TMI Blog2024 (3) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... r and above the profits declared by the assessee in the liquor business carried out - AO again failed to reject the book results u/s 145(3) of the Act before estimating the profits of the liquor business declared by the assessee - HELD THAT:- The estimation has been made by the ld. Assessing Officer mainly on surmises and conjectures without bringing any other evidence on record and such action of the Assessing Officer of assuming jurisdiction u/s 145(3) of the Act without rejecting the book results and without pinpointing the specific defects in the books of accounts regularly maintained and audited, cannot be held to be justified. Ground No. 3 raised by the assessee is allowed. Addition made for unexplained cash deposited during the demonetisation period - HELD THAT:- Assessee is carrying out business of selling goods and providing services regularly and books of accounts of each of the concerns have been maintained. Financial statements are duly audited and profits from each of the concerns are declared. As per the consolidated cash statement as on 08/11/2016, there is a cash balance of Rs. 96,34,619/-, which is sufficient enough to explain the source of alleged cash deposit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The complete details of the said transaction has been placed on record. We thus, find that the assessee has successfully explained the nature and source of the alleged sum and has discharged its burden casted u/s 68. Since the revenue authorities have failed to bring any contrary material on record, we find it to be a genuine transaction and the identity and creditworthiness of the creditor is not disputed. Thus, the addition u/s 68 of the Act, is uncalled for and the same is hereby deleted. Ground Nos. 7 8 of the assessee are allowed. - Shri Sanjay Garg, Hon ble Judicial Member And Dr. Manish Borad, Hon ble Accountant Member For the Assessee : Shri Somnath Ghosh, Advocate For the Revenue : Shri B.K. Singh, JCIT, Sr. D/R ORDER PER DR. MANISH BORAD, ACCOUNTANT MEMBER : The present appeal is directed at the instance of the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter the ld. CIT(A) ) dt. 15/03/2023, passed u/s 250 of the Income Tax Act, 1961 ( the Act ) for the Assessment Year 2017-18. 2. The assessee has raised the following grounds of appeal:- 1. FOR THAT the Ld. Commissioner, of Income Tax (Appeals)- N.F.A.C. acted unlawfully i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cogent explanation adduced on record and the impugned finding on that issue is completely unfounded, unjustified, and untenable in law. 6. FOR THAT on a true and proper interpretation of the scope of the provisions of s. 145(3) of the Income Tax Act, 1961, the Ld. Commissioner of Income Tax (Appeals)-N.FA,C. was absolutely in error in impliedly upholding the specious estimate to the extent of Rs. 49,11.694/- resorted to by the Id. Assistant Commissioner of Income Tax, Circle 8(1), Kolkata being the alleged gross profit on undisclosed sales earned by the appellant in a convoluted manner without considering the matter in the proper perspective and such specious conclusion reached on extraneous considerations not germane Jo the issue in dispute is totally opposed to law. 7. FOR THAT on a true and proper interpretation of the scope of the provisions of s. 68 of the Income Tax Act, ,1961, the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. was absolutely in error in impliedly upholding the specious addition of Rs. 1,65,00,000/- resorted to by the Ld. Assistant Commissioner of Income Tax, Circle 8(1). Kolkata without considering the matter in the proper perspective and such spurious co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement of demonetisation scheme by the Central Government, certain cash was deposited for which the assessee could not explain the source and such sum amounting to Rs. 67,94,000/- was added to the income. Further the ld. Assessing Officer also estimated the net profit on the pharmaceuticals business carried out by the assessee by observing that there is undisclosed sales amounting to Rs. 2,45,58,472/- and on those undisclosed sales, gross profit @ 20% is estimated thus making addition of Rs. 49,11,694/-. Further the ld. Assessing Officer observed that there is liability of Rs. 1.65 Crores shown in the balance sheet of sole proprietorship concern M/s. S. Paik and Co.. It was submitted by the assessee that this is a loan from M/s. Gitanjali Hotel and Inn Private Limited and transactions have been carried out through banking channels. However, from perusal of the financials of M/s. Gitanjali Hotels and Inn Private Limited, it was seen that no fixed assets have been sold during the year. The ld. Assessing Officer thus, concluded that this unexplained cash credit in the books of the assessee was liable to be added u/s 68 of the Act and made addition of Rs. 1,65,00,000/-. Accordingly, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has taken a loan from M/s. Gitanjali Hotel and Inn Private Limited (in short GHIPL) and the same has not been transferred during the year. An advance has been received by GHIPL against the sale of the asset from Hotel Mahaprabhu but funds have been received by the director of GHIPL i.e., the assessee on company s behalf. Complete details of the transactions are provided and, therefore, no addition is called for u/s 68 of the Act. 5.1. While concluding, the ld. Counsel for the assessee submitted that most of the issues have been raised by the assessee in its appeal before this Tribunal for Assessment Years 2014-15 and 2016-17 and the facts are almost identical and they have been decided by this Tribunal vide ITA No. 431/Kol/2023, order dt. 08/11/2023 and ITA No. 468/Kol/2023, order dt. 29/11/2023 and the finding of this Tribunal is squarely applicable in the issues raised in the instant appeal. 