cash in hand - high cash on hand disclosed in the balance sheet as compared to the preceding year - HELD THAT:-Revenue has not brought any material suggesting that the withdrawal made by the assessee were utilized for making payments. It is also not brought on record that the amounts so withdrawn from the bank account was utilized for any other undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this much cash sale is also in favour of the assessee. The assessee submitted the best possible details/information/documents/explanation to present its case before ld. AO and as explained in forgoing paras no specific defects had been pointed out by ld.AO therein.The entire assessment order is based on presumption and assumption by twisting the data and drawn the conclusion therefore as per his own whims just to make the huge addition. There is no abnormal rise in the cash sales made by the assessee. The sales are genuine and supported by the proper invoices and properly shown in the VAT return, which also accepted by the VAT authorities, therefore, the same cannot be considered as fabricated or manipulated transactions. It is further relevant to mention here that ld.AO alleged that cash deposited in bank account in demonetized currency is undisclosed income of the assessee which deposited under the garb of cash sales. In this regard it is submitted that there is no evidence with ld. AO to support this allegation. The assessee is having only source of income from business of Jewellery and except to that the assessee is not having any other business.Theld.AO also could not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas the same is 13 % of total sales in this period in question only. The revenue could not pin point any fault on these cash sales comparison provided and thus, we do not find any absurd result and there was no abnormal rise in over all cash sales in the sales results of the assessee. The case sales made during October 2016 was 18% and November 2016 was 13% out of total cash sales made during the financial year 201617. The cash sales made in two months is higher compared to cash sales made in remaining 10 months of that year. Further when the trend of cash sales is compared to previous years it was noticed that in October 2015 cash sales was just 11% of the total sales and in October 2014 it was 13% compared to total sales. The ld. AR of the assessee explained from the comparison of chart that cash deposited in the month of Oct Nov 2014-15 Rs. 40,72,00,000 2015-16 Rs. 44,62,00,000 2016-17 Rs. 35,94,68,500 Above data proves that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year. The assessment of VAT were completed and placed on record where in the revision were accepted(APB 139-147). The ld. AR of the assessee further submitted the copy of the receipted VAT taxes paid challan for all three quarters at PB page 110 where in it is explained that all the three quarters respective tax have been paid before the demonetization and the assessee has not foreseen this event and their payment it self proves that the revision of order though the tax paid in advance was just a procedure lapse and since the tax has already been paid related to this composition the merely the return revised cannot be used against the assessee. Thus, there is no force in the arguments of the revenue. The assessee has shown purchase from various concerns during the period before demonetarization. To verify the genuineness of the purchase an enquiry was conducted u/s 133(6) of the Act and notice were issued on test check basis which includes entity Shri Mahesh Soni Prop of M/s Paras Gems Jewellers from whom the assesee has shown purchase of Rs 110561454/ during month of October and November of the year. The notice was issued issued through ITBA as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he debtors telephone calls were made to some of the debtors on test check basis from the landline phone of the office of undersigned having no. 01412227574. In the verification the debtors fail to recognize such purchase from the assessee. As rightly confirmed by the ld. CIT(A) that once the sales is considered as genuine the receipt cannot be doubted. The assessee has shared the details of invoices and the AO has merely alleged that the same is without PAN and address. The calls were made to very few person and nominal value of sales and all the cell number given were active. No party has categorically denied about the purchase that they have made so the strata selected was very small and thus based on that strata the sales made by the assessee cannot be disbelieved and recorded as debtors, whose sales is already considered by the revenue. It is customer who are not willing to share their private information such as PAN, address etc. and assessee can not force the customer to provide such information. 