9911796707
TMI Blog2025 (5) TMI 880X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the instant case. The 2nd issue involved is deletion of addition made u/s 69C of the Act in the sum of Rs. 16,06,335/- treating interest paid as unexplained expenditure. 3. We have heard the rival submissions and perused the material available on record. The assessee is engaged in the business of sale/ purchase of gold and diamond jewellery. The assessee filed return of income for AY 2017-18 on 01.11.2017 declaring total income of Rs. 97,91,450/-, which was duly processed u/s 143(1) of the Act. A survey u/s 133A of the Act was conducted at the business premises of the assessee firm on 10.11.2016. Subsequently, a search u/s 132 of the Act was conducted at on the assessee firm on 23.03.2018. Pursuant to the search, notice u/s 153A of the Act stood issued to the assessee on 15.07.2019. The assessee filed the return u/s 153A of the Act on 08.08.2019 disclosing the return of income of Rs. 97,91,450/-. During the course of survey operation on 10.11.2016, wherein, discrepancies were found with regard to sales of gold on 08.11.2016 to cover up unexplained cash of Rs. 2,00,97,526/- and cash sales of silver during October 2016 to cover up unexplained cash of Rs. 2,41,51,751/-. The ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f cases. The case of the assessee was also covered u/s 132 of the Income tax Act, 1961. The Assessee is engaged in the business of jewellery. During the course of search operation at the business premises of the assessee, the value of jewellery found at the Business premises of M/s. Shri Ram Hari Ram, 1658- 59, Daribakalan, Chandni Chowk, Delhi, came to Rs. 60,51,48,590/-. At the time of recording of statement u/s 132 of the Income Tax Act, 1961 on 23/03/2018, Shri Rajat Gupta, one of the partners of M/s Shri Ram Hari Ram stated that the aforesaid items of jewellery found at the business premises at the time of search and seizure operation on 23/03/2018 belonged to M/s Shri Ram Hari Ram. However, minor difference of stock was detected during the time of valuation vis-à-vis the books of accounts found in the business premises. During the course of assessment proceedings the assessee explained the minor difference in the stock. Also cash of Rs. 52,63,250/- found at the office cum Business premises of M/s Shri Ram Hari Ram at 1658-59, DaribaKalan, New Delhi, ShriRajat Gupta stated in his statement recorded u/s 132(4) of the Income Tax Act, 1961 on 23/03/2018 that the cash found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pounded material of the Survey and has mentioned that the bills of the appellant for 08.11.2016 did not have the name, address or mobile number of the buyer, that all the said bills were of cash sales and were on average of higher amount as compared to the sale prior to the date. In the concluding Para of the assessment order, the AO has stated that on consideration of all the facts of the case and explanation of the assessee, entire sale of Silver of Rs. 2,41,51,751/- and Gold of Rs 2,00,97,526/- could not be considered as bogus only on the ground of unusual pattern of invoices. That the Diwali and the day of announcement of demonetization were unusual events and possibility of higher sale of gold and silver on such occasion could not be overruled. However, as per the AO, the sale of silver to the extent of Rs. 2,41,51,751/- and Gold of Rs. 2,00,97,526/- appeared on higher side and were unverifiable, which were introduction of unaccounted business income of the assessee in the form of cash sales in the books. On the basis of the analysis from various tabular charts, the AO has made an estimated addition of Rs. 90,00,000/- on account of cash sales of gold and an estimated addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is imperative to examine as to whether the case of the assessee falls into these parameters are not. 9.4 The appellant has submitted that comparative charts were called for by the Assessing Officer during the assessment proceedings in order to analyse the business pattern viz a viz cash sales. The appellant has filed its written submissions, which were also submitted during the assessment proceedings. From the said submissions the comparative charts are reproduced below and the trend emerging from the said charts is also analysed hereunder: Chart No. 1.: Percentage of cash turnover viz a viz total turnover over the past 5 years. Details of Trend of Sale of Jewellery/Bullion on Cash Basis during last 6 year F.Y. SECTION UNDER WHICH ASSES SMENT MADE TOTAL SALES CASH SALES % of Cash Sales CASH DEPOSITED IN BANK ASSESSMENT ORDER F.Y. 2011- 12 143(3) 33,64,47,396 20,97,91,686 62.35 20,22,38,535 Copy of Assessment Order & CIT(A) Order enclosed F.Y. 2012- 13 143(3) 32,84,22,563 20,80,00,742 63.33 19,99,87,000 Copy of Assessment Order & CIT(A) Order enclosed F.Y. 2013- 14 143(1) 34,31,32,608 22,19,14,941 64.67 21,32,69,000 F.Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparable with the turnover of the immediately preceding previous year both in terms of monthly sales as well as average daily sales. Further the net sales in the months of October 2016 are more than the sales in the month of November 2016. Thus it is not the case wherein the sales are high only in the month of November 2016. Chart No. 4 Comparative data of Cash Sales and Cash Deposits Oct. Nov. 2016 and 2015. Month Op. Cash in Hand Cash Sales Cash Deposited In Bank Cash Withdrawn from Bank Closing Cash in hand October'2016 22,35,318 5,59,94,787 2,20,50,000 3,21,23,720 Till 08.11.2016 3,09,88,398 45,00,000 - 5,83,44,623 From the comparative of cash sales made by the assessee during Nov till 08.11.2016, it can be seen that it is not unusual for the assessee to make sales in cash and deposit the said cash into the bank account in so far as the cash sales during October 2016 was Rs. 5,59,94,787/- which is much more than cash sales during Nov ember 2016 till 08.11.2016 which was Rs. 3,09,88,398/-. This is a usual trend for the jewellers who have cash sales during the festive months/ marriage season ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal cash deposit in Bank from 01.04.2015 to 08.11.2015 110,545,000 (c) Total cash deposit in Bank from 09.11.2015 to 31.12.2015 88,950,000 1.2 (a) Total cash deposit in Bank in F. Y. 2016-17 198,234,300 (b) Total cash deposit in Bank from 01.04.2016 to 08.11.2016 98,524,300 (c) Total cash deposit in Bank from 09.11.2016 to 31.12.2016 62,510,000 From the above chart it is evident that during the current year, the total cash deposit in the bank was of Rs 19,82,34,300/- which was slightly less than the cash deposit in the AY 2016-17 of Rs 19,94,95,000/-.It is a usual practice in the business of the assessee to deposit cash generated out of cash sales into the bank account. The assessee had deposited cash as high as Rs. 20,22,38,535/- in Assessment Year 2012-13. Chart No.8 Month wise cash sales and cash deposits from 01.04.2015 to 08.11.2015 Month wise Op. Cash in hand Cash Sales Cash deposited in Bank Cash withdrawal from the Bank Closing cash on hand April, 2015 3,469,556 16,107,343 17,800,000 - 791,631 May, 2015 791,631 13,400,249 11,950,000 - 1,685,527 June, 2015 1,685,527 10,890,055 8,075,000 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its business during this period, that comparative data of cash sales / collections during similar periods / dates compares favourably from year to year with normal business fluctuations and that the assessee company's account properly record and reflect these sales. The charts reflect that the appellant is regularly incurring cash sales. It is a normal business practice in the business of jewellery that part sales are done in cash. The percentage of cash sales to the total turnover which was 67.29% for the period ended 31.03.2016 have come down to 45.38% for the period ended 31.03.2017 i.e. in the AY 2017-18. Further the total sales have increased in the quarter October to December in the impugned year from Rs. 10,84,26,125/- to Rs. 18,11,75,577/- i.e by 67.1% whereas the cash sales have increased from Rs. 7,81,69,280/- to Rs. 9,54,23,959/- which is an increase of 22%. Thus, during the said quarter of AY 2017-18, the cash sales as a percentage of total sales has declined. Again it is seen from the above charts that the sales during the month of November 2015 amounted to Rs. 4.02 crores whereas the sales during the month of November 2016 were of Rs 6.32 crores, the increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a, it is seen that majority of sales of appellant takes place as cash sales. In comparison to the average cash sales during the previous years have been above 60% of the total sales during the impugned financial year 2016-17 the percentage of cash sales to total sales is only 45% of the total sales. It is a matter of fact that on 08.11.2016 all jewelers kept their shops opened post announcement of demonetization, and there was huge rush of customers to buy jewellery to utilise the old currency lying with them. Thus the assessee was able to make sales of Gold Jewellery of Rs. 2,00,97,526/ on 08.11.2016. It is further seen that it is usual practice in the business of the assessee to deposit cash generated out of cash sales into the bank account. During the period 01.04.2015 to 08.11.2015 total amount of Rs 11,05,45,000/- and for the period 01.04.2016 to 08.11.2016 total amount of Rs 9,84,24,300/- was deposited. During the course of survey bill wise details of cash sales of gold jewellery made by the assessee on 08.11.2016 which was