TMI Blog2024 (2) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... facet of that matter we do not found any merits in the contentions of the revenue in disturbing gold disclosed under IDS, 2016 which was for an amount of Rs. 12,76,81,150/- and after conversion into stock in trade on various dates the total sale proceed was Rs. 15,63,62,967/- is to be considered as correct sale price considering the arguments of the assessee that the rate of gold for physical delivery is higher. Not only that when there is no disputed regarding the overall income of the assessee in the year under consideration, the only difference disputed by the ld. AO and CIT(A) the head under which is to be calculated. Considering the material available on record and based on the arguments advanced before us we are of the considered view that the assessee has correctly computed the capital gain. Based on these observations ground raised by the assessee is allowed. Unexplained money u/s 69A r.w.s.115BBE - cash sales recorded in the books of the assessee considered as unexplained - Sale of gold on the date of demonetization - HELD THAT:- Assessee has recorded the cash in their books of account and the source of the said cash being the sale of goods is duly recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the circumstances of the case, the order passed by ld. CIT(A) is bad in law and bad in facts. 2. That on the facts and in the circumstances of the case the CIT(A) grossly erred in not analyzing the submission of assessee supported from material evidence in right prospective and judicious manner and sustained the addition in a hypothetical way which is against principle of natural justice. 3. That on the facts and in the circumstances of the case the ld. CIT(A) grossly erred in upholding the provision of sec 145(3) of the Act applied by the ld. AO for rejection of books of accounts. 4. That on the facts and in the circumstances of the case the ld. CIT(A) grossly erred in sustaining addition of Rs. 8,95,23,633/- in respect of cash sales made on 08/11/2016 deposited in bank account as unexplained money u/s 69A of the Act. 5. That on the facts and in the circumstances of the case the ld. CIT(A) grossly erred in recording observation and finding in the appellate order contrary to the principle of law laid down by Hon ble Courts and also against the principle of natural justice. 6. That on the facts and in the circumstances of the case the ld. CIT(A), grossly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to explain vide various notices issued by this office to explain the source of the huge cash deposits made during the time of demonetization period. Assessee had claimed in ITR that he is doing a trading business in the year under consideration and over the year had sold silver and gold to various persons in cash. The ld. AO noted that assessee has changed his name and style of doing business in the instant year under consideration and the quantum of the turnover from AY 2015-16, AY 2016-17 and even in AY 2018-19 is much less that even the books of account are not audited. There is no business in the proprietorship concern M/s Shrinath Jewellers, which is evident from the Bank A/C which was came into operation on 28.07.2016 and there is no transaction before this date. Further, assessee has also not declared balance on date 31.03.2016 in the return filed by him for AY 2016-17. As per submission of assessee, he is running his business at Bhistiyon Ka Bass, Patel Chowk, Jodhpur'. It is also pertinent to mention that assessee is a director in the Dwarika Jewellers Pvt. Ltd. which is also running its trade business on the same premise. As the assessee had deposited Rs. 9,38,64,808 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt on 15.09.2016 and Rs. 108975/- on 03.10.2016. This pattern of sale is highly suspicious and raises serious concerns about the books of account. In this regard, the assessee was show caused to substantiate this anomaly in his books of account but the submission received from assessee was not found acceptable on grounds that the assessee's plea that name of the concern mentioning Shri Nath Corporation and showing as income from service is not acceptable. As he has current bank account in the name of Shree Nath Corporation A/C No. 200003147881 in Indusind Bank Ltd. Further, in the ITR for AY 2017-18 he has made claim of expenses of Rs. 2544581/- against receipt of Rs. 5793875/- and not shown any opening stock or closing stock. Even in his the revised return and his reply he has accepted that silver was seized by sales tax department and released in 2011, by the order of Hon'ble High Court. Further, High Court also imposed penalty of Rs. 4500000/- on the silver and as such the silver should have been sold then and there to deposit the penalty. There was no stock available with assessee is also proves from the return of AY 2011-12 in which no closing stock has been mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available to dispose off one customer is 21 seconds. Which cannot be accepted by the undersigned as the same is humanly impossible. Therefore, the argument of the assessee that from 9.00 pm to 12.00 pm it has sold gold ornaments to 510 customers is unreasonable and far from reality as the customers have come to purchase the gold ornament, which involves certain checks and balances i.e., weight, rate and the actual weight in the weighing