TMI Blog2023 (12) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... seized AO has accepted the business income reported by the assessee on entire sales and on the other hand, out of sales reported by the assessee, the AO has considered sales as trading sales only on the basis of estimation made by him and the rest of the amount has been considered as unexplained money u/s. 69A of the Act, without rejecting the books of account of the assessee, which is not correct. Once the AO has accepted the returned income calculated on the basis of total turnover for the year, the same turnover cannot be treated as unexplained money u/s. 69A . It is interesting to note that the AO has also not applied section 145(3) of the Act. Accordingly, we hold that the entire sales reported by the assessee is the business sales of the assessee relying on the decision of Mahesh Kumar Gupta [ 2023 (3) TMI 1148 - ITAT JAIPUR] Therefore, section 69A will not apply in this case. Since we have held that entire sales is business sales of the assessee, therefore the other grounds raised in appeal and CO are not required to be adjudicated. - Shri George George K., Vice President And Shri Laxmi Prasad Sahu, Accountant Member For the Revenue : Shri Nischal B., Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner of Income Tax [Appeals] failed to appreciate that the entire addition is unsustainable in law as learned Assessing Officer has merely disbelieved the sales of the Respondent / Cross Objector although there were no discrepancies in the purchases, stock or books of account of the Respondent/ Cross Objector on the facts and circumstances of the case. 5. Without prejudice, the learned Commissioner of Income Tax [Appeals] failed to appreciate that the entire cash pertains to the business transactions of the Respondent / Cross Objector and consequently the learned Assessing Officer was not justified in invoking the provisions of section 69A r.w.s 11SBBE of the Act on the facts and circumstances of the case. 6. Without prejudice and not conceding that the cash seized was out of unexplained sources and from the business of the assessee, the sum of Rs. 54,62,298/ - at best shall be treated as profits earned out of business, since there was no other source of income, on the facts and circumstances of the case. 7. The Respondent / Cross Objector craves leave to add, alter, delete, substitute or modify any of the grounds urged above. 8. For the above and other grounds that may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re. The cash was seized and information of such seizure was passed on the income tax department. Upon receipt of information, necessary enquiry proceeding were initiated and statement u/s. 131 was recorded from S. Mahesh on 06.02.2021. Subsequently summons were issued u/s. 131 to the assessee and statement was recorded on 06.02.2021 and the statement of S. Mahesh was endorsed by the assessee and he accepted that the cash seized by Deputy Superintendent of Police belongs to him. However, he failed to explain the source of the cash. In view of the above, warrant u/s. 132(A) dated 06.02.2021 was issued by PDIT(Inv), Panaji and the cash was taken over and deposited in the PD account of the Pr. DIT(Inv.), Bengaluru. Later on the case was assigned to respective Officer. 8. Consequent to search/requisition, notice u/s 143(2) was generated and issued electronically on 01.10.2021 and further notices u/s.142(1) were issued along with questionnaire to the assessee calling for books of account and relevant details. In response to notices issued, the assessee filed copies of ITR-V with statement of computation of total income, statement of accounts i.e., Profit Loss a/c, Balance sheet, Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the AO rejected this contention of the assessee as an afterthought of the assessee to accommodate cash of Rs. 1.48 crores in the form of sales into books of accounts. 11. The AO noted from the month-wise cash sales and both cash cheque/Transfer/Credit Sales (including GST) for the last three years i.e., FYs 2017-18 to 2019-20 and 2020-21 (upto 04.02.2021) that the highest cash sales and highest total sales upto Dec. 2020 was in the month of Feb. 2019 is at Rs. 4,66,295 and Rs. 30,35,999 respectively, whereas the cash sales made in Jan. 2021 Feb. 2021 (upto 04.02.2021) is at Rs. 1,32,37,207 and Rs. 18,44,620 respectively, which is very abnormal and not justifiable and hence rejected the same. The AO also noted the sales bills have been prepared consciously at a stretch and drawn 10 to 13 bills per day through the month of Jan. Feb. 2021 post cash seizure which is an after-thought. He also noted some deficiencies in the sales bills that name of purchaser is not mentioned even in a single bills from Apr. 2020 to Dec. 2020, except in credit sales to small jewellers. In most of the bills, date of sale has not been recorded. Entire sales in Jan. 2021 to 04.02.2021 are in exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was from his regular business source. Suddenly on 11.02.2021, the assessee stated before the ADIT (Inv.) Gulbarga that the cash found was out of its business sales and produced the related documents. The ld. DR submitted that this was an after-thought by the assessee to show that cash seized was from business sales of the assessee. The AO also pointed out some defects in the sales bills in his order. Accordingly, the AO has rightly brought to tax u/s. 115BBE of the Act. He further submitted that the CIT(Appeals) has accepted the additional evidence and re-estimated the GP rate of average sales for the period Jan. 21 to 04.02.2021 which is not on the basis of any credible reasons and granted relief to the assessee without giving opportunity and obtaining comments of the AO. Therefore the CIT(Appeals) has violated the provisions of Rule 46A of the I.T. Rules. The sales bills produced by the assessee are not genuine. He accordingly prayed that the order of the AO should be upheld. 