TMI Blog2023 (10) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... e by unrelated third parties and it is not always within the domain of assessee to enforce attendance of third parties. Nothing adverse need to be imputed in such circumstances, more so, where the payments have been made through banking channel. We see a greater degree of plausibility in the version of the assessee. Action of the CIT(A) is set aside and the additions / disallowances made on this count are cancelled. Unexplained money u/s 69A - Unaccounted cash found in course of search and seizure at the branch office of business premises of the assessee-firm u/s 132 - HELD THAT:- Once the existence of cash sales are reckoned, the source of cash found at the time of premises of the assessee stands recognized. The mismatch appears to have resulted owing to partial coverage of all premises u/s 132 - assessee cannot be blamed for towering failure of the search team to keep the main office out of purview of search action. It is rather inexplicable that only a branch office was covered under search and a statement of partner was regarded as gospel truth despite visible lack of business activities, attendant work force, books, records etc. The claim of assessee that the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent action of the CIT(A) is quite cryptic and mere reiteration of the observations such as no details of purchases, absence of books, etc. Assessee appeal allowed. - Shri Chandra Mohan Garg, Judicial Member And Shri Pradip Kumar Kedia, Accountant Member For the Appellant : Shri Vishal Kalra, Adv. For the Respondent : Shri Anuj Garg, Sr.DR O R D E R PER PRADIP KUMAR KEDIA, A.M.: The captioned appeal has been filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-XXIII, New Delhi ( CIT(A) in short) dated 22.01.2018 arising from the assessment order dated 30.12.2016 passed by the Assessing Officer (AO) under Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AY 2015-16. 2. The revised grounds of appeal raised by the assessee seeking to challenge the first appellate order read as under: 1. Grounds of Appeal No.1 Addition on account of purchases treated as bogus for Rs. 11,21,920/- The Hon'ble CIT(A) has erred in law and on facts in confirming the above addition. The order passed by the Hon'ble CIT(A) is arbitrary, unlawful, unjustified and not founded on facts of the case and is pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not respond to the notice under Section 133(6) of the Act. Dissatisfied with the documentary evidences filed to support the purchases made from these two parties, the Assessing Officer held that purchases made from these parties are not genuine. The Assessing Officer thus held that the purchases made aggregating to Rs. 11,21,920/- (Rs.4,26,620/-+Rs.6,95,300/-) are bogus and consequently disallowed the expenditure incurred by way of purchases from these two parties. 3.2 The Assessing Officer further observed that during the course of search and seizure at the branch office of business premises of the assessee-firm under Section 132 of the Act, unaccounted cash amounting to Rs. 3 crore were found and seized. On being inquired about the source of cash found in the course of search, the assessee pointed out that the aforesaid cash of Rs. 3 crore was accumulated out of cash sales affected during the immediately preceeding period between 05.09.2014 to 21.09.2014 prior to search. The cash sale bills and cash books were produced. It was also submitted that all purchases were made through banking channel. The sales were made both in cheque as well as in cash. The VAT returns, bank statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tnership firm as per partnership deed dated 9/4/2009 as well as PAN records. The ROI also has been filed as per main office address. The main office or establishment was however not covered under survey and search operations by the revenue authorities. It was also brought to the notice of the CIT(A) that the PAN address of the assessee is also that of 1165 Kucha Mahajani, Chandni Chowk, Delhi and the returns of income are also filed from the aforesaid address and the premises at 1167 Kucha Mahajani, Chandni Chowk, Delhi is only a branch office where delivery of sales and purchases are mainly executed. 4.2 The assessee asserted before the CIT(A) that the search was unauthorized and without search warrant and unauthorizedly converted/commenced at mid night at about 11.45 pm and panchnama was drawn at 5.30 am in the morning of 21/09/2014. The books of account of the assessee were claimed to be duly maintained since inception of the firm in FY 2009-10 and such books are kept at 1165 Kucha Mahajani, Chandni Chowk, Delhi [main office] and such books were duly produced before the ADIT soon after the search on 27/10/2014. Another communication letter dated 9/3/2015 was furnished to conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entitled to a great weight. It was essentially noted that neither the books were found nor cash sale bills were found in the course of search. The Partners had also admitted to the non-existence of books and explanation towards cash sales is merely an afterthought to justify the unaccounted cash. The CIT(A) thus invoked doctrine of preponderance of probabilities of normal human behavior and disregarded the contentions raised on behalf of the assessee. The CIT(A) thus endorsed the action of the Assessing Officer and refused to grant any relief to the assessee. 