9911796707
TMI Blog2022 (10) TMI 116X X X X Extracts X X X X X X X X Extracts X X X X ..... l:- "1. Whether on the facts and in the circumstances of the case the ld. CIT(A) was justified in deleting the addition of Rs. 12,17,48,500/- by treating the same as part of turnover whereas the same was found to be bogus and false entries or undisclosed income of the assessee which was induced in the books under the garb of cash sales and advance from customer and receipt from debtors, deleting the addition of Rs. 12,17,48,500/- made u/s 68 of the IT Act, 1961 which was deposited by the assessee during the demonetization period and which was also remained unverified during the assessment proceedings. Deleting the addition of Rs. 12,17,48,500/- and treating the same as part of turnover and apply NP rate of 2.59% on the whole transaction including the sham transaction of Rs. 12,17,48,500/-, deleting the addition of Rs. 12,17,48,500/-, deposited during the period of demonetization, and spoil the sole purpose of curbing out black money under tax bracket." 4. Brief facts of the case are that the assessee company e-filed its return of income for the previous year 2016-17 relevant to Assessment Year 2017-18 on 31.10.2017 declaring an income of Rs. 4,37,53,418/-. The case of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious years it was noticed that in October 2015 cash sales was just 11% of the total sales and in October 2014 it was 13% compared to total sales. d) Further, Assessee failed to furnished the details of the persons such as full name, address and PAN to whom cash sale was made during the demonetization period. e) Further, it is found that the assessee has revised its quarterly VAT return for the AY 2017-18 wherein the turnover of the assessee has been significantly increased which is tabulated as under: Quarter Original VAT return Revised VAT return 1st 15047440 300269589 2nd 10653316 260005971 3rd 376741818 991231791 4th 41629068 --- The revision of the VAT return related to the pre demonetarization period further strengthen the fact that the assessee company has booked bogus cash sale for the period before demonetarization which subsequently increase the sale of the assessee and to show the sale as genuine the assessee revised its VAT return for First 3 quarters. The assessee also revised the VAT return of 4 quarter however the turnover was not disturbed which shows that the assessee has revised the Return to duped the Department. The whole excise made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ji 99820760 35 10000 No response by debtor call dated 15.12.2019 time 5.47PM 6 8267 05.11.2016 Asha Singh 94140623 55 42413 Debtor not remember that's she has purchased any item In the above verification genuineness of the cash receipt from debtors not found substantiated which further reveals that the assessee has booked bogus debtor to accommodate his unaccounted income under grab of receipt from debtors. In view of the above, it is evident that, assessee has fabricated the whole transaction to make it look real, however, when the trends of cash sales and series of transactions are considered, it beyond any shadow of doubt that the whole transaction is fabricated and the assessee has deposited its undisclosed income under the grab of cash sales. 7. Based on these observations the ld. AO issued a show cause notice to the assessee requesting to show cause as to why the cash deposited during the demonetization period amounting to Rs. 12,17,48,500/- should not be considered as undisclosed income and added back to the total income under section 68 of the Act. Subsequently, another show cause notice was issued on 17.12.2019 stating that the on verification propose rando ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptable considering the fact that all the sale invoice are below 2 lakhs and it cannot be believe that the person who has budget for the marriage ceremonies will purchase all the items below 2 lakhs. e) The argument of the assessee that sale of the jewellery business depends on occasion such as Diwali and Marriages not found convincing considering the fact that the purchase made on these occasion are not a purchase like walking person come to the showroom of the assessee and purchase anything as he has to has purchase which is also evident from the methodology of issuance of invoices wherein no detail such as address, full name has been noted. f) Further, the argument of the assessee is contrary itself. As per logic of the assessee when demonetarization was declared people rushed to jewellery shop than there should be extra ordinary increase in the sale in the month of November as the date of demonetarization dated 08-11-2016 pertains to November. Whereas in actuality the assessee has shown 18% increase in the month of October in compare to sale of November at 13%. g) The assessee has claimed that he cannot compelled purchaser to disclosed there name, address and PAN and same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on a wrong address. The same also not as acceptable since the notice was sent at the address mentioned in PAN so provided by the assessee. Further the notice was issued through ITBA which was also served to the assessee at his registered e-mail: However, no reply to the notice was received. Hence the claim of the assessee does not have any substance, Further, as assessee has claimed bogus purchase is from M/s Paras Gems & Jewellery amounting to Rs. 110561454/-. Therefore, Penalty proceedings u/s 270A of the Act is initiated separately for under reporting of the income and misrepresent of the fact. l) Furthermore, in the confirmation so furnished the name of proprietor Shri Mahesh has been duly written as signature authority for Paras Gems & Jewellery whereas the assessee has claimed that he is not known to Shri Mahesh Soni. It is quiet surprising that the assessee has made purchase amounting to Rs. 11.05 crore from a proprietor Shri Mahesh concern but does not known the prop. The fact further strengthen that the purchase shown from M/s Paras Gems & Jeweller it not genuine and only a book entry has been made through bogus purchase bill to increase the stock so that same can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellery item so purchase is 14 krt or 18krt or 22 krt gold item. In these circumstances the said purchase cannot be verified from stock register. q) Further, it is found that the cash so deposited in the bank account of assessee having no 911020053773688 and account no. 916030041790950 held in the Axis Bank during the period of demonetarization subsequently transferred to Girdhar Associate in significant amount which is sister concern of Girdhar Jeweller Pvt. Ltd. having same address at C-114, Lal Kothi C-Scheme, Jaipur and same director which is further strengthen the fact that no actual purchase was made from Girdhar Jeweller Pvt. Ltd. as purported by the assessee and only book entry of purported purchase was made to show high stock before demonetarization so that bogus sale can be substantiated by such high stock in hand. This fact is also shows that no actual delivery of such stock was received before the demonetarization period and not actual stock was sold on the day of demonetarization and all the adjustment has been made after the demonetarization. r) As discussed above, the assessee a purchase from M/s Paras Gems and Jewellery not found extent during the enquiry and gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,80,398/- declared by the assessee in the retun and the same is considered for total income of the assessee. Since, the assessee deposited amount of Rs. 12,17,48,500/- in the demonetized currency which the AO treated the same as unexplained cash credit of the assessee and by applying the provisions of section 68 of the Act the same was added as income of the assessee and the same taxed as per the provisions of section 115BBE of the Act. The assessment of the assessee was completed by ld. AO vide his order dated 29.12.2019 wherein the total income of the assessee was assessed at Rs.16,45,24,988/- as against the return income of Rs. 4,37,53,418/-. 10. Aggrieved by the order of the assessing officer making the assessment based on the above stated fact, the assessee preferred an appeal before the ld. Commissioner of Income Tax, Appeals-4, Jaipur. The appeal filed by the assessee was partly allowed by the ld. CIT(A) and the relevant findings of the ld. CIT(A) is reiterated here in below: "(xxvi)In view of the facts of the case, it is evident that the appellant has duly substantiated its claim from the documentary evidences and also with the facts which duly supported with his own pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of the appellant by invoking the provisions of section 145(3) of the Act. It is also observed that the AO has applied Net Profit rate at 2.59% for the year under consideration as against 2.36% declared by the appellant. However, while applying the aforesaid rate, the AO has treated the amount of Rs. 12,17,48,500/- as bogus turnover and taxed the same u/s 68 of the Act. Since in the above paras, I have held Rs. 12,17,48,500/- to be part of total sales and deleted the addition made by the AO u/s 68 of the Act, accordingly, the Net Profit rate of 2.59% applied by the AO is now directed to be applied on the total turnover of Rs. 2,09,09,94,399/- (including the amount of Rs. 12,17,48,500/-) declared by the appellant for the year under consideration. The AO has made an addition of Rs. 5,10,03,468/- by applying the Net Profit rate of 2.59% on reduced turnover of Rs. 1,96,92,45,899/-. Consequently, the Net Profit rate by applying 2.59% on total turnover of Rs. 2,09,09,94,399/- is worked out at Rs. 5,41,56,755/-. Accordingly, an addition of Rs. 31,53,287/- (Rs. 5,41,56,755 - Rs. 5,10,03,468) is confirmed and the balance addition of Rs. 4,78,50,181/- is directed to be deleted. Accordingl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act and proceeded to considered the cash sales to the extent of Rs. 12,17,48,500/- as unexplained cash credit u/s. 68 of the Act and also proceeded to estimate the profit as per last three-year profit declared by the assessee as arrived at 2.59 % and applied that the same on the remaining part of the sales after reducing the cash sales added separately which is correct action based on the detailed findings recorded by the ld. Assessing Officer and based on these reasoning he supported the order of the assessing officer and submitted that the AO is justified in rejecting the book result of the assessee and the considering the detailed defects noted the ld. DR submitted that cash sales shown by the assessee on the day of the demonetization nothing but the unaccounted money of the assessee