9911796707
TMI Blog2022 (12) TMI 1309X X X X Extracts X X X X X X X X Extracts X X X X ..... issions play a very important role in the income-tax proceedings, as admissions bound the maker. In the absence of any denial or explanation thereof, an admission is almost conclusive regarding the facts contained therein. They generally dispense with the requirement of adducing further evidence or proof to support a fact. Though section 31 of the Indian Evidence Act, 1872 states that admissions are not conclusive proof of the matters admitted, yet admissions in the absence of rebuttal may conclude an issue. Effect of Letter dt.17.01.2017 - Considering the Judgment of hon ble High Court in the case of Y. Ramachandra Reddy [ 2015 (5) TMI 429 - ANDHRA PRADESH HIGH COURT ] we are of the considered opinion that the subsequent retraction will not come for rescue of the assessee, as neither the retraction dt.17.01.2017 was made before the Assessing Officer / Investigating Wing nor it was made within reasonable time and nor any reasons for retraction of the earlier statements were given. In our view, the letter dt.17.01.2017 was after thought, motivated and against earlier conduct of assessee whereby he had accepted the income of Rs.40 Crore in the earlier statements, affidavit in PM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is that, as per version of the assessee, Mr. Neel Sunder has arranged the customers, money and bullion and made delivery to the customers. This version of the ass is incongruous and against human preponderance, as why Mr. Neel Sunder will approach the assessee to route his clients transaction through the assessee. In that way Mr. Neel Sunder could have completed the entire transaction right from procuring to selling the gold to customers and retained the profit himself. It is also not the case of the assessee that Mr. Neel Sunder did not have the bank account in the same Axis Bank where the money was allegedly deposited by him in the account of the assessee. There is no explanation for the redundant routing of the transactions with the assessee if we have to believe Mr. Neel Sunder. This shows that the statement of Mr. Neel Sunder s statement attributes redundancy to the role of the assessee, which we find difficult to believe. In our opinion, conduct of the assessee was incomprehensible and abnormal. The assessee either deposited its undisclosed amount or otherwise helped undisclosed, unanimous and unidentifiable persons to convert their undisclosed prohibited currency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant and the appellant has offered net profit earned on such turnover in his return of income and paid taxes. 3. The ld.CIT(A) erred in not considering the evidence that the cash deposited in the bank account of the appellant was utilized for purchase of gold bullion by the appellant in the normal course of his business. 4. The ld.CIT(A) erred on facts and in law in granting partial relief of Rs.28,37,00,000 out of cash deposit of Rs.40,11,50,000 and confirming the addition of Rs.11,74,50,000/- although the entire cash deposits are of the same genre of business. 5. The ld.CIT(A) erred in law in confirming the AOs findings that the provisions of section 68 are attracted in respect of cash deposits made in the appellant s bank account. 6. The ld.CIT(A) erred in law in confirming the AOs findings that the provisions of section 68 are attracted in respect of cash deposits made in the appellant s bank account despite the fact that the AO did not make any inquiries to satisfy himself about the explanation offered by the appellant although making of such inquiries is a condition prerequisite for invoking the provisions of section 68. 7. The ld.CIT(A) e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neral law of Income Tax Act. 6. The Ld.CIT(Appeal) erred in ignoring the findings of Central Forensic Science Laboratory that the computer systems claimed to have been used by the assessee for making advance credit entries on 08.11.2016 were not at all opened/used on that date and consequently the credit entries in the books of account are ante-dated to escape the consequences of accepting SBNs after demonetization. 7. The ld.CIT(Appeal) erred in taking into cognizance the letter dated 01.11.2017 claimed to have been filed by the assessee before the assessing officer without calling for a remand report as no such letter had been filed before the assessing officer. 8. The ld.CIT(Appeal) erred in granting relief solely on the basis of the statements given by Mr.Neel Sundar before Investigative agencies which was retracted in his subsequent statement given before the DDIT(Inv) on 09.02.2017, wherein he categorically stated in reply to Q.No.13 that ?the cash does not belong to me or my family or my concern M/s. Ashta Lakshmi Gold nor does it belong to any of my friends from the market. 9. The Ld.CIT(Appeal) erred in not taking into cognizance of the fact that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy himself about the explanation offered by the appellant although making of such inquiries is a condition prerequisite for invoking the provisions of section 68. 7. The ld.CIT(A) erred on facts and in law in ignoring the various judicial pronouncements of High Courts and Supreme Courts submitted by the appellant which showed that the AO could not have invoked the provisions of section 68 considering the facts of the appellant s case. 8. The ld.CIT(A) s finding that the AO, in the statement recorded from the appellant u/s 131 on 20.11.2019 discussed the issues raised by the appellant is contrary to the facts on record. 9. The ld.CIT(A) s finding that the AO, in the statement recorded from the appellant u/s 131 on 20.11.2019 discussed at length the explanation regarding sources of cash as submitted by the appellant in his letter dt.01.11.2017 is not a fact and is based on the wrong appreciation of the contents of the assessment order. 10. The finding of the ld.CIT(A) s that the requirements of section 68 are met by AO is not based on correct appreciation of the provisions of section 68 of the Act in as much as that the ld.CIT(A) erred in law in concluding that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Agarwal before the police authorities even though such statement is not admissible as evidence. 10. The ld.CIT(A) erred in relying on the statement of Sri Pavan Kumar Agarwal given before Police Authorities on 17.02.2017 that he contributed 37.11 crores out of total cash deposits made in the bank accounts of the assessee, without considering the fact that this averment was different from the statement recorded before the Income Tax authorities. 11. The Ld.CIT(Appeal) erred in deleting the addition made stating that no enquiries were conducted. The ld.CIT(A) who has coterminous powers to conduct further enquiries before coming to his conclusions instead of deleting the addition for lack of enquiry. 