4.12 The CIT(A) also issued show cause notice in terms of Section 251(2) of the Act to enhance the assessed income on account of bullion found and inventorised at the time of search amounting to Rs. 3,13,44,002/- in aggregate. For this purposes, the CIT(A) yet again relied upon the statement of the partner recorded at the time of search. The CIT(A) observed that; the stock found in the course of search were unaccounted and were offshoot of unaccounted cash purchases as deposed by the partner of the assessee; that the reliance placed by the assessee on the books of account and the stock register does not have much credence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stantial, have been purposely brushed aside and the additions and disallowances have been carried out on the basis of unworthy oral statement of partners which were resiled and retracted immediately after search citing coercion and fear. No examination of the partners were carried out by the Investigation wing or by the AO after such retraction of statement deposed in the course of search. 7.1 The ld. counsel next submitted that the bogus purchases alleged on account of suppliers namely, Shri Arun Yadav towards purchase worth Rs. 4,26,620/- and from supplier Ms. Nisha Sharma at Rs. 6,95,300/- have been leveled as bogus and non genuine merely on the ground that notice under Section 133(6) could not be served on one party and not responded by the other party. The ld. counsel submitted in this regard that the Assessing Officer has totally overlooked the fact that confirmations of both the parties were placed on record in the course of hearing before the Assessing Officer. The ld. counsel also submitted that the AO has further overlooked the direct evidences of purchases such as purchase bills as well as the payment through banking channel against such purchases months before the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k register the purchases found through banking channel and the stock was required to have been sold out in part in cash. The stock thus stands tallied only when the cash sales are excluded from the stock. Paradoxically, while the CIT(A) has declined to appreciate the vital evidences, has also enhanced the assessed income by unaccounted stock if the cash sales are rejected then the stock position would go up to the same extent. The CIT(A) on the one hand rejected the cash and on the other hand also seeks to include stock found in the course of search as unaccounted stock. The stand taken by the CIT(A) is thus apparently contrary and reflects total non application of mind. The ld. counsel insisted that the statement recorded under Section 132(4) is not an incriminating material per se and cannot be used as evidence without confronting the same to the assessee. It was insisted that bullion stock found at the time of search was out of purchases duly recorded in the books of account. The date-wise stock register placed in the paper book, bank account statement, complete details of purchases and purchase invoice, copy of cash book, copy of VAT returns, cash sale bills and vouchers as sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment through banking channel. The ld. counsel thus urged that the additions/enhancement on various counts may be reversed and quashed. 7. Per contra, the ld. Sr.DR for the Revenue supported the action of the Assessing Officer and CIT(A). The ld. Sr.DR pointed out that both the authorities have returned the findings in detail towards the circumstances existing in the present case which make the claim of the assessee wholly improbable and unbelievable. 7.1 As regards bogus purchases, the ld. DR pointed out that the onus was upon the assessee to produce the supplier to support the bona fides which has not been done. 7.2 As regards unaccounted cash found in the course of search, the ld. DR pointed out that no sale bills were found at the premises of the assessee. Likewise, no books of account were found at the premises covered under search. The Revenue Authorities have demonstrated that cash book is unreliable and the cash sales declared does not evoke any confidence on the genuineness of the transaction and is an afterthought. The ld. DR also supported the enhancement action having regard to the failure of the assessee to discharge onus to support the bona fides of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hird parties. Nothing adverse need to be imputed in such circumstances, more so, where the payments have been made through banking channel. 9.1.2 In the light of the factual context and balance of probabilities, we see a greater degree of plausibility in the version of the assessee. The issue is thus adjudicated in favour of the assessee. Hence, the action of the CIT(A) is set aside and the additions / disallowances made on this count are cancelled. 