TMI Blog2023 (8) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances, we hold that the ld. CIT(A) has rightly deleted 80% of the addition made on account of alleged bogus purchases and wrongly confirmed 20% of the same purchases without any basis. We find that the assessee has duly discharged the onus placed upon the assessee regarding proving genuineness of the purchase. - Decided in favour of assessee. Unexplained Cash Sales/Cash Deposits - Assessee has deposited cash during the period of demonetization and has not able to substantiate with cogent reasons and documentary evidence about the source of cash - CIT(A) restricted part addition - HELD THAT:- As at the time of demonetization i.e. on 08.11.2016 there was not much variation in the cash sales/turnover of the assessee company in comparison to the preceding years. Explaining the fluctuations, the ld. AR submitted that the assessee company had cash in hand balance as low as Rs. 11,16,165/- as on 06.05.2016 and as high as Rs. 2.97 crores as on 10.08.2016 and Rs. 1.74 Crores as on 24.09.2016. Based on these amounts, it was not for the first time that the assessee had held cash in hand balance of Rs. 3 Crore or Rs. 4 Crores. In fact, in the year under consideration th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w and on facts. 2. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the order of the AD rejecting the contention of the assessee that reopening the assessment under Section 147 of the Act and consequent reassessment without complying with the statutory conditions and the procedure prescribed under the law are bad and liable to be quashed. 3. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the order of the AO rejecting the contention of the assessee that the reasons recorded for reopening the assessment does not meet the requirements under section 147 of the Act, bad in law and are contrary to the facts. 4. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the reopening ignoring the fact that there is no live nexus between the reasons recorded and the belief formed by the assessing officer. 5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming action of the AO despite that assessment order having been framed on the basis of mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, both on facts and in law in confirming the addition on account of bogus purchases, despite their being adequate material and evidences brought on record by the assessee before the AO to show that the purchases and sales were made in the regular course of business. 12. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that AO has erred in not taking the allegation to the logical conclusion after having held that purchases are not genuine it's the obvious implication would have been made that sales are also not genuine. 13. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that reasons recorded by the AO are contrary to the report received by it whereby it was clearly stated that purchases made by the assessee are actual purchases and hence there was no reason to believe that income has escaped assessment. 14. (1) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs 2,12,316/- made on account of commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition, despite the fact that the assessee has regularly maintained complete stock records, books of accounts are audited as per law and nothing adverse were pointed out both by the AO as well as CIT(A) 4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition, despite the fact that the amount has already declared by the assessee as cash sales and the action of the learned AO will tantamount to double taxation of the same amount. 5. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the learned AO in charging the income of Rs. 1,23,77,599/- already offered by the assessee as discrepancy in stock under section 68 read with section 115BBE of the Act. (ii) That the above action of the learned CIT(A) is invalid in total disregard to the fact that the additional income was on account of discrepancy in stock found during the course of survey and is the business income of the assessee and hence cannot be c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the cash in hand as on 8th November, 2016 was shown at an abnormal increase of about Rs. 3.40 Crores which was equal to cash sales of about 18 days' iv. The Ld. CIT(A) has erred on facts and in law in deleting the addition ignoring the facts of the case that the assessee has shown big increase in sales on 8th November 2016 in a single day resulting into increase in the cash-in-hand whereas it could not submit complete copy of cash account with narration of entries and details of persons from whom the cash had been received in the required format. v. The Ld. CIT(A) was not justify in law in overlooking the modus operandi adopted by the assessee to take benefit of the situation and circumstances arised due to demonetization wherein the assessee just managed artificial entries of cash sales which is nothing but part of a colorable device, as held by Hon'ble Supreme Court in the case of Mc Dowell Co. Ltd. Vs CTO 154 ITR 148(SC), to bring the unaccounted cash into the books of account. 7. With regard to the reopening u/s 147, we affirm the order of the ld. CIT(A). 