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TMI Blog2024 (12) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... nd decide mainly the issues on the facts of A.Y.2013-14. ITA No.2886 and 3200/Del/2018 for A.Y. 2013-14. 3. The first common issue in these two cross appeals is as regards to the order of the CIT(A) deleting the addition made by the AO of unverifiable purchases u/s. 69C of the Act and restricted the addition by estimating commission/ profit @0.25% on alleged cash sales. For this revenue has raised the following ground No.1 as under: "1. Whether the Ld. CIT(A) was correct, on facts and in law, in deleting the addition made by the AO u/s. 69 C of the Act in respect of the unverifiable purchase made by the assessee?" 4. For this assessee has raised ground No.1 as under :- "1. That in view of facts and circumstances of the case and in law the CIT(A) erred in estimating profit @ 24,28,427/- i.e. @ 0.25% on cash sales alleging "that the appellant might have been compensated by paying some amount in the form of commission over and above the value of transaction" on presumption and without any corroborative evidence, therefore, the same is arbitrary, unjust, bad in law and deserved to be deleted." 5. Brief facts of the case are that the assessee company is engaged in the business o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee and held that the source of money for making purchase is purely through cash sales and hence genuineness of these cash sales is not supported by the circumstantial evidences. Hence, he notifying the instances of cash sales made addition of Rs. 97,13,70,670/- tried to explain that the assessee has no man power to handle volume of sales and brought out that the assessee has only following two premises :- "Registered and head office B-45/47, Basement Connaught Place, New Delhi-110001 Branch office - 204 Nishit Diamond Complex 5/1129-30, Contractor Khancho Behind Word Diamond Centre, Hatfalia Haripura, Surat - 395003" 6. The AO also examined the details of employees working with the assessee company during the year and he brought out that there are only 10 employees and particularly sales man are only 4 or 5. 7. He estimated the working hours and then considering the human probability noted that the cash sales shown in the books of accounts is unverifiable and hence he added this sum u/s. 69 C of the Act by observing in para 4.6 as under :- "4.6 In view of the above mentioned it is hard to believe that different persons came and purchase separately the diamonds for l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the books of account by the AO. It is also noted that there is no variation in the manner of conducting business by the appellant in this year and similar transactions in earlier years have been accepted by the AO. The purchases have been duly recorded in the books of account and day to day stock register has been maintained. The Purchases have not been doubted by the AO and the books of account have been accepted not only for this year but in earlier years also when similar transactions were done by the appellant. Moreover, it is not correct on the part of AO to accept one part of the books of account and reject the other part i.e. rejection of sales but acceptance of purchases and other entries in the books of account is not a prudent decision. The source of purchases made by the appellant is duly recorded and is supported by valid documents. In view of these facts, I am of the opinion that there is no reason to treat the source of purchases made by the appellant as unexplained. However, from the issues raised by the AO, it appears to me that the appellant has split large value cash sale transactions into a number of small value transactions (with each transaction restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases are supported by bills and vouchers and even the imports are supported by the certificate of origin of diamonds etc. He stated that the import of diamonds is with custom clearance documents which were never doubted by the AO. Once the entire bills and vouchers details and books of account are reliable and assessee has recorded each and every transaction of purchase and sales, the AO cannot take out cash sales and make addition u/s. 69 C of the Act as unverifiable. Hence, he urged that the addition restricted by the CIT(A) on account of commission @ 0.25% be deleted and addition deleted by the CIT(A) cash sales qua that the order be sustained. 12. On the other hand the Ld. CIT(DR) supported the order of the AO and made argument that humanly it is not possible that on an average assessee with small number of employees can issue cash vouchers on an average 144 people. Hence, according to him the cash sale which is unverifiable was rightly added by the AO u/s. 69C of the Act. He assailed the order of the CIT(A) stating that there is no basis for deletion of addition and thereby estimating the commission over and above the value of transaction by estimating @ 0.25%. 13. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n facts and in law, in deleting the addition made by the AO u/s. 69C of the IT Act in respect of unverifiable purchases made by the assessee? 19. Similarly the assessee has raised following ground No.1:- 1. That in view of facts and circumstances of the case and in law the CIT(A) erred in estimating profit @ Rs. 48,41,838/- i.e. @ 0.25% on cash sales alleging "that the appellant might have been compensated by paying some amount in the form of commission over and above the value of transaction" on presumptions and without any corroborative evidence, therefore, the same is arbitrary, unjust, bad in law and deserved to be deleted. 20. Since the facts and circumstances are exactly identical in these cross appeals for A.Y.2014-15 that of ITA No.2886/Del/2018 and 3200/Del/2018 for A.Y. 2013-14. Hence, the addition of unverifiable deleted by the CIT(A) is confirmed exactly on same facts and circumstances of the case. Hence, the order of CIT(A) estimating profit/ commission @ 0.25% & addition of income on the above value of transaction of cash sale of Rs. 193,67,34,962/- is without any basis and hence deleted. On these two issues the appeal of assessee is allowed and revenue appeal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh sales during the year and the total amount of cash deposits in the bank account. It has been stated that the appellant had opening cash in hand as on the beginning of the year, which can be seen from the Balance Sheet. The source of cash deposit in the bank accounts of the appellant is duly recorded and is supported by valid documents. In view of these facts, I am of the opinion that there is no reason to treat the source of cash deposits in the bank accounts as unexplained and therefore, the addition made by the AO under section 68 of the Act is deleted and the ground of appeal is allowed." Aggrieved, revenue is in appeal before Tribunal. 24. We have heard rival arguments and gone through the records. When a query was put to Ld. Counsel for the assessee, that what is source of this excess cash deposit of Rs. 58,09,830/-, the Ld. Counsel explained that the assessee is having opening cash balance and total of that regular cash received during the year was deposited in the bank account and that is why there is excess cash deposit of Rs. 58,09,830/- qua the sales of Rs. 97,13,70,670/-, on query from the bench, that the facts are not emerging from the order of the AO or that of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Sachit Kapur Account) (a) Rs. 5,00,000/- (on 01.07.2012 vide cheque No. 747327 of Axis Bank) (b) Rs. 43,00,000(on 21.03.2013 vide cheque No.6551 of ING Vysya Bank). 29. The AO required the assessee to explain the cash credit by filing bank statement of Sh. Sachit Kapur as well as the creditworthiness and source of this unsecured loan. According to AO since the assessee could not prove the creditworthiness or the genuineness of the transactions in regard to this amount of Rs. 48,00,000/-, the same was added by him u/s 68 of the Act. Aggrieved, assessee preferred appeal before the Ld. CIT(A). 30. The Ld. CIT(A) after going through the facts of the case and circumstances of the case, confirming the action of AO by observing as para 6.3 as under: "6.3 I have considered the facts of the case and the submission made by the AR. It is contended that the appellant had submitted the copies of bank statements of Sh. SachitKapur to the AO who has not accepted his creditworthiness on the ground that there are continuous cash deposits of huge amounts. It is submitted that these cash deposits are made out of cash withdrawals from other bank accounts maintained by Sh. SachitKapur. On per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act by the Assessing Officer." 33. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that assessee during the Financial Year 2013-14 relevant to Asst. Year: 2014-15 received unsecured loan of Rs. 1,44,50,000/- from one Sh. Pankaj Kapur. The AO noted that as per ITR of Sh. Pankaj Kapur, he has meager income of Rs. 1,80,000/- and from the banks statement of Shri Pankaj Kapur i.e., particularly submitted reflects that there are continuous deposits and cash withdrawals and to examine the source of cash deposits the AO required the assessee to explain the three ingredients of section 68 of the Act. As the assessee failed to prove the creditworthiness or the genuineness of the transaction of unsecured loan of Sh. Pankaj Kapur, he added this amount of Rs. 1,44,00,000/. Aggrieved assessee preferred an appeal before Ld. CIT(A). 34. The CIT(A) confirmed the action of Ld. AO by observing para 6.3 as under: "6.3 I have considered the facts of the case and the submission made by the AR. It is contended that the appellant had submitted the copies of bank statements of Sh. Pankaj Kapur to the AO who has not accepted his creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X
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