12 The Ld.CIT(Appeal) erred in holding that the assessing officer simply ignored the material produced before him by the assessee and made his own conclusions without bringing any material evidences to show that Sri Pavan Agarwal had contributed Rs.37.11 crores, except for referring to the Bank CCTV footage and Cell phone recordings, which were never produced before Income tax authorities at any point of time. 13. The Id.CIT(Appeal) erred in of restricting credits w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on filed, assessment was completed by the AO u/s.143(3) of the Act on 31.12.2019 assessing the total income at Rs.41,57,69,390/- by making an addition of Rs.40,11,50,000/- u/s 68 of the Act. 8. The relevant portion of Assessing Officer s discussion and finding reads as under : 3.5.1 Apparent inconsistency even in the second version of cash advance from one customer: The first issue for consideration is the deviation of the assessee in replacing single customer in place of their earlier stance of 2153 customers, who purportedly lent advance of Rs.40.11 crores. In para 15 of the above submissions, the assessee now brings in the concept of 'human possibility' of receiving cash of below Rs.2 lakhs from 2100 persons within three and half hours in their business premises. In fact, the claim of the assessee of receiving cash of Rs.40.11 crores and the probability of entering the details of 2153 customers (5200 customers including the customers of M/s MGJPL), printing cash receipt vouchers within three hours from 09.00 PM to 12.00 midnight on 08.11.2016 was questioned in the statement recorded u/s 131 on 01.12.2016 vide Q.No.70. To this, the Director of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d flaws. As per assessee's own' ad-Mission, the list of 2153 customers was provided by Sri Neel Sundar Tharad and accordingly they entered the advance cash receipts in their books against 2153 customers. Having accepted (even other-wise proved later by the Investigation Wing that the list of customers is a fabricated one) that the list is a bogus one,, the assessee cannot 'Claim that cash advances were entered in their books on the night of-08.11.29164sell and only physical cash was directly deposited by the purported lone customer on 10.11.2016. 'The second flaw is also factual and was proved by the CFSL report that no entries whatsoever were made in the systems impounded from the business premises of the assessee on 08.11.2016. A separate discussion on this-issue of entry of cash advances is made in the ensuing paras (3.5.5). Now coming to the second component of this claim, that the cash was directly deposited in their bank account by Sri Tharad on 10.11.2016 and therefore the same does not belong to them. It is against this claim of Director, Sri Nitin Gupta, the other Director of M/s MGJPL, Sri Mallesh in his statement recorded u/s 131 (pl. refer to para 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contracts Act 1872 : 23. What considerations and objects are lawful, and what not.- The consideration or object of an agreement is lawful, unless-it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent ; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. (emphasis supplied) Section 26 of the Reserve Bank of India Act 1934 : 26. Legal tender character of notes.- (1)Subject to the provisions of sub-section (2), every bank note shall be legal tender at any place in India in payment, or on account for the amount expressed therein, and shall be guaranteed by the Central Government. (2) On recommendation of the Central Board the Central Government may, by notification in the Gazette of India, declare that, with effect from such date as may be specified in the notification any series of bank notes of any ease to be legal tender save ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir account maintained with any bank on or before 30-12-2016 so that the equivalent value of SBNs will be credited to such accounts. The Government has further announced that the SBNs will continue to be legal tender during demonetization period for the limited purpose of making payments at places like petrol bunks, gas agencies, etc. Thus, except where the SBNs were deposited in a bank, or exchanged for goods / services at designated places like petrol bunks etc., in all other cases such SBNs are no longer legal tender w.e.f. 09-11-2016. Coming to the present issue on hand, as discussed in para 5.3.2, it was proved that the assessee has carried on their trading operations, made cash sales during the demonetization period, paid sales tax (VAT) wherever required, and also reported such sales to the VAT Authorities. As already discussed above, in a concluded and valid Contract of Sale, price for the goods sold shall only be the receipt of money in legal tender. Once the assessee says that he has carried out sales, even during demonetization period, it ha 'to be understood thit he has received the money not in legal tender, because from 09-11-2016 onwards, the SBNs are no lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a part of-contract of sale is opposed to the said 'public policy' as announced by the Central Government and vitiates the whole exercise of demonetization. Hence, for these reasons, the contract of sale if it involves receipt of SBNs as price', is ab-initio void as per the provisions of Sec.23of the Contracts Act, 1872 and thus non-est in the eyes of law. Hence, such SBNs cannot be treated as having arisen out of a contract for sale. The above discussion takes care of the additional submissions made by the assessee on 24.12.2019 that entire credits in the books are nothing but advance against sales which; were ultimately 'credited to the profit loss account and that since the character of such sale has already been offered to tax, the question of treating the said credits as unexplained u/s 68 of the Interne Tax Act, 1961 does not arise at all. In the case on hand, the assessee is claiming that the cash deposits made on 10.11.2016 by others directly in their bank account do not belong to them. Acceptance of this version as such does not help the case of the assessee in view of the discussion made as above on SBNs and other allied Acts. The assessee after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-7 crores from Mr Sanjay Sarda who is partner of M/s Sanjay Sunil Associates situated at Secunderabad some amount received from other customers the names of the customers I don't remember. I have done the above transactions purely as a business transaction and without any intention of any illegal gain from this transaction since my both firms were having Secured and un-secured loans. I thought by doing these legal business transactions I will earn some profit and clear my loans. I requested the customers who have deposited the cash with me on 8-11-2016 to help me to assist us in depositing the cash in bank by carrying their own cash from our office to our respective banks. Accordingly they came to my office and helped me for depositing the cash in my bank from 10-11-2016 onwards since 9-11-2016 was bank holiday. As per the order received from the customers, we have placed the order of gold to various bullion dealers eg:- M/s Asthalaxmi Gold, M/s Sri Balaji Gold, M/s S.K.Impex, M/s Nav-Durga Bullion Co-op. We transferred all the amount to the bullion dealer by way of RTGS and cheques. Subsequently we have received the gold on various days and accordingly we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises. I don't remember the name of the employee who entered the details in the tally accounting package installed in these computers. The-same version was reiterated by the assessee in a recent statement recorded u/s 131 on 20.11.2019, the relevant portion of which is as under: 20. To SLIM up, you are confirming that you have received cash advances of Rs.57,75,35,000/- from six customers (against 3100 customers stated in the statement recorded on 01.12.2016) ion the case of MGJPL on 08.11.2016 after 09.00 PM, entered the cash advances in your books on the same day, generated cash receipts on the same day from the systems available in your premises in tally software and issued to all the customers. Likewise, in the case of M/s VBPL, you have received Rs. 40,11,50,000/- as cash advances from one customer (2100 customers earlier) and followed the Ohm piticedure.as was done in the case of M/s MGJPL? Ans. Yes. I confirm that in M/s MGJPL, I have received approximately Rs.57 crores from sis customers and Rs.40 crores from one customer in M/s VBPL. Entered the details of cash advances bifurcating all below Rs.2 lakhs in the names of various persons (as provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of cash receipts was done in the systems available in your premises on the-date-of servey. How-could you deviate from the replies already given-above in reply to Q.22 above? Ans. I am not a technical expert in operating computer systems. Whatever Was conveyed to me by my staff, I in turn conveyed to the IT authorities on the date of survey. I cannot comment too much on the technicalities involved in computer systems. 