TMI Blog2023 (10) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... el/Petrol Price and on which there is no adverse finding of the ld. AO. Therefore, since the GP is derived from the purchase and sale price difference and are frequent fluctuating, we see no reasons to reject the books merely on this observation. Not only that the bench also noted that the accounts of the assessee are audited and before estimating the GP the book result declared by the assessee is required to be found but the fault mentioned in the show cause notice is not a defect to be sufficient to invoke the provision of section 145(3) of the Act based on the set of facts made available on records. We find from the records that the assessee was given the specific shows cause notice for rejection of the books and even though the order is passed u/s. 143(3) of the Act and not u/s. 144 of the Act. The assessee has already advanced the reasons for low profit and has submitted the details called, ld. AO only requires the books of account which the assessee submitted that not requirement when the assessment is going on in ITBA and the books are audited. The assessment of the assessee completed u/s. 143(3) of the Act. No specific information was called for and ld. AO only insist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CPC, Bangaluru passed under Section 143(3) of the Income tax Act, 1961 (in short 'the Act') dated 09.12.2019. 2. The assessee has marched this appeal on the following grounds:- 1. That action of Ld AO in doing addition while passing the assessment order is bad in law, perverse and against the facts and law. Further action of Ld CIT(Appeal), NFAC in so far as confirming addition as made by Ld AO is absolutely illegal and unjustified in the facts circumstances of the case. 2. That the Ld AO has grossly erred in doing addition of Rs. 8690500/- of cash deposited in his bank account during demonetization period whereas same is arising out of sale of diesel/ petrol and thus Ld AO has grossly erred in appreciating facts of the case by wrongly treating the same as unexplained cash and which may please be please be deleted. 3. That AO has erred in doing trading addition @ 0.90% based on the comparative Gross Profit of preceding year which may please be directed to be deleted. 4. That Ld AO has grossly erred in determination of tax @ 60% by applying the provisions of section 115BBE for the AY 2017-18 whereas substantial provision of section 115BBE has come i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is in lower side in comparison to preceding year. As the gross profit declared by the assessee is decline therefore, the necessary explanation called for from the assessee and asked to produce the same. In absence of the books of account being not presented, trading result declared by the assessee in the opinion of the ld. AO cannot be accepted and therefore, the assessee was given the show cause notice on 01.12.2019 for the case of the assessee for hearing on 04.12.2019. As the assessee did not complied with the notices so issued and did not produced the books of accounts, bills/vouchers for verification and thus the trading result submitted by the assessee not accepted and the books of accounts rejected invoking the provisions of section 145(3) of the Act. Considering the interest of the justice and the past trend ld. AO applied Gross profit @ 2.8 % as shown in A. Y. 2016-17. Based on this the addition on account of the lower G.P. to the extent of Rs. 4,60,052/- was made in the total income of the assessee. 3.3 Further, as per information available on record, the assessee has deposited cash of Rs. 74,35,500/- in the bank account no. 3420787121 maintained with the State B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O issued a final show cause notice dated 01.12.2019 as appearing under para 1 of the assessment order. The AO also required the assessee to produce complete books of accounts along with bills and vouchers which were not produced. 6.2.1 The AO under para 3 of his order observed that the GP for the AY 2017-18 @ 2.3 % was less in comparison to preceding year GO of 2.8 %, thereby the assessee was required once again to produce the complete books of account but assessee did not complied. In the absence of books of account for verification the AO rejected the trading result submitted by the assessee by invoking the provisions of section 145(3) of the Act and applied a GP @ 2.8% as shown by the assessee for the preceding AY 2016-17. Further, in the absence of any explanation in respect of source cash deposit in bank accounts, the AO added the cash credit of Rs. 80,90,500/- u/s 68 of the Act Aggrieved by the order the assessee has filed this appeal. 6.3 Ground no.1 of the appeal is on the issue of addition of Rs. 86,90,500/-. Since the only issue involved is of addition made u/s 68 on account of unexplained money found credited in the bank account of appellant. It is imperative to lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity of creditors, their creditworthiness and genuineness of transactions. 