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TMI Blog2023 (5) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... in which it was held that the solitary reason of not serving of summons cannot be relied only by ignoring the other relevant material produced by the assessee. As noticed that in the case of the assessee, the confirmation with the name, address, copy of ledger account, copy of bank statement and PAN number in respect of the parties were filed before the Assessing Officer, therefore addition should not be made in the hands of assessee. Assessee has proved the source of money and the assessee need not to prove source of the source , as held in the case of Prayag Tendu Leaves Processing Co, [ 2017 (12) TMI 932 - JHARKHAND HIGH COURT] - assessee`s case is covered by the judgment of Gopal Heritage (P.) Ltd, [ 2021 (10) TMI 422 - GUJARAT HIGH COURT] wherein the Court held that where assessee had taken unsecured loans from some persons and Assessing Officer made addition under section 68 on ground that assessee had not been able to prove immediate source of cash-in-hands of party, since all ingredients contemplated under section 68 had been duly satisfied in aspect of identity of creditors, genuineness of transactions and their creditworthiness, said addition was to be deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in ITA No.1442/AHD/2017, are as follows :- 1) The learned Commissioner of Income Tax (Appeals)-III has erred in upholding addition of Rs.1426541/- toward estimated gross profit by rejecting books of accounts and Rs.12513000/- towards unexplained cash credits. 2) The learned Commissioner of Income Tax (Appeals)-III ought not to have upheld addition of Rs.1426541/- towards estimated gross profit by rejecting books of accounts and Rs.12513000/- towards unexplained cash credit. 3) The learned Commissioner of Income Tax (Appeals)-III has erred in not considering the facts of the case submitted to the learned Commissioner of Income Tax (Appeals)-III. 4) The assessee craves to leave add to or amend any of the ground(s) of appeal. 4. Succinctly, the factual panorama of the case is that assessee before us is an Individual. The assessee is a proprietor of M/s Shital Distributors and is engaged in business of trading in TV, Refrigerator, Washing machine etc, on wholesale basis. For the year under consideration, the assessee had shown gross profit to the tune of Rs.23,27,044/- @ 4.89% and net profit of Rs.2,26,964/- @ 0.48%, on total turnover of Rs.4,75,51,369/- as aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... declared by the assessee to the tune of Rs.23,27,044/- @ 4.89% on turnover. 8. After rejection of books of accounts, the assessing officer also proceeded to make addition on estimate basis of various expenses claimed in the profit and loss account. The assessing officer observed that in absence of any bills/vouchers and other documentary evidences, veracity of expenses claimed in the profit and loss account of Rs.21,00,146/- could not be verified, therefore assessing officer made an addition at a lump sum amount of Rs.2,50,000/-, on estimate basis. 9. After rejection of books of accounts, the Assessing Officer also proceeded to make addition on estimate basis of creditors/unsecured loan. During the course of assessment proceedings, on perusal of statement of loans and deposits taken or accepted and repaid forming partly in the year under consideration, it was noted by Assessing Officer that the assessee had accepted unsecured loans. Vide questionnaire issued u/s 142(1) of the Act dated 17.10.2013, the assessee was asked to furnish confirmation of depositors including squared up loans and was also asked to furnish documentary evidences to prove identity of depositor, genuinen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts are rejected, the assessing officer should not have made other line by line addition. The ld Counsel pointed out that Assessing Officer, after rejection of books of accounts made estimated (ad-hoc) disallowance of various expenses at Rs.2,50,000/-, however, on appeal by the assessee, the ld CIT(A) deleted the same holding that Assessing Officer cannot make other ad-hoc disallowance, after rejection of books of accounts. The Assessing Officer also made addition on account of sundry creditors/loan which is not tenable, as the assessee took unsecured loan to purchase goods for trading/business. The assessee is engaged in business of trading in TV, Refrigerator, Washing machine etc, on wholesale basis. The assessee has felt shortage of cash flow therefore he took temporary loan for trading/his business purposes, hence disallowance of sundry/temporary loan should not be made after rejection of books of accounts especially when such temporary loan was taken to purchase trading goods. 13. In respect of sundry creditors/temporary loan, Shri Desai, further pleaded that the assessee had furnished details and documents before the Assessing Officer such as, confirmation of cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see discharged its obligations and thereafter it was the duty of the Department to proceed further in the matter and it was not the duty of the assessee to find out more about the creditworthiness of the persons who supplied the materials. It is also submitted that even such was not necessary in the matter of trade creditors which may be necessary in the matter of cash deposit. 5. In the alternative, it has been submitted that once the assessing officer has rejected the books of account after appreciation of the evidence of the alleged materials suppliers then the assessing officer should have proceeded to assess the income of the assessee under s. 144(3) of the Act of 1961. It is submitted that non-proving of the genuineness of the transaction shown by the assessee in his books of account itself cannot be a ground to treat those entries to be a taxable sum under s. 68 of the Act of 1961 as it has not been held that the said amount is cash credit in terms of s. 68. It is submitted that s. 68(1) has been enacted for taxing the sum where there are entries of sum in the books of account of the assessee and those transactions have not been proved genuine transactions to the satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f them have filed any return of income, none of them have any evidence regarding purchase of goods supplied by them, none of them have any evidence regarding transport of goods supplied by them and even though a number of them had claimed to have bank accounts, none of the payments was ever received by those persons for the goods from the assessee's bank account and even though the transaction of each of the sundry creditors run into several lakhs not even a single rupee out of the cash (bearer cheque) received was deposited into their bank accounts. 