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2024 (2) TMI 1292

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....d as below: 1. That on the facts and 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 upholding the findings recorded by the Ld AO that cash deposit in bank account during demonetization period out of cash sales as unexplained money being unexplained cash money available with the appellant which had tried to introduce in the books. 5. That on the facts and in the circumstances of the case the Ld CIT(A), grossly erred in sustaining the addition of Rs. 64,49,220/- in respect of cash deposit in bank account as unexplained money u/s 69A of the Act. 6. That ....

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.... the ld CIT(A) erred in upholding the validity of the retracted statement under section 133A, particularly when such statement has no evidentiary value in the eyes of law. 4.  That on the facts and in the circumstances of the case, the ld CIT(A) erred in deliberately and consciously not considering the legal & valid documentary evidences furnished in support of retraction of statement immediately after the survey. 5. That on the facts and in the circumstances of the case the ld CIT(A) grossly erred in represented irrelevant, arbitrary and contrary facts and law while upholding the validity of addition made by ld AO. 6 . That on the facts and in the circumstances of the case the ld CIT(A) grossly erred in upholding the finding recorded by ld AO that the stock found at the time of survey was excess without taken to consider the valid & legal documentary evidences and also no adverse material or evidence found as a result of investigation made by ld AO during the proceedings. 7. That on the facts and in the circumstances of the case the ld CIT(A) grossly erred in sustaining addition of Rs 94,27,696/-on account of undisclosed gross profit. 8 . That on the facts and in th....

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.... team amount to Rs. 1.30.14.836/-. The physical stock calculated by survey team amount to Rs.7,15,00,000/-. After deduction of the approval, the revenue valued the closing stock amount of Rs.6,43,54,832/-. But as per the books of account the closing balance of the stock on 31.03.2018 was amount to Rs.5,18,17,873/-. So, the ld. AO added back the difference of closing stock as income. Accordingly, the Gross Profit of the date of survey was calculated by the revenue amount to Rs.3,91,88,467/- and the GP declared on dated 31.03.2018 by the assessee amount to Rs.2,97,60,771/-. Therefore, the difference amount of Rs.94,27,696/- was added back with the total income of the assessee. Being aggrieved assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) uphold both the assessment orders. Being aggrieved on the appeal order, the assessee filed an appeal before us. 6. The ld. AR filed the written submissions which are kept in the record. The ld. AR started argument on appeal bearing ITA No. 353/Jodh/2023. 6.1 The ld. AR submitted the written submissions which are kept in the record. The ld. AR invited our attention in assessment order page 2 to 4 which are reproduced as below: 1. ....

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....Rs. 22,30,745/- Further, it was also noticed that huge sale booked by assessee resulting into cash balance of Rs. 7939745/-. That means the Jewellery of Rs.57,09,000/- was sold on 08.11.2016 only. It was noticed that on an average the sale of jewellery per day after Diwali was Rs. 2 lakh. On the previous day from 07.11.2016 it was 7.2 lakh as per the cash book in cash. There was no sudden reason for such high cash on 08.11.2016. It was also noticed that assessee was never maintaining cash balance of more than 5 lakh previous to 10.10.2016. A query was raised in this regard and reply furnish by the assessee on 27.09.2019 is as under:- "1.There as on for the huge Cash Balance:- 1. Maintaining huge cash balance is necessary looking to nature of business. For purchases of small and antique items of silver from villagers, cash is necessary. 2. Prior to demonetization, festival of Dhanteras falls, on this day, it is a general tendency amongst the people of India to purchase silver and gold items to get the aashirwad of Goddess Lakshmi. Due to Diwali festival cash sale group and results in accumulation of huge cash. 3. Due to Demonetization, it was a fear in the mind of the pe....

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....lable at P.B Page No. 19 to 182. 6.5. The ld. AR further argued that further the each & every detail like month wise sales, purchase, cash deposit etc and also the comparative figures of previous years on the basis of audited books of accounts maintained by the assessee were furnished before the Ld AO during the assessment proceeding. The explanation supported from documentary evidence established beyond the doubt that the source of cash deposit out of cash sales of sufficient stock available with appellant firm which is duly recorded & supported and genuineness of same cannot be doubted. The AO has neither disproved the genuineness of the purchase and stock position submitted by the assessee nor sales transactions in support of its claim that sale was made out of stock of goods available with the assessee. Further looking to nature of business and items in which assessee is dealing, it is not practically possible to maintain stock register on day-today basis. However, the material record which are part of paper book clearly demonstrated the quantity of purchase and sales of stock are duly recorded and verifiable from invoices and purchase & sales register maintained on day-to-da....

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....e vouchers and other records had been found to be in order, mere fact of non-maintenance of stock resister could not be basis for rejection of books of account if Revenue had found no other defect in books of assessee and there was no hindrance in determining true and correct profits earned by assessee." ii)Chirag Nareshbhai Soni Vs ITO (ITAT Ahmedabad) ITA No. 19/Ahd/2022 11/10/2023 "9. We have heard the rival contentions and gone through the facts and circumstances of the case, including the materials available on record. As per the provisions of section 145(3) of the Act, the AO is empowered to reject the books of accounts of the assessee and make best judgment assessment in the manner as specified under section 144 of the Act if he is not inter-alia satisfied with the completeness or correctness of the books of accounts of the assessee. Generally, the instances for the rejection of books of account include when entries in respect of certain transactions are altogether omitted or incorrect or where the accounts show an abnormally low rate of profit or where there is an inherent lacuna in the system of accounting. However, the AO cannot use this power as a tool to reject th....

