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TMI Blog2023 (5) TMI 572X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was selected for scrutiny through CASS on account of "Low net profit shown from large gross receipt". The assessment was completed u/sec 143(3) of the Act at income of Rs.15,95,44,120/- i.e after making an addition of Rs. 15,65,41,118/-by rejecting the audited books of accounts of the assessee. Appeal was filed before the ld. CIT(A) against the order of the AO. The ld. CIT(A) partly allowed the appeal. The addition was restricted amount to Rs. 15,54,20,000/- against the assessee. Being dissatisfied on the order of appeal, the assessee has agitated the grounds before us. The status of the issues on account of which additions were made by the ld. AO is as follows: S.No Issues on account of which additions have been made Amount (Rs.) CIT(A) ITAT 1. Rejection of books of accounts u/sec 145(3) of the Act NA Ground Rejected In appeal 2. Introduction of own cash by showing bogus sales (Addition made u/sec 68 r.w.s 115BBE of the Act) 15,54,20,000/- Ground Rejected In appeal 3. Applying GP rate of 11.87% (But the addition of Rs. 2,72,17,362, were covered by the AO in addition of Rs. 15,54,20,000/- and no separate addition was made) NA 4. Disallowance of expenses (1/4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Co-operative Bank, Jalalabad & the same cheque books were handed over to. the said persons after duly signing on it. Against the such activity, I received Rs 1 lakh per annum from the said persons. Sir, I have never deposited a single penny in my account in the Fazilka Central Co-operative Bank, Jalalabad. I have never withdrawn any amount from the said Bank. The Bank was operated but the said party i.e. M/S Ganesh Rice Mills' itself Q: Please state why the such transactions have been made by you in lieu of a penny amount. Do you know that such transactions are illegal & even leads to prosecution? Ans: Due to financial crisis and to meet both ends. I do not know the consequences of the transactions made by the said party. Q: Have you made any purchases from M/S Ganesh Rice Mills, Mukatsar during the financial year 201314 and onwards? Ans: I have not made any purchases from M/S Ganesh Rice Mills, Mukatsar during the financial year 2013-14 & onwards. Sh Rajesh Dhawan also filed an affidavit, confirming his above depositions during the course of assessment proceedings. The statement of Sh Rajesh Dhawan and his affidavit were duly confronted to the assessee and copie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf on various dates- S.S. Enterprises, Jalalabad Rs.3,62,93,300/- Narinder Joson& Co., Jalalabad Rs.6,11,56,000/- Amrinder& Sons, Jalalabad Rs. 2,00,00,000/- Gurkirat Enterprises, Jalalabad Rs. 2,00,00,000/- Nawab Trading Rs. 1,07,06,700/- Josan Food Pvt. Ltd., Rs. 2,00,00,000/-" The ld. Counsel, Mr. Sehgal further placed the observation of the ld. CIT(A) in appeal order page-11& 12 "4.3 I have given careful consideration to the above and find that the question of bogus sales and consequential sale amount finding entrance into books of account was under consideration of Hon'ble jurisdictional High Court in the cases of Self Knitting Works Vs. CIT [20141 51 taxmann.com 137 (P & H) and CIT vs. Sanjay Chhabra 120121 21 taxmann.com 221 (Punjab & Haryana). It has been concluded and adjudicated in these cases that in the event where any assessee fails to establish the sales as a transaction, thereafter any amount found credited in the books of account of the assessee would be treated as unexplained cash credit. In the present case, the appellant has not come forward to substantiate the claim with the help of independent evidence that the sales transactions were gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debited to profit and loss account as an ad hoc addition. In the course of appellate proceedings it has been vociferously contested that the addition has been made by the Assessing Officer without any justification and pointing out the defect. I have given careful consideration to the contention above and also read the relevant part of assessment order. The Assessing Officer without pointing out any defect in the claim of the appellant has disallowed the expenses on surmises and conjunctures. It is settled principle of law that the claim expenditure cannot be denied until and unless it is proved that either the claimed expense is bogus or not for the purposes of business. The Assessing Officer has not based his disallowance on any independent enquiries; therefore such addition cannot be sustained and hence deleted. The ground of appeal is allowed. 7.0 Ground of Appeal no. 8: In the assessment proceedings, the Assessing Officer made an addition of Rs. 1 lakh being unexplained expenditure incurred by the appellant being the payment made by the assessee company to above-mentioned Sh. Rajesh Dhawan for opening a bank account in the name of Vasudev Sales Corporation for facilitatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciples of natural justice because adequate opportunity to meet the case made out in the notice was not given to the appellant. 7. Having regard to the statutory limit within which the appropriate authority has to act and his failure to act in conformity with the principles of natural justice, we do not think we can remand the matter to the appropriate authority. We must set his order aside. 