machine, preparing bill, giving cash and checking the cash by the self either by physical counting or through cash counting machine and delivering the jewellery in a proper packed condition. It is also pertinent to mention here that there is also need to cut the raw gold in the pieces as per the requirement of the purchaser. Moreover, from the details of cash sales and invoices raised there is no proper mention of complete address of the parties to whom such cash sales were made. The action of the assessee, clearly establishes the fact that the assessee intentionally made such arrangement of manufacturing artificial bills. Further, during the assessment proceeding assessee had provided invoices/bills generated from tally software which is signed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o proper records or justification. The cash in hand balance on date 09.11.2016 was Rs. 9,38,64,808/- but it was noticed that assessee deposited the same on date 07.12.2016. The explanation of the assessee in this regard was considered but is not acceptable as the assessee is indulged into trading of gold and in this business line persons are habitual of large cash handling and security of the same is ensured by the various methods and skills developed over the time. Further, the action of the assessee in relation to late cash deposit on 07.12.2016 also supports the aforesaid view. Assessee has not given any valid reply with proper supporting documents in relation to restriction by bank and safety purpose. Thus, out of total cash deposit, amount claimed to be received on date 08.11.2016 of Rs. 8,95.23,633, being the cash sale on 08-11-2019 reported by the is nothing but the unaccounted cash of the assessee routed through books as cash sales. The Human probability Test could be applied when the Assessee makes the Officer to believe his/her story as a valid event. The false claims of the assessee cannot sustain before the test of Human Probabilities. As enumerated in the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A). Apropos to the grounds so raised by the assessee in first appeal, the relevant finding of the ld. CIT(A) is reiterated here in below: 7.2 I have considered the facts of the case and written submission of the appellant as against the observations/ findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under.- I. The appellant is engaged in the business of trading and had sold silver and gold to various person in cash. In last two AY, his total turnover is 25.30 lakh and 57.93 Ikah. It is pertinent to mention here that in the year under consideration the total turnover is Rs 16.92 cr which is exorbitant high and that too sale in cash. It is again important to mention here that books of accounts are not audited. 30 - 30m ^ 2 * 3 Book of MC me andred II. The AO specified in the assessment order that the assessee had not furnished the correct position of opening and closing stock in the ITR of previous year and subsequent year. It shows that the assessee was not having such stock. The AO had doubted that there was no opening stock or no such stock was available for s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 69A of unexplained money being unexplained cash money available with the appellant which had tried to introduce in books. The AO had not added back the stock of gold which had declared in IDS scheme. The AO had proved that the appellant was also having unaccounted cash which he tried to introduced in bank on the day of demonetization in the guise of IDS stock. VIII. The appellant had relied upon various judgments. The facts of the present case are different from other cases which are as under a. The day to day stock register was not maintained in the present case whereas in the case laws replied upon by the appellant, the stock register was maintained on day to day basis and the same were produced before AO as well before appellate proceedings. In the present case the AO had unearthed the stock anomalies, b. In the present case the AO had proved and doubted the availability of stock on the day of cash sale whereas in the case laws replied upon by the appellant the stock availability was not doubted C. In the present case the books of accounts were rejected u/s 145(3) of the Act whereas in some case laws replied upon by the appellant the books of accounts were acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69A of the Act and accordingly the same is hereby upheld. Grounds of appeals from 4 to 10 are hereby dismissed. On the second addition the observation of the ld. CIT(A): 8.2 I have considered the facts of the case and written submission of the appellant as against the observations/ findings of the AO in the assessment order for the year under consideration. The appellant had claimed that he had converted the gold into stock in trade on various dates and LTCG was paid on it. The gold stock declared in IDS was of Rs 12,76,81,150/- and after conversion into stock in trade the total sale proceeds was Rs 15,63,62,967/- the AO had observed that the per gram rate taken by the appellant was higher than the per gram value of prevailing rate. The AO concluded that the assessee was trying to diver the difference of amount between as LTCG; however the same should be considered as business income. The AO had given detailed chart in which date wise rate taken by appellant, stock converted in gm and rate as per prevailing market was there and accordingly calculated that the Appellant had taken excess value of Rs 1,09,57,300/- in underline LTCG rather than it should be taxed as business i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s based on the rate already converted the capital asset into stock in trade the same cannot be doubted for merely rate adopted by the assessee and that stock sold by the assessee cannot be again be taxed when the same stock is converted by sale into cash. Here the revenue is trying to tax the same income thrice, one at the time the asset declared, then at the time of conversion and when the same is ultimately sold, so the contention raised by the lower authority is not tenable. 