routed as cash sales and the addition of deposit of SBN in to the bank account should be sustained and the findings of the ld. CIT(A) is required to be reversed to that extent. The ld. DR has relied upon the following judicial pronouncements to drive home to their various contentions raised as to the onus of the assessee to prove the correctness of the sales reflected by the assessee : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales of Rs. 2,09,09,94,399/- declared by the assessee. Thus the ld. AO computed the net profit of the assessee Rs. 5,10,03,468/- as against Rs. 5,19,80,398/- declared by the assessee. ii) Further the assessee deposited amount of Rs. 12,17,48,500/- in the demonetized currency which was out of cash balance available with the assessee from sales made by it, amount realized from sundry debtors and advance received against sales. The ld. AO treated the same as unexplained cash credit of the assessee and by applying the provisions of section 68 of the Act the same was added as income of the assessee and the same taxed as per the provisions of section 115BBE of the Act. 2). Aggrieved from the assessment order, the assessee filed appeal before ld. CIT(A). The ld CIT(A)after analysing each facts and various judgments made detailed factual finding in para 6.2 at page 45 to 57of her order and partly deleted the addition made by ld. AO. The findings of ld CIT (A) in brief are as under: - i) deleted the addition of Rs. 12,17,48,500/- made by ld. AO under section 68 of the Act alleging the cash deposited in bank a/c in demonetized currency as unexplained cash credit. ii) Upheld the rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the case and in law the ld. CIT (A) erred in estimating the net profit of Appellant Rs. 5,41,56,755/- by applying the net profit rate @ 2.59% on declared turnover of Rs 2,09,09,94,399/- and thereby confirming the addition of Rs. 47,72,297/- 3. The Appellant prays for leave to Add, to amend, to delete, to modify the all or any grounds of appeal on or before the hearing of appeal." Departmental Appeal 4). Submission on Grounds of Appeal raised by department The sole ground raised by department is regarding to the deletion of addition of Rs. 12,17,48,500/- made by ld. AO by applying the provisions of section 68 and taxed as per provisions of section 115BBE of the Act. 4.1. Finding of ld.AO: - The findings and observations of ld. AO are at page 2 to 23 of the assessment order. In view of the observations and findings the ld. AO alleged that the sales made, amount realized from debtors and advances received from customers, which was utilized to deposit in bank account in demonetized currency after post demonetization were fabricated and manipulated. These entries are bogus & false and only made to generate cash in hand in books of account for adjustment of cash deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 etc. and the amount of Rs. 12,17,48,500/- was in demonetized currency. 3) The date wise detail of amount of Rs. 12,17,48,500/- deposited in demonetization currency is as under: - Date of deposit Amount deposited Name and Address of Bank 10.11.2016 7,20,00,000 Axis Bank Ltd., Apex Tower, Lal Kothi, Tonk Road, Jaipur A/c No. 916030041790950 10.11.2016 4,80,00,000 Axis Bank Ltd., Apex Tower, Lal Kothi, Tonk Road, Jaipur A/c No. 911020053773688 06.12.2016 17,48,500 Axis Bank Ltd., Apex Tower, Lal Kothi, Tonk Road, Jaipur A/c No. 916030041790950 Thus, out of total cash Rs. 12,17,48,500/- deposited in bank in demonetized currency, Rs. 12,00,00,000/- deposited on the first working day of banks after the announcement of demonetization i.e.on 10.11.2016 and balance left out meagre amount, which could not be deposited on 10.11.2016 was deposited on 06.12.2016. 4) The cash was deposited in bank account of out of the cash sales, advance received from customers against sale and recovery from outstanding debtors during the period 03-11-2016 to 08-11-2016. The date wise cash receipt to the assessee from each source is as under: - Date Amount Rs. Source 03-11-201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted along with letter dated 14.08.2019 & 15.10.2019 (Copy of the same is at PB Page 161 to 162)andalsosubmitted (corrected) along with letter dated 21.12.2019 (Copy of the same is at PB Page 163 to 165). 6) Copies of VAT quarterly returns (Original)submitted along with letter dated 21.12.2019 (Copy of the same is at PB Page 97 to 109) and revised returnssubmitted along with letter dated 11.03.2019 (Copy of the same is at PB Page 110 to 138). 7) Copy of assessment order of VAT and CST submitted along with letter dated 12.12.2019 (Copy of the same is at PB Page 139 to 147). In view of above documents, the assessee duly substantiated its claim. 4.3.4 Facts duly supported with the own previous history and trend of the assessee. The various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017 - ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-ITA.II ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ummary of the cash balance at the end of each month submitted to ld. AO in submission dated 15.10.2019 (Copy of such submission is at PB Page 75 to 79). Such summary is as under: - a) Comparison of month wise Cash in hand in last four years:- Months F.Y. 2014-15 F.Y. 2015-16 F.Y. 2016-17 F.Y. 2017-18 Amount of Cash in hand Amount of Cash in hand Amount of Cash in hand Amount of Cash in hand April 6,96,42,865.00 5,22,71,834.00 97,75,268.26 1,22,93,657.14 May 8,94,92,944.00 5,94,80,621.00 6,33,50,088.26 3,57,43,696.14 June 4,73,31,692.00 79,09,530.00 8,54,06,309.26 3,11,81,850.14 July 5,26,97,000.00 4,61,57,595.00 9,49,12,520.76 2,39,52,615.48 August 61,95,404.00 5,47,27,012.00 2,17,87,121.20 34,64,380.46 September 2,12,80,570.00 5,46,49,417.00 39,79,656.16 68,64,118.02 October 3,39,82,340.00 3,12,90,333.00 3,57,65,036.20 1,98,30,211.48 November 4,10,44,185.00 2,81,78,828.00 91,85,834.00 3,77,06,758.20 December 3,14,68,972.00 5,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 12% 19,17,28,186.00 17% 13,55,23,909. 00 13% In Nov 2014 total cash sales were of Rs. 15.51 crores and in Nov 2015 the cash sales of the assessee were of Rs. 19.17 crores whereas the cash sales in Nov 2016 was of Rs. 13.55 crores, lesser than Nov 2014 and Nov 2015. In term of % of cash sales to total sales, it was 12% of total sales in Nov 2014, and in Nov 2015, it was 17% of total sales of FY 2015-2016, whereas in Nov 2016 it was only 13% of total sales of FY 2016-2017. Therefore, there was not abnormal rise in overall cash sales of the assessee due to demonetisation. The same trend, though some slowdown in next few months, has also continued after the demonetization period i.e.in Dec. 16 to March 2017.The reason of marginally slow down in cash sales in the month of December 2016 to February 2017 in comparison to cash sales during this period in the A.Y 2015-16 and 2016-17 was that due to heavy purchases on 08th November 2016 for the purpose of utilizing the demonetized notes the purchase in the month of December 2016 to February 2017 came down. This implies that the business of the assessee was run with the same feature even after demonetization and there was no unusual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and alleged that the amount of cash sales made on 08/11/2016 is asymmetrical and is not comparable with sales made on the other dates of the month of November 2016. The ld. AO failed to appreciate that in Nov 2014 total cash sales were of Rs. 15.51 crores and in Nov 2015 the cash sales of the assessee were of Rs. 19.17 crores whereas the cash sales in Nov 2016 was of Rs. 13.55 crores, lesser than Nov 2014 and Nov 2015. In term of % of cash sales to total sales, it was 12% of total sales in Nov 2014, and in Nov 2015, it was 17% of total sales of FY 2015-2016, whereas in Nov 2016 it was only 13% of total sales of FY 2016-2017. Therefore, there was not abnormal rise in overall cash sales of the assessee due to demonetisation. There was no overall increase in cash sales of assessee during the month Nov 2016 but the sale of a particular date i.e.8/11/2016 was increased which shows the shifting of regular cash sales of other dates of Nov 2016 to a particular date 08/11/2016 because there was frenzy amongst the customers who wanted to convert their SBN into Gold. Demonetization, itself was on historical event which had led to such a high demand of the goods like gold in order to convert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is apparent that the cash sale of October-2016 to December-2016 was higher than the sales of other months. The major reason for the higher cash sale on 08.11.2016 that the panic and haste amongst the peoples who intended to off-load the SBN currency, which was acceptable till the midnight of 08.11.2016 by purchasing the gold ornaments. It is further relevant to mention here that after the Diwali festival, the marriage ceremonies are started. In the FY 2016-17 the Diwali festival was on 30.10.2016 and thereafter the marriage ceremonies started. It is admitted fact that and also customary in India, that each person keep some cushion for purchases of Jewellery at the time of marriage. As soon as the Diwali function ended few days thereafter the demonetization was announced and the persons who were having the planto purchases the Jewellery for marriage etc. and having accumulated funds for that purposes preferred to consume such funds for purchase the Jewellery as on soon the demonetization announced i.e. on 08.11.2016 as thereafter such currency could not be utilized for purchases of Jewellery. From the above table, it is clear that cash sale made by the assessee during the wed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pined that the party does not exist and the purchases made from this party is not-genuine. In this regard we may submit that: - i) The notice u/s 133(6) of the Act to Paras Gems & Jewellers (Prop. Mahesh Soni) was sent on the address of party mentioned in his PAN data base. The notice was not issued on the address available on the sale bill supplied by the party to assessee. The assessee made the purchases from M/s Paras Gems and Jewellershaving business address: - Plot No. 828C-5a, JatKeKue Ka Rasta, Chandpole Bazar, Jaipur. Instead of sending the notice on this address or making the inquiries on this address the notice was sent on different address. ii) It is relevant to mention here that assessment proceeding of this party of the same year was completed by his jurisdictional AO vide order dated 24.12.2019 (Copy at PB Page 244 to 245) and the sales made by this party has been accepted as genuine by the AO of this party, therefore there remains no doubt that the party does not exist and the purchases made from the party is not genuine. It is further relevant to mention here and also apparent from the confirmation of account of this party (Copy at PB Page 186) the assessee also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reason. The party duly existed at the time of goods purchased by the assesseeand there is no requirement under the law that the buyer of goods should continue to keep track of the seller's whereabouts. v) It is established position of law that the purchases cannot be treated as non-genuine for the sole reason that the notice returned unserved or party not found. In this regard reliance is placed on the following decisions: - a) Hon'ble Bombay High Court in the case of CIT vs. Nikunj Exirnp Enterprises(P) Ltd[2013] 216 Taxman 171 (Bom.), the Hon'ble High Court of Bombay(Copy at Case Law PB Page No. 6-7) held that where sales supported the purchases and payment was made through banks, merely because suppliers had not appeared before AO, the purchase could not be treated as bogus. b) Gujarat High Court in the case of CIT v. M.K. Bros. (1987)163 ITR 249 (Guj.)