24. We are not interested in involving you too much into technicalities of computer systems. The question is when on the date of survey, all the systems shown by you were impounded from the business premises, purportedly used for entering cash receipts received on 08th November, 2016. Against this, the- CFSL report suggests that these systems used for entering the cash receipts were not at all opened (four systems) and one was closed by 06.45 PM. Therefore, the findings of CFSL clearly indicate that the cash receipts were generated much after 09th November, 2016. Please comment. Ans. On the inputs given by my staff, I stated 25. I am showing you again the statement recorded n 01.12.2016. Your attention is invited to reply to question No.67, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng cash from them as advance towards sale of gold is genuine. However, it is also equally the case of the said Sri Tharad that he traded in bullion with the assessee on receipt of RTGS and no further. In this context, it is seen that on one hand, the assessee company submits to accept the averments made by their Directors, who constantly went on changing their versions from time to time before various investigating agencies to suit their convenience and feigned to ignorance on occasions when clinching evidences and circumstantial evidences were put beforethem-173inst the submissions made; and on the other hand claims that Sri Tharad confessed before CCS and ED owning up the money in question and therefore, their responsibility of proving the genuineness of the transaction is discharged. In this process; the assessee company resorted to (i) forgery of documents by furnishing false information in respect of 12 identified customers, (ii) falsification of their accounts by claiming that they entered all the cash receipts in their cash on the night of 08th November, 2016, which was proved otherwise. At the same time, the assessee company accepts that their Directors su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess, then the AO must conduct an enquiry, and call for more details before invoking sec.68 of the Act. If the assessee is not able to provide a satisfactory explanation of the nature and source, of the investments made, it is open to the revenue to hold that it is the income of the assessee, and there would no further burden on the revenue to show that the income is from any particular source. With respect to the issue of genuineness of transaction, it is for the assessee to prove by cogent and credible evidence that the investment made in the share capital (or any cash credit u/s 68) are genuine borrowings, since the facts are exclusively within the assessee's knowledge . Similarly in the case of CIT Vs Mohankala (291 ITR 278) (SC), the Apex Court held that: A bare reading of the sec.68 of the Income Tax Act, 1961 suggests that (i) there has to be credit of amounts in the books maintained by the assessee; (ii) such credit has to be a sum of money during the Previous year, and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove that the same belong to either the said 2153 persons or one person with cogent evidences. The assessee has indulged in mis-representation/suppression of facts. Therefore, for the reasons discussed above and particularly in para 3.5.1 to 3.5.5 4,111e -credits appearing in the books of account of the assessee in the form of cash advances against gold sales on 08.11.2016 aggregating to Rs. 40,11,50,000/- are treated as unexplained credits in the hands of the assessee u/s 68 and assessed-as such, @ 60% tax irate as prescribed under provisions of section 115BBE of the IT Act. In view of the detailed discussion above and the provisions of section 270A(9), I am satisfied that the assessee has indulged in under-reporting of income in consequence of mis-reporting of income, and accordingly, Penalty proceedings u/s 270A are initiated for mis-reporting of income u/s 270A(9). 9 . Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who partly allowed the appeal of the assessee. The relevant portion of the discussion and finding of the ld.CIT(A) are as under : 5.1) On receipt of credible information that the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.11.2016 after announcement of demonetization and gave advances ranging from Rs.1,89,000/- to 1,72,000/- and that they entered these advances in their systems and generated receipts to all the 2153 customers and this work continued till midnight. When questioned as to how he handled 2153 customers by way of collecting cash on one side, generating receipts and discussing the weightage etc.. Sri Nitin Gupta said that he managed the things with the help of another Director of Musaddilai Gems Jewels Pvt Ltd, Sri Mallesh and cashier Sri Jeelan Basha. In course of survey, it was found that another sister-concern M/s Musaddilal Gems and Jewels Pvt Ltd also carried business from the same premises and the above findings were Quite similar and since the assessee is making seemingly incomprehensible and dubious claims with regard to the receipt of advances, fabricated KYC forms/declarations, a police complaint was lodged with the Jubilee Hills police Station. Accordingly, an FJR was registered vide No.7552016, dated 07.12.2016 against the Directors of the assessee company. Based on the above F1R registered with Jubilee Hills, Hyderabad, 1nvestigations were carried out further by the police ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.263/2016. The Hon'ble High court vide their common order in CRLP Nos.124, 125, 132, 155 and 157 of 2017, dated 30.01.2017 dismissed tile anticipatory bail. Subsequently, the appellant was arrested on 31.01.2017 along with Sri Kailash Chand gupta father of Sri Nikhil Gupta, brother of the appellant. .. 7.3 Coming to the amounts mobilized by Sri Neel Sunder Tharad, Proprietor of M/s Ashtalakshmi Jewellers, he had in fact confessed in his statement dated 21.01.2017 before the ACP that he mobilized Rs.28 crores from the following persons. SI. No. Name of the party from whom amounts mobilized by Neel Sunder Tharad Amount in INR 1 P. Satyanarayana Sons, Rep by Prakash Agarwal, 2,50,00,000. 