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TMI Blog2016 (4) TMI 551X X X X Extracts X X X X X X X X Extracts X X X X ..... has computed 1% income on total purchases on estimate basis whereas the accounts of the assessee have been audited by the Chartered Accountant and submitted the tax audit report in appropriate form and the Assessing Officer has not disturbed the financial results. The sales and purchase invoices were produced before the AO, but he did not reject any single paper and accepted the same. He issued notice u/s. 133(6) to the creditors, bankers and all have responded to the AO. The major part of the purchases was from Anshika jewellers, the sister concern and payments were made directly to the MMTC Ltd., which is a government organization. Therefore, no interference is called for in the well reasoned order passed by the ld. CIT(A). - Decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.4% in the immediate preceding year. The AO asked the assessee for the reasons for decrease in profit margin rate. The assessee could not offer any satisfactory explanation. The assessee provided the details of purchases and sales before the AO which is as under : Sales: Gagan Jewellers Rs.26,76,790/- SR Chains & Jewellers Rs.4,50,495/- Kundan Mal Roop Chand Jewellers Pvt. Ltd. Rs.8,70,297/- Uni Gold Jewel Craft Rs.26,74,554/- Gollu Chain House Rs.3,96,040/- Kangan Jewellers Rs.99,010/- Others including cash sales Rs.105,94,67,328/- Purchases: S.K. Impex Rs.13,39,77,226/- Kalyan Lakshmi Overseas Rs.2,31,19,421/- N K Gold Medallion Pvt. Ltd. Rs.3,37,42,654/- Anishka Jewellers Rs.87,10,43,943/- Gagan Jewellers Rs.27,56,638/- Other including customer Rs.53,34,167/- 3. During the relevant previous year, the assessee has made total purchases at ₹ 87,10,40,943/- from Anshika Jewellers which is sister concern. M/s. Anshika Jewellers was registered in MMTC, but the assessee was not so registered with MMTC. The assessee has made direct payment to MMTC on behalf of the Anshika Jewellers. On scrutiny of cash credit limit bank account, the AO found that befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Rs.5000 + ₹ 7,00,000 + ₹ 5,00,000) which remained with the assessee out of the loans received by the partner, was treated as capital introduction by Sh. A. K.. Malik and the remaining amount of ₹ 23,95,000/- (Rs.36,00,000 - ₹ 12,05,000) was treated as unexplained income of the firm routed through its partner Sh. A. S. Malik. Accordingly, the same was added to the income of the assessee. 5. Aggrieved by the order of ld. AO, the assessee preferred appeal before the ld.CIT(A).the assessee submitted before the CIT(A), confirmation of loans and evidences of creditworthiness of the creditors and genuineness of the transactions which were not filed before the AO. The ld. CIT(A) deleted the additions. Aggrieved by the order of CIT(A), the Revenue has preferred this appeal before the Tribunal. 6. The learned DR relied on the order of the AO and the contentions raised by the Revenue in the grounds of appeal. He submitted that the AO has passed a reasoned order and the same does not require any interference. 7. The present case lastly came up for hearing before the Bench on 08.10.2015. On the request of DR, the case was adjourned for 14.01.2016 in the presence of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f these entries were required. Some of these are not even related to the amounts received by the appellant. e) The correct details of amount received by appellant firm (total ₹ 36,00,000) from its partner and its sources (of the partner) are as given below: f) The appellant has explained its source of capital which, in any case, the AO had never held in doubt, i.e., the amount introduced in the appellant firm is from the partner's bank account Further, the source of the source, though not required by law, is also proved as brought out above. g) All the payments were received through a/c payee crossed cheques through proper banking channels and are duly accounted for in the books of account, which is evident from the documents placed on record. h) The basic requirement of section 68 as held in CIT vs. Oasis Hospitalities P. Ltd. [2011-ITRV-HC-DEL-031] ITA No. 2093 of 2010 with ITA No. 2094 of 2010 were proved by the assessee as follows: Identity: PAN is submitted. Genuineness: The money is received by cheque and is transmitted through banking or other indisputable channels. This was never held in doubt by the AO. Creditworthiness: The payers had suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11.03.2013 containing pages 1 to 163. He placed reliance on the following case laws : (i). CIT vs. Taj Borewells (2007) 291 ITR 232 (Mad), (ii).CIT vs. Metachem Industries (2000) 245 ITR 160 (MP), (iii).Smt Shanta Devi vs. CIT (1998) 171 ITR 532 (P&H), (iv). CIT vs. Orissa Hospitality Pvt. Ltd. 2011(ITR-V-HC-Del-031) ITA No. 2093 of 2010 with ITA No. 2094 of 2010. (vi). CIT vs. Value Capital Services Pvt. Ltd. (2008) 307 ITR 334(Del) 10. The Revenue has raised the issue before us regarding Rule 46A, but we find that after considering the facts and circumstances and case law cited by the assessee, the impugned addition should be made in the hands of the partners and not in the hands of the assessee firm. Therefore, there is no question of additional evidence. Therefore, no interference is called for in the well reasoned order passed by the CIT(A). We uphold the impugned order on the issue involved in ground No. 1. 11. On ground No. 2, the ld. DR relied upon the order of the AO and submitted that the AO has passed the reasoned order, which needs no interference and the ld. CIT(A) has erred in deleting the addition of ₹ 1,06,99,740/- made by AO by estimating the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the transactions of purchases and sales of gold bullion/jewellery as recorded in the books of account are sham, as the sales have been made in cash, cash has been deposited in bank before making payment for purchases by cheque, and no expenditure has been claimed on advertisement, security guard etc. Holding, without any basis or material, that the appellant is conducting the business of giving bogus accommodation entries and allegedly earning a commission of 2% of the amount thereof, but keeping in view the possible expenses, estimated the commission @ 1% on total purchases of ₹ 106,99,74,049/-, i.e., commission of ₹ 1,06,99,740/-. Ignoring the income of ₹ 2,56,020/- declared by the appellant and in its place treating the aforesaid amount of ₹ 1,06,99,740/- as the income from purported accommodation entries without the books of account being rejected. 