10. We have mentioned these reasons only because of the reason that the learned counsel for the assessee tried to assail the findings of fact recorded by the Tribunal but we are satisfied that the findings of fact recorded by the assessing officer and the Tribunal were based on some reasons and cannot be interfered with. 11. However, so far as the assessment of the income of the assessee is concerned, for that purpose a few facts are very relevant and which are that the total gross receipts of the assessee were Rs. 4,51,01,011 the disclosure of his income is Rs. 14,13,624 and interestingly this income was accepted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CIT(A) noted that the Assessing Officer has rejected the books of accounts of the assessee for limited purpose i.e. for making only gross profit addition. 16. We note that in this particular case of Amitabh Construction P. Ltd (supra), though on the basis of same sets of books of accounts, the GP has been relied upon by the Assessing Officer and the order passed by Assessing Officer was not under section 144 of the Act, therefore, Hon`ble High Court remitted the issue back to the file of the Assessing Officer with the direction to frame assessment order under section 144 of the Act. However, in the case of assessee under consideration, the Assessing Officer had rejected the books of accounts of the assessee under section 145(3) of the Act and estimated the profit on the total turnover of the assessee and framed the assessment under section 144 of the Act. Hence, we note that findings of the case of Amitabh Construction P. Ltd (supra) do not apply to the assessee under consideration. 17. We also do not agree with the findings of ld CIT(A) (vide para 5.5 of his order) to the effect that assessing officer has rejected the books of accounts of the assessee for limited purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, suo-motu to the tune of Rs.23,27,044/- @ 4.89% on turnover of Rs.4,75,51,369/-, therefore total gross profit would be 4.89% + 3%= 7.89%, which is more than the audited profit and loss account declared by the assessee in previous year as per his audited books of accounts. Therefore, we are of the view that other line by line addition on account of creditors/temporary deposits should not be made in the hands of the assessee. We note that the Assessing Officer could have ventured into estimation only after rejecting the books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 of the Act. Here in this case, the Assessing Officer has passed order u/s 144 of the Act, therefore other line by line addition on account of sundry creditors/temporary deposits should not be made in the hands of the assessee. We note that Hon`ble High Court of Karnataka in the case of Bahubali Neminath Muttin, [2016] 73 taxmann.com 100 (Karnataka) held that where books of account of assessee had been rejected by assessing authority, same books of account could not be relied upon in an addition on account of trade creditors and also for arriving at closing stock. The fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the parties before it are concerned. To be a question of law 'involving in the case' there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case, or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis. 20. In Hero Vinoth (Minor) v. Seshammal reported in [2006] 5 SCC 545, 556 this Court has observed that: The general rule is that High Court will not interfere with the concurrent findings of the courts below. But it is not an absolute rule. Some of the well-recognised exceptions are where (i) the courts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perverse, in the sense that it is such as could not reasonably have been arrived at on the material placed before the Tribunal. In this case, there was no such question before the High Court. Unless and until a finding of act reached by the Tribunal is canvassed before the High Court in the manner set out above, the High Court is obliged to proceed upon the findings of fact reached by the Tribunal and to give an answer in law to the question of law that is before it. 20. Accordingly, we hold that the High Court was not justified in upsetting a finding of fact arrived at by the Tribunal, particularly in the absence of a substantial question of law being framed in this regard. Therefore, we set aside the conclusion arrived at by the High Court on this question and restore the view of the Tribunal and answer the question in favour of the Assessee and against the Revenue.' 14. In M. Janardhana Rao's case (supra), Sudarshan Silks Sarees case (supra) and K. Ravindranathan Nair's case (supra), the Apex Court has again reiterated the principles laid down in the aforesaid decisions. 15. The principle that if a finding of fact is not challenged as being perverse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of not serving of summons cannot be relied only by ignoring the other relevant material produced by the assessee. The relevant part of this judicial pronouncement in the case of CIT-2 vs. D H Enterprises (2016) 72 taxmann.com 91 (Gujarat High Court is reproduced as under: . .It was pointed out that all the summons were issued to the alleged parties at the address mentioned in their respective latest return of income, however, none of them were found at the given address, not only by the employee of the Department, but also by the postal authorities. It was submitted that the assessee had failed to produce any of such persons before the Assessing Officer. It was submitted that it is by now well settled that merely because payments are made by cheques would not establish the genuineness of the transactions. In support of his submissions, the learned counsel placed reliance upon the decision of this court in the case of Manoj Kumar Saraf v. ITO [2014] 45 taxmann.com 63/223 Taxman 43. It was, accordingly, urged that the impugned order passed by the Tribunal does give rise to a substantial question of law, as proposed or as may be formulated by this court. 