2 PSS Jewellers, Old City, Rep. by Jithin Agarwal 2,25,00,000 3 Tibarumal Jewelers, Jubilee Hills, Rep. by Praveen Agarwal, 2,25,00,000 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Sri Nitin Gupta has transferred an amount of Rs.28.37 crores to M/s Ashtalakshmi Gold from 11.11.2016 to 19.11.2016. Transfers to the account of M/s Ashtalakshmi Gold as appearing the Bank Statement of Vaishnavi Bullion Pvt Ltd with AXIS Bank Account No:916020066093266 Date Cheque No Amount 11-11-2016 140852 4,72,95,000 11-11-2016 140851 4,73,40,000 12-11-2016 140855 6,15,60,000 12-11-2016 140853 3,15,30,000 15-11-2016 140860 1,54,25,000 17-11-2016 140862 3,00,00,000 18-11-2016 140866 3,09,70,000 18-11-2016 140865 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the factual position as brought out above, it is held that deposits in the bank account to the extent of Rs.28.37 crores, as received from Sri Neel Sunder stands explained and the addition to this extent is deleted. 10 . Feeling aggrieved with the order of ld.CIT(A), the assessee as well as Revenue are in appeal before us. Firstly, we will take the appeal of Revenue i.e. ITA 58/Hyd/2021 as the ld.CIT(A) has granted part relief to the assessee, against which the Revenue is now before us. 11. Before us, at the outset, the ld. DR for the Revenue had submitted that the order passed by the ld.CIT(A) deleting the addition of Rs.28.37 crores was without application of mind and the ld. DR had drawn our attention to the facts mentioned in the order of ld.CIT(A) in paragraph 5.1 to 5.6 reproduced hereinabove at Para 9. 12. It was the contention of the ld. DR that at the time of survey, the statement of the Shri Nitin Gupta was recorded on 01.02.2016 wherein the said Shri Nitin Gupta had made the following admission : i) That the assessee had received the advances from 2153 customers to the extent of Rs. 40 crores. ii) On the intervening night of 08.11.2016 to 09.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt further shows that the system was shut down on 08.11.2016 at 18:45:34 and it was again logged on 09.11.2016 at 09:20:32. Thus, it was clear that no receipts were issued by the assessee either on 08.11.2016 or on 09.11.2016. The above said information was confronted to the assessee during the assessment proceedings by Assessing Officer, however, the assessee had tried to shift his liability to Mr. Neel Sunder during the course of assessment. The AO after examining the record had concluded that undoubtedly, 2153 customers, who paid the advances were duly reflected in the books of the assessee as on 08.11.2016 which fact has not been disputed by the assessee. It was also not disputed that the amount of Rs. 40 crores were deposited in the bank account of the assessee. It was the contention of the ld. DR that merely because the money was deposited with the help of wife of Neel Sunder or by Neel Sunder, the assessee was not discharged from proving the entries under section 68 of the Act. Further, it was the contention of the ld. DR that the assessee had utilized the said amount of Rs. 40 crores for purchasing the Gold from Ashtalaxmi Gold and Impex Gold. It was submitted that the reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e order of the Assessing Officer wherein the Assessing Officer had dealt with the contention of the assessee in his order, reproduced in the preceding paragraphs. 17. Further, the ld. DR had submitted that the ld.CIT(A) had confirmed the part of addition made by the Assessing Officer and the observation of the ld.CIT(A) vide para 8.1 to 10 and 10.1 read as under : 8.1) However, Sri Neel Sunder had submitted before the Police on 21.01.2017 that only Rs.28.37 crores was contributed by him and the balance amount of Rs.11.63 crores was contributed by Nitin Gupta himself. The basis for Neel Sunder's statement was that Sri Vaishnavi Bullion has carried out RTGS transfers of Rs.28.37 crores to its concern Ashtalakshmi Gold, wherein, he is a partner. After receipt of the amount through RTGS, it placed orders for gold bullion from the following parties: 1) DP Gold Pvt. Ltd. 2) SK Impex 3) Capsgold Pvt Ltd 4) SMC Comtrade Ltd 5) Bhagyalaxmi Gems Jewellers Ltd 6) Sri Durga Jewellers It was submitted by Sri Neel Sunder that SK Impex and SMC Comtrade Ltd delivered the gold through M/s Brinks Arya Agency and that he p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores in the hands of the appellant is confirmed. The grounds raised are disposed off with above direction. 10.0) The appellant raised contention against the application of provisions of Section 68 for making addition by the AO. The appellant contends that the AO without satisfying the requirements of Section 68, made the addition. The appellant contends that the explanation as to source of cash deposits given by the appellant was not even considered by the AO before making the addition. The appellant's detailed contentions in this regard are as under: 10.1. I have considered the assessment order, submissions of the appellant and the material placed before me. The contention of the appellant is that the explanation as to sources for cash deposits in the bank account submitted vide letter dated 01.11.2017 has not been considered by the AO. It is seen that the AO discussed at length the statement recorded from the appellant u/s 131 on 20.11.2019, wherein, the appellant was examined at length on the very same issues. The explanation of the appellant dated 01.11.2017 forms part of the replies given during the statement recorded on 20.11.2019. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. AR for the assessee that the entire sale of Rs.40 crore was disclosed in the profit and loss account of the assessee and the Revenue has accepted the profit declared by the assessee. Once the Revenue had accepted the profit, then Revenue cannot make the addition on account of advance given by these 2153 persons. It was submitted that the assessee had proved the ingredients of section 68 of the Act and therefore, no addition can be made in the hands of the assessee. It was the contention of the assessee that the Assessing Officer was duty bound to examine Shri Neel Sunder for the purpose of coming to the conclusion whether he had deposited Rs.28 crore in the bank or not since the above said aspect has been examined by the ld.CIT(A) therefore, the action on the part of the ld.CIT(A) in deleting the addition was in accordance with the law. 20. We have heard the rival submissions and perused the material on record. Before we deal with the individual submissions, the summary of facts of the present case is as under:- I. The assessee had allegedly taken advances from 2135 persons on 8/11/2016. II. As per the statement dated 2/12/2016, the receipts of advance c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By our affidavit we have informed you that we are going to get covered under the Prime Minister Garth Kalyan Yojana (PMGKY),since we were given strong assurance that such a course of action will protect us from criminal prosecution and PMLA enquiry / investigation. Sincerely, believing the same, we have submitted that the affidavit to get covered under the scheme, and in that context we have stated that the money belong to us. Even after nearly one month, we are subjected to enquiry and interrogation by the Police and Enforcement Department authorities. We have disclosed the benefit in our books of accounts and we have paid the self assessment tax thereon. It is only under pressure and misrepresentation by Police / ED/ IT we have submitted to get covered under the scheme..... All our directors are under threat of arrest and their petition for Anticipatory Bail are pending. Hence we hereby withdraw our affidavit dated 30.12.2016 and hence our request for getting covered under the scheme is-hereby withdrawn / rescinded 22 . However, in the letter dt.17.01.2017 addressed