impounded. The sales of Rs. 2,00,97,526/- made on 08.11.2016 of Gold was out of stock of gold available with the assessee. The chart of stock of gold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, stock or sales made by the assessee in October 2016. Accordingly it is inferred that the sales of Silver of Rs. 2,41,51,751/- in October 2016 were out of stock of silver of Rs. 5,24,81,022/- available with the assessee which was duly accounted for in the books of accounts of the assessee and was verified by the survey team During the course of survey or search on the appellant, nothing incriminatory was found which has been brought on record in the assessment order to suggest that any sales of silver made in October 2016 was unaccounted. 9.10 It is common practice in the jewellery business to deposit cash generated out of cash sales into the bank account. This is evident from the Chart No.7 in pre paras. From the said it is seen that during the current year, the total cash deposit in the bank was of Rs. 19,82,34,300/- which was slightly less than the cash deposit in the AY 2016-17 of Rs 19,94,95,000/- It is a usual practice in the business of the assessee to deposit cash generated out of cash sales into the bank account. The assessee had deposited cash as high as Rs. 20,22,38,535/- in Assessment Year 2012-13, 9.11 It may be noted that it has not been proved that the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have arisen on account of income from unexplained sources. Also no incriminating material was found in course of search or survey to suggest that the assessee had indulged in any other unaccounted business activity leading to generation of unaccounted cash. 9.14 In the practice of book keeping the purchases, sales and the stock are interlinked. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer has accepted the sales and the stocks. Accordingly the sales already credited in the assessee's books of accounts as revenue receipt and offered for taxation cannot be taxed again u/s 68 of the Act as unexplained cash credit. 9.15 In view of the above facts and discussions and respectfully following the decision of ITAT Delhi in the case of Agson Global (P.) Ltd. Vs Assistant Commissioner of Income Tax, Central Circle-28, New Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounting to Rs. 1,70,00,000/- to appellant company out of their Audited Net Worth comprising of their Share Capital and Reserves and Surplus. It is seen that Net Worth of the company as per the Audited Financial Statements of the company as on 31.03.2016 are multiple times more than the unsecured loan given to the assessee company. Further, it is seen from the submissions of the appellant that the company M/s Vagmi Financials Pvt. Ltd. is in business of giving loans and that the loan given to assessee company is small percentage of total loans and advances made by Vagmi Financials Pvt. Ltd. That the company M/s Vagmi Financials Pvt. Ltd. is assessed to Income Tax with PAN Number AAACF7741C and is active company as per Certificate obtained from Registrar of Companies, Ministry of Corporate Affairs. Regarding the genuineness of Unsecured Loan the appellant has submitted that the appellant company had paid Interest @9% on unsecured loan amounting to Rs. 16,06,335/-, that the appellant company had duly deducted and deposited the applicable TDS @10% on Interest Paid of Rs. 16,06,335 and that the said loan was fully repaid during the F.Y 2017-18 through banking channels. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctors or shareholders. The statements of Praveen Agarwal and Mahenderlal Sethia were recorded u/s 131 after conclusion of search behind the back of the appellant company without providing opportunity to rebut, which have been retracted by the deponents. Since the statements were not confronted to the appellant and those people were not made available for cross examination it makes those statements inadmissible for assessment in view of the judgment of Apex Court reported at Andaman Timber Industries vs. CCE Civil Appeal No. 4228 of 2006 wherein it is held that "Failure to give the assessee the right to cross-examine witnesses whose statements are relied up results in breach of principles of natural justice. It is a serious flaw which renders the order a nullity". 8. None of the aforesaid factual and legal findings could be controverted by the revenue with cogent evidence before us. We find that the ld CIT(A) has given a categorical finding that interest paid in the sum of Rs. 16,06,335/- is already recorded in the books of account of the assessee. We find that in order to treat the said expenditure as unexplained, it is bounden duty of the revenue to state that the said expenditur ..... 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