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....stiff competition in the market and the huge loss incurred by assessee in a particular transaction-Therefore, neither the rejection of books of account nor estimation of GP by application of rule of thumb was justified-When none of the date and entries in the trading account has been found to be incorrect in any manner, the result shown by the assessee in the books of account has to be taken as true." iv)The Hon'ble ITAT Jodhpur Bench in the case of M/s Dwarka Dass Doshi in ITA No. 477/JDPR/06 dated 30-10-07 held as under: - "We find that the books of account were rejected only because low gross profit was shown during this year. We are aware that non maintenance of muster roll or day to day stock consumption register cannot be considered as a good ground for rejection of books of account. The Assessing Officer did not pinpoint any material defect in the books of accounts. He rejected the books mainly because he considered the rate of profit as low. The reason that there was low rate of profit cannot be made sole ground for rejection of books of account." v)Hon'ble Bombay High Court, in the case of Bastiram Narayand as Maheswari (210 ITR 438), held that it is the settle....

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....entiary value of sales & purchases by Sales Tax/VAT Department is apparently show the ld CIT(A) was predetermined to disobey the binding nature of judicial pronouncements. The allegation made by ld CIT(A) is contrary to principle laid down by Hon'ble Madras High Court in the case of CIT V/s Smt. Sakuntala Devi Khetan (2013 (352) ITR 484 (Mad), wherein it has been clearly held that the Assessing Officer has to adopt the figures and turnover finally assessed by the sales tax authorities. 8.2. The ld. AR further argued the business activates as carried out by the appellant firm and earned the profit on such business activities and same was offered for taxation which was accepted as genuine by ld AO while passing the order. Further also the VAT authority had treated such purchases and sales as genuine and as such when the genuineness of such business activities had not been doubted by any authority in law. Therefore, it is appeared that ld AO has not analyzed the information, documentary evidences, explanation and submission furnished by assessee in right perspective and merely conceiving a fact the cash sale was jumped to very high level which is very abnormal in compare to previous ....

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....) 49 ITR 112 (SC): The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof." 8.3.The Hon'ble ITAT Amritsar Bench in the case of Raj Kumar (M/s Radhika Sales Corp) V/s ITO, ITA No. 195/Asr/2022 dated 11.04.2023 held that:- "12.1 We also considered that the amount deposited in the bank account was out of ale of various items which had been held by the assessee as stock in trade an since the deposits in the bank account were out of sale of stock therefore the stock of the assessee has depleted and the cash has come in respect of stock, such sales had been disclosed in the trading account against the purchase which had not been doubted, neither the opening and closing stock had been doubted. Therefore, nothing could have been doubted when the source of cash was well explained and was shown in the bank account. However the addition was made only on the basis of surmises without establishing any motive on the part of the assessee and without disturbing the closing stock as on 31/03/2017 which had been arrived at after reducing the sale in quantity of stock in trade. 12.2 Further, in our considered view, the AO has no right to cal....

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.... Jewellers Pvt. Ltd. and KGK Creation India Pvt. Ltd.in APB page 46 to 49. The ld. AR further placed that both the parties are filed the affidavit before the revenue authorities. Copy of the affidavit are enclosed in APB page 52 to 53. All the documents are duly filed during the time of assessment and the copy of reply furnished before the assessment authority is enclosed from APB page 54 to 64. The ld. AR placed that without verifying the parties and without rejecting his affidavit the above was made by the ld. AO which is arbitrary and not accepted. 11. The ld. DR vehemently argued and invited our attention in assessment order page 9 to 10 para 3.3 which are reproduced as below: Vide reply dated 06/04/2021 the assessee submitted that during survey on 21/03/2021 value of stock was estimated at Rs. 6.43 crore resulting in gross profit of Rs. 3.91crore due to excess stock calculate at Rs. 1,00,00,000/-. This excess stock was surrendered for taxation but the assessee retracted to this statement of surrender of excess stock with cogent evidence submitted by letter dated 26/03/2018 before the Jt. CIT, Range -1, Jodhpur. The assessee further submitted that the statement, which was re....

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....s sufficiently covered by the stock. The assessment was completed by the Sales Tax Authority and the turnover and purchased was duly accepted. It is further submitted that from the documentary evidence the source, purpose and sequence of event duly established that there was direct nexus of cash deposit in bank account out of sales realization in cash. It is settled position of law that when the ld. AO had not doubted the sales, purchases, stock and gross profit declared by the assessee then the cash deposit out of such sales cannot be doubted. The authority below had treated the normal transaction in respect of business receipt as something unusual and out of the ordinary only as undiscerningly which is against the principle of natural justice. 12.1 We respectfully, relied on the order of the Anand Metal Corporation (supra). Further, the assessee's books was rejected u/s 145(3) for non maintenance of stock register. The assessee claimed that the assessee is dealing with the items which are not possible for her to maintain stock register. The ld. AR respectfully relied in the order of the Hon'ble Jurisdictional High Court in the case of Malani Ramjivan Jagannath (supra). 12.2 We....