to the Deputy Commissioner of Police, CCS, Hyderabad a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onwards since 9-11-2016 was bank holiday. As per the order received from the customers, we have placed the order of gold to various bullion dealers eg:- M/s Asthalaxmi Gold, M/s Sri Balaji Gold, M/s S.K.Impex, M/s Nav-Durga Bullion Co-op. We transferred all the amount to the bullion dealer by way of RTGS and cheques. Subsequently we have received the gold on various days and accordingly we have given the delivery of gold to the customers by raising the sales invoices against the oath receipts generated. Further, I would like to inform that the total business transactions has been reflected in our books of accounts and we have shown the profit earned and paid the necessary advance tax to the Income tax department and VAT, the Commercial tax department. All the amount collected during the business transaction has been deposited in bank transferred to the necessary bullion dealers for purchase of gold and from the remaining amount the secured loan of about 1 crore of SBI and un-secured loans of about 3 crores have been paid and the necessary taxes of income tax department and commercial tax department has already been paid. Therefore, I have l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Sunder Tharad was also recorded by the DDIT, Hyderabad on 07.12.2016 and in the said statement, Mr. Neel Sunder in reply to questions 13 to 16 had stated as under : Q.13 Please state what is the total amount of sales (including Quantity) made by you on 08.11.2016 and 09.11.2016 ? Ans: The total sales of gold and silver made on 08.11.2016 and 09.11.2016 is Rs.5.82 crore and the details of the same are as under : S.No. Description of the metal Quantity Amount (Rs. In crores) 1 Pure Gold 18.8 Kgs Rs.5.79 Cr 2 Silver 3 Gold Ornaments 96 grams Rs.0.03 Cr 4 Silver articles Total Rs.5.82 Cr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployees of M/s. Vaishnavi Bullion Pvt. Ltd, but I do not remember their names at the time of delivery. I take only confirmation from Sri Nitin Gupta, Director of M/s. Vaishnavi Bullion Pvt. Ltd over phone for delivering the metal to their employees. 25. From the conjoint reading of the statements of Mr. Nitin Gupta (M.D. of the assessee) recorded on 02.12.2016, 07.12.2016 and the affidavit filed on 30.12.2016, it is abundantly clear that the assessee had admitted that the assessee had shown the bogus entry in the books of accounts mentioning to have received the advances of less than Rs.2 lakhs from 2153 customers amounting to Rs.40 crore. Moreover, the assessee had accepted Rs.40 crore as its income and agreed to deposit taxes as per the Scheme Pradhana Mantri Garib Kalyan Yojana, 2016 . 26. It is the case of the assessee before us that the initial statements dt.01.12.2016 and 07.12.2016 were recorded under pressure. In the first affidavit filed on 13.01.2017, the assessee had submitted that the assessee had agreed to cover under the Pradhana Mantri Garib Kalyan Yojana, 2016 as the assessee was given the assurance, no criminal prosecution / PMLA inquiry / investigatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a confirmation that they will take care of the matter, when the time comes. .. 30. Thus, it is abundantly clear that the assessee had not denied the earlier statement given by him on 02.12.2016 as well as on 07.12.2016. However, in the subsequent statement recorded on 20.11.2019, the assessee had submitted a different version. Further, he had changed his stand by stating that he had given the earlier statement under the pressure of the people who gave him the money as they had confirmed that they will take care of the matter. The above said statement of the assessee recorded on 20.11.2019 if juxtaposed with the affidavit submitted on 13.01.2017 whereby the assessee had submitted that it had given the affidavit and opted for the PMGKY Scheme on the pressure and misrepresentation of police / E.D. / I.T. then it is clear that both the statements were contrary to each other. The above said aspect of contradiction of statements had duly been addressed by the Assessing Officer in his order. Thus, in our view, the assessee has failed to establish any plausible reason for taking a contrary stand, while giving the statement on 20.11.2019. In our view, the statement initially rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has been trying to approach the Income Tax Department to give his factual statement/retract/make,, corrections to his earlier statements recorded on 01st and 7th December, 2016, since those statements are given under undue influence, mental pressure and ill health condition. However, such averments are far from true as discussed in pare 3.5.1. In this connection, reference to the confessional statement of Sri Nitin- Gupta made before CCS, Hyderabad on 17.01.2017 is in place. Further. I would like to inform that all three firms, (i) Musaddilal Gems Jewels Pvt. Ltd., (2) Vaishnavi Bullion (P) Ltd., and (3) Musaddilal Jewellers Pvt Ltd, are independent of each other doing business separately. On 08.11.2016 at around 7 PM I was at my office of M/s Musaddilal Gems Jewels (Pvt) Ltd and M/s Vaishnavi Bullion (Pvt) Ltd, during that time some people called me for purchase of gold then I have informed them to come to my office and they said that they want to purchase gold from me at that time. I did not have much stock of gold due to which I told that customers to place order by giving advance amount, accordingly those people have place booking by paying the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cured loans of about 3 crores have been paid and the necessary taxes of income tax department and commercial tax department has already been paid. Therefore I have lastly decided that 'to give my confessional statement in writing and submit at your office and your good-self. From the above it can be seen that' thought the assessee is claiming that the statements given u/s 131,before the Income Tax authorities on 1st /2nd 7th December, 2017 are under influence of others, he continued to stick to his version of accepting cash advances 'from customers on 08th December, 2016 (though the number of customers are not specifically mentioned), asked them to assist in depositing the cash into their bank account from their office, etc. Against this confessional statement given on 17.01.2017 before the CCS, Hyderabad the assessee claims that he had decided to retract from the statements given on 1st December 2017 before the IT authorities and make corrections to his earlier statements. 33. Ld CIT(A) in his order had dealt with the retraction as under :- 4.2. However, later vide letter dated' 01-11-2017(Annexure-7), ,Sri Nitin G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssional statement of assessee dt.17.01.2017 and the statements of Mr. Neel Sunder and Pawan Agarwal cannot be considered to be retraction in the eyes of law. i. Said letter dt.17.01.2017 was not addressed either to the assessing officer or to the Investigation wing of the revenue. ii. No retraction was made by the assessee from the earlier statements given to Revenue. iii. In the statement /confession given to police it was admitted that I have received nearly about 40 Crores for Mr Neel Sunder Tharad, who is owner of M/s Astha Laxmi Gold . iv. It is not the case of the assessee that he had not received Rs.40 crore in old currency notes. Assessee changed his version whereas in earlier statements and documents, it was admitted that he had received Rs.40 crore from 2153 customers, wherein in letter dt.17.01.2017, he alleged that it was given by Mr. Neel Sunder. v. The assessee had admitted to have prepared the cash receipt advances after receiving the amount. vi. No reasons were assigned by the assessee to retract the earlier statements after one year from the original statements. vii. Mr. Neel sunder was arrested by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de any inquiry from the parties whose details have been given by Neel Sunder. Thirdly, Mr. Neel Sunder was authorized to deposit in the bank account of the appellant was not contradicted. Fourthly, the deposit of cash by the third party in the account of the assessee has not been disputed by the Assessing Officer. 