14. The ld. AR reiterated the submissions made before the lower authorities and filed written synopsis as under:- 7. The AO without considering the submissions and documents furnished by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F.Y. 2017-18 to 2019-20 and for the F.Y. 2020-21 upto 04.02.2021. The assessee reiterated the said submissions and furnished supporting documents before the AO. c) The AO did not accept the submissions of the assessee and accordingly rejected the submissions of the assessee that the cash seized represents the sales of the assessee for the months of January 2021 and February 2021 upto 04.02.2021. However, the AO considered the average sales for the months of January and first week of February 2021 for the three F.Ys. 2017-18, 2018-19 and 2019-20 and arrived at a sum of Rs. 17,36,480/- as the actual genuine sales of the assessee for the period 01.01.2021 to 04.02.2021 and gave credit for the same against the total cash seized of Rs. 1,48,00,000/-. Accordingly, computed addition of a sum of Rs. 1,30,63,520/- (Rs. 1,48,00,000/- less Rs. 17,36,480/-) under section 69A of the Act. d) The relevant portion of the assessment order where the AO has estimated the actual, genuine sales of the assessee for the period 01.01.2021 to 04.02.2021 is reproduced below for ready reference 6.6 Year-wise Average Sales for the month of January First week of February are tabulated as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 2021 to justify the same. Copy of the same is at Pages 267 273 of the paperbook. ii) Year 2020 was impacted by Covid-19 pandemic which lead to reduced sales in the initial 6 months of FY 2020-21 due to lockdown and other curbs imposed by the Government from time to time. Consequently, the sales increased due to relaxation of curbs and lockdowns by the end of November and December 2020 and therefore, there was spurt in sales for the period from January 2021. iii) Business in F.Y. 2019-20 to be excluded on account of the assessee having been through a major car accident in the month of June 2019 due to which the assessee was mentally disturbed on account of which the assessee did not undertake major transactions during the F.Y. 2019-20. Copy of the prescriptions issued by doctors are at Pages 274 to 277 of the paperbook. iv) The estimation of sales should be based on the quantity rather than the amount of sales considering the fact that the quantity of sales has increased and coupled with the increase in the gold prices, the sales declared by the assessee was in sync with the estimation, if done based on quantity of sales. i) The CIT(A) after due consideration of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order which is reproduced below for ready reference 5. In response to notices issued, the assessee has filed copy of ITR-V with Statement of Computation of Total Income and Statement of Accounts i.e., Profit Loss A/c and Balance Sheet, Note on nature of business activities and sources of income, List of Bank accounts, Loan account with account extracts, Monthly Purchases Sales, Cash Book, Copy of F.No.26AS, Copy of monthly GST and Annual return, Purchase and Sales Registers for the year, Statement of Statement of total turnover and Gross Profit declared for the Asst. Years 2015-16 to 2021-22, Copy of Stock Register along with Valuation of Opening Closing Stock, List of Unsecured Loans with letters of confirmations, List of Sundry Creditors with confirmations, Note on cash found and seized by the department of Rs. 1.48 crores, Copy of Cash Book etc., for information. The said details have been submitted by the assessee through e-filing portal. After verification of details furnished by the assessee and in consonance with the material on record, the assessment is completed with following additions to the total income declared in the return filed u/s 139(1) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-16) 543 558 Sales Register (A.Y. 2015-16) 302 309 Sales Register (A.Y. 2016-17) 596 609 Sales Register (A.Y. 2016-17) 338 343 Sales Register (A.Y. 2017-18) 647 657 Sales Register (A.Y. 2017-18) 372 375 Sales Register (A.Y. 2018-19) 711 716 Sales Register (A.Y. 2018-19) 405 411 Sales Register (A.Y. 2019-20) 747 755 Sales Register (A.Y. 2019-20) 458 466 q) It is clear from the above, to the extent of the details tabulated above, submitted by the assessee to the learned CIT(A) for estimating the sales during the period 01.01.2021 to 04.02.2021 were already available with the learned AO. Consequently, to the