6.8 While examining the issue of genuineness of the transactions entered into by the assessee, it is also important to keep in mind Hon'ble Supreme Court's observation, in the case of CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)]. to the effect that Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities . 6.9 Similarly, in a later decision in the case of Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)]. Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities............Similarly the observation..........that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... credits in books / bank account maintained for any previous year. Thus, the very sine qua non for making of an addition under Section 68 pre supposes a credit of the aforesaid amount in the books / bank account held for the previous year. This is the settled position of law that a statutory provision has to be strictly construed and interpreted as per its plain literal interpretation, and no word howsoever meaningful it may so appear can be allowed to be read into a statutory provision in the garb of giving effect to the underlying intent of the legislature. 6.12 Having considered entire facts of the case, and the case laws cited above, it is apparent that the appellant has completely failed to offer any explanation either before the AC during assessment proceedings or before me during appellate proceedings, despite affording sufficient number of opportunities and hence, I find no infirmity in the order of AO. Accordingly, the addition made of Rs. 86,90,500/- is confirmed. As a result, appeal is dismissed. 7. Ground no. 2 is in respect of rejection of books of accounts. As can be seen the AO has rejected the books of accounts after observing a fall in the GP results of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any contrary evidence on record and same is treated as unexplained credit u/s.68 of IT Act whereas there is no iota of evidence have been brought on record by Ld AO to treat the same as unexplained and further provision of section 115BBE is also invoked and which is absolutely illegal and unjustified in the facts circumstances of the case. That summary position of cash deposit during demonetization period is given as below:- PARTICULARS Amount (In Rs. ) f/year 2015-16 Amount (In Rs. ) f/year 2016-17 Opening cash balance as on 8.11.2016 825001.00 5206068.00 Add: Cash received on sale of petrol/ diesel in November, 2016 5614520.00 6960972.00 Add: Cash received on sale of petrol/ diesel in December, 2016 3955328.00 5033603.00 Less: Cash deposited in bank in November, 2016 5164990.00 9788800.00 Less: Cash deposited in bank in December, 2016 5444850.00 4729113.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Outward Qty. MONTH Inward Qty. Outward Qty. Nov.2015 HSD diesel 114000 109752 Nov.2016 163000 159259 Dec.2015 HSD diesel 65000 71967 Dec.2016 69000 66875 Stock register is annexed as Annexure-D(ii). That on going through with above comparison chart it is crystal clear that there is higher quantity of diesel purchase and sold during the months of November-December, 2016 then in comparison to November-December,2015. Thus accordingly there is quiet justification about cash collection and deposition in the bank account by the appellant. It is to submit that petrol/diesel are sold at their pre determined prices and no higher price can be collected from any of buyers, thus there is no way to manipulate stock quantities and its sale price and further more the books and stock record are under regular check by D.S.O. and by HPCL. Thus action of Ld AO in contending about deposition of cash du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssly erred in doing rejecting the books of accounts by invoking provision of section 145(3) and has made GP addition @ 0.50% without any basis. That sale price of petrol/diesel are fixed by HPCL and there is no control over those prices and on which fixed percentage of commission are given to dealer by HPCL. That to maintain fixed/permanent customers discount in form of lowering of sale price are required to be given and thus there is no chance and mechanism to charge/ collect higher sale price then offered by supplier company. That comparative turnover and GP Chart are given as below:- AY Turnover (Rs.) Gross Profit G.P. ratio 2016-17 79191895.00 2219555.00 2.80% 2017-18 91298333.00 2096301.00 2.30% That there is turnover hike by Rs. 12106438.00 during the impugned period and to get increase in sale, it is inevitable to reduce GP to achieve higher turnover. (ii) That Ld AO has erroneously rejected books of accounts on the reason that no stock record has been produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never be retrospective in nature and become effective only after getting assent from President of India i.e. on dt. 15.12.2016 and there can not be two rate of tax in one year, thus it is made effective w.e.f. 01.04.2017 only. (copy of order enclosed) PRAYER 1. It is humbly requested to delete addition made into total income of Rs. 8690500/-. 2. Addition made by doing GP addition may please be deleted. 