8. The assessee filed its return of income u/s 139(1) on 23.09.2010 declaring an income of Rs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are engaged in the business of providing accommodation entries and bogus purchase bills. The statements of Sh. Lunkaran Parasmal Kothari, Sh. Anil Khichda and Sh. Ritesh Siroya were recorded u/s 131 of the Act on 06.10.2013, 06.10.2013 and 04.10.2013 respectively. They all concurred in the whole modus operandi of issuing bogus purchase bills to parties. It was also revealed that Bhanwarilal Jain Group comprises of about 70 companies who are engaged in booking bogus sales in their books, thereby providing bogus purchase entries to its customers. The firms mentioned below viz., M/s Rajan Diamonds, M/s Mayur Exports and M/s Mukti Exports figure in the list of group firms/companies of Bhanwarilal Jain Group. Consequent upon the search operation, information was received from the Director of Income Tax (Investigation)-II, Mumbai regarding bogus purchase entries provided by Bhanwarilal Jain Group to M/s Neha Jewellers Pvt. Ltd., 1170, Kucha Mahajani, Chandni Chowk, Delhi. As per the information, the bogus purchase entries provided to M/s Neha Jewellers Pvt. Ltd. by the group concerns of Bhanwarilal Jain Group for the Financial Year 2006-07, relevant to the Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase of diamonds. 12. Thereafter, the AO issued statutory notice u/s 143(2) dated 26.05.2017. The AO issued notice u/s 142(1), wherein the Ld. AO has asked the assessee to submit the details in respect of purchase made from following parties: Megha Gems Navkar India 13. The assessee vide reply dated 10.08.2017 submitted the details of the above 2 parties from whom the purchases were made by the assessee. The assessee stated that it was not aware about any of those statements and asked for the copy of the statement of Bhanwar Lal. Thereafter, the AO vide notice u/s 142(1) dated 10.10.2017 asked to file various details in respect of these 2 parties to whom assessee has purchased the material during the year under consideration. The assessee vide reply dated 06.11.2017 also submitted the following documentary evidences to prove the genuineness of the transaction: i. Ledger A/c in the books of the assessee. ii. Copy of purchase Bill and Purchase Account. iii. Stock Ledger in the books of assessee. iv. Bank statement of the assessee highlighting the payment made for purchase. v. Sales Ledger of the assessee showing sales of the goods purchased from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of accounts of the assessee. Further, as the payment for purchase has been made through proper banking channels. 16. The AO after considering the entire facts and the statement of Sh. Bhanwarlal made addition of Rs. 2,12,31,648/- by the treating the purchases made by the assessee from Megha Jems and Navkar India as bogus purchases. The AO also made an addition Rs. 2,12,316/- i.e. 1% of Rs. 2,12,31,648/- as commission paid. 17. Aggrieved by the order of the AO, the assessee filed an appeal before the ld. CIT(A). 18. The ld. CIT(A) in his order at PB Pg 46 para 5.5.10 observed that assessee has demonstrated beyond doubt that it has indeed made purchases and therefore the genuineness of purchases cannot be doubted, however the Ld. CIT(A) assumed that purchases has been made from grey market and the assessee has obtained bogus purchase bill from Bhanwarlal Jain and therefore the Ld. CIT (A) confirmed the addition of Rs. 42,46,330/- i.e. 20% of Rs. 2,12,31,648/-. 19. Aggrieved, both the Revenue and the assessee are in appeal before the Tribunal against the order of CIT(A). The revenue filed appeal against the deletion made by the ld. CIT(A) on account of bogus purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer and submitted all the details required by the Assessing Officer. The Assessing Officer has not raised any concern whatsoever regarding the identities of parties or about the authenticity of the documents submitted by the parties directly to the AO in the response to the notice under section 133(6) of the Act. the Id.AO did not make any further enquiry and just passed the adverse order against the assessee. The assessee has made purchases from M/s Megha Gems which is the proprietorship concern of Sh, Mitesh Pamecha and M/s Navkar India which is the proprietorship concern of Sh. Abhishek Lodha who have not given any such statement where they would have admitted being employees of Sh. Bhanwarlal Jain and providing accommodation entry. Infact, Sh. Mitesh Pamecha and Sh. Abhishek Lodha, have provided confirmations and affidavit to the assessee confirming that the purchases were actually made and are totally genuine. During the course of search operation in the case of assessee in the year 2014, the business operation of the assessee company were verified by the search party. The block period covered in said search included the year under consideration. Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining confirmation letters in the form of affidavits from all the suppliers. The AO has done independent enquiry during the course of assessment proceedings by issuing notices u/s 133(6) of the Act to all the suppliers. We notice that the notices were duly served upon the suppliers and they have also responded by filing their replies duly confirming the transactions. The AO has rejected the replies by observing that the replies lacked details and they did not mention about the nature of transactions. In our view, the said observations are vague in nature. On the contrary, a perusal of the affidavits furnished by the suppliers would show that they have confirmed the sales affected by them to the assessee. Further they have also verified and signed the ledger account copies as available in the books of account. When the suppliers confirm that the transactions of sales made by them to the assessee are genuine, that too, in response to the notices issued by the AO u/s 133(6) of the Act during the course of assessment proceedings, in our view, the said replies cannot be rejected without bringing on record any material to show that they are not true. We notice that the AO did not bring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and documentary evidence about the source of cash. 29. The ld. CIT(A) restricted the addition of Rs. 4,58,30,000/- to Rs. 2,63,34,940/-. Aggrieved with the order of the ld. CIT(A), the assessee filed appeal against the confirmation of Rs. 2,63,34,940/- and the revenue came in appeal against the deletion of Rs. 1,94,95,000/-. 