7.3. It has been submitted that the facts relating to each of the issues raised by the Ld. A.O. in the assessment order are serially dealt with as under: Assessee made purchase/sale from Gagan Jewellers but no labour charges were shown in P & L A/c. It is pertinent to note that the appellant&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held in doubt. Sale proceeds from cash sales are deposited in the bank on regular basis, which the Ld. AO has himself stated in his order at several places. Proper stock records were maintained and details were duly audited and shown in tax audit report, which the Ld. AO never doubted. It has, thus, been submitted that from the above facts, it is quite evident that the appellant made cash sales which are duly recorded in its books of account and duly supported by bills/vouchers, bank statements and VAT returns. The banks, VAT authorities, insurance companies, etc. all dealing with the appellant have found them genuine for the last more than 30 years. The very basis of the Ld. AO that non-availability of details of customers to whom cash sales is made, makes the sales non-genuine is totally baseless and without any logic. Purchases are doubtful. The Ld. AO stated that sales are doubtful as purchases itself are doubtful. Details of purchases asked by the AO (party-wise above ₹ 25 lakh) were submitted as under: S. No. Detail of Parties from whom purchases made above ₹ 25 lakh each Amount (in Rs.) 1 Anishka Jewellers A/c MMTC Ltd. 161, Hardhiyan Singh Road ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant made cash sales of ₹ 105 Crore, but Anishka Jewellers has made cash sales of only 15.75 Crore out of total sale of ₹ 128 Crore. It may be noted that Anishka Jewellers has made sales of ₹ 87 Crore approx. to the appellant itself which was not in cash. The Ld. AO has also stated that the notice was returned unserved in the case of M/s Kalyan Laxmi Overseas. To the appellant's knowledge, the Ld. AO had made enquiries from the appellant's creditors by issuing 133(6) and almost all of them had confirmed the transactions with the appellant. However, in one case, i.e., M/s Kalyan Laxmi Overseas, the notice was returned unserved. As per the appellant's information, M/s Kalyan Laksmi Overseas is no more in the business now. However, it is pertinent to note the following facts regarding M/s Kalyan Laxmi Overseas: During the year under consideration, the appellant did business with the said concern. M/s Kalyan Laxmi Overseas is registered with MMTC Ltd., a government undertaking under OGL Gold scheme. All payments on account of M/s Kalyan Laxmi Overseas were made to MMTC Ltd. directly. M/s Kalyan Laxmi Overseas was registered with VAT authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck and the same is insured too. Copy of insurance of stock of the appellant is enclosed to substantiate the same. Copies of cash collection from appellant's premises by bankers with recent bank statement is submitted in evidence that bankers visit appellant's premises on almost alternative days to collect cash to deposit the same in bank. It has, thus, been submitted that the report of the inspector cannot be relied upon at all as he visited the wrong premises and all his observations are based on the wrong premises. Deposit in cash before issue of cheque. The Id. AO has stated that the appellant has deposited cash before issue of cheque for purchases. It is to be noted that the appellant's major sales are in cash and the sale proceeds are being regularly deposited in bank. When sale is in cash, then cash would naturally be deposited in the bank to clear the dues and to pay for purchases. This is a normal business practice and nothing adverse can be concluded out of the same. Purchases from Anishka Jewellers. The Ld. AO has also formed an opinion that purchases from M/s Anishka Jewellers are not genuine. However, the following facts prove beyond doubt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n doing so successfully since years. Hence, the AO's observation is not correct. Expenses on security guard - The AO has stated that there are no expenses on security guard. The AO never asked all these questions to the appellant otherwise the appellant would have surely replied. The partner of the appellant firm has three valid weapon licences, which the appellant feels is much better to save its assets rather than a simple security guard. Hence, there are no security guard expenses of the appellant. Replies from employees - The Ld. AO sent notices u/s 133(6) to two employees of the appellant, one residing at Rohini and another at Ghaziabad. Both of them responded, to which also the AO objects that the replies are on plain paper and without envelope. How does the AO believe that these simple employees should have their letterheads? The employees responded in a simplistic manner by writing on a plain paper and delivering the same personally to the AO's office. What else did the Ld. AO expect is not understandable. Computing income on estimate basis. The Ld. AO has, thus, computed the income of the appellant on estimate basis without considering the following facts: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover declared in the Income-tax return. The assessee has taken cash credit loan from PNB, Punjabi Bagh, New Delhi against hypothecation of stock. As per submissions, he has fulfilled the requirement of bank against cash credit loan taken. Therefore, the purchase and stock declared before the bank cannot be questioned. After going through the AO's order and the paper book submitted, we observe that the Inspector has submitted wrong report. Regarding very low amount of depreciation, the assessee was carrying his business since last many years, therefore, their WDV has gone down. The AO has computed 1% income on total purchases on estimate basis whereas the accounts of the assessee have been audited by the Chartered Accountant and submitted the tax audit report in appropriate form and the Assessing Officer has not disturbed the financial results. The sales and purchase invoices were produced before the AO, but he did not reject any single paper and accepted the same. He issued notice u/s. 133(6) to the creditors, bankers and all have responded to the AO. The major part of the purchases was from Anshika jewellers, the sister concern and payments were made directly to the MMTC Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X
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