5.1 The ld. AR of the assessee relied upon the following evidences in support of the contentions so raised:- Sr. No. Particulars Page No. 1. Written submissions to the Hon ble ITAT 1-5 2. Form No. 36 (memo of appeal before ITAT) 6-8 3. Order of CIT(Appeals dt. 09.01.2023 9-14 4. Form no. 35 with Grounds of appeal 15-17 5. Assessment order dt. 09.12.2019 18-23 6. Copy of License issued by HPCL (annexure-A) 24- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication, the appeal order is passed and which is absolutely illegal and unjustified in the facts circumstances of the case. The screen shot of adjournment application as filed on IT portal is enclosed herewith as Annexure-1. 2. Thus looking factual aspect of the case the above documents which are in form of additional evidences are crucial and which justifies that there is regular maintenance of stock record on day to day basis and which is also audited by the HPCL, thus in these circumstances there is no room for getting deposition of cash in guise of sale collection of petrol/HSD. 3. That the Hon'ble Tribunal has discretionary powers to entertain the additional evidence and for which it is humbly requested to kindly consider and allow additional evidence on record. That in support of our contention below judgements are being submitted. (i) That Hon'ble ITAT, Jaipur Bench in the case of Rajendra Pathak Vs. Asstt. DIT (2015-124-DTR-337) has held that Whatever evidences filed along with the prayer go to the root of the cause, we consider that these documents are required to be filed and to be considered for disposal of this appeal and thus additional evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P.) Ltd. (2013) 351 ITR 57 (Hel-HC) National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC) Ajay Goyal vs. ITO (2006) 099 TTJ 0164 (Jodh-Trib) CIT v. Gotan Lime Khanij Udhyog (2002) 256 ITR 243 ( Raj- HC) ACIT vs. Sandesh Kumar Jain ITA No. 41/JAB/2020 dated 31.10.2022(Jabalpur-Trib) 5.4 The Bench directed the ld. AR to file the summary of the cash position as on the date of demonetization, cash sales made on the dates were the assessee permitted to accept the SBN and details of the cash deposit. The said details were submitted on 19.07.2023. The summary of the same is reproduced as under:- May it please be your Honours, That on the previous date of hearing the Hon ble Bench has asked to submit the details of cash collection and cash deposition during demonetization and in compliance thereof the cash Summary during the period of 9.11.2016 to 31.12.2016 are annexed as Annexure-A. That summary cash position is given as below:- Particulars Amount (In Rs. ) Opening cash balance as on 9.11.2016 5116867 Add:- Cash Sales (during 9.11.2016 to 30.11.2016) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermitted to accept the SBN he has deposited the same till 15.12.2016 and therefore, the cash so received by the assessee is against the sale proceeding of the petroleum product by the assessee. The ld. AR of the assessee further submitted that the assessee objects to the figure of the addition of Rs. 86,90,500/- . As the assessee has cash sales during the demonetization period from 09.11.2016 to 30.11.2016 and 01.12.2016 to 15.12.2016 Rs. 46,43,367 and Rs. 21,49,893/- respectively totaling to Rs. 67,93,260-. Whereas the assessee has deposited the cash into the bank account during the demonetization for the three period as tabulated here in below : Cash deposit in bank during 09.11.2016 to 30.11.2016 Rs. 94,38,500/- 01.12.2016 to 15.12.2016 Rs. 21,83,000/- 16.12.2016 to 31.12.2016 Rs. 25,31,500/- Thus, he argued that the ld. AO has not appreciated the correct facts. Since, the assessee permitted to accept the SBN notes for a particular date the same being against the sale proceeds already recorded in the book of account same cannot be again added as unex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hly stock summary was given and there is no adverse remark even the stock is daily maintained the same is given just to confirm and satisfy that the assessee is covered by the essential commodity Act and the assessee without purchase cannot sale the goods and the assessee purchase the goods from HPCL which is not under dispute. The assessee has filed the cash book which is also not disputed by the ld. AO. As regards the addition of GP the ld. AO has not rejected the book results by invoking the provision of section 145(3) and thereby pinpointing the defects in the audited books of accounts. The ld. AR of the assessee further submitted that the assessee being the dealer of the petroleum company and the price being fluctuated and there by the commission also the GP cannot be compared and in fact in this line of business net profit should be compared. 6. Per contra, the ld DR is heard who has submitted as under:- Kindly refer to the subject mentioned above. 