9.2 The second issue concerns additions of Rs. 3 crore as unexplained money under Section 69A of the Act. 9.2.1 The propriety of source of cash found at the branch office (1167 Kucha Mahajani. Chandani Chowk, Delhi-6) in the course of survey (and later converted to search) is in question. It is the case of revenue that the assessee could not cogently explain the source of cash so found in the course of search. No books of account, cash sale bills etc. were found in the course of search to support the source. The integrity of purchase and sale quantity data as extracted in the stock register is unknown. The partner of the assessee on the other hand, has rather confessed that the source is unaccounted. Per contra, the assessee su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... j) (f) the statement was thus ostensibly involuntary is not capable of determining the culpability (g) the statement given on 21-09-2014 was retracted soon vide letter dated 5/11/2014 before ADIT(Inv.) in the post investigation proceedings thus unworthy of any evidenciary value(h) the little gap in retraction is owing non availability of copy of statement despite repeated requests to deptt. beginning with 22/09/2014 (i) no cross of the partners were recorded either by the investigation team or by the AO post retraction and thus such beleaguered statement is of no consequence (j) when seen de horse such fallible statements, the revenue is not left with any concrete adverse material except resorting to surmises and conjectures (k) the information not yielded on the existence of main office by partners, may, at worst be regarded as somewhat immoral but law is different from morality and outweighs such considerations; the assessee is not expected to advert the facts which were otherwise conspicuously present on the record of the deptt. (l) the assessee can not be faulted for the remissness and abject failure of the deptt. to cover the main office to gain access to the bank records, boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c queries appear to have been put with an unstated object to obtain a declaration. Furthermore, it was not difficult for the investigating team to check the record of all addresses available and make enquiries in this regard. It does not stand to reason that the investigation team in a search action of colossal nature would readily agree to a complete non existence of books without exerting himself on the factum of turnover reported over years, auditing of books in the preceding years. A bare glance at the statement gives an impression that the search team has closed the statement after extracting confession of declaration in gross breach of CBDT Instruction F.No.286/2/2003-IT (In) dated 10.03.2003 which bars addition on the basis of confession. It manifest that some generic and half baked questions were put to the deponent which renders such statement highly fragile notwithstanding the allegation of duress etc. The statement of other partner Mr. Kaushal Gupta, obtained in similar circumstances, is merely in the nature of endorsement of the earlier statement of key partner Kailash Chand Varshney without traces of independent inquiries. The underlying purpose implicitly was to obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, on 05.11.2014, 09.03.2015 and 17.10.2016 wherein it was disowned on the grounds of factual inaccuracies and wrong assertions. The books of account so produced in the course of the assessment reflects generation of cash from sale of stock acquired from purchases carried out through banking channel. To augment its case, the assessee also contends that total sales made by the assessee in the instant assessment year was Rs. 792.10 crore out of which total cash sales stands only at Rs. 7.61 crore. The ld. counsel contends that adverse inference drawn by the Assessing Officer that cash sales prior to September, 2014 was merely Rs. 88,39,145/- whereas in the month of September, 2014 total cash sales recorded was Rs. 3,64,39,043/- and thus such cash sales appears to be non genuine is wholly misconceived and contrary to the facts. The total sale made by the assessee from 1st April, 2014 to 4th September, 2014 is Rs. 362.16 crore which includes Rs. 88.39 lakh cash sales. The assumption of the Assessing Officer that prior to 4th September, 2014 there was total sale of Rs. 88.39 lakh is thus contrary to the record. The VAT return filed by the assessee towards reflecting sales made also su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being subject to tax audit under Section 44AB of the Act, VAT returns etc. The reduction in the stock on account of such sales also vouches the claim of the assessee. 9.2.7 We are thus of the view that the action of the revenue authorities to make additions towards unexplained cash sales under s. 69A is without any sound basis and hence cannot be countenanced in law. 9.3 Ground No.3 concerns the allegation of the CIT(A) towards bullion stock found at the branch premises of the assessee in the course of search to be acquired out of unexplained source and consequent enhancement of Rs. 3,13,44,002/- to this effect carried out by the CIT(A). 9.3.1 In the first appeal by the assessee against the order of the Assessing Officer, the CIT(A), in exercise of its power under s. 251(1)(a) issued show cause notice to the assessee seeking to enhance the assessed income by Rs. 3,13,44,002/- under Section 69A of the Act towards stock (gold and silver bullion) found at the premises of the assessee at the time of search on its branch office at 1167 Kucha Mahajani, Chandni Chowk, Delhi-6 alleging that such stock remained unrecorded in the stock register and is in the nature of unexplained ..... 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