(HC)(Copy at Case Law PB Page No. 8-9) Purchases made by assessee. Subsequent statements by sellers in Sales Tax proceedings that they had issued bogus vouchers. No evidence that bogus vouchers were issued to assessee. Payments by account payee cheques. Amount represented purchases cannot be disallowed. c) CIT v Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2019 it was submitted that we have not provided any bill or detail regarding to purchase made from Shri Mahesh Soni and in our books of accounts no purchases has been debited in the name of Shri Mahesh Soni. However, after receiving your notice the assessee has enquired about this matter and came to known that the Shri Mahesh Soni was proprietor of M/s Paras Gems and Jewellers. The assessee made the purchases from M/s Paras Gems and Jewellers, Address: - Plot No. 828-C-5a, JatKeKue Ka Rasta, Chandpole Bazaar, Jaipur. Since all the transaction in the record of the assessee were entered in the name of M/s Paras Gems and Jewellers, therefore on examination of books of accounts and record no one can instantly know that who is Mahesh Soni and the same can only be find out after making the inquiries from the staff who is dealing the purchases and the same happened in the case of assessee also. So far as regarding to the allegation of ld. AO in the same para of the assessment order that purchases from Paras Gems & Jewellers is only a book entry has been made through bogus purchase bill to increase the stock so that same can be shown as stock in hand to support the sale made during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adverse finding which is for the sole reason that he was bent to make the huge addition in the total income of the assessee. 3) Purchases from Girdhar Jewellers Private Limited The purchase made from M/s GirdharJewellers Private Limitedwas also treated as non-genuine on presumptions and assumptions and for no cogent reason. During the course of assessment proceedings, the ld. AO did not provide any opportunity to assessee to present its case on this footing. Aggrieved from this allegation of learned AO it is submitted as under: - i) The purchases made from this party in earlier years was held as genuine in 143(3) assessment of the assessee:-The assessee has also made purchases in earlier year from M/s Girdhar Jewellers Private Ltd as well as M/s Girdhar Associates. The assessment of the assessee for AY 2015-16 and AY 2016-17 was completed u/s 143(3) after detailed scrutiny as the department has carried out search over the assessee on 22-07-2015. The purchases from M/s Girdhar Jewellers Private Ltd as well as M/s Girdhar Associates were accepted as genuine. The purchases by the assessee from both these parties during AY 2015-16 and AY 2016-17 were as under:- i) AY 2015-16: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of Rs. 5,55,87,688/- was also made on 10.11.2016i.e.immediate after one day when the demonetization announced. Thus the finding of ld. AO is patently wrong that the entire purchases of Rs. 18,83,64,857/- was on credit. b) The credit purchase is matter of understanding in between the buyer and seller and the purchases cannot be treated as nongenuine on this only footing. Still as submitted earlier and at the cost of repetition it is submitted that this is not the case the entire payment of purchase made prior to 08.11.2016, as alleged by ld. AO was outstanding. As submitted earlier para the major payment was already made prior to 08.11.2016 and balance payment on 10.11.2016. As on the date of demonetization announcement i.e.08.11.2016 the payment of Rs. 5,55,87,688/- was only outstanding, majorly of which was for the purchases made after 22.09.2016 i.e.the same remained outstanding for above 1.5 month only,as against 3-4 months alleged by ld. AO and this is the normal credit cycle. It is further relevant to mention here that as on 01.04.2016 the payment of Rs. 8,34,53,390/- was payable to this party, which was majorly paid upto 28.06.2016. The outstanding credit balance as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason that the ld. AO was bent for making the huge additions. d) The amount transferred in account of M/s Girdhar Associates was transferred for purchase made from this party and the same has no bearing with the transactions made with M/s Girdhar Jewellers Pvt Ltd as the transaction carried out with both concerns are separate transactions and both the concerns are different. From the ledger account of M/s Girdhar Associates (Copy at PB Page No. 215 to 216) it is clear that whatever payment made to this party was adjusted against the purchases made from this party only. It is not understandable that if the assessee made the payment Girdhar Associates, who is sister, concern of M/s Girdhar Jewellers Pvt Ltd, than how the purchases made from Girdhar Jewellers Pvt Ltd can be treated as non-genuine. It is further relevant to mention here that the genuineness of purchases made from Girdhar Associates had not doubted by the ld. AO and the same is treated as genuine. Therefore, it is not correct on part of ld. AO to treat some payments made to Girdhar Associates for such purchases as non-genuine by linking the same from other transactions of other concern and giving totally irrelevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving the sufficient stock the make the sale.Therefore, the finding of ld. AO that the purchase made from this party is book entry to show high stock before demonetarization is incorrect. vi) From the submission it is apparent that the purchases made from the above named partiesare genuine and payment of purchase consideration was made banking channels. There was no moto of the assessee to introduce the alleged non-genuine purchases in books of accounts.Therefore, the purchases of the assessee cannot be treated as non-genuine. The reliance is placed on the following decisions: - a) Bhagatram, Hyderabad Vs ACIT (ITAT Hyderabad)Appeal Number :ITA No. 1753/Hyd/2018 dated 28/07/2020(Copy at Case Law PB Page No. 76-80) it is evident that the assessee had made purchases apparently from his accounted money as the payments have made through banking channels. Further it is also a fact that the Gold/Jewellery purchased are either sold by the assessee or remains with the assessee as his closing stock, since there are no other contrary findings by the Revenue. Therefore, I hereby set aside the order of the Ld. CIT (A) and confirm the order of the Ld. AO. b) 2017 (10) TMI 729 - GUJARAT HIG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the assessee during the period from 03.11.2016 to 08.11.2016. The first sale of pure gold in the month of November-2016 was made on 11.11.2016. Further all consideration of sale of pure gold, sold in the month of November-2016 was received through banking channels. The copy of stock ledger of pure gold for the period from 01.11.2016 to 30.11.2016 is enclosed at PB Page 184 to 185 and fact narrated above is duly verifiable from such ledger. Thus, the finding of ld. AO have no bearing on the cash deposit in the demonetized currency. The ld. AO himself accepted such sales as genuine. From the stock summary it is apparent that the opening stock of pure Gold as on 01-11-2016 was 13385.100 grams + 746.330 grams = 14,131.43 grams. There was no purchase or sale of pure Gold in between 01-11-2016 to 10-11-2016. The first sale is to M/s S.K. Jewellers 4000 gram on 11/11/2016 over which the AO has no objection or dispute. Further this sale is through banking channel. Thereafter, the purchases of 13000 gram are from M/s Girdhar Jewellers Pvt Ltd on 15-11-2016, which has no concerned with the SCN deposited by the assessee. Thereafter the following purchases are from the group assessee:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The audited books of account and the tax audit report for the impugned F.Y. 2016- 17 were also filed before the AO in course of the assessment proceeding and the sale for the other periods was accepted by the department. Sales shown by the assessee are fully backed with the sales bills, duly recorded in books of accounts and also in the stock register while on the other hand the ld. AO has not brought any material on record to establish that these sales are bogus. It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer or not having the sufficient stock for making the sales. Even after eliminating the quantity from the stock, which enumerated in the purchases alleged by ld. AO as non- genuine, the assessee was having the sufficient stock to make the sale. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. The ld. AO did not make any enquiry on the material submitted by the assessee. He merely proceeded on statistical analysis and also irrelevant or/and wrong findings to make the addition on account of cash deposits. He neither found any concrete and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e I. Tax Act, 1961 to collect the information related to full name, address or/and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. 1. It is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. It is voluntary to the customer to provide their personal information to the assessee while goods being sold. The assessee cannot enforce or compel to their customer to give their personal information and if the assessee would do it ruined to the business of the assessee. 