extent of details tabulated above, it cannot be said that the same were additional evidence submitted before the CIT(A). r) Similar details were furnished before the CIT(A) for the A.Y. 2013-14 and 2014-15 which is the basic deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the estimation of sales of Rs. 17.36 lakhs is completely erroneous and unrealistic going by the market trends and the circumstances of the business on account of Covid-19 pandemic. After considering the said submissions, on the directions of the learned CIT(A), the assessee filed written submissions on 15.11.2022 along with details of sales registers, quantitative details and increase in gold prices. The fact that the same was on the direction of the CIT(A) is evident from Para 4.19 of the CIT(A) order. The relevant portion is reproduced below 4.19 The aforesaid averments carry some weight. Once the AO accepted that the aforesaid cash seizure included some cash out of the legitimate business activities of the appellant, then he was duty bound to make a realistic estimate of the amount of such sales. The appellant has given cogent reasons backed by proof for low volume of sales in the FY 2019-20 (on account of personal inquiry which in a small-scale business being principally run by the owner himself can impact the business). Hence the AO needed to exclude the sales in that year to compute the scale of sales in January February 2021. Further, the AO also needed to factor in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and the sales estimation? Estimation of sales a) The details of computation of estimated sales by the learned AO for the period 01.01.2021 to 04.02.2021 has been elaborated above. The same is not reiterated again for the sake of brevity. b) The assessee submits that the above estimation of the alleged actual/ genuine sales was done without giving the assessee an opportunity to make any submissions with respect to the same. c) Before the CIT(A), the assessee, inter alia, contended that the estimation of sales for the period 01.01.2021 to 04.02.2021 by the AO is without considering the prevailing gold rates for the year, stock in hand, impact due to Covid-19 pandemic, etc. d) The assessee submits that the computation made by the learned AO was based on average sales for three years including the year in which sales was drastically impacted by Covid-19 pandemic. Further, during the F.Y. 2019-20 the assessee was subject a serious accident and was seriously injured and consequently business was affected and the same was to excluded for the purpose of computation. Estimation of gross profit e) The assessee s contention has all along been that the entire cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no additional evidence produced by the assessee before the CIT(Appeals) and hence the ground raised by the revenue is not correct. He further submitted that on 11.02.2021 before the ADIT(Inv.), Gulbarga the same documents were filed from AY 2015- 16 upto 04.02.2021 on which no defects have been pointed out and same were filed during the course of assessment proceedings. The assessee has also filed PB containing pages 1 to 924 and he submitted that these documents were filed during assessment as well as appellate proceedings which consisted of sales register, stock register, VAT return, cash book, bank statement from AY 2015-16 onwards. He further submitted that the AO without pointing out any defect in the documents and without rejecting the same, he cannot treat the turnover declared by the assessee as unexplained investment. Once he has accepted the turnover declared on the basis of which the assessee has calculated his business income, the same amount cannot be taxed twice by both the authorities by taking shelter of other provisions of the Act.. The AO has accepted the returned income of the assessee which was calculating on the basis of total turnover of the assessee. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Note on cash found and seized by the department of Rs. 1.48 Crores, Copy of Cash Book etc., for , information. The said details have been submitted by the assessee through e-filing portal. After verification of details furnished by the assessee and in consonance with the material on record, the assessment is completed with following additions to the total income declared in the return filed u/s 139(1) of the act. 17. There is no dispute that the assessee is trading in gold and silver from of jewellery, ornaments, utensils, bullion, etc. During the assessment proceedings, the AO has considered the month wise details from FY 2017-18 upto 04.02.2021. The total sales has been tabulated by the AO in page 7 8 of his order. The AO has extracted some of the sales bills and noted that in some of the bills name of purchaser is not noted, except the credit sales and in some bills, the date has not been mentioned. The AO has not pointed out any defect in the books of accounts of assessee except in some sales bills. The AO has computed the turnover incorporating the cash found and seized of Rs. 1.48 crores. On going through the computation placed at PB pages 1 to 4, the assessee has ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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