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2020 (9) TMI 915 - AT - Income TaxAssessment u/s 153A - Estimation of profits - A.O. estimated profits @ 1% on sales from 24-11-2014 to 31-3-2015 on transaction recorded in regular books of accounts as well as not recorded in regular books of accounts and for MCX portal transactions making a lump sum addition without any basis while actual profit earned from those transactions was correctly worked out by assessee from record found in survey and submitted before A.O. - HELD THAT - A.O. wrongly held that books of accounts are rejected invoking section 145 (3) which is uncalled for. As far as transactions found in Hazir software of computer it records all transactions whether recorded in regular books of accounts or not recorded in regular books of accounts including transaction made by assessee on MCX Portal which are also found correct and completely maintained from which income could have been properly deduced and assessee has submitted complete account of transactions i.e. purchases, sales and profit resulting from those transactions alongwith complete quantitative details separately i.e. accounted, unaccounted on MCX portal in said Hazir software as is evident from assessment order itself. A.O. also accepted the purchases, sales, op. stock closing stock resulted from the transactions recorded therein as such in Hazir software without pointing out any defect or deficiency therein and so also in law even those accounts cannot be rejected by invoking section 145 (3). The A.O. while accepting all transaction in Hazir software in toto is just not accepting the profit resulted from said details which is not correct in law and so cannot be a ground for invoking section 145 (3). G.P. rate of 1% applied by the A.O. on the sales found recorded in Hajir software is thus wrong, unwarranted and uncalled for. CIT(A) is also wrong and bad in law in sustaining the lump sum addition in the hands of assessee as against the addition made by the AO. Undisclosed profit from undisclosed transaction with MCX - HELD THAT - AO in the assessment order made lump sum addition of ₹ 1000000/- to the income of the assessee on account of alleged profit on unaccounted transactions at MCX. That the profit from transaction with MCX is computable from record found in Hazir software and assessee submitted before A.O. the resultant profit from MCX transaction which A.O. verified the same and found it correct and accepted it and added the same in income of assessee assessed by A.O. Besides that, the A.O. further made an lump sum addition without any reason or basis or finding any shortcoming in resulted profit computed from transaction on MCX. Addition is purely based on surmises and conjectures and accordingly the Ld. CIT(A) is correctly deleted the same. Investment of capital for alleged unrecorded transactions - HELD THAT - A.O. without any basis or material held that assessee would have made investment of capital for alleged unrecorded transactions of sales/purchases found recorded in Hazir software and worked out total investment for business on the basis of alleged total turnover of ₹ 5,47,31,72,177/- which is worked out by him in proportion to actual capital of ₹ 3496965/- for declared turnover of ₹ 2,03,30,09,914/- and made addition of ₹ 59,17,397/-. The record found in Hazir software do not have any investment of capital by assessee nor there is any credit his name otherwise also the unrecorded transactions in gold/silver are on day to day basis. The modus operandi of the business as also evident and verifiable from the Hazir software that the transaction of purchases and sales are placed simultaneously and as such capital investment is required. The buyer first makes payment and assessee delivers gold/silver which he purchased making the payment which it received from buyer and earns his profit requiring no capital investment. As the addition made is without any basis, material or reason it is just on hypothesis and arbitrary which cannot be sustained in law. Loss suffered by the assessee in respect of alleged unrecorded transactions is not eligible for set off against declared profit by wrongly invoking sec. 115BBE - Clarification regarding set off of losses against deemed undisclosed income - HELD THAT - Amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. Accordingly, we hold that the assessee current loss is allowable to set off against the current year income. In M/s Pitamber Commodity Futures P Ltd. 2018 (4) TMI 19 - ITAT JAIPUR by confirming the appeal order of CIT (A) 4, Jaipur held that amended provisions are applicable from 01-04-2017 only and cannot be applied retrospectively. The issue in this case is thus being exactly the same and is covered by the said judgement of ITAT, Jaipur Bench, Jaipur. The CIT (A) thus is wrong and has erred in law in not allowing the set off of net unaccounted loss from the accounted income of assessee. Unexplained investment purchase of Gold - HELD THAT - CIT(A) is correct in deleting the addition made by the AO on account of alleged undisclosed investment in purchase of Gold.