5.1 To support, contentions so raised the ld. AR of the assessee relied upon the written submission made before the CIT(A) and the same is reproduced herein below: Submission in respect of sales considered as unexplained cash a) It is an admitted fact that assessee has declared the sales of stock of gold amounting to Rs. 156362967/- out of stock of gold held him on conversion. The complete documentary evidence in support of sales transaction are fumished before the Ld. AO and also disclosed in VAT Return however only on the basis of statistical analysis and assumption presumption the Ld. AO had made arbitrary allegation that amount entered in the cash book on date 08/11/2016 ie Rs. 8,95,23,633 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d treated the normal transaction in respect of business receipt as something unusual and out of the ordinary only as un- discerningly which is against the principal of natural justice. The Hon'ble Rajasthan High Court in the case of Smit Harshila Chordia vs, ITO (2007) 208 CTR 208 (Raj) Held - Cash credit - Cash received from customers - Tribunal has found as a fact that the assessee was receiving money from the customers against which delivery of vehicles was made- Such cash deposits are self-explanatory and would not attract sec 68- Therefore, no addition could be made F ] It is further submitted that the Id. AO made addition in respect of cash deposited in bank account as unexplained money u's 69A which is double taxation on same income as on one hand the Ld. AO had taxed the profit on sale made by assessee and on the other hand Id. AO taxed the cash received from sales realization which was deposited in bank as unexplained money also been added u/s. 69A of the Act. The Hon'ble Supreme Court in the case of CIT vs Devi Prasad Vishwnath Prasad (1969) 721TR194 (SC) that It is for the assessee to prove that even if the cash credit represents income, it is income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been taxed twice firstly the same was treated as sales and secondly the same was treated as unexplained cash credit under section 68 of the Act. The Tribunal observed that the provisions of section 68 of the Act can be attracted where there is a credit found in the books of accounts and the assessee failed to offer any explanation or the offer made by the assessee is not satisfactory in the opinion of the assessing officer. Whereas in the instant case, the assessee had explained that the impugned amount represented the sale which had not been doubted by the authorities below. Therefore, the impugned amount could not be treated as unexplained cash credit under section 68 of the Act merely on the ground that the assessee failed to furnish the details of the existence of the parties. The Tribunal also opined that the provisions of section 68 could not be applied in relation to the sales receipt shown by the assessee in its books of accounts. It was because the sales receipt had already been shown in the books of accounts as income at the time of sale only and once the purchases had been accepted by the authorities, then the corresponding sales could not be disturbed without giving a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, it is evident that the AO has not made out a case calling for an addition under section 69A of the Act. Probably, an addition under section 68 of the Act could have been considered: but then that is not the case of the AO The assessee, apart from raising several other grounds, has challenged the legality of the addition being made under section 69A of the Act. In support of the assessee's contentions, the leamed AR placed reliance on the decision of the ITAT-Mumbai Bench in the case of DCIT VS Karthik Construction Co. in ITA No. 2292/Mum/2016 dated 23.02.2018, wherein the Bench at para 6 thereof has held that addition under section 69A of the Act cannot be made in respect of those assets/ monies/entries which are recorded in the assessee's books of account. In my considered view, the aforesaid decision of the ITAT Mumbai Bench (supra) is squarely applicable to the facts of the case an hand, where the entries are recorded in the assessee's books of account in this view of the matter, I am of the opinion that the addition of Rs 33,23,425/- made under section 69A of the Act is bad in law ITA Nos. 1383 and 1384/Bang/2019 in the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned amount represented the sale which had not been doubted by the authorities below. Therefore, the impugned amount could not be treated as unexplained cash credit under section 68 of the Act merely on the ground that the assessee failed to fumish the details of the existence of the parties. The Tribunal also opined that the provisions