13. The ld. AR of the assessee further submitted that out of total cash of Rs. 12,17,48,500/- Rs. 12,00,00,000/- was deposited on the first working da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the show room, all were available and time calculated for 3 hours and not four hours (8+4) then even in 3 hours average 22 minutes can be given to single person [725/90= 8 person can be handled in hours a single men and 60*3=180/8=22.5 minutes available for a customer and that time is sufficient time to attend the 725 person if believe that in a day there is no other sale also in day. This cannot be considered as impossible task for the assessee having stock, place to display and parking availability this fact is also not disputed. The average sales of the assessee in a year is around 200 cr. and looking to strength of the assessee the cash sales which in comparison to past year cannot be considered as non-genuine which supported by availability of stock, staff strength, past history and giving all the required details in form of value and quantity and in all the records not a single defects is observed by the ld. AO. Not only that the ld. AR of the assessee shared the new paper report where in it has been reported that on night of the demonetization 15 tonne of gold ornaments were sold. The ld. AR of the assessee cited a circular issued by the CBDT no. 14 of 1955 dated 11.04.1955 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Accountant and copy of audit report and statement of profit and loss account is filed by the assessee company. It is noted from the record that the case of the assessee was taken up for scrutiny assessment u/s 143(3) on the basis of CASS and desired information by the AO were submitted by the assessee from time to time. After completion of assessment the AO vide his order dated 29-12-2019 assessed the income of the assessee at Rs.16,45,24,988/- as against return income of Rs.5,37,53,418/- . During the course of assessment proceedings, the AO rejected the books of account of the assessee by applying the provisions of Section 145(3) and estimated the net profit rate of 2.59% being average Net Profit of last three years and applied the same on the sales of Rs.1,96,92,45,899/- i.e. to say Rs.2,09,09,94,399 Sales as per books and Rs.12,17,48,500 Cash deposited in Bank. It is further noted that the AO reduced the amount of Rs.12,17,48,500/- deposited in the demonetization currency which was against sales, realization from debtors and advances against sales, out of total sales of Rs.2,09,09,94,399- declared by the assessee. Hence, the AO computed the net profit of the assessee at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. As regards the receipt of the cash from the customer the ld. AR of the assessee relied upon the findings of the jurisdiction high court judgement in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC). In this case the Jurisdictional Hon ble High Court have held that So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise. We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal is interconnected to each other and born out from the common finding, therefore in the written submission the same are commonly dealt with. 2. The ld. AO rejected the books of account of assessee basically for following reasons: - i) Non genuine purchases from Paras Gems and Jewellers and therefore, stock register prepared after thought and does not disclose true income of the assessee. ii) Non verified cash sales during the period from 03.11.2016 to 08.11.2016. iii) The assessee declared total turnover of Rs. 209,09,94,399/-. The assessee deposited Rs. 12,17,48,500/- in bank in demonetized currency, which was part of the above turnover. The ld AO reduced the declared turnover from the amount deposited in bank in demonetized currency. The ldAO estimated the net profit rate of assessee 2.59%, being average NP of last three years and applied the same on the sales of Rs. 1,96,92,45,899/- (Rs. 209,09,94,399/- (Sales as per Books) 12,17,48,500/- (cash deposited in bank). Thus the ld. AO computed the net profit of the assessee Rs. 5,10,03,468/- as against Rs. 5,19,80,398/- declared by the assessee. 3. The ld. CIT (A) in para 6.2 (xxvii) of her order confirmed the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total turnover of Rs. 2,09,09,94,399/- is worked out at Rs. 5,41,56,755/-. Accordingly, an addition of Rs. 47,72,297/- [Rs. 5,41,56,755 Rs. 4,93,84,458 (as declared by the appellant)]) is confirmed and the balance addition of Rs. 4,62,31,171/- is directed to be deleted. 5.3 Submission of assessee: - 5.3.1 The ld AO has not given any show cause notice for rejection of books of account and estimation of income by apply profit rate:- The AO has never issued show cause notice as to why the books of account may not be rejected under section 145(3) of the Act and the assessment may not be completed in the manner provided under section 144 of the Act. (i) The lower authorities have not made a categorical finding that accounts of the assessee are not correct or complete or the method of accounting provided in sub-section (1) has not been regularly followed by the assessee or income has not been computed in accordance with the standards notified under sub section (2). 145(3) Where the 7 Assessing] Officer is not satisfied about the correctness or the completeness of the accounts of the assessee, or where the method of accounting provided in sub section (1)[has not been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) over genuineness of purchases has attained finality. Therefore, the books of account cannot be rejected on the ground of genuineness of purchases. 