2. Further in the preceding financial year the same practice being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. In the preceding year the cash sales made by the assessee were accepted by the ld. AO while completing the assessment proceeding u/s 153A r.w.s 143(3) of the Income Tax Act, 1961. Therefore, due to non-furnishing of address and PAN of the customer, the sale made by the assessee in the demonetization period ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounting - Rejection of accounts - On assessee's inability to supply addresses of purchasers who purchased goods on cash, ITO rejected assessee's books of account showing result in respect of cash sale transactions, and made addition - AAC deleted additions but Tribunal restored ITO's orders - Whether there was no necessity whatsoever for assessee to maintain addresses of cash customers - Held, yes - Whether, therefore, rejection of book results of assessee was unjustified - Held, yes - Whether, consequently, additions made to assessee's income were liable to be deleted - Held, yes ii) Hon'ble ITAT Jaipur Bench in the case of ACIT Circle-1 Jaipur Vs M/s Uttam Chand Deshraj(ITAT Jaipur Bench ITA No 419/JP/2010 Order dated 25/03/2011) (Copy at Case Law PB Page No. 157-158 )has made following findings as regard cash sales. "Making some sales in cash is also no ground for rejecting the books of account. There should be some material that cash sales made by assessee either on account of sale on a lower price or sale made out of the material which is not shown in the books of account. There is no instance that cash sales have been made on lower rate than prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rove all these ingredients of section 68 of the Act and even also in case of sale exceeding to certain limit the assessee is not required to prove the creditworthiness of buyer. Thus, this also strengthen the contention of the assessee that the provisions of section 68 are not applicable on the transaction which are already credited in the P&L and the same can only made applicable on the cash credits such as loans, share application etc. It is an admitted fact that in the case of transactions of sales/purchases of goods/investments/assets the creditworthiness of the payee is not relevant for the receiver as the amount was received against the something sold to him, therefore such transactions cannot be examined with point of view of cash credits. Hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia vs Income-tax Officer Appeal No. 4 of 2002 NOVEMBER 7, 2006 [2008] 298 ITR 349 (Rajasthan) (Copy at Case Law PB Page No. 147152)held that no addition could be made in respect of the amount standing in the books of the assessee, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them. Ld AO accepted cash deposit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash also. Further in assessment order of VAT and CST, the revision of turnover has been accepted as genuine. Copy of VAT and CST assessment order is at PB 139-147. 4.3.12 Assessment was made on surmises, conjectures and with bias pre-set mind 1) In view of the submission of the assessee, as given in ongoing paras it is clear that the assessee duly explained the source of cash deposited in bank a/c in demonetized currency and such explanation was supported by the documents. However, the ld. AO did not considerto such submission and documents in right perspective and by brushing aside all the submission and settled principal of law made the huge additions. From the perusal of the assessment order it is explicit that the books of accounts were rejected and consequently impugned addition u/s 68, estimation of NP was made by the AO in the wake of demonetization and cash deposited in demonetized currency. Though the ld. AO was duty bound to examine the genuineness of purchases & sales and source of cash deposited in bank in demonetized currency but the same exercise was made with bias pre-set mind and with sole motive to treat the same as income of the assessee in any manner. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k accounts during the demonetization period in demonetized currency and have acted merely on surmises, conjectures, suspicion, presumptions and assumptions. The humble submissions of the assessee highlighting the glaring internal inconsistencies in the orders of the ld. AO the repeated violations of the provisions of law by them are as under: i) The AO has treated the cash deposited in the banks during the demonetization period in demonetized currency as unexplained cash credits u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales etc. is patently evident from the entries in the audited books of account of the Assessee. ii) It is not the case of the Department that the cash deposited in the banks during the demonetization period was in excess of what was available in the cashbooks. The fact that the cash deposits in banks were sourced out of cash sales is evident from the entries in the cashbooks. iii) The books of account of the Assessee have been audited by an independent reputed auditor. The cash sales & receipts are duly supported by relevant bills, which were produced before the AO in course of the assessment proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Bill 2012 as under:- 1) "Under the existing provisions of the Income-tax Act, certain unexplained amounts are deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate applicable to the assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption limit. Therefore, in these cases, no tax can be levied on these deemed income if the amount of such deemed income is less than the amount of basic exemption limit and even if it is higher, it is levied at the lower slab rate. 2) In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed to tax the unexplained credits, money, investment, expenditure, etc.,which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed to provide that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing deemed income under the said sections. This ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s amended on 15.12.2016 and received the ascent of President of India on the said date. It was submitted that though the amendment was applicable for assessment year 2017-18 but only on income referred to in said section pertaining to the date after 15.12.2016. As in case of the assessee, the cash in demonetized currency was lastly deposited on 06.12.2016 and accordingly at the material time, old provisions of section 115BBE were applicable. The amendment provisions are not retrospective in operation and are not applicable in the present case and therefore the ld. AO has been wrongly taxed the addition made u/s 68 of the Act by applying the amended provisions. In support of this the reliance is place on decision of Hon'ble Supreme Court in case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala [1966] 60 ITR 262 (SC). (Copy at Case Law PB Page No. 255-257) 10. Now, it is well-settled that the Income-tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments of that year. Any amendments in the Act which come into, force after the first day of April of a financial year, would not apply to the assessment for that year, even if the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in last Four years. Para 4.3.4.(b) Comparison of Cash sales and % of total sales in last three years. Para 4.3.4 (c) Comparison of Cash sales in the month of Nov. and % of total sales. Para 4.3.4.(d) Comparison of Cash deposited in Bank in the month of Oct, Nov and Dec in last three years. 4.3.5 Comparison of Cash sales in the month of Oct Nov Dec in the last three years. Further, we have compared the data of cash sales of Nov 2016 with cash Sales in Nov 2014 and Nov 2015 and explained that cash sales in Nov 2016 was at lesser figure than in Nov 2014 and Nov 2015. The sales of particular day i.e.08/11/2016 has increased abnormally because of demonetization but this sales were also shifting of regular sales of other days on particular day because of demonetization. We have submitted detailed explanation in this regard in above paras. Para 4.6 (2) Page 14 Para 4.6 (2): - The assessee has further claimed that there was a rush in the shop to purchase the jewellery after the news was published in various newspapers. The claim of the assessee totally misplaced as the Hon'ble Prime Minister declared demonetization at 8:30 PM on 08-11-2016 through electronic media. Further, the SBN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of which 63 staff members were salespersons. Thus averagely to 9 to 10 customers were deal by each sale staff within the time span of about 3.5 hours (i.e. 210 minutes) i.e. average 20 to 22 minutes were available for each customer which is quite reasonable looking to the situation existed after the announcement of demonetization and limited time allowed to the customer to stay in the showroom. Para 4.6 (3) page 15 3. Further, the argument of the assessee is contrary itself. As per logic of the assessee when demonetarizatio n was declared people rushed to jewellery shop than there should be extra ordinary increase in the sale in the month of November as the date of demonetarizatio n dated 08-11- 2016 pertains to November. Whereas in actuality the assessee has shown 18% increase in the month of October in compare to sale of November at 13%. First of all this is to submit that the cash realized against/for the sale in the month of October-16 was already deposited in the bank a/c before demonetization, therefore, the comparison of data of sale of October-2016 is not relevant in this case. However still it is relevant to mention here that one of the main reasons for lower sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequently for the rest of the month of November and December 2016 had seen a dry spell as the people had purchased jewellery in demonetized currency during the closing hours of 8th November itself not only for the wedding in immediate vicinity but also for weddings and functions in late November or December and also even otherwise for future use. The ld. AO completely ignored this vital and important fact of the case. Para 4.6 ( 4) page 16 Further, Assessee failed to furnished the details of the persons such as full name, address and PAN to whom cash sale was made during the demonetization period. It is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address or/and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. The reliance is placed on the following decisions: - i) Hon'ble High Court of Bombay in the case of R.B. JessaramFatehchand(Sugar Dept.)v/s Commissioner of Income Tax [1970] 75 ITR 33 (Bombay) (Copy at Case Law PB Page No. 153-156) ii) Hon'ble ITAT Jaipur Bench in the case of ACIT Circle-1 Jaipur Vs M/s Uttam Chand Deshraj(ITAT Jaipur Bench ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO meaning thereby the Revision of Vat return was accepted by the ld. AO as genuine. Therefore, once the sales declared in such revised quarterly returns had