of section 68 could not be applied in relation to the sales receipt shown by the assessee in its books of accounts. It was because the sales receipt had already been shown in the books of accounts as income at the time of sale only and once the purchases had been accepted by the authorities, then the corresponding sales could not be disturbed without giving any conclusive evidence/finding. c) That the id AO in his order had rejected the books of accounts for the sole reason that the sales made by assessee were bogus. However, the addition has been made based on these very books of accounts only. It is settled law that once, the books of account had been rejected thereafter no addition can be made on the basis of books of account as held by Hon'ble ITAT Kolkata Bench in the case of Kabra Brothers ITA No 2022/Kol/2017 dated 08.07.2020 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was observed that no other cash sales were recorded before and after 8 November 2016 except on 15.09.2016 and Rs. 108975/-on 03.10.2016. This pattern of sale is highly suspicious und raises serious concerns about the books of account. In this regard, the assessee was show caused to substantiate this anomaly in his books of account hut the submission received from assessee was not found acceptable The observation made by Id AO is not only against the principle of natural justice but also contrary to law decided by Hon'ble Courts. Further also it is settled principle that no additions can be made on own guess work, assumption. presumption and suspicion. An allegation remains a mere allegation unless proved. Suspicion may be strong however cannot take the place of reality. In this regards I rely on the decision of Hon'ble ITAT Visakhapatnam bench in the case of M/s Hirapanna Jewellers in ITA No 253/Viz/2020 dated 12/05/2021. On the identical issue the Hon'ble Bench. On the issue of capital gain considered partly as business income That the addition so made by Id AO only on the basis of assumption presumption and also against the principle of natural justi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of decisions of Hon'ble ITAT, Jodhpur Bench in the case of M/s Gems Art Plaza v/s DCIT, Jodhpur in ITA No. 353 354/Jodh/2023 dt. 05/01/2024. 88 - 109 7. Copy of decision of Hon'ble ITAT, Amritsar Bench in the case of Balwinder Kumar v/s ITO, Jalandhar in ITA No. 256/Asr/2022 dt. 31/01/2023. 110 - 119 8. Copy of decision of Hon'ble Madras High Court T/CIVIL Application No. 1526 of 2007 dt. 27/07/2007. 120 - 128 6. The ld DR is heard who has relied on the findings of the lower authorities and has relied upon the following case laws : Sr. No. Name Citation Date of judgment/order 1 Sunil Jain vs. Income Tax Department 154 taxmann.com 14(SC) 04/08/2023 2 Sapta Panchait Kirshk Seva Swablambi Sahkari Samit Ltd. vs. Union of India (2020) 121taxmann.com 332 (Patna) 3 Bharat Krishi Kend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has deposited huge cash during the demonetization period. Assessee was asked to explain the source of the huge cash deposits made during the time of demonetization period. Assessee claimed that he is doing a trading business in the year under consideration and over the year had sold silver and gold to various persons in cash. The ld. AO noted that assessee has changed his name and style of doing business in the instant year under consideration and the quantum of the turnover from AY 2015-16, AY 2016-17 and even in AY 2018-19 is much less that even the books of account are not audited. There is no business in the proprietorship concern M/s Shrinath Jewellers, which is evident from the Bank A/C which was came into operation on 28.07.2016 and there is no transaction before this date. Further, assessee has also not declared balance on date 31.03.2016 in the return filed by him for AY 2016-17. As the assessee had deposited Rs. 9,38,64,808/- into bank account during the demonetization period. Assessee has submitted that he had disclosed 44.90 Kgs of Gold under IDS scheme 2016. As per assessee's submission, assessee had declared gold of Rs. 12,76,81,150/- on date 15.09.2016 as capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is to be calculated. Considering the material available on record and based on the arguments advanced before us we are of the considered view that the assessee has correctly computed the capital gain. Based on these observations ground no. 7 8 raised by the assessee is allowed. 8. The assessee in ground no. 4 raised the issue of cash sales recorded in the books of the assessee considered as unexplained money u/s. 69A of the Act. The assessee has deposited cash during the demonetization period of Rs. 9,38,64,808/- and sold exorbitantly high value of gold in one day that is 08.11.2016 which appears as an anomaly. The ld. AO noted that assessee never made any cash sale in previous year and the average cash balance in the previous year s remains Rs. 1,71,801/-. When the same stats are compared with the current year, before November 2016, the average cash in hand balance is Rs. 9,94,860/- which is abysmal low in the comparison of the cash deposited during the time of demonetization in the name of cash sale. The ld. AO also noted that assessee has claimed that he had converted the gold declared in IDS, 2016 into stock in trade in the month of September and October. But the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the decimal