2. In this connection it is respectfully submitted that during the hearing of the said case before the Hon'ble bench, the AR of the assessee, vide his paper book dated 06.07.2023 submitted (in para 2 at page no 2 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock register. Therefore the AO has rightly rejected the books of account in absence of the aforesaid details. The Id. CIT (A) has also concurred with the finding of the AO taking into account the non-compliance of the assessee. In the absence of details such as stock register, cash credit u/s 68 was added to the income of assessee upheld by the Ld. CIT(A). 8. The Hon'ble bench is therefore requested to dismiss the appeal of the assessee for mis- reporting, non-compliance and providing false information before the Hon'ble bench and take rightful action against the AR for misleading the Hon'ble Bench. Respectfully submitted for kind consideration. 6.1 The ld. DR in addition to the written submission so filed also submitted that the case of the assessee is not only on the cash deposit. It is on account of demonetization and therefore, revenue has to see all the aspect of the case as it is on account of operation clean money. The ld. AO asked for the books of account which the assessee could not furnish and therefore, even the GP addition should sustain. As regards the contention that the ld. CIT(A) has not granted adjournment, the ld. DR mentioned that the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not accepted by the ld. AO. Hence the books of accounts were rejected invoking the provisions of section 145(3) of the Act and applied Gross profit @ 2.8 % as shown in A. Y. 2016-17. Based on this observation the addition on account of the lower G.P. to the extent of Rs. 4,60,052/- was made in the total income of the assessee. Against this action of the ld. AO assessee is in appeal raising ground no. 3. Since the issue of books of account is required to be examined first, we deal with this ground no 3 of appeal first. On this account the bench observed that the only observation of the ld. AO in the assessment order while issuing the show cause notice dated 04.12.2019 is that the gross profit rate has been decreased in the year under consideration as compared to last year. The explanation was called for, but proper reply not submitted, and no corresponding documents / books were submitted. The bench noted that the assessee is a dealer of the petroleum company i.e. HPCL, as per the agreement placed on record all the purchases are to be made from the said company and the assessee purchases and thereby make sale of the petroleum product which are controlled at predetermined prices. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eason to sustain the same. Hence, the addition made by the ld. AO for an amount of Rs. 4,60,052/- on account of the low G. P. is deleted and the finding of the ld. AO rejecting the book result is not correct. Based on these observations the ground no. 3 raised by the assessee is allowed. 9. As regards the ground of appeal no. 2 raised by the assessee, the bench noted that as per the information available with the ld. AO that the assessee deposited cash of Rs. 74,35,500/- in the bank account no. 3420787121 maintained with the State Bank of India and Rs. 12,55,000/- in the account no. 3241071566 maintained with the Central Bank of India during the demonetization period. Considering that aspect of the case the ld. AO contended that the assessee has deposited a total sum of Rs. 86,90,500/- during the demonetization period and was considered as unexplained cash deposits. During the assessment proceedings the explanation was called for from the assessee vide show cause notice dated 01.12.2019 fixing the case for hearing on 04.12.2019 but the assessee did not comply with the notice. As no explanation regarding the source of this cash deposit appearing in the bank account during the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k account is also emanate from the sale of the petroleum product. The grievance of the revenue that the assessee failed to establish the source of the cash so deposited into the bank account with that of the availability of stock by the assessee. On this aspect of the case, we note the following submission of the ld. DR: In this connection it is respectfully submitted that during the hearing of the said case before the Hon'ble bench, the AR of the assessee, vide his paper book dated 06.07.2023 submitted (in para 2 at page no 2 of the paper book) that Id AO has grossly erred in contending that the appellant has not produced the stock register whereas the same was submitted vide submission letter dt. 27.11.2019 . The assessee has submitted the stock register in annexure-D (page no 134 185) of the paper book dated 06.07.2023. However on perusal of the assessment order it is found that the assessing officer in his order dated 09.12.2019 has categorically mentioned (in para 4 at page no 4 of the assessment order) that the assessee has not furnished any documentary evidences like stock register etc. Therefore, the assessing officer was asked to clarify on this issue vide this off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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