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TMI Blog2020 (1) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover of the assessee in purchase and sale of digital dollars. Addition relating to the deposits made in various accounts - we observe that there were sufficient amount of cash withdrawals from the bank accounts for making deposits in different persons. Therefore, we do not see any reason to suspect the source of deposit when there were sufficient withdrawals in the bank account. Accordingly, we hold that having accepted by the AO that the assessee had purchased the dollars from different persons to the extent of ₹ 46,37,000/- out of total deposits of ₹ 1,87,45,260/-, there is no reason to suspect the source of deposits made in the different persons of the bank accounts. Hence, we uphold the order of the Ld.CIT(A). CIT(A) has estimated the turnover at ₹ 2,50,00,000/- and estimated the income @4%. The assessee in his statement recorded u/s 133A as well as in the return of income admitted the income @2%. The Ld.CIT(A) has not given any basis for estimating the turnover at ₹ 2,50,00,000/- when the turnover works out to sum of ₹ 2,32,82,260/-. Out of 2,33,82,260/-, A sum of ₹ 15,00,000/- was given as loan to Sri Andhavarapu Srinivasa Rao ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in whose account the cash was deposited, credits the liberty reserves to his liberty reserve account No.U0137810(lade). The entire transactions for purchase and sale of liberty reserves were routed through the website www.libertyreserve. com. The AO also observed that the assessee was receiving liberty reserves from different persons and sending liberty reserves to different persons, but identity of the persons from whom he received the liberty reserves and to whom he sent the liberty reserves were not available in the e-mail copies since the transactions were routed through the email accounts. Only liberty reserves account numbers of the persons from whom liberty reserves were received and liberty reserve account numbers of the persons to whom liberty reserves were sent are seen in the copies of the emails. The assessee also admitted that he did not know the name and address of the persons from whom he was trading and it was just online trading. The assessee further submitted before the AO that he receives calls to his phone number from the persons who were interested in purchasing the liberty reserves and also from the persons who are interested in selling the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncoming and outgoing digital dollars, furnishing the details of dollars allotted vide their account numbers, amount of dollars and date of transaction. All the transactions were evidenced by emails. He submitted before the AO that he is only doing mediation towards his client for purchase and sale of digital dollars. All the deposits made in the bank account were deposited by the buyers and sellers of the digital dollars. He submitted that he is like Katcha Arahatia , and acts only as an agent on behalf of his clients, but never acts as a principal. The AO examined the explanation of the assessee, but not convinced with the explanation and found that out of ₹ 1,87,45,260/- was deposited in the account and the assessee had purchased the digital dollars to the extent of ₹ 46,37,000/- from others and there was difference of ₹ 1,41,08,260/- for which the assessee could not explain the application of withdrawals. Hence, the AO was of the view that the sum of ₹ 1,41,08,260/- was income of the assessee, since, the assessee has not utilized the amounts for purchase of digital dollars and observed that the assessee was collecting the amounts and giving loans to othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before the CIT(A) and furnished some additional evidence in the form of confirmation letters from six parties which were forwarded to the AO by the Ld.CIT(A). The AO examined the confirmation letters and submitted the remand report stating that out of six persons, five transactions were admitted as correct and five transactions were not admitted by the respective persons. Accordingly, the AO submitted the remand report stating that the additional evidence in the form of confirmation letters filed by the assessee were related to earlier year or subsequent year but not related to the impugned assessment year, hence, not relevant to the impugned assessment year. Copy of the remand report was given to the assessee by the Ld.CIT(A) and the assessee contended that the AO is not justified in rejecting the confirmation letters. The assessee further submitted before the Ld.CIT(A) that www.libertyreserves was shut down due to ban in May 2013, therefore, the assessee was unable to collect the required information. The Ld.CIT(A) considered the submissions made by the assessee and observed that the assessee was engaged in the activity of purchase and sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the order of the Ld.CIT(A) and allow the appeal of the revenue. 7. On the other hand, the Ld.AR submitted that the assessee is engaged in the liberty reserves, purchase and sale of digital dollars which is evidenced by e-mails submitted before the AO as well as before the CIT(A). The assessee was receiving only commission to the extent of 2% of the transactions, therefore submitted that estimation of turnover at ₹ 2,50,00,000/- or taxing the entire receipts is unjustified. With regard to deposits made in the bank accounts of other persons it is unjustified to hold that the assessee could not explain the source, since the assessee has sufficient cash withdrawals to meet the payments made in different accounts of the persons. Therefore, argued that since there were sufficient withdrawals in the bank accounts, the deposits made in the bank account of others needs to be taken as a source, thus argued that making separate addition is unjustified. Accordingly, the Ld.AR argued that estimation of income @2% of the entire turnover would meet the ends of justice. Hence, requested to set aside the order of the Ld.CIT(A) and direct the AO to estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,41,08,260/- by the AO was the assessee s inability to establish that he has purchased the liberty reserves and viewed that he had diverted the funds for other than business purposes. From plain reading of the assessment order page No.18 and 19, it is observed that the AO made the addition of ₹ 1,41,08,260/- (18745260-14108260) due to assessee s inability to establish the purchase of digital dollars and the AO did not suspect the nature and source of deposits made in the bank account. There is no provision to tax the withdrawals made from the bank account for assessee s inability to explain the application of funds. However, in the instant case, the assessee had explained that the amounts were received from various clients throughout India for purchase and sale of digital dollars through www.libertyreserves.com. The assessee also filed identity proofs in page No.189 to 201 in paper book with confirmation letters from various persons having purchased digital dollars from the assessee. The assessee also furnished copies of E-mails from various Email accounts and from libertyreserves.com with regard to receipt of the payment along with the amounts deposited in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the difference amount taxed by the AO as observed by the Ld.CIT(A). Therefore, we hold that the amount of ₹ 1,87,45,260/- is turnover of the assessee for purchase and sale of digital dollars and income is to be estimated on the turnover. Accordingly, we hold that ₹ 1,87,45,360/- represent the turnover of the assessee in purchase and sale of digital dollars. 8.2. The next issue is addition of ₹ 46,37,000/- relating to the deposits made in various accounts. This is the exact amount which the AO considered as purchase of digital dollars. The assessee deposited various amounts in different persons accounts for purchase of digital dollars which was accepted by the AO. However, the AO has made the addition since the assessee could not explain the source of deposits made in the different accounts. The Ld.AR during the appeal hearing submitted that there were sufficient withdrawals in the various bank accounts to make the deposits in the different accounts. Therefore, the source of deposit cannot be disputed. On examination of the bank accounts furnished in the paper book, we observe that there were sufficient amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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