38. As mentioned hereinabove, the case of the Assessing Officer was that the director of the assessee in the sworn statement dt. 02.12.2016 had admitted that there was no sales made by the assessee from 01.04.2016 to 07.11.2016. Further, the assessee had admitted no sales were made either on 08.11.2016 or on 09.11.2016 (Question No.6). However, the cash advances of Rs.40.11 crore were received from 2153 customers on 08.11.2016. It was also the case of the Assessing Officer that the purchases were made between 09.11.2016 to 30.11.2016 for an amount of Rs.37.39 crore. Out of the said amount, Rs.28.97 crore valuing gold (91 kg bullion) was purchased from Asthalakshmi Gold of Neel Sunder. It is an admitted case of Assessing Officer as well as the assessee that the sale invoices below Rs.2 lakhs were made on 08.11.2016 and 09.11.2016 from the Computer installed in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of accounts but had also collected the KYC documents of some of the customers. Though, subsequently, on verification, it was found by the officers of the Revenue / Police that the invoices issued by the assessee were bogus and even 12 customers whose documents were given by the assessee to prove their identity, had denied to have given their advances for purchase of gold from the assessee. 40.1. For the purpose of Section 68 of the Act, it is the onus of the assessee to explain the entries made in the books of accounts. In the present case, assessee being a company, as per proviso to section 68, any unexplained amount credited in the books of the assessee shall be deemed to be the assessee was not satisfactory and was against the preponderance of probability and evidence on record, hence, the Assessing Officer had rightly made the assessment in the hands of assessee on the basis of the credit entries made in the books of accounts which were duly supported by the deposit of SBNs in the bank account. 41. The assessee has not been able to explain the entries made in the books of accounts. On the contrary, the assessee in subsequent statement dt. 20.11.2019 had even admit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding those maintained in an electronic form], regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability. 43 . Similarly, Section 292C of the Income Tax Act provides as under : 1)] Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 13216[or survey under section 133A], it may, in any proceeding under this Act, be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant or disposition of property, may be proved: Proviso (4).-The existence of any distinct subsequent oral agreement to rescind or modify any such contract, grant or disposition of property, may be proved, except in cases in which such contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents: Proviso (5).-Any usage or custom by which incidents not expressly mentioned in any contract are usually annexed to contracts of that description, may be proved: Provided that the annexing of such incident would not be repugnant to, or inconsistent with, the express terms of the contract: Proviso (6).-Any fact may be proved which shows in what manner the language of a document is related to existing facts. 45. From the reading of the above said provisions, it is abundantly clear that the entries made in the books of accounts, if not disputed would be sufficient to charge the assessee with the liability. In the present case, the assessee has not disputed the maintenance of the books of accounts and had also not disputed the entries made therein showing the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016, who had duly supported the initial version of the assessee made on 02.12.2016. In view of the above, we are of the opinion that the ld.CIT(A) had wrongly concluded that the statement of Neel Sunder was not contradicted by the Assessing Officer. In our view, there was no occasion for contradicting the statement given by the third party before the police / E.D. for the purpose of contradicting the evidence already collected by the Revenue during the course of survey. The statement of the assessee s director was duly corroborated by the other clinching evidence in the form of books of accounts, invoices, KYC documents, CFSL Report and therefore, no further corroboration or contradiction were required. 48. The second reason given by the ld.CIT(A) to delete the addition was that the officer had not made any inquiries whose details had been given by Mr. Neel Sunder. In fact, the statement of Mr. Neel Sunder was recorded u/s 50(2) and (3) of PMLA Act, 2002. In the said statement, Mr. Neel Sunder had stated as under : To your specific enquiries about Mr. Nitin Gupta and Nikhil Gupta, I state that they are the cousins of my wife Nisha Gupta. They are running business in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons of Mr. Nitin Gupta contacted intended buyers and sold the gold. However, the persons concerned of intended buyers along with Shri Seera Mallesh used to take delivery of gold bullion outside the premises of M/s. Brinks India Private Limited, from where I took gold delivery. I also took gold delivery form M/s. DP Gold Private Limited and also from the premises of M/s. Sequel Logistics, Basheerbagh, Hyderabad. However, the gold is delivered to the persons of Mr. Nitin Gupta and persons concerned of intended buyers outside the premises of M/s. Brinks India Private Limited. To your enquiries about the buyers to whom I have handed over the Gold Bullion on behalf of M/s. Vaishnavi Bullion Private Limited or Shri Nitin Gupta, I state that as required by Shri Nitin Gupta, I have given the details of intended buyers whom I know from my past business experience. Shri Nitin Gupta or his persons contacted them directly. I have not interfered with their business. I have delivered the Gold bullion to the persons who were sent by Shri Nitin Gupta through his employee Shri Seera Mallesh and others and Shri Nitin Gupta used to confirm over the phone about the delivery. To your speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,50,00,000 6 Saibaba Jewelers, Pot Market, Sec'bad, rep by Susheel Jain @ Ramu Jain 1,50,00,000 7 Ashoka Jewelers, Ameerpet, Rep. by Amit Kumar Jain, 1,75,00,000 8 Kamya Jewelers, Ameerpet, Rep. by Arun Kumar Jain, 1,50,00,000 9 Venus Jewelers, Chikkadpally, Rep. T. Ram Praveen, 1,00,00,000 10 Tirumala Jewelers, Abids, Hyderabad, Rep. Amit Agarwal, 1,00,00;000 11 Balaji Jewelers, Abids, Hyderabad 2,00,00,000 12 A.P.Furnitures, Nampally, Hyderabad 3,00,00,000 13 Own Funds of Neel Sunder Tharad 5,50,00,000 28,00,00,000 Others (Names not provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the Authorization given by the appellant to Sri Neel Sunder and his concerns to deposit the amount in the bank account of the appellant were not examined nor contradicted. 