6. The ld. D/R, on the other hand, vehemently argued supporting the order of both the lower authorities. 7. We have heard rival contentions and perused the material placed before us. 8. Ground No. 1 is against the addition made u/s 43CA of the Act at Rs. 1,67,44,907/-. Perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n some cases, the said advance or consideration through banking channel has been received prior to financial year 2013-14. We notice that similar issue came up for adjudication before us for Assessment Year 2014-15, wherein we have held that since the agreement for sale was entered prior to 01/04/2015 and the assets in question are stock-in-trade and not capital asset, Section 43CA of the Act will have no application on such transactions. Before us, the ld. Counsel for the assessee has referred and relied on the decision of the Co-ordinate Bench of this Tribunal in the case of M/s. Reegal Construction vs. ITO (supra) and this Tribunal after examining the facts of the case observed as under:- 11. We have also gone through the copies of the sale agreement placed at page 97 to 322 along with copy of ledger account of the sellers. A perusal of the above chart and read with copies of the sale agreement would reveal that in almost of the cases, the booking of the flat was made in the year 2012 or in the year 2013, whereas, the sale deeds were effected in F.Y 2014-15. Further, the assessee has also placed on file the ledger account in respect of each of the party showing the receipts of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts written submissions, have placed on record copy of development agreement dated 06/03/2011 entered in to by the assessee with the Society. As per Clause-12 of the agreement, the assessee has agreed to sell additional carpet area of 12350 square feet to 92 members of the society. The additional area was to be sold at Rs. 15000/- per square feet and the sale consideration was to be paid by the members in various trenches as specified in subclause (c) of Clause-12. Thus, quite clearly the additional area has been sold by the assessee pursuant to the development agreement which has been entered into by the assessee during financial year 2010-11 which is prior to introduction of Sec.43CA. The provisions of Sec.43CA has been inserted by the legislatures only with effect from 01st April, 2014 and the same would not apply to any such agreements as entered into by the assessee in earlier years as held by Hon'ble Bombay High Court in Pr. CIT V/s Swananda Properties (P.) Ltd. {2019 111 taxmann.com 94 (Bombay) dated 09/09/2019}. The Hon'ble Court declined to admit the question of law as raised by the revenue with following observations: - Re. Question (b) 12. The Respondent- Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuation of the property to determine capital gains and cannot govern valuation of transfer of assets (other than a capital asset) i.e. stock in trade. This view is further strengthened by the fact that section 43CA has been introduced into the Act w.e.f. 1st April, 2014 which governs taking of full value of consideration for transfer of assets other than capital assets on the basis of stamp duty valuation. This section 43CA of the Act finds a place as a part of Chapter IV-D - Profits and gains of business or profession. Therefore, with effect from 1st April 2014 the stamp duty valuation of assets sold could be taken as value of consideration. Our above view that section 50C of the Act has no application to value stock in trade is also a view taken by Allahabad High Court in Commissioner of Income Tax v. Ken Construction and Colonizers (P .) Ltd.(2012) 208 Taxman 478/20 taxman.com 381. Similarly the Madras High Court in CIT v. Thiruvengadam Investments (P .) Ltd. (2010) 320 ITR 345 has also held that section 50C of the Act cannot be invoked to arrive at full consideration of sale of business asset. We see no reason not to adopt the views of the above two High Courts to the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciated Builders is in different facts and circumstances and would have no application to the present facts. 16. It is to be noted that the Revenue has not made any reference even remotely that the Respondent had received amounts in excess of that shown in the agreements in respect of twelve flats which is not being accepted. The entire case of the Revenue is merely on suspicion. It is not the case of the Revenue that the Respondent made secret profits out of sale of the twelve flats. 17. The Supreme Court has observed in the case of CIT v. A. Raman Co . [1968] 67 ITR 11 that the law does not oblige a trader to make maximum profit, he can make, out of his trading activity. Income on which he can be taxed is only the income he has earned. So also recently, the Supreme Court in the case of S.A. Builders v. CIT [2007] 158 Taxman 74/288 ITR 1 has observed that no businessman can be compelled to maximize his profits. Therefore, in view of the above, this question as proposed also does not give rise to any substantial question of law. Thus not entertained. 