been accepted by the ld. AO and such sales have no bearing on demonetized currency deposited into bank account than how it can be presumed that such revision for the period 01-10-2016 to 31-12-2016 was for booking the bogus cash sales. The due date of filing of VAT return of third quarter (i.e. for the period from 01.10.2016 to 31.12.2016) was obviously after 31.12.2016 and the same was filed (originally) on 15.02.2017i.e. much after to deposit the demonetization currency deposited into bank a/c. Therefore, there was no reason to revise the VAT return with the intention to book the bogus sale to justify the source of demonetized currency because the original return was itself filed much after the date of deposit of cash in bank account and if the assessee was intended to book the bogus sale to justify the cash deposit in demonetized currency than it would have declared such sale in original return also. This shows that the revision of VAT return of this quarter was also made for bona-fide reasons. In revised return the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The finding of the ld. AO that "the assessee has not furnished any challan of composition fees paid as stated in reply" it is submitted thatthe details of payment of composition taxes was duly verifiable from the detail submitted by the assessee, its VAT returns and also from the VAT assessment order, therefore the assessee did not find relevant to submit the copies of challans separately. However, the ld AO has not asked specifically to furnish the copy of vat challan otherwise the same could have been produced. However, such detail was already available with the ld AO in Vat return and Vat Assessment Order. It is further most importantly relevant to mention here that the Commercial Taxes Department had accepted the sales of the assessee declared in its VAT returns as genuine, therefore there remains no reason to doubt the genuineness of part of such sale by the ld. AO. Para 4.6 (6) page 16 Name, telephone number and address of debtors not available. The credit sales of Jewelleryis made to the parties who are either well known of salesman/staff or well known of existing reputed customers or known persons of the assessee group. In case of sales to unknown parties the deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uine than there remains no reason to treat the amount realized from debtors during the period from 03.11.2016 to 08.11.2016 as non-genuine and the same is because of single reason that the ld. AO was bent to making the huge addition for which he was supposed to cook the story. Para 4.6 (7) page 17 On telephonic verification of debtors on random basis they denied to recognize any such purchases on credit. The ld AO listed out only 6 cases at page 5 of Assessment order. Firstly none of them has denied. They either said that they do not remember or not responded. The matter was belongs to May to Nov 2016 and inquiries was made in 2019. Further, the amount was very small so it is very possible not to remember. Para 4.6 (7) page 17 In these para the ld. AO alleged that that the purchases made from M/s Paras Gems &Jewellers and Girdhar Jewellers Private Limitedis not genuine. The elaborate submission on this issue was given to CIT (A) and relevant submission is at PB Page 298 to 305. After considering the reply of the assessee the CIT (A) treated the purchases made from both the parties as genuine. The finding of CIT (A) is at Para 6.2 (ix and x) page 48 and 49 of order of CIT (A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 016 MS-5386 10,000 05.11.2016 1,00,00 0 Shri Narayan Sharma 29.06.2017 Bill No. JB-1710 1,02,000 06.11.2016 4,000 Pankaj Meena 15.11.2016 Bill No. MG-8867 13,700 06.11.2016 5,000 Namita Ji Garg 14.11.2016 Bill No. MG-8842 16,500 06.11.2016 25,000 Chandrakala Ji 08.11.2016 Bill No. MG-8785 90,000 06.11.2016 1,00,00 0 Gurpreet Kaur 05.12.2016 Bill No. MG-9492 2,08,900 06.11.2016 1,00,00 0 Maya Devi Ji 05.12.2016 Bill No. MG-9490 1,90,750 06.11.2016 1,00,00 0 Norat Mal Ji 05.12.2016 Bill No. MG-9488 1,35,000 06.11.2016 50,000 Pankaj Ji 13.12.2016 Bill No. MG-9826 68,000 06.11.2016 6,500 Richa Shukla 15.12.2016 Bill No. MG-9891 56,500 06.11.2016 5,000 Komal Sharma 11.11.2016 Bill No. MG-8820 32,800 07.11.2016 15,000 Jassi Ji 03.12.2016 Bill No. JB 3264 42,200 07.11.2016 50,000 Kailash Ji 08.11.2016 Bill No. JB-2863 1,37,500 07.11.2016 5,000 Krishna Joshi 13.05.2017 Bill No. MG-2202 44,380 07.11.2016 10,000 Rakesh Ji 23.11.2016 Bill No. MG-9058 18,265 07.11.2016 13,000 Suman Ji 02.12.2016 Bill No. MG-9382 43,000 08.11.2016 60,000 Ankit Ji 18.11.2016 Bill No. JB-3128 1,51,200 08.11.2016 1,40,000 Ashok Ji ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le of pure gold was 68.71% of total sale. It is highly surprising that how was assessee predicted that there will be sudden increase in demand of pure gold in that particular month. We have submitted explanation in detail in Para 4.3.7 above 4.3.15 In support of our submission reliance is also placed on the following judgements: - 1) ITAT Chandigarh in the case of SmtCharu Agarwal & M/s Kalanidhi Jewellers Vs DCIT ITA No 310 & 311/Chd/2021 order dated 25/03/2022 The findings of Hon'ble ITAT is in para 10 of the order. Hon'ble ITAT after considering the decision of the Hon'ble Delhi High Court in the case of Pr. CIT (Central)-3 V/s M/s Agson Global Pvt. Ltd. In ITA No. 68-73/2021 and various other High Courts and decision of Hon'ble ITAT Vishakhapatanam Bench on identical issue in the case of ACIT v/s Hirapanna Jewellers (2021) 128 Taxmann.com 29 held that the assessee was maintaining complete stock tally, the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. Sales made by the assessee to cover the cash depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 68 of the Act." 22. Since the facts of the instance case are identical to the facts of the case decided by the Hon'ble Delhi High Court cited (Supra), therefore, I am of the opinion that the learned NFAC was not justified in sustaining the addition of Rs.30.00 lakhs made by the Assessing Officer in the Bank A/c during the demonetization period in old currency notes of Rs.1000. Accordingly, the order of the NFAC on this issue is set aside and the grounds raised on this issue are allowed. 3) 2021 (5) TMI 447 - ITATVisakhapatnam Asst. Commissioner of Income Tax, Central Circle-1 Visakhapatnam Versus M/S Hirapanna Jewellers (Vice-Versa)) (Copy at Case Law PB Page No. 181-184) Addition u/s 68 r.w.s 115BBE - assessee had deposited the sum in high denominations of specified bank notes (SBNs) post demonetization - CIT-A deleted the addition - HELD THAT:- The assessee produced the newspaper clippings of The Hindu, The Tribune and demonstrated that there was huge rush of buying the jewellery in the cities consequent to declaration of demonetization of Rs. 1000 and Rs. 500 notes on 08.11.2016. As cash receipts represent the sales which the assessee has rightly offered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessee did not have that kind of cash available with it. Even otherwise, if the assessee had to introduce his unaccounted money he would have deposited it at the first instance. 4. ITAT observed that assessee also filed its VAT returns, which are not found to be in variance with the accounting and tax records. Therefore, it cannot be substantiated that the assessee has backdated the transactions of the sale. 5. ITAT further observed that CBDT had issued various standard operating procedures under 'Operation Clean money'. ITAT opined that "...it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money." 6. In the result the addition of Rs. 73.13 crore sustained by Ld CIT(A) on account of deposit of demonized currency was deleted by Hon'ble ITAT. In appeal by the Revenue, the Hon'ble High Court Pr. CIT (Central)-3 V/s M/s Agson Global Pvt. Ltd. In ITA No. 6873/2021 order dated 19-01-22 dismissed the bunch of appeals filed by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales and again as unexplained cash credit which is against the principles of taxation. Assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. As in the case of CIT Vs. Associated Transport Pvt. Ltd. [1994 (1) TMI 18 - CALCUTTA HIGH COURT] on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. When cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE - See M/S HIRAPANNA JEWELLERS AND (VICE-VERSA) [2021 (5) TMI 447 - ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors as on 08.11.2016 was to the tune of Rs. 14,93,120/- as is evident from the list of sundry debtors. So on the same reasoning as adopted by the AO to have accepted Rs. 11,08,796/- (invalid currency notes) as genuine (trade receipt), I find no reason not to accept the explanation of assessee that Rs. 12,41,704/- was deposited by the sundry debtors reflected in the books as on 08.11.2016. And since the AO has accepted the sales/turnover of the assessee which were reflected in the audited books of accounts, as well as the explanation of assessee is supported by material on record, the AO/Ld. CIT(A)'s action of addition of Rs. 12,41,704/- cannot be countenanced. So on this factual finding the assessee's explanation regarding Rs. 12,41,704/- is plausible. And it is noted that the AO / Ld. CIT(A) / Ld. D.R could not disprove or controvert this fact and so it is accepted. In the aforesaid facts and circumstances, the assessee depositing invalid notes to the tune of Rs. 12,41,704/- cannot be dis-believed as from any tainted source or termed as black money. So taking into consideration the peculiar over all facts and circumstances discussed supra, it is directed that the addition of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamined the cash book and taking into consideration all the circumstances which had been adverted to by the ITO held that the appellant might be expected to have possessed as part of its business cash balance of at least Rs. 1,50,000 in the shape of high denomination notes on 12th Jan., 1946, when the Ordinance above-mentioned was promulgated. The Tribunal came to the conclusion that the nature of the source from which the appellant derived the remaining 141 high denomination notes of Rs. 1,000 each remained unexplained to its satisfaction. It accordingly ordered that the addition be reduced from Rs. 2,91,000 to Rs. 1,41,000. On the said facts, the Hon'ble Supreme Court held that-the Tribunal having held that books of assesseewere genuine which showed a cash balance of Rs. 3,10,681 on the relevant date; the Tribunal could not have accepted the cash balance of Rs. 1,50,000 out of the value of high denomination notes of the value of Rs. 2,91,000 and treated the balance Rs. 1,41,000 as income from undisclosed sources. It was held that in doing so, The Tribunal had indulged in conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 141 high denomination notes of Rs. 1,000 each unexplained. Either the Tribunal did not apply its mind to the situation or it arrived at the conclusion it did merely by applying the rule of thumb in which event the finding of fact reached by it was such as could not reasonably be entertained or the facts found were such as no person acting judicially and properly instructed as to the relevant law could have found, or the Tribunal in arriving at its findings was influenced by irrelevant considerations or indulged in conjectures, surmises or suspicions in which event also its finding could not be sustained. [para 19] As the conclusion of the ITO was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb came to the conclusion that the possession of 150 high denomination notes of Rs. 