55. The finding of the ld.CIT(A) is not based on correct appreciation of facts. The Assessing Officer had elaborately dealt with the above said issue of cash deposits in his order in the following manner : Now coming to the second component of this claim, that the cash was directly deposited in their bank account by Sri Tharad on 10.11.2016 and therefore the same does not belong to them. It is against this claim of Director, Sri Nitin Gupta, the other Director of M/s MGJPL, Sri Mallesh in his statement recorded u/s 131 (pl. refer to para 2.6 above) averred that he got a call from Sri Nitin Gupta to rush to the bank on 10.11.2016 and oversee the work of depositing the cash in their bank account. Even thereafter, the cash deposited in the bank account was utilized by the assessee company for purchase of bullion through RTGS transfer. All these enquiries by the Investigation Wing and, the CFSL findings prove, that the assessee had made entries of cash advances of Rs.40.11 crores i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ou have stated that there are only 3 employees in this company. Please go through all the advance receipt vouchers spiral bounded and confirm whether you have signed any of the vouchers or not. Ans: There are not only 3 employees, there are were around 10 total employees on the day of 08.11.2016. However, I don t remember their names. As far as I remember, I have not accepted any cash on that day and therefore, I remember that I have not signed any voucher. Q.58. Where did you keep Rs.90 Crore on 08.11.2016 night. Ans. In this office premises. Q.59. When did you deposit this Rs.90 crore in the bank. Ans: After 09.11.2016 for a period of 4-5 days I have deposited this amount in the bank. 57. The statement of Mr. Nitin Gupta was recorded by the officials of Enforcement Directorate on 13.01.2017 and in the said statement, it was specifically stated by Mr. Nitin Gupta as under : To your specific enquiries, I state that Mr. Neel Sunder Tharad and his family members visited Axis Bank Limited, Film Nagar along with my office staff of Shri S. Mallesh etc. for depositing of money in the account of M/s. Vaishnavi Bullion Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , money and bullion and made delivery to the customers. This version of the ass is incongruous and against human preponderance, as why Mr. Neel Sunder will approach the assessee to route his clients transaction through the assessee. In that way Mr. Neel Sunder could have completed the entire transaction right from procuring to selling the gold to customers and retained the profit himself. It is also not the case of the assessee that Mr. Neel Sunder did not have the bank account in the same Axis Bank where the money was allegedly deposited by him in the account of the assessee. There is no explanation for the redundant routing of the transactions with the assessee if we have to believe Mr. Neel Sunder. This shows that the statement of Mr. Neel Sunder s statement attributes redundancy to the role of the assessee, which we find difficult to believe. 59. In our opinion, conduct of the assessee was incomprehensible and abnormal. The assessee either deposited its undisclosed amount or otherwise helped undisclosed, unanimous and unidentifiable persons to convert their undisclosed prohibited currency into bullion after notification of demonetization. In both circumstances, the action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce -such an agreement. It essentially means, that the right to repudiate an agreement rests with the parties to the agreement alone. If in this process, there has been any violation of law, then the concerned agency which administers that particular law will have to step in and take appropriate action. In the instant case, Income Tax Department is not the Government Agency to declare the sale as void. Hence, the entire argument of the AO on this ground has no legs to stand. b) Secondly, the taxability or otherwise must be decided as per the provisions of Income Tax Act. It is totally irrational on the' part of the AO to conclude that because the sale is rendered void, the advance amounts received should be taxed in the hands of the seller as unexplained credits. It may not be out of place to mention here that under the Income-tax Act, even incomes earned illegally are subjected to tax. 6.6. At page 40 (last para) of the assessment order, the AO referring to the notification relating to demonetization states: As per the said Notification, the only way-out given to the persons holding SBNs as on 09-11-2016 to realize the equivalent value of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true owners of such SBNs, merely stating that the SBNs were received beyond 09-11-2016 therefore the cash is unexplained,' doesn't prove anything, which is not disputed by the Appellant that the cash was deposited beyond 09-11-2016 only. In fact, the deposit of SBNs into the bank accounts was permitted from 10-11-2016 only. In this case, the entire thrust of the argument of the AO was that transactions in SBNs after demonetization notification is illegal and be has not taken cognizance of the evidence i.e. bank transfers to bullion traders. It is submitted that there was nothing illegal in the deposit of SBNs by third parties in the bank account as already discussed in para 6.7 above. Even assuming that, though legally not correct, the transactions are illegal, as opined by the AO, the income needs to be taxed, as the Income tax Act does not differentiate between legal and illegal incomes. Kind attention of the CIT(A) is invited to the following judgments which support this contention. 63. The ld.CIT(A) has not dealt with the above-said issue and had granted part relief to the assessee without considering the case of the Assessing Officer. Before we deal with the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eans that the parties to the agreement cannot resort to legal action to enforce such an agreement. b. The taxability or otherwise must be decided as per the provisions of Income Tax Act. It is totally irrational on the part of the AO to conclude that because the sale is rendered void, the advance amounts received should be taxed in the hands of the seller as unexplained credits. c. The AO while quoting from the Notification, failed to appreciate the contents of para 2(v) of the same Notification (Gazette Notification No.S.0.3407 (E)-RBI) (Annexure-10) which reads as under: the equivalent value of specified bank notes tendered may be credited the equivalent value of specified bank notes tendered may be credited ,to a third party account, provided specific authorization therefor accorded by the third party is presented to the bank, following standard banking procedure and on production of valid proof of identity of the person actually-tendering . d. Even assuming that though legally not correct, the transactions are illegal, as opined by the AO, the income needs to be taxed, as the Income tax Act does not differentiate between legal and illegal incomes. Kind atte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be remitted to the linked or nearest currency chest, or the branch or office of the Reserve Bank, for credit to their accounts. 