Issues Involved:
1. Rejection of books of account by invoking Section 145(3) of the Income Tax Act, 1961. 2. Addition of unexplained investment and expenditure. 3. Deletion of additions related to unrecorded transactions in the "Johri Bazar" software. 4. Application of Section 115BBE. 5. Lump sum addition for undisclosed profit from unaccounted transactions with MCX. 6. Unexplained investment in the purchase of gold. Detailed Analysis: 1. Rejection of Books of Account by Invoking Section 145(3): The assessee's books of account were rejected by the AO under Section 145(3) of the Act for the Assessment Years 2015-16, 2016-17, and 2017-18. The CIT(A) upheld this rejection but sustained a nominal addition of ?10,00,000. The Tribunal observed that the assessee maintained correct and complete books of accounts, which were duly audited under Section 44AB. The AO did not point out any defects or discrepancies in these books. Consequently, the Tribunal held that the AO was wrong in invoking Section 145(3) and rejecting the books of accounts. 2. Addition of Unexplained Investment and Expenditure: For A.Y. 2015-16, the AO made additions of ?5,69,79,862 as unexplained investment and ?59,17,397 as unexplained expenditure. The CIT(A) deleted ?2,20,37,862 and ?43,42,901 respectively but sustained ?10,00,000 and ?15,74,496. The Tribunal found that the AO's additions were based on incorrect assumptions and without any material evidence. The Tribunal ruled that the CIT(A) was correct in deleting the major part of the additions but erred in sustaining the nominal amounts. 3. Deletion of Additions Related to Unrecorded Transactions in the "Johri Bazar" Software: The AO made additions based on transactions recorded in the "Johri Bazar" software, which were allegedly unrecorded. The CIT(A) deleted these additions, and the Tribunal upheld this decision. The Tribunal noted that the software contained both recorded and unrecorded transactions, and the AO did not find any defects in the transactions recorded in the software. Therefore, the additions were deemed arbitrary and unsustainable. 4. Application of Section 115BBE: For A.Y. 2016-17, the CIT(A) held that a loss of ?17,45,527 suffered by the assessee in respect of unrecorded transactions was not eligible for set-off against declared profit by invoking Section 115BBE. The Tribunal observed that Section 115BBE(2) only bars deductions for expenditures or allowances but does not bar the set-off of losses under Section 71. This provision was amended to include the set-off of losses only from A.Y. 2017-18. Thus, the Tribunal allowed the set-off of the loss against the declared profit for A.Y. 2016-17. 5. Lump Sum Addition for Undisclosed Profit from Unaccounted Transactions with MCX: The AO made a lump sum addition of ?10,00,000 for undisclosed profit from unaccounted transactions with MCX. The CIT(A) deleted this addition, and the Tribunal upheld this decision. The Tribunal found that the AO had no basis or material evidence for this lump sum addition, making it arbitrary and unsustainable. 6. Unexplained Investment in the Purchase of Gold: For A.Y. 2017-18, the AO made an addition of ?3,02,00,000 as unexplained investment in the purchase of gold. The CIT(A) deleted ?2,57,00,000 of this addition, sustaining only ?45,00,000, which the assessee had already declared under the PMGKY scheme. The Tribunal upheld the CIT(A)'s decision, noting that the source of payment for the gold purchase was from the sale proceeds, and only the profit from these transactions should be taxed. Conclusion: The Tribunal dismissed the appeals of the revenue and allowed the appeals of the assessee for all the assessment years involved. The Tribunal found that the AO's actions were largely arbitrary and without substantial evidence, while the CIT(A)'s decisions were mostly upheld except for nominal additions, which were also deemed unsustainable.
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