TMI Blog2024 (3) TMI 946X X X X Extracts X X X X X X X X Extracts X X X X ..... orrectness and completeness of the accounts of the assessee; or (ii) failure on the part of the assessee in computing its income as per system of accounting regularly employed by him, existence of neither of which, had been proved in the case of the assessee company before us, therefore, rejection of its books results by the A.O cannot be approved. Estimation of income - AO estimated profit element (Net Profit) of 25% on the subject sales - We find substance in the claim of the Ld. AR that no material had been placed on record by the department, which would reveal that the subject sales were not carried out by the assessee company during the pre-demonetization period, i.e, as disclosed in its books of accounts, but were made during the demonetization period. Also, as stated by the Ld. A.R., and rightly so, there is even otherwise no basis for the A.O. to have inferred that the assessee company had carried out the subject sales at an abnormally high profit of 25%. We are unable to comprehend that as to on what basis, the A.O. had presumed a profit element (Net Profit) of 25% on the subject sales. In our view, both the assumptions of the A.O, viz. (i) that the sales in question were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case properly and judiciously. Conclusion drawn by the A.O Ld. CIT(A) and consequent addition is arbitrary, baseless, ill-founded and not justified. 2. Without prejudice to ground no.1, Ld. CIT(A) erred in confirming addition of Rs. 36,57,000/- made by A.O on the basis of entries in regular books, after having rejected the same books. 3. The appellant reserves the right to amend, modify or add any of the ground/s of appeal. 2. Succinctly stated, the assessee company, which is engaged in the business of wholesale and retail trading of gold, diamond, and silver ornaments, had e-filed its return of income for A.Y.2017-18 on 31.10.2017 declaring a total income of Rs. 2,61,38,530/-. The return of income filed by the assessee company was processed as such u/s. 143(1) of the Act. Subsequently, the case of the assessee company was selected for limited scrutiny under CASS for verifying the cash deposits made in its bank accounts during the demonetization period. 3. During the course of the assessment proceedings, on verification of books of accounts and bank statements, it was observed by the A.O that the assessee company had from 09.11.2016 to 31.12.2016, i.e. during the demonetizati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stricted the addition in its hands to 14% [25% (-) 11%] of the balance amount of Rs. 2,61,21,435/- [Rs. 2,71,32,000/- (-) Rs. 10,10,565/-] and worked out a consequential addition towards suppressed profit at Rs. 37,98,480/-. Accordingly, the A.O. backed by his aforesaid deliberations, vide his order passed u/s. 143(3) dated 29.12.2019 determined the income of the assessee company at Rs. 2,97,95,530/-. 5. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without success. For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: 5. DECISIONS REASONS: The appellant in its grounds of appeal has assailed the AO in making the addition of Rs. 36,57,000/- being cash deposit during demonetization period. The AO in the assessment order noted that assessee was issued notice u/s.142(1) of the Act. Assessee responded after considering the submissions made and based on the facts of the case. The AO hereby considering all the fact, the addition of Rs. 36,57,000/- i.e.,14% of Rs. 2,71,32,000/- i.e., 14% of Rs. 2,71,32,000/- (-) Rs. 10,10,565/- (cash in hand as on 01.10.2019). The conduct of the appellant continued in the appellate proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O in the assessment order noted that 5.3 It is, thus, evident that the appellant has no evidence to substantiate the grounds taken and it has not even once argued with any supporting, relevant and cogent arguments/averments, constraining me to, therefore, go through the extremely brief non-speaking submission appearing in the grounds of appeal and statement of facts filed along with the impugned appeal to decide on the merits while adjudicating the same. But the narrative submission/contention made vide the statement of facts/grounds of appeal is by and large on the very same made at the time of instant assessment which the AO after considering, has duly rejected or found without much merit leading him/her to add the same i.e., the disallowance/additions made in the said assessment order and enumerated in the impugned grounds against which I am constrained to concur with the AO's findings of fact and decisions thereof, more particularly in the absence of any meaningful and worthwhile submissions/documentations even during the instant appellate proceedings in this case to counter effectively the position adopted by the AO on the concerned issues and reduced in writing in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otes. Observing, that the assessee company had shown substantially high sales in the months of October and November, 2016, the A.O. had serious doubts as regards the authenticity of the said sale transactions. Also, it was observed by the A.O. that though the assessee company as a matter of a consistent practice would regularly deposit cash in its bank accounts on a day-to-day basis, but during the aforesaid period there was a departure from the said practice. The A.O, observed, that while for the cash deposits trail up to September, 2016 revealed that the assessee company had deposited almost the entire amount of its cash sales in its bank accounts within 1 or 2 days, but there were no justifiable reasons as to why it had retained with it a substantial amount of cash in hand during the pre-demonetization period and deposited the same during the period. Although it was the claim of the assessee company that the cash in hand available with it during the pre-demonetization period, i.e. in the months of October and November, 2016 was sourced out of the cash sales carried out during the said period but the same did not find favor with the A.O. The A.O was of the view that SBNs of Rs. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting its income as per system of accounting regularly employed by him, existence of neither of which, had been proved in the case of the assessee company before us, therefore, rejection of its books results by the A.O cannot be approved. 10. Apropos the observation of the A.O as regards the substantial amount of cash deposits of Rs. 3,06,32,000/- (supra) made by the assessee company in its bank accounts in SBNs during the demonetization period, i.e. 09.11.2016 to 31.12.2016, we may herein observe that though at the first blush, the same appeared to be very convincing, but a careful perusal of the facts reveal that the cash deposits made by the assessee during the demonetization period, i.e. from 09.11.2016 to 31.12.2016 is very much in conformity with those made during the same period in the immediately preceding year, i.e. 08.11.2015 to 31.12.2015. We, say so, for the reason that as per the details filed by the assessee company, it had during the demonetization period, i.e. 09.11.2016 to 31.12.2016 made cash deposits in its bank account of Rs. 3,06,32,000/- as in comparison to cash deposits of 4.88 crore (approx.) made during the same period in the immediately preceding year, i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough disclosed by the assessee as having been carried out during the pre-demonetization period, but were carried out by the assessee company in lieu of SBN's during the demonetization period; and (ii) earning of the super profit by the assessee company on the subject disclosed sales of Rs. 2.37 crores (approx.) in SBN's, are merely based on mere suspicion, assumptions, presumptions, surmises, and conjecture without any material proving the same. 13. Although the A.O had drawn support from certain media clippings and status reports of the Income Tax Department on Operation Clean Money , and also the fact that certain jewellers had opted for IDS and PMGKY scheme and had offered 25% to 40% of their total cash deposits as undisclosed income, but the said observation, on a standalone basis, in our view, cannot justify the drawing of adverse inferences and the consequential impugned addition in the hands of the assessee company. 14. Backed by our aforesaid deliberations, as we are unable to fathom the very basis, on which, the duly disclosed sales of the assessee company had been related by the A.O to the demonetization period, i.e. 09.11.2016 to 31.12.2016; and also, the presum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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