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of Rs. 1,000 each.[para 20] Therefore, the Tribunal in arriving at the conclusion in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to see any reason or basis for the so called finding recorded by the Tribunal that the assessee was in possession of 35 notes on the day the Ordinance was promulgated or that 10 notes were from some undisclosed source. These cannot be recognised as finding at all. The assessee's business was not one in which large amount of petty notes might have been necessary for the purpose of business, and keeping money in large notes is evidently more convenient for counting, for making payments and for other purposes and no material has been placed to show that the explanation offered by the assessee was one which was inherently improbable or one which could not be accepted. The so-called estimate made by the Tribunal was based on no reason and was a mere guess. In fact there was no justification in the circumstances of the case for making an estimate at all. The assessee had a large cash balance which could very conveniently include the 45 high denomination notes encashed by him. The explanation offered by the assessee was not unreasonable and nothing has been said which could justify its being rejected as unreasonable. On the other hand the so-called estimate by the Tribunal is based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation, except making an assertion that it was not acceptable. The other important aspect, namely, whether, on the facts and in the circumstances of the case, it should be inferred that these amounts constituted income of the previous year, though the explanation offered by the assessee was not acceptable, did not receive the consideration of the Appellate Tribunal or the subordinate authorities. Except some agricultural properties, whose annual income came to about Rs. 6,000 according to the assessee, it had no known source of income in India, until it started the toddy business on August 17, 1950. Nor is there any material in the case even to raise a reasonable suspicion that the assessee indulged in any activity of an income-earning nature in the accounting year or in prior years. In these circumstances, a finding that the sum of Rs. 60,518 found with the assesseemust be its income from undisclosed sources during a period of about seven and a half months prior to August 17, 1950, appears a little preposterous. Whatever it may be, the explanation offered by the assessee was not on the face of it improbable, though it is entirely a matter for the fact-finding authority to acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all notes - Held, yes - Whether, in view of aforesaid, there was no material before Tribunal for holding that assessee could not have been in possession of any of remaining thirteen notes also and that those notes or any part of them represented income of assessee from some undisclosed sources - Held, yes 17) Hon'ble High Court of Bombay in the case of Narendra G Goradiavs Commissioner of Income Tax [1998] 101 Taxman 571 (Bombay)/[1998] 234 ITR 571 (Bombay)/[1999] 154 CTR 365 (Bombay)(Copy at Case Law PB Page No. 232-237) Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1979-80 - In relevant period assessee had tendered notes of Rs. 1000 denomination valuing Rs. 2 lakhs for encashment - There was no dispute about source of money nor about fact that there was sufficient balance on date of deposit - Assessing Officer, however, made additions of part of amount for want of details of receipts of some of high denomination notes - Whether there was no justification for adding a portion of amount tendered by assessee for encashment of high denomination notes as income of assessee from undisclosed sources for alleged failure of assessee to furnish source of acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by her from her parents and in-laws on the occasion of birthdays, anniversaries etc. - HELD THAT:- CIT(A) grant relief to Rs. 50,000/- and upheld the addition to the extent of Rs. 2,00,000/-. Before us, assessee has submitted that the deposits to be out of accumulated savings and out of the cash gifts received by her on the occasion of birthdays and anniversaries. It is also a fact that assessee's husband is an income tax payer working for an MNC. In view of the CBDT Circular vide Instruction No. 03/2017 dated 21st February 2017 and relying on the decision of SMT. UMA AGRAWAL BABA KAPUR SUNARAN KA MOHALLA VERSUS I.T.O -1 (3) GWALIOR, M.P. [2021 (6) TMI 712 - ITAT AGRA], the explanation of the assessee about the source of cash deposits cannot be brushed aside without there being any evidence to the contrary.- Decided in favour of assessee. 21) 2021 (9) TMI 1192 - ITAT VISAKHAPATNAM DY. Commissioner Of Income Tax Circle-3 (1) Visakhapatnam Versus Sri Jaya Prakash Babu Valluri And (Vice-Versa) Cash deposits made during demonetization period, which was added back to income u/s 69A - HELD THAT:- CIT(A) observed that the assessee is maintaining regular books of accounts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplained source could not be treated as undisclosed income of the Assessee u/s 68 without bringing on record any credible evidence/materialin support of such allegation merely on the basis of surmises and conjecture of the ld. AO. 4.3.17 In view of above submission it is submitted that entire sales of the assessee are supported by the bills, duly verifiable from books of accounts & records and the same is completely genuine. The ld. AO did not specify any defects in the sale and the sale is in line of its own previous history of the assessee. The ld. AO could not bring any single evidences on record to prove his allegation to be correct. Further all the surrounding circumstances and human probability of this much cash sale is also in favour of the assessee. The assessee submitted the best possible details/information/documents/explanation to present its case before ld. AO and as explained in forgoing paras no specific defects had been pointed out by ld.AO therein.The entire assessment order is based on presumption and assumption by twisting the data and drawn the conclusion therefore as per his own whims just to make the huge addition. There is no abnormal rise in the cash sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 and increased 1.07 times compared to October 2014 The ld. AR of the assessee explained that this issue is already considered by the ld. CIT(A) at para 6.2 page 46 of her order. The ld. AR of the assessee further explained by way chart submitted before the AO too where in the comparison of cash sales made by the assessee was explained and he submitted that in Nov 2014 total cash sales were of Rs. 15.51 cr and in Nov. 2015 Rs. 19.17 cr., whereas, cash sales in Nov 2016 was of Rs. 13.55 cr only which is lessor then Nov 2014 & 2015. In terms of % cash sales to total sale, it was 12 % & 17 % in Nov 2014 & 2015 respectively, whereas the same is 13 % of total sales in this period in question only. The revenue could not pin point any fault on these cash sales comparison provided and thus, we do not find any absurd result and there was no abnormal rise in over all cash sales in the sales results of the assessee. The case sales made during October 2016 was 18% and November 2016 was 13% out of total cash sales made during the financial year 201617. The cash sales made in two months is higher compared to cash sales made in remaining 10 months of that year. Further when the trend of cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has been indulged in booking of bogus cash sales The ld. AR of the assessee submitted all the four quarter returns were revised and not for any particular quarter. If this contention is accepted then it will also lead to a presumption that the assessee did not made any composition sales for whole of the year. The assessment of VAT were completed and placed on record where in the revision were accepted(APB 139-147). The ld. AR of the assessee further submitted the copy of the receipted VAT taxes paid challan for all three quarters at PB page 110 where in it is explained that all the three quarters respective tax have been paid before the demonetization and the assessee has not foreseen this event and their payment it self proves that the revision of order though the tax paid in advance was just a procedure lapse and since the tax has already been paid related to this composition the merely the return revised cannot be used against the assessee. Thus, there is no force in the arguments of the revenue. The assessee has shown purchase from various concerns during the period before demonetarization. To verify the genuineness of the purchase an enquiry was conducted u/s 133(6) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and PAN no. of such persons. However, no such details were provided by the assessee as such and only contract number and name were provided. As no details of address was provided. Hence, in these circumstances to verify the genuineness of the debtors telephone calls were made to some of the debtors on test check basis from the landline phone of the office of undersigned having no. 01412227574. In the verification the debtors fail to recognize such purchase from the assessee. As rightly confirmed by the ld. CIT(A) that once the sales is considered as genuine the receipt cannot be doubted. The assessee has shared the details of invoices and the AO has merely alleged that the same is without PAN and address. The calls were made to very few person and nominal value of sales and all the cell number given were active. No party has categorically denied about the purchase that they have made so the strata selected was very small and thus based on that strata the sales made by the assessee cannot be disbelieved and recorded as debtors, whose sales is already