for each sale bill. There was no time available for buyer to bargain of such small range. Further, all the sales bills were in the range of Rs. 1,50,000/- to 2,00,000/-. If any customer has only such small amount, what was the need of purchase the gold in haste while he can deposit the same in his bank account, as it was assured that there will be no enquiry if the cash deposit is below 2.5 lacs. Even if it is considered that sales were made in whole days, which cannot be accepted as statistically it is proved in the previous Para's that the event of sale on date 8.1.2016 was an exceptional event and only justification to occur such event, is announcement of demonetization. However, even if the same is accepted that assessee made the whole sale during the day, even then assessee had working hours of 11 AM to 12 PM per customer time comes as 1.5 minutes which is approx. 90 seconds. The same cannot be accepted as genuine. Based on that finding it was hold that assessee has its own unaccounted cash of SBNs which have been introduced in its books way of cash sales for which has no proper records or justification and therefore, the cash in hand balance on date 09.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee, gold disclosed under IDS, 2016 was of Rs. 12,76,81,150/- and after conversion into stock in trade on various dates the total sale proceed was Rs.15,63,62,967/-. Even the ld. AO accepted the fact that the value adopted by the assessee on the date of conversion being higher he has taken the fair market value on the date of conversion of capital into stock in trade and the balance amount considered as business income of the assessee. As regards the observation of per gram rate taken by assessee as fair market value was higher than the per gram value of prevailing market rate, we found force in the argument that rate of physical delivery of gold and the rate of online trading of gold will be different and when the assessee has offered the higher rate there is no loss to the revenue. From the records it is admitted fact that the assessee has declared the sales of stock of gold amounting to Rs. 15,63,62,967/- out of stock of gold held by him on conversion. The complete documentary evidence in support of sales transactions were furnished to the ld. AO. The assessee also supported that the sale made by him is in accordance with the disclosure of turnover in the VAT return. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted at 298 ITR 349 (Rajasthan-HC) that So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise. We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them. Thus, when in this case delivery of gold is not doubted supported by the stock and payment of cash the consequential receipt of the cash cannot be doubted and respectfully following that finding the receipt of the cash cannot be doubted merely the same has been received on the day of demonetization. The ld. AR of the assessee also relied upon the coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring ITA 353/Jodh/2023 is allowed. 9. On being consistent to that finding recorded the bench of the considered view that when revenue not proved that the sale made by the assessee which is executed after giving the goods to the customer, duly supported by the invoice issued, assessee having sufficient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT. Therefore, the contention of the revenue based on the facts and circumstance of the case is not accepted and we see no reason to dispute the sales recorded in the books. Moreover, in the turnover this sales is already recorded and there is no finding in the order of the lower authority when out of total sales of Rs. 15,63,62,967/- only sales of Rs. 8,95,25,633/- without bringing anything contrary to the records proved and therefore, even the same income cannot be taxed twice once by accepting the income recorded in the books on account of sales and other by taxing the cash generated out of the cash sales reported in the books of account. As regards the human probability it is not contended the these sales were only made after demonetization declared at 8 pm. The assessee in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods. Therefore, once the goods is supported by the Invoice recorded in the books and no defects found merely the same is recorded on the date of demonetization addition of cash receipt cannot be made in the hands of the assessee. 11. Thus, considering all the facets of the case the bench noted that the revenue did not pinpoint any defects in the books of accounts, quantitative records available with the assessee, cash book and invoice presented in the assessment proceedings. Merely the assessee has sold the gold on the date of demonetization it does not make the sale as non-genuine and we find support of this contention from the decision of the jurisdictional high court in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC)(supra) holding that once the cash receipt is supported by invoice supported by the delivery of goods the source of that cash cannot be in doubt. Considering the above Judgment of the jurisdictional high court in the case of Smt. Harshil Chordia (supra) we do not find any merits on the finding of the ld. AO and that of the ld. CIT(A) in disbelieving the sales recorded by the assessee as the sales is in regular course of business w ..... 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