5. This court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the revenue that any evidence had been brought on the record which even remotely indicated that the money originally belonged to the assessee and it had returned back to the assessee again. In the light of the above findings of fact recorded by him, the Commissioner (Appeals) allowed the appeal and set aside the additions made by the Assessing Officer. 6. The Tribunal, in the impugned order, has concurred with the above findings recorded by the Commissioner (Appeals) and has noted that the solitary grievance of the Assessing Officer was that he had tried to serve the notice upon the investors but failed to serve them. The Tribunal, after considering the material on record, was of the view that as to how the Assessing Officer could not serve the notices upon these persons was not specifically discernible. It took note of the fact that there were two sets of evidences. The alleged assertions of the Assessing Officer on the basis of the alleged report of the process server which has not been placed on record by the revenue, nor reproduced by the Assessing Officer in the assessment. The Assessing Officer has not even made reference to any particular witness in whose presence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of bank statement and PAN number in respect of the parties were filed before the Assessing Officer, therefore addition should not be made in the hands of assessee, for that reliance can be placed on the judgment of Hon'ble jurisdictional High Court of Gujarat in the case of CIT V/s Ranchhod Jivabhai Nakhava [2012] 21 taxmann.com 159 (Guj) wherein it was held as follows: where lenders of assessee are income-tax assessees whose PAN have been disclosed. Assessing Officer cannot ask assessee to further prove genuineness of transactions without first verifying such fact from income-tax returns of lenders and held that additions were not justified on account of cash credits, where it was found that in respect of said credits assessee had filed PAN of creditor, their confirmation and their bank statement which established their creditworthiness and moreover, transactions were made through banking channels. 23. In the judicial pronouncement in the case of CIT-Rajkot Vayachi Chandrashekhar Narsangi in which the Hon'ble jurisdictional High Court held that the loan amount has been repaid by the assessee in the immediate next financial years that indicate that the departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine in view of the principles laid down by the Supreme Court in the case of Orissa Corporation [1986] 159 ITR 78. In the said decision the Supreme Court has observed that when the assessee furnishes names and addresses of the alleged creditors and the GIR numbers, the burden shifts to the Department to establish the Revenue's case and in order to sustain the addition the Revenue has to pursue the enquiry and to establish the lack of creditworthiness and mere non-compliance of summons issued by the Assessing Officer under section 131, by the alleged creditors will not be sufficient to draw and adverse inference against the assessee. in the case of six creditors who appeared before the Assessing Officer and whose statements were recorded by the Assessing Officer, they have admitted having advanced loans to the assessee by account payee cheques and in case the Assessing Officer was not satisfied with the cash amount deposited by those creditors in their bank accounts, the proper course would have been to make assessments in the cases of those creditors by' treating the cash deposits in their bank accounts as unexplained investments of those creditors under section 69. 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons: - (1) Mit G. Shah - Rs. 5,75,000/-, (2) Sejal Shah - Rs. 67,30,000/-, (3) Shaan Leisure Ltd. - Rs. 1,07,05,000/-, (4) GSM Infra Projects Ltd. -Rs. 92,60,000/-, (5) Yuva Sports Academy Pvt. Ltd. - Rs. 5,00,000/-, and (6) Manibhadra Tradelink Pvt. Ltd. - Rs. 1,25,64,000/-. The Assessing Officer directed to submit the identity of the creditors, their creditworthiness and genuineness of the transactions and since when he disbelieved the creditworthiness of the creditors, he made the additions. 4.1 The CIT(Appeals), as could be noticed, threadbare examined the entire material in case of each of these persons and entities and eventually held that the identity of the depositors had been proved as they had filed the return of income along with the PAN. Moreover, loans have been granted through banking channels and in respect of the same copy of the bank statement also has been provided and hence, genuineness also has been believed by the CIT(Appeals) and further the return of income had been filed by the said depositors and hence, the creditworthiness also has been proved. The appellant provided a copy of audited balance sheet and profit and loss account for the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been passed on 3-10-2019 i.e. after decision of the ld. CIT(A) and nothing adverse could be collected by the AO. Similarly, the ld. CIT(A) has examined the facts with regard to Sejal G. Shah and observed that the assessee has fulfilled all necessary conditions contemplated in section 68 of the Act. We also find that the ld. CIT(A) has examined these details in light of decisions of the Hon'ble Gujarat High Court as well as of Hon'ble Supreme Court. The ld. CIT(A) has made reference to the ratio of law laid down in all these decisions from pages no. 22 to 27 of the impugned order, and we have gone through the proposition in these decisions and examined as to how the ld. CIT(A) has appreciated the facts of the assessee's case in the light of these propositions. After looking to the well reasoned finding of the ld. CIT(A) coupled with absence of any incriminating evidence in the subsequent assessment orders of the creditors, we are of the view that no interference is called for in the finding of the ld. CIT(A). This ground of Revenue is dismissed. 5. We could notice the concurrent findings of both the authorities on facts which deserve no interference from this C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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