8. The appeal is, accordingly, allowed. The judgment and order under appeal is set aside. The order of the appropriate authority dated 31-5-1993 is quashed." M/s. Fortune Metaliks Ltd. in ITA No. 82/Chd/2021 for A.Y. 2016-17 The self-serving statement and affidavit of Shri Rajesh Dhawan Prop. M/s Vasudev Sales Corp. by itself does not establish that whatever has been stated by him is true and whatever has been stated by the assessee is not correct so long as such depositions are not supported with documentary evidence. It is a matter of common knowledge that no person who is engaged in the business for about 20 years would open a bank account at the instance of two ordinary persons and hand over blank-cheque book to the assessee after affixing his signatures. There is also no evidence on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the case of the Assessee. The amount of Rs. 15,54,20,000/- pertains to the sales as made by the assessee to M/s Vasudev Sales Corporation. The entire amount has been received by the assessee through banking channels. The assessee is not concerned about the bank account of M/s Vasudev Sales Corporation. If cash has been deposited in the Bank account of M/s Vasudev Sales Corporation, it would not mean that the cash belongs to the assessee as the amount has been received by the assessee after the deposit of cash by the party. The question regarding the source of cash and the applicability of the provisions of sec 68 of the Act must only be in the hands of the M/s Vasudev Sales Corporation and not in the hands of the assessee. The assessee is maintaining regular books of accounts and such amount of sales have been recorded in the regular books of accounts. The ld. AO has only doubted the cash as deposited in the books of M/s Vasudev Sales Corporation and has linked the same with the assessee. The assessee has only realised his Debtors against the sales made by the assessee. 4.1. The ld. Counsel, Mr. Sehgal further argued that the ld. AO has not at all doubted the Opening stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew is possible, would not constitute a basis for us to reverse the findings after re-appreciating evidence. In that regard; we place reliance on a judgment of Hon'ble the Supreme Court in the case of Santosh Hazari v. Purushottam, Tiwari [2001] 251 ITR 84. Therefore, we are of the view that no opportunity is provided to set aside the findings recorded by the Tribunal that the amount of Rs. 13,56,000 has been deposited by the sons of the assessee, which was realized after selling the pilferage stocks outside the books of account. There is no merit in the appeal as no substantive question of law for its admission would arise." 4.3. In argument, it is placed that the assessee is even liable to provisions of VAT and the book results of the assessee have even been accepted by the Sales Tax/VAT department. Even at the time of survey proceedings, the department has accepted that the closing stock as on 31.03.2016 had been sold before the survey. So, the stock as on 31.03.2016 has again been accepted by the department at that time. Further, the department had even recorded the statement of the partner of the assessee, Sh. Pushpinder Singh, wherein again the trading in between the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chance to cross examine has been given to the assessee. It has also been held that the ld. AO cannot make such additions only on the basis of surmises and conjectures: - i) Shri Sanjay Singhalvs DCIT in ITA No. 708,710,711/Chd/2018 order dated 20.09.2021 ii) Parkash Chand Kothari vs. DCIT as reported in 94 ITR (Trib.) 49 Jaipur Bench iii) Great India Steel Fabricators in ITA No. 746/Chd/2014 dated 03.03.2017 vii) CIT, Delhi vs. SMC Share Brokers Ltd. (2007) 288 ITR 345 (Del) The observation of the Hon'ble Delhi High Court is extracted as below:- "6. Learned counsel for the revenue relied upon One-up Shares &Stock Brokers (P.) Ltd. v. R.R. Singh, CIT [2003] 262 ITR 2751 to contend that the statement of Manoj Aggarwal had evidentiary value, as observed by the Bombay High Court. There is no doubt that the statement of Manoj Aggarwal had evidentiary value but weight could not be given to it in proceedings against the assessee without it being tested under cross-examination. In the absence of the statement being tested, it cannot be said that it should be believed completely to the prejudice of the assessee. Under the circumstances, we do not think that the judgment relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is not missing but the party is denying the purchase as he has deposited cash in the bank account to make payment to the Assessee. * No cash has been deposited in the bank account of the Assessee. * If any cash has been deposited by M/s Vasudev Sales Corp, the question of source of the said cash must have been done from him. * The Assessee has received sale amount through banking channel and the same cannot be doubted. CIT vs Sanjay Chhabra 21 taxmann.com 221 (P&H HC) Assessee was engaged in business of a commission agent and derived income by way of commission from sale of vegetables and fruits on behalf of farmers and traders - During course of survey at business premises of one J, it was found that assessee had made certain sales of apples to J - Since sale was not verifiable, Assessing Officer made addition of amount of sale to income of assessee as unexplained investments under section 69 - On appeal, Commissioner (Appeals) deleted said addition holding that only commission on sales made to J could be added to assessee's income - Tribunal upheld order of Commissioner (Appeals) - Whether since assessee was unable to show that amount of sales was either entered in boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inally added back to the total income of the assessee. The books of accounts are rejected u/s. 145(3) of the Act without finding any lacuna in the books of assessee. We respectfully relied on the order of the jurisdictional High Court in the case of CIT vs. Om Overseas & Hon'ble high Court of Chattisgarh ACIT Vs. Roopchand Tharani, supra to find that there is no specific discrepancy for rejecting books of accounts by the assessee u/s. 145(3). So, grounds taken by the assessee- in this context is fully allowed. 6.2. Related to the addition on the basis of statement of the party is uncalled for. The assessee was not allowed to cross examination of the party before the addition. We respectfully relied on the order of the Hon'ble Apex court in the case of Sona Builders &Andaman Timber Industries, supra. The reasonable opportunity for the assessee was denied without allowing cross verification of the party. The assessee already informed and prayed to the revenue for the said verification of the party who had made the statement against him. The revenue relied on the judgement in the appeal order which was confronted by the ld. Counsel for assessee in the submissions, During the hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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