18. The appeal is dismissed. The Hon'ble Court has held that the provisions of Sec.43CA would not have retrospective application a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Assessing Officer has not rejected the book results and provisions of Section 145(3) of the Act has not been invoked. Without rejecting the book results the ld. Assessing Officer cannot estimate the profits of the assessee s business ignoring the fact that books of accounts are duly and regularly maintained and audited. The alleged estimation is merely on surmises and conjectures. We find that similar issue was raised for Assessment Year 2016-17 in Ground No. 3, which has been dealt by this Tribunal observing as follows:- 12. Ground No. 3 is raised against the addition of Rs. 4,52,731/-, which the ld. Assessing Officer has made by applying GP rate of 4.65% on the suppressed sales of Rs. 97,36,152/-. For arriving at this figure, the ld. Assessing Officer on going through the details of total cash deposits in respect of sale of country spirit noticed with the actual receipts from sale of liquor credited to the profit and loss account is Rs. 14,07,20,712/- but the amount credited in the bank account is Rs. 15,04,56,864/-. We find that the ld. Assessing Officer while arriving at this figure of suppressed sales has mentioned that total cash deposit is Rs. 13,91,47,825/- but then refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Assessing Officer firstly referred to three business concerns of the assessee, namely, M/s. Gitanjali Enterprises, M/s. Gitanjali Polyclinics Diagnotics and M/s Gitanjali Chemist Drugist and referred to the commission income earned from sale of medicine. Thereafter, the ld. Assessing Officer referred to the total amount of credits in the bank account which amounted to Rs. 13,86,52,917/- and asked the assessee to give a breakup of the same. The assessee filed the details of the two bank accounts held with Oriental Bank of Commerce and three bank accounts held with Allahabad Bank and total of the credits in its bank accounts was Rs. 12,18,31,381/-. Thereafter, the ld. Assessing Officer applied the gross profit rate of 38.22% on a figure of Rs. 9,84,52,571/- observing as follows:- 6.3 It is to note here that the amount of credit claimed in the above reconciliation in respect of S. Paik Co. is not included into total of Rs. 13,86,52,91 II- as discussed above. So total credit as per reconciliation comes to Rs. 9,40,67,835/- (Rs. 12,18,31,381/- - Rs. 2,77,63,546/-). Hence, total amount remained un-reconciled stands at Rs. 4,45,85,082/-. Moreover, the assessee has further submitted led ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, 1961 only in respect to his concern styled Gitanjali Enterprises which were duly audited under the statutory requirement of s. 44AB of the Act and the entries made therein were fully supported by proper bills and vouchers. In pursuance of the activities of the appellant, it acts as Clearing and Forwarding agents and receives the payments on behalf of his principal and thereafter, he remits such sum to the principal after keeping his commission. The total receipt disclosed by the appellant in respect of Gitanjali Polyclinic Diagnostics was Rs. 65,57,062/-, Gitanjali Chemists Druggists was Rs. 65,22,864/- and Gitanjali Enterprises was Rs. 30,49,764/-during the relevant previous year. The Ld. Assessing Officer misconceived such receipts to be income and thereafter considered the total deposits in the related banks accounts to the tune of Rs. 13,86,52,917/- as revenue, without giving the breakup of such amount, nor desired an explanation regarding the source thereof. The appellant, in rejoinder, prayed to provide the breakup of such figure of the alleged deposits in the bank accounts. Nevertheless, the appellant had filed a reconciliation of the aggregated deposits in ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds, the statutory prescription contained in the provisions of s. 145(3) of the Act requires the Assessing Authority to reject the books of accounts maintained by an assessee by recording plausible reasons. Therefore, rejection of books of accounts is a condition precedent for invoking the power and estimation of income is the subsequent condition. Accordingly, unless the books of accounts are rejected by the Assessing Authority and such a rejection is based on sound and cogent reasons, the Assessing Authority does not have the jurisdiction to estimate the profits. Where the books of accounts produced were not rejected nor even a single voucher was found unverifiable, the gross profit cannot be estimated as the books were taken into account [SWADESHI COMMERCIAL CO. LTD. -VS- C.I.T. (I.T.A. NO. 219 OF 2001 DATED 18-12-2008) (CAL)]. In such an event, the estimation of income by the ld. Assessing Officer is ultra vires the scope of s. 145(3) of the Income Tax Act, 1961 as the Ld. Assessing Officer had not rejected the books of account of Gitanjali Enterprises maintained by the appellant with cogent reasons. Since the books of accounts were not rejected, there cannot be any estimation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regularly. It is not a case where all of a sudden assessee has deposited the cash for which no sources available. Assessee is carrying out business of selling goods and providing services regularly and books of accounts of each of the concerns have been maintained. Financial statements are duly audited and profits from each of the concerns are declared. As per the consolidated cash statement as on 08/11/2016, there is a cash balance of Rs. 96,34,619/-, which is sufficient enough to explain the source of alleged cash deposit of Rs. 67,94,000/-. Where the nature and source of the cash credit is explained satisfactorily by the assessee and the Assessing Officer fails to find any defect or any inconsistency in such explanation then, provision of Section 68 of the Act cannot be invoked. We, therefore, hold that no addition is called for u/s 68 of the Act at Rs. 67,94,000/-. The finding of the ld. CIT(A) is set aside and Ground Nos. 4 5 raised by the assessee are allowed. 15. Ground No. 6 is raised against the addition made for estimating the income of Rs. 49,11,694/- for clearing and forwarding agent business. We find that the Assessing Officer has taken the basis of the VAT returns to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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