5.3.4 No ground to reject the books of account:- When all the purchases are genuine and correctly recorded in books of account including stock register, the books of account cannot be rejected as the assessee fulfils all the conditions of section 145(3) namely:- (i) The books of account are complete and correctly maintained by the assessee. (ii) The method of accounting provided in sub section (1) has been regularly followed by the assessee, and (iii) The income has been computed in accordance with the standards notified under sub-section (2) 5.3.5 Non-verification of amount received from debtors and advance from customers cannot be a ground for rejection of books of accounts particularly when the sales against the debtors and advances have been accepted as genuine: - The assessee claimed that out of total Rs. 12,17,48,500/- deposited into bank a/c in demonetized currency the amount of Rs. 25,96,480/- was realized to its from its debtors and Rs. 11,86,250/- received advance from customers. The ld. CIT (A) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 03.11.2016 to 08.11.2016, therefore the verification from such debtors is completely irrelevant to examine the source of demonetized currency deposited into bank a/c. In other two cases the sales of Rs. 19,000/- was made to Asmita Ji on 04.11.2016 against which payment of Rs 9,000 received immediately on 04-11-2016 and balance of Rs 10,000/- was received on 5-11-2016. The sales of Rs. 1,38,000/- was made to Asha Singh on 05.11.2016 against which payment of Rs. 1,00,000/- received immediately on 05-112016 and payment of Rs. 38,000/- received on 07-11-2016. Since the sales was made during the period from 03.11.2016 to 08.11.2016 and realization was also made in the same period, therefore there remain no reason to doubt that this amount was realized on some other date and the same was shown in this period. Further, on telephonic verification made by ld. AO fromfew debtors (As tabulated at Page 5 of the assessment order) it is apparent from the list in the assessment order that none of the customer expressly had denied the purchases made from the assessee. Some of the customers did not pick the call which cannot be treated as not verified by the customers. Further, the AO could h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 3. The details of advances received viz a viz sales made to such parties, in which the advances were adjusted is as under: - Date of advance Advance amount Name of party Date of sale made and bill No. Amount of sales (after discount) 03.11.2016 10,000 Anil Ji Mehta 07.01.2017 Bill No. MG 10852 55,000 03.11.2016 1,00,000 Asha Ji Bakliwal 30.11.2016 Bill No. MG-9291 1,00,000 03.11.2016 10,000 Prahlad Meena 29.11.2016 Bill No. MG-9238 70,000 03.11.2016 50,000 Siddharth Ji 18.11.2016 Bill No. MG-8933 50,000 03.11.2016 5,000 Sweta Ji 13.01.2017 Bill No. MG-11162 31,000 04.11.2016 46,650 Mahal Ram Meena 26.11.2016 Bill No. JB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15.12.2016 Bill No. MG-9891 56,500 06.11.2016 5,000 Komal Sharma 11.11.2016 Bill No. MG-8820 32,800 07.11.2016 15,000 Jassi Ji 03.12.2016 Bill No. JB 3264 42,200 07.11.2016 50,000 Kailash Ji 08.11.2016 Bill No. JB-2863 1,37,500 07.11.2016 5,000 Krishna Joshi 13.05.2017 Bill No. MG-2202 44,380 07.11.2016 10,000 Rakesh Ji 23.11.2016 Bill No. MG-9058 18,265 07.11.2016 13,000 Suman Ji 02.12.2016 Bill No. MG-9382 43,000 08.11.2016 60,000 Ankit Ji 18.11.2016 Bill No. JB-3128 1,51,200 08.11.2016 1,40,000 Ashok Ji 18.11.2016 Bill No. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30/- on account of realisation from debtors and advances, which is very excessive and highly unjustifiable more so when the other receipts are not questionable. At the worst the profit rate could be applied on this alleged unverifiable amount of Rs. 37,82,730/- 5.3.9 In this regard the reliance is placed on the following decisions: - i) Hon bleHigh Court of Bombay in the case of R.B. JessaramFatehchand(Sugar Dept.)v/s Commissioner of Income Tax [1970] 75 ITR 33 (Bombay)(Copy at Case Law PB Page No. 153-156) held that :- Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income-Tax Act, 1922] - Method of accounting - Rejection of accounts - On assessee's inability to supply addresses of purchasers who purchased goods on cash, ITO rejected assessee's books of account showing result in respect of cash sale transactions, and made addition - AAC deleted additions but Tribunal restored ITO's orders - Whether there was no necessity whatsoever for assessee to maintain addresses of cash customers - Held, yes - Whether, therefore, rejection of book results of assessee was unjustified - Held, yes - Whether, consequently, additions made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-verifiable. These defects were purported just to support addition made. In view of above submission, the rejection of books of account is not correct, therefore consequently addition of Rs. 47,72,297/- sustained by ld CIT(A) byupholding the rejection of books of account and invoking the estimation of the Net profit is also not correct, highly unjustifiable and the rejection of books of account should not be