considered by the revenue. It is customer who are not willing to share their private information such as PAN, address etc. and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eposited by the appellant. As regards the possibility of making sales invoice ld. AR of the assessee submitted that regular billing of the assessee is ranging from 100 to 200 per day there are 91 employees for both the show room, all were available and time calculated for 3 hours and not four hours (8+4) then even in 3 hours average 22 minutes can be given to single person [725/90= 8 person can be handled in hours a single men and 60*3=180/8=22.5 minutes available for a customer and that time is sufficient time to attend the 725 person if believe that in a day there is no other sale also in day. This cannot be considered as impossible task for the assessee having stock, place to display and parking availability this fact is also not disputed. The average sales of the assessee in a year is around 200 cr. and looking to strength of the assessee the cash sales which in comparison to past year cannot be considered as non-genuine which supported by availability of stock, staff strength, past history and giving all the required details in form of value and quantity and in all the records not a single defects is observed by the ld. AO. Not only that the ld. AR of the assessee shared the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth the parties to drive home to their contentions. The assessee is a limited company and deriving income from manufacturing and trading of jewellery. The books of assessee's are audited by the independent Chartered Accountant and copy of audit report and statement of profit and loss account is filed by the assessee company. It is noted from the record that the case of the assessee was taken up for scrutiny assessment u/s 143(3) on the basis of CASS and desired information by the AO were submitted by the assessee from time to time. After completion of assessment the AO vide his order dated 29-12-2019 assessed the income of the assessee at Rs.16,45,24,988/- as against return income of Rs.5,37,53,418/- . During the course of assessment proceedings, the AO rejected the books of account of the assessee by applying the provisions of Section 145(3) and estimated the net profit rate of 2.59% being average Net Profit of last three years and applied the same on the sales of Rs.1,96,92,45,899/- i.e. to say Rs.2,09,09,94,399 - Sales as per books and Rs.12,17,48,500 - Cash deposited in Bank. It is further noted that the AO reduced the amount of Rs.12,17,48,500/- deposited in the demonetization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible looking to the strength of staff, space of demonstration and parking and the considering availability of stock on hand as proved that the sales made by the assessee company is genuine sales recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. As regards the receipt of the cash from the customer the ld. AR of the assessee relied upon the findings of the jurisdiction high court judgement in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC). In this case the Jurisdictional Hon'ble High Court have held that So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged the rejection of books of accounts and the second ground of appeal is regarding confirming of addition of Rs.47,72,297/- by CIT (A) by estimated the net profit.Since both ground of appeal is interconnected to each other and born out from the common finding, therefore in the written submission the same are commonly dealt with. 2. The ld. AO rejected the books of account of assessee basically for following reasons: - i) Non genuine purchases from Paras Gems and Jewellers and therefore, stock register prepared after thought and does not disclose true income of the assessee. ii) Non verified cash sales during the period from 03.11.2016 to 08.11.2016. iii) The assessee declared total turnover of Rs. 209,09,94,399/-. The assessee deposited Rs. 12,17,48,500/- in bank in demonetized currency, which was part of the above turnover. The ld AO reduced the declared turnover from the amount deposited in bank in demonetized currency. The ldAO estimated the net profit rate of assessee 2.59%, being average NP of last three years and applied the same on the sales of Rs. 1,96,92,45,899/- (Rs. 209,09,94,399/- (Sales as per Books) - 12,17,48,500/- (cash deposited in bank). Thus the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has made an addition of Rs. 5,10,03,468/- by applying the Net Profit rate of 2.59% on reduced turnover of Rs. 1,96,92,45,899/-. Consequently, the Net Profit rate by applying 2.59% on total turnover of Rs. 2,09,09,94,399/- is worked out at Rs. 5,41,56,755/-. Accordingly, an addition of Rs. 47,72,297/- [Rs. 5,41,56,755 - Rs. 4,93,84,458 (as declared by the appellant)]) is confirmed and the balance addition of Rs. 4,62,31,171/- is directed to be deleted." 5.3 Submission of assessee: - 5.3.1 The ld AO has not given any show cause notice for rejection of books of account and estimation of income by apply profit rate:- The AO has never issued show cause notice as to why the books of account may not be rejected under section 145(3) of the Act and the assessment may not be completed in the manner provided under section 144 of the Act. (i) The lower authorities have not made a categorical finding that accounts of the assessee are not correct or complete or the method of accounting provided in sub-section (1) has not been regularly followed by the assessee or income has not been computed in accordance with the standards notified under sub section (2). "145(3) Where the 7 Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of her detailed findings in para 6.2 (ix) and 6.2(x) of her order and the department has not challenged the finding of ld CIT(A) and therefore, the decision of ld CIT(A) over genuineness of purchases has attained finality. Therefore, the books of account cannot be rejected on the ground of genuineness of purchases. 5.3.4 No ground to reject the books of account:- When all the purchases are genuine and correctly recorded in books of account including stock register, the books of account cannot be rejected as the assessee fulfils all the conditions of section 145(3) namely:- (i) The books of account are complete and correctly maintained by the assessee. (ii) The method of accounting provided in sub section (1) has been regularly followed by the assessee, and (iii) The income has been computed in accordance with the standards notified under sub-section (2) 5.3.5 Non-verification of amount received from debtors and advance from customers cannot be a ground for rejection of books of accounts particularly when the sales against the debtors and advances have been accepted as genuine: - The assessee claimed that out of total Rs. 12,17,48,500/- deposited into bank a/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page 163 to 165) it is apparent that the debtors mentioned at S. No. 1 to 4 of the table (Page 5 of the assessment order) were not realized during the period from 03.11.2016 to 08.11.2016, therefore the verification from such debtors is completely irrelevant to examine the source of demonetized currency deposited into bank a/c. In other two cases the sales of Rs. 19,000/- was made to Asmita Ji on 04.11.2016 against which payment of Rs 9,000 received immediately on 04-11-2016 and balance of Rs 10,000/- was received on 5-11-2016. The sales of Rs. 1,38,000/- was made to Asha Singh on 05.11.2016 against which payment of Rs. 1,00,000/- received immediately on 05-112016 and payment of Rs. 38,000/- received on 07-11-2016. Since the sales was made during the period from 03.11.2016 to 08.11.2016 and realization was also made in the same period, therefore there remain no reason to doubt that this amount was realized on some other date and the same was shown in this period. Further, on telephonic verification made by ld. AO fromfew debtors (As tabulated at Page 5 of the assessment order) it is apparent from the list in the assessment order that none of the customer expressly had denied the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k in demonetized currency the advance received from customers was of Rs. 11,86,250/- which is very meager amount looking to the quantum of sales of the assessee. 3. The details of advances received viz a viz sales made to such parties, in which the advances were adjusted is as under: - Date of advance Advance amount Name of party Date of sale made and bill No. Amount of sales (after discount) 03.11.2016 10,000 Anil Ji Mehta 07.01.2017 Bill No. MG 10852 55,000 03.11.2016 1,00,000 Asha Ji Bakliwal 30.11.2016 Bill No. MG-9291 1,00,000 03.11.2016 10,000 Prahlad Meena 29.11.2016 Bill No. MG-9238 70,000 03.11.2016 50,000 Siddharth Ji 18.11.2016 Bill No. MG-8933 50,000 03.11.2016 5,000 Sweta Ji 13.01.2017 Bill No. MG-11162 31,000 04.11.2016 46,650 Mahal Ram Meena 26.11.2016 Bill No. JB-3204 51,050 04.11.2016 18,000 Mahendra Kumar Jain 17.11.2016 Bill No. MG-8909 1,11,227 04.11.2016 10,000 Seema Ji Mittal 05.12.2016 Bill No. MG-9480 88,441 04.11.2016 10,000 Mukesh Ji (Geet Jewellers) 28.11.2016 Bill No. MS-6168 15,450 05.11.2016 5,000 Anish Ji 09.11.2016 Bill No. MG-8817 23,000 05.11.2016 20,000 Ashima Gupta 02.01.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alized during period 03.11.2016 to 08.11.2016 as non-genuine and amount realized thereafter as genuine. In case the ld. AO wanted some more details from the assessee in respect of advances so received, over & above to whatever submitted by the assessee, he could have asked to assessee to submit the same but the same were never called for and the advances simply treated as non-genuine by holding that no full detail of such person was furnished and not available for verification and completely ignoring the details already filed by the assessee. 5.3.8 Addition of Rs. 47,72,297/- sustained as against the alleged unverifiable realisation from debtors Rs. 25,96,480/- and advances of Rs. 11,86,250/- totalling to Rs. 37,82,730/- The ld CIT(A) sustained addition of Rs. 47,72,297/- on account of NP and ground against such addition is unverifiable amount of Rs. 37,82,730/- on account of realisation from debtors and advances, which is very excessive and highly unjustifiable more so when the other receipts are not questionable. At the worst the profit rate could be applied on this alleged unverifiable amount of Rs. 37,82,730/- 5.3.9 In this regard the reliance is placed on the following d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the fact that stock record was available with the assessee, which evidenced the making of sale, we fail to appreciate as to how any addition can be made by treating cash sales as bogus........................................We are dealing with a situation in which the assessee has himself offered the amount of cash sales as his income by duly including it in his total sales. Once a particular amount is already offered for taxation, the same cannot be again considered u/s 68 of the Act. In fact, such addition has resulted into double addition." 