30. Heard the arguments of both the parties and perused the material available on record. 31. Before us, the ld. AR argued that where assessee has filed its submissions and placed evidence on record, then it is the duty of AO to act fairly as a reasonable person and examine the fact of the case in the light evidence available and should not come to a conclusion on the basis of surmises and conjectures. 32. It is a fact on record that out of the total cash deposits, an amount of Rs. 48,35,500/- pertains to deposit of new currency note on various dates from 06.12.2016 to 30.12.2016 in State Bank of India A/c No. 31021809029 and in A/c No. 000026426830019 Deutsche Bank. The deposit on 10.11.2016 of specified currency note was to the tune of Rs. 4,10,00,000/- in the State Bank of India A/c No. 34355670650. 33. It is a fact that cash deposits during t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency. It was argued that on perusal of the above facts it can be clearly noticed that the deposits made in new currency was nowhere unexplained, since assessee had submitted all the details pertaining to the same including name and address of the buyer, amount received in new currency alongwith invoice number against which said amount was received, it cannot be treated as undisclosed income. 34. It was further argued that vide note no. 28- Disclosures on Specified Bank Notes, of audited financial statement of the assesse wherein the details of specified bank notes and new currency notes held and transacted during the period from 08.11.2016 to 30.12.2016 is given. On perusal of the same, it can be found that the assesse has deposited Rs. 4,10,00,000 only in demonetized currency and balance amount of Rs. 48,34,500/- was deposited in new currency. Therefore, it was argued that addition to the extent of cash deposited in new currency notes amounting to Rs. 48,34,500/- is liable to be deleted. 35. The ld. AR argued that the cash sales have been made to the extent of Rs. 8,14,975/- on 08.11.2016 to identified parties having PAN and assessee has given including name, address, PAN of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20,600,000 March, 2017 79,895,800 60,342,902 19,552,898 22,600,000 Total 201,366,742 137,447,164 63,919,578 64,034,500 Average of four months 50,341,686 34,361,791 15,979,894 16,008,625 37. Based on the factual presentation of the business affairs, the ld. AR argued that even after demonetization the assessee had made total sales of Rs. 20.13 Crores which includes credit sales of Rs. 13.74 crores and cash sales of Rs. 6.39 cores in the months of December, 2016 to March, 2017. The ld. AR also submitted the details of sales and cash deposits of the pre demonetization period of the assessee company which is as under: Month Total Sales Credit sales Cash Sales Cash Deposits Apr-16 5,380,720 1,802,233 3,578,487 15,000,000 May-16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17670400 19000000 29244092 27100000 3578487 15000000 23885405 21500000 May 9911408 8600000 21225517 17500000 13133525 12000000 21128693 23900000 June 14944316 14600000 15986339 19300000 23187447 3600000 53265768 51150000 July 22806590 18250000 26203657 25200000 16897760 11050000 24412886 26705000 August 24303509 21550000 29494804 33000000 16857742 43800000 24095760 24700000 September 35666106 33600000 31158370 28200000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unch in the market during the post demonetization period. the cash sales made in the pre demonetization i.e. April, 2016 to October, 2016 is Rs. 15.29 Crores in comparison to Rs. 19.52 crores in the preceding year (April, 2015 to October, 2015) did not have much variation, the variation was only 21.67%. However, if we look at the post demonetization period cash sales i.e. from December, 2016 to March, 2017 the same was Rs. 6.39 Crores in comparison to Rs. 16.53 Crores in the preceding year in the same period (December, 2015 to March, 2016) the variation was 61.34%. Accordingly, it can be said that it was the post demonetization period which has contributed to the decline in overall cash sales in the year under consideration in comparison to the preceding year. It can further be derived from this analysis that at the time of demonetization i.e. on 08.11.2016 there was not much variation in the cash sales/turnover of the assessee company in comparison to the preceding years. 40. Rebutting the arguments of the AO that the average monthly cash in hand balance in the preceding year was Rs. 75,00,000/- however, as on 08.11.2016 the assessee had abnormal cash in hand balance of Rs. 3.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth Cash Deposit in Diwali Month Total Cash Deposits in FY 2015-16 November 5,48,98,674 5,40,00,000 40,25,00,000 2016-17 October 5,23,19,725 5,40,00,000 28,04,84,500 43. We also find that the ld. CIT(A) has rightly deleted the amount of Rs. 1,94,00,000/- owing to proving the details of all the parties with name and PAN number. On going through the cash sales and cash deposits in the month of December 20116, January 2017, February 2017, March 2017 which has reflected cash sales of Rs. 32 lacs, Rs. 1.76 Cr., Rs. 2.3 Cr., Rs. 1.9 Cr. totaling to Rs. 6.39 Cr. in a period of four months which has been accepted by the Revenue. Further, the comparison of cash sales from the month of April 2016 to October 2016 reflected total cash sales of Rs. 15.29 Cr. which was also accepted by the Revenue. Further, the total cash deposits in the F.Y. 2014-15 was Rs. 27.53 Cr., F.Y. 2015-16 was Rs. 40.50 Cr., F.Y. 2016-17 was Rs. 32.39 Cr. and F.Y. 2017-18 was Rs. 32.90 Cr. approximately. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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