2. The specified bank notes held by a person other than a banking company referred to in sub-paragraph (1) of paragraph 1 or Government Treasury may be exchanged at any Issue Office of the Reserve Bank or any branch of bank referred to in sub-paragraph (1) of paragraph 1 for a period up to and including the 30th December, 2016, subject to the following conditions, namely:- (i) 1a[***] (ii) 2[***] (iii) there shall not be any limit on the quantity or value of the specified bank notes to be credited to the account maintained with the bank by a person, where the specified bank notes are tendered; however, where compliance with extant Know Your Customer (KYC) norms is not complete in an account, the maximum value of specified bank notes as may be deposited shall be Rs.50,000: 2a[Provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawal from an ATM shall be such as may be specified by the Reserve Bank of India from time to time.] (ix) any person who is unable to .. 5[(x) the limits for cash withdrawal by farmers (xi) for wedding expenses a maximum of Rs. 2,50,000 .] 5a[(xii) deposit of specified bank : Provided that the linked currency chest to District Co-operative Central Banks shall give the exchange value for verified specified bank notes only and subject to usual checks relating to identification of fake Indian currency notes.] 3. (1) . (2) .. (3) . 70. From the reading of the above notification, it is abundantly clear that SB Notes may be exchanged at any issue Office of RBI and / or any branch of bank subject to the conditions laid down in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en completed on the date of opening of its account. It is not understandable how the bank permitted the deposit of huge amounts in the newly opened account, on the date of its opening itself. The concerned agency must look into the role of the bank employees in this regard. When the assessee itself cannot deposit more than Rs.50,000/- as per notification, then how a third party can be authorized to deposit more than the specified limits in the bank account of the assessee. The disability of the assessee would entail the disability of its delegate / agent. 73. As per clause (v) of the notification (supra), the equivalent value of specified bank notes tendered may be credited to a third party account, provided specific authorization therefor accorded by the third party is presented to the bank, after following the standard banking procedure and on production of valid proof of identity of the person actually tendering. In the present case it is not the case that the notes were lying with the third party, rather it is undisputed case that S.B. Notes were received by the assessee from the so called purchaser of the gold and thee assessee had authorized one Asha, wife of Mr. Neel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receipts to the respective seven customers. 20. As you are aware, as per page -3 of the impounding order, the five systems available (one Compaq CPU SG 34401L, one assembled PU - Intex, One Lenovo CPU S.No.LQCH015, One Lenovo CPU S.No.L9C3LC60 (belonging to MGJPL) and Lenovo CPU S.No.ES0Q7220256 (belonging to M/s VBPL) in your premises on the date of survey in which you have claimed to have entered the cash advances were impounded by the Department vide impounding .order We 133A(3)(ia) on 02.12.2016. Please confirm. Ans. I exactly do not remember the number and models of the systems. However, certain systems were impounded from our premises when the survey was conducted as per the above impounding order. 21. The above impounded CPUs were sent to Central Forensic Science Laboratory and a report was obtained. I am showing you the findings of CFSL, dated 01.05.2017, starting from pages 1 to 9 along with covering letter dated 01.05.2017. Please offer your comments? Ans. From the said report, I have understood that the timings of operation of our systems, which were impounded from our premises, four systems were not operated on 08.11.2016 and one sy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity by committing an offence, as there was no corresponding penal provision in the 2002 Regulations applicable to it - there is no doubt that its actions fell within the purview of prohibited by law in Explanation 1 to Section 37(1). 25. Furthermore, if the statutory limitations imposed by the 2002 Regulations are kept in mind, Explanation (1) to section 37(1) of the IT Act and the insertion of section 20A of the Medical Council Act, 195611 (which serves as parent provision for the regulations), what is discernible is that the statutory regime requiring that a thing be done in a certain manner, also implies (even in the absence of any express terms), that the other forms of doing it are impermissible. ( emphasis added by us) 26. 27. It is also a settled principle of law that no court will lend its aid to a party that roots its cause of action in an immoral or illegal act (ex dolo malo non oritur action) meaning that none should be allowed to profit from any wrongdoing coupled with the fact that statutory regimes should be coherent and not self-defeating. Doctors and pharmacists being complementary and supplementary to each other in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, sub-let or a partnership is entered into with respect to the privilege/business under the said licence, contrary to the prohibition contained in the relevant excise enactment, is an agreement prohibited by law. The object of such an agreement must be held to be of such a nature that if permitted it would defeat the provisions of the excise law within the meaning of Section 23 of the Contract Act. Such an agreement is declared by Section 23 to be unlawful and void. The question is whether such an unlawful or void partnership can be treated as a genuine partnership within the meaning of Section 185(1) and whether registration can be granted to such a partnership under the provisions of the Income-tax Act and the Rules made thereunder. We think not. When the law prohibits the entering into a particular partnership agreement, there can be in law no partnership agreement of that nature. The question of such an agreement being genuine cannot, therefore, arise. It is also a known principle that what cannot be done directly, cannot be achieved indirectly. As was said in Fox v. Bishop of Chester [1824] 2 BFC 635 Jagir Singh v. Raubir Singh [1999] 2 SCR 282 that it is a : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndeed relied upon the same in filing the suit for specific performance. The illegality is not trivial or venial. The illegality cannot be skirted nor got around. The Plaintiff is confronted with it and he must face its consequences. The matter is clear. We do not require to rely upon any parliamentary debate or search for the purpose beyond the plain meaning of the law. The object of the law is set out in unambiguous term. If every allottee chosen after a process of selection under the Rules with reference to certain objective criteria were to enter into bargains of this nature, it will undoubtedly make the law a hanging (sic laughing) stock. 76. In light of the above discussions, it is crystal clear that the assessee has failed to prove the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Therefore, the assessee had failed to discharge his onus under section 68 of the Act; hence, the order of the Assessing Officer is required to be restored and the order of the ld.CIT(A) is required to be set aside. We do it accordingly. In the result, we uphold the addition of Rs.40,11,50,000/- as unexplained credit in the hands of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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