sustained and the addition should be deleted. The ld AR further submitted that for minor lapse whole books of account cannot be rejected. He submitted that the realization from debtors and advances were for Rs. 25,96,250/- and Rs. 11,86,250/- totaling to Rs. 37,82,830/- as against the total sales of Rs. 209 crore, which comes to only 0.18% for which the whole books of account cannot be rejected. He relied upon the following decisions: - a) Hon ble Rajasthan High Court in the case of Malani Ramjivan Jagannath Vs. Assistant Commissioner Of Income Tax (2009) 316 ITR 120 has held as under:- 10. In the face of these undisputed facts and circumstances, the Tribunal in our opinion could not have interfered with the order of CIT(A). In doing so, it had ignored all admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lt except what has been shown by the assessee in the books of account. We are, therefore, unable to sustain the order of the Tribunal. b) Further Hon ble High Court of New Delhi in the case of CIT-XII vs Smt Poonam Rani in ITA No. 406/2009 vide order dated 07/05/2010 held that as under:- Section 145(3) provides for assessment in the manner prescribed in section 144 where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee or where either the method of accounting provided in sub-section (1) or the accounting standards as notified under subsection (2) has been regularly followed by the assessee. It was not the case of the revenue that the assessee had not followed either cash or mercantile system of accounting. It was also not the case of the revenue that the Central Government had notified any particular accounting standard to be followed by tour operators. Hence, the second part of sub-section (3) of section 145 would not apply to the instant case. [Para 5] The Assessing Officer had not pointed out any particular defect or discrepancy in the account books maintained by the assessee. During the course of hearing bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the actual cost of the raw material purchased by the assessee was less than what was declared in the account books. There was no finding that the actual cost of processing carried out by the assessee was less than what had been declared in her account books. No particular expenditure shown in the account books had been disallowed by the Assessing Officer. There was no finding by the Assessing Officer that the actual quantity of finished products produced by the assessee was more than what was shown in the account books. There was no finding that the assessee had made any such sale of the finished products which was not reflected in the account books. There was no finding by the Assessing Officer that the finished products were sold by the assessee at a price higher than what was declared in the account books. In those circumstances, the Commissioner (Appeals) and the Tribunal were justified in holding that the Assessing Officer could not have increased the gross profit ratio merely because it was low as compared to the gross profit ratio of the preceding year. [Para 9] The revenue contended that the assessee was not maintaining the daily stock register. However, no such fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whether the assessee's accounts are maintained according to the method regularly employed by him, whether they are correct and complete, and whether the income can be properly computed from the accounts. There is no finding that the purchases have been exaggerated or the sales have been suppressed, or that any transaction has not come into the accounts. In these circumstances, the grounds stated by the Tribunal are neither valid nor relevant in rejecting the accounts of the assessee. d) ST Teresa s Oil Mills Vs State of Kerala 76 ITR 365 (Ker) Accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reason to indicate that they are unreliable. e) CIT Vs Jas Jack Elegance Exports 324 ITR 95 (Delhi) :Hon ble Delhi High Court held that Sec. 145(3) provides for assessment in the manner prescribed in s. 144, where the AO is not satisfied about the correctness or completeness of the accounts of the assessee or where either the method of accounting provided in sub-s. (1) or the Accounting Standards as notified under sub-s. (2) have not been regularly followed by the assessee. This is not the case of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than the number of pieces declared in the account books produced before him. Another important aspect of this case is that, admittedly, the GP percentage declared by the assessee in the asst. yr. 2003-04 which was the immediate preceding year, was more or less the same as was declared in the asst. yr. 2004-05, to which this appeal pertains. However, the AO, instead of applying the GP ratio declared in the immediate preceding year, applied the GP ratio declared in the asst. yr. 2002-03, thereby failing to maintain the accepted principle of continuity and consistency. The question whether fall in gross profit stood explained by the assessee or not is a question of fact. Both, the Tribunal as well as CIT(A) has accepted the explanation given by the assessee. No substantial question of law arises. f) Haridas Parikh Vs ITO 113 TTJ 274 (ITAT Jodhpur):- Hon ble ITAT Jodhpur Bench has held that unless the AO is able to point out certain transactions which have been left to be entered in the books of account or that the assessee has sold some of the items at a price higher than what is disclosed in the books of account or if proper particulars, bills, vouchers, are not forthcoming etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pack (P) Ltd. (2000) 245 ITR 492 (Del). h) ITAT Jaipur in M/s Dreamax Infrastructure Developers, vs ITO ITA No 374/JP/2017 order dated 25/05/2018 held that :- Accordingly, in view of the above facts and circumstances of the case when the assessee produce all the relevant details and evidence then insignificant defects in supporting evidence cannot a reason for rejection of books of account. In case the Assessing Officer proposed to examine the claim of expenditure then each and every item of expenditure has to be verified independently and disallow the same if it is not supported by a proper verifiable evidence. Once the expenditure claimed by the assessee is not found to be bogus or excessive then the low profit declared by the assessee cannot be a reasoned for rejection of books of account. i) Triveni Pharma V. Income Tax Officer (2005) 142 Taxman 46 (Jaipur) (TM) (MAG) No objection, whatsoever was raised by the Assessing Officer that valuation of closing or opening stock was not available with the assessee. Thus, it was unnecessary for the Tribunal to get involved in the controversy not raised by the Assessing Officer. The Assessing Officer further did not challe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to such a material as would lead to the conclusion that the account books were incomplete or inaccurate. Similarly, if the rate of gross profit declared by the assessee in a particular period is lower as compared to the gross profit declared by him in the preceding year, that may alert the Assessing Officer and serve as a warning to him, to look into the accounts more carefully and to look for some material which could lead to the conclusion that the accounts maintained by the assessee were not correct. But, a low rate of gross profit, in the absence of any material pointing towards falsehood of the account books, cannot, by itself, be a ground to reject the account books under section 145(3) . In view of above observations and considering the facts of the case, the view taken by Commissioner (Appeals) is required to be accepted by setting aside the impugned order of the Tribunal . o) Delhi Securities Printers V. Dy. Commissioner of Income Tax, Circle 33 (1), New Delhi (2007) 15 SOT 353 (Delhi) The books of account regularly maintained in the course of business which are duly audited under the provisions of the Act and are free from any qualification by the auditors sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue of genuineness of the purchases and thus the books of account cannot be rejected on the ground of genuineness of purchases. It is essential to indicate that when all the purchases are genuine and correctly recorded in the books of account as well as stock register then the books of account should not be rejected u/s 145(3) of the Act. It is further noted from the record that the assessee claimed that out of total claim of Rs.12,17,48,500/- deposited into bank account in demonetized currency, the amount of Rs.25,96,480/-was realized from its debtors and Rs.11,86,250/- was received as advance from the customers and the ld. CIT(A) in her order treated the entire cash sales and corresponding cash deposit as genuine. Thus the amount received from debtors/ advance from customers cannot be treated as unverifiable and this cannot be a ground for rejection of books of account. We noted from PB Page 163 of the paper book i.e. the list of debtors where total sales to such debtors was amounting to Rs.41,75,995/- against which Rs.13,30,000/- was received at the time of sales and balance Rs.28,45,995/- was outstanding which was receivable from the debtors. It is also observed from the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks of account on the basis of insignificant defects in all respect, is not justified and books of account deserves to be accepted. Before invoking the provisions of Section 145(3) of the Act, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed by it. In the instant case, it was not the case that the assessee had not followed either cash or mercantile system of accounting. It was also not the case that the Central Government had notified any particular accounting standard not followed by assessee. Further the assessee maintains proper books of account audited by Chartered Accountant and the profit may be derived from the audited books of account therefore there is no justification in estimation of income by applying NP rate and accordingly the lower authorities are directed to delete the addition of Rs. 47,72,297/- sustained by ld CIT(A). 21. In the result, the appeal of the revenue is dismissed and the appeal of the assessee is allowed. Order pronounced in the open Court on 29 /09/2022. - - TaxTMI - TMITax - Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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