5.3.10 In view of above submission it is apparent that all the amount realized from debtors and received as advance from customers, during the period from 03.11.2016 to 08.11.2016, was genuine and verifiable from books of accounts. The ld. AO as well as CIT (A) for no cogent reason treated the same as non-genuine and non-verifiable. These defects were purported just to support addition made. In view of above submission, the rejection of books of account is not correct, therefore consequently addition of Rs. 47,72,297/- sustained by ld CIT(A) byupholding the rejection of books of account and invoking the estimation of the Net p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guesswork. Lower GP rate shown in the books of account during current year and fall in GP rate was justified and also admitted by the AO as well as CIT(A) as well as the Tribunal. Therefore, fall in GP rate lost its significance. Having accepted the reason for fall in GP rate, namely, stiff competition in market and also that huge loss caused in particular transaction, neither the rejection of books of account was justified nor resort to substitution of estimated GP by rule of thumb merely for making certain additions. We are, therefore, of the opinion that the findings arrived at by the Tribunal suffers from basic defect of not applying its mind to the existing material which were relevant and went to the root of the matter. When all the data and entries made in the trading account were not found to be incorrect in any manner, there could not have been any other result except what has been shown by the assessee in the books of account. We are, therefore, unable to sustain the order of the Tribunal." b) Further Hon'ble High Court of New Delhi in the case of CIT-XII vs Smt Poonam Rani in ITA No. 406/2009 vide order dated 07/05/2010 held that as under:- "Section 145(3) provides ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also by the Tribunal. The Assessing Officer had no material before him on the basis of which it could be said that the weight of the wire did not increase even marginally during the process of enamelling. Therefore, he had no justification, in law, in rejecting the explanation given by the assessee in that regard. The fall in gross profit ratio, in the absence of any cogent reasons could not, by itself, have been a ground to hold that proper income of the assessee could not be deduced from the accounts maintained by her and, consequently, could not have been a ground to reject the accounts by invoking section 145(3). [Para 8] The fall in the gross profit ratio could be for various reasons such as increase in the cost of raw material, decrease in the market price of finished product, increase in the cost of processing by the assessee, etc. There was no finding that the actual cost of the raw material purchased by the assessee was less than what was declared in the account books. There was no finding that the actual cost of processing carried out by the assessee was less than what had been declared in her account books. No particular expenditure shown in the account books had bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could lead to the conclusion that the accounts maintained by the assessee were not correct, but a low rate of gross profit, in the absence of any material pointing towards falsehood of the account books, cannot, by itself, be a ground to reject the account books under section 145(3).[Para 10] In any case, the question whether fall in gross profit stood explained by the assessee or not was a question of fact. Both, the Tribunal and the Commissioner (Appeals), having accepted the explanation given by the assessee and the finding of fact recorded by them having not been shown to be perverse in any manner, no substantial question of law arose in the instant case and the appeal was, accordingly, to be dismissed." c) M. DURAI RAJ vs. COMMISSIONER OF INCOME TAX HIGH COURT OF KERALA (1972) 83 ITR 484 (KER) :- Held What is relevant to consider in such cases is whether the assessee's accounts are maintained according to the method regularly employed by him, whether they are correct and complete, and whether the income can be properly computed from the accounts. There is no finding that the purchases have been exaggerated or the sales have been suppressed, or that any transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e persons to whom payments were made by the assessee for fabrication, embroidery and dyeing and finishing, etc., the AO was at liberty to summon any or all of them in case he wanted to verify the genuineness of the payments made to them. No such course of action was, however, adopted by him. Failure of the assessee to produce those persons could not have been a ground for rejecting the accounts under s. 145(3). The AO did not point out any difference in the consumption of raw material and production of finished goods when compared to earlier years. The AO did not say that after comparing the raw material consumed and finished goods produced in the previous years with the raw material consumed and the finished goods produced in the year in question, he had found that the number of finished goods pieces actually produced by the assessee should have been more than the number of pieces declared in the account books produced before him. Another important aspect of this case is that, admittedly, the GP percentage declared by the assessee in the asst. yr. 2003-04 which was the immediate preceding year, was more or less the same as was declared in the asst. yr. 2004-05, to which this appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t omission therein. This finding has been accepted by different AOs over a period of seven years. Though the principles of res judicata do not apply to incometax proceedings, each assessment year being a unit by itself, yet in cases, when a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have been allowed that position to be sustained by not challenging the order, it may not be appropriate to allow that position to be changed in a subsequent year. For rejecting the view taken for the earlier assessment years, there must be a material change in the fact situation. Hon'ble ITAT placed reliance on - Radhasoami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC), CIT vs. A.R.J. Security Printers (2003) 183 CTR (Del) 323 : (2003) 264 ITR 276 (Del) and CIT vs. Neo Poly Pack (P) Ltd. (2000) 245 ITR 492 (Del). h) ITAT Jaipur in M/s Dreamax Infrastructure Developers, vs ITO ITA No 374/JP/2017 order dated 25/05/2018 held that :- "Accordingly, in view of the above facts and circumstances of the case when the assessee produce all the relevant details and evidence then insignificant defects in suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k) Pandit Bros Vs CIT (1954) 26 ITR 159 (Pun) -Held that absence of stock register is not sufficient ground to reject the books of account. l) Ashok Refractories Pvt Ltd Vs CIT (2005) 279 ITR 475 (Cal) -Held that absence of stock register may not per se lead to an inference that accounts are false or incomplete. m) Antiquairiate Vs ACIT 37 Taxworld 145 (ITAT. Jaipur). n) Jaitick Intermediates (P) Ltd V. Assistant Commissioner of Income Tax (2016) 73 Taxmann.com 195 (Gujarat) "In CIT v. Smt. Poonam Rani [2010] 192 Taxman 167/326 ITR 223 (Delhi) it was held that if stock register is not maintained by the assessee that may put the Assessing Officer on guard against the falsity of the return made by the assessee and persuade him to carefully scrutinize the account books of the assessee. But the absence of one register alone does not amount to such a material as would lead to the conclusion that the account books were incomplete or inaccurate. Similarly, if the rate of gross profit declared by the assessee in a particular period is lower as compared to the gross profit declared by him in the preceding year, that may alert the Assessing Officer and serve as a warning to him, to l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. It is also noteworthy to mention that that the AO has not given any show cause notices as required u/s 144/145 of the Act before estimation of income by applying the N.P. Rate. It is also ridiculous to note that AO had rejected the books of account u/s 145(3) of the Act which has been confirmed by the ld. CIT(A) but assessment has been framed u/s 143(3) and not u/s 144 as required u/s 145(3) of the Act which indicates that the assessment is bad in the eyes of law. From the order of the ld. CIT(A) it is seen that the ld. CIT(A) had examined the genuiness of purchases from M/s. Paras Gems and Jewellers, M/s. Girdhar Jewellers (P) Ltd. and M/s. Girdhar Jewellers and held the same as genuine on the basis of her detailed findings in para 6.2 (x) for which the Department has not challenged the findings of the ld. CIT(A) as to the issue of genuineness of the purchases and thus the books of account cannot be rejected on the ground of genuineness of purchases. It is essential to indicate that when all the purchases are genuine and correctly recorded in the books of account as well as stock register then the books of account should not be rejected u/s 145(3) of the Act. It is fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be treated as non-genuine. Such advances are adjusted against sales made to the parties. It is also noted that the ld. CIT(A) sustained the addition of Rs.47,72,297/- on account of N.P and ground against such addition is unverifiable amount of Rs.37,82,730/- (i.e. on account of realization Rs.25,96,480/- from debtors and Rs.11,86,250/- from advances). It is apparent from records that all the amounts realized from debtors and received as advance from customers during the period 03-11-2016 to 8-112016 was genuine and verifiable from the accounts then there is no cogent reason by the lower authorities to treat the same as nongenuine. Hence, looking into the entirety of the facts, circumstances of the case and the case laws cited by the AR of the assessee (supra), we allow the appeal of the assessee by holding that the rejection of books of account on the basis of insignificant defects in all respect, is not justified and books of account deserves to be accepted. Before invoking the provisions of Section 145(3) of the Act, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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