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TMI Blog2024 (4) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act needed. As in the case of CIT Vs. Dhiraj R. Rungta [ 2014 (4) TMI 711 - GUJARAT HIGH COURT] held that once rejection of books of account is justified under section 145 of the Act, no other addition can be made referring the same set of books to the income of the assessee. How to make the best judgement in the manner provided under section 144 of the Act after rejecting the accounts under the provisions of section 145(3) of the Act ? - When the books are rejected, a lump sum addition is made to the original return of income. Such addition may be based on estimate of turnover and profit rate or disallowance of claims, expenditure, etc. as held in case of CIT v. Pilliah Sons [ 1966 (10) TMI 35 - SUPREME COURT] - After rejecting book results, the Assessing Officer has to determine the income in reasonable and scientific manner after considering the results/ performance of the earlier years or some comparable cases. In the present case, what we find is this that the AO after rejecting the books of accounts has not estimated the income but has treated the amount of cash sales deposited during the demonetization period in the bank as unexplained cash credit which is against the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in invoking section 115BBE of the Act when transactions are occurred prior to insertion of provision on statute. 5. The appellant Craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal." 3. The interconnected issue raised by the assessee is that the learned CIT-A erred in upholding the rejection of the books of accounts and further confirming addition of the sales made in cash of ₹ 3,28,75,000 on account of unexplained cash credit under section 68 of the Act. 4. The facts in brief are that the assessee in the present case is an individual and carrying on his business under the name and style of 2 proprietary concerns M/s. Mahalaxmi Ornaments and M/s Veer Fabrics which are engaged in the business of gold jewellery and wholesale business of fabrics respectively. 5. The AO during the assessment proceedings found that the assessee during the demonetisation period has deposited substantial cash of ₹ 3,28,75,000 which was claimed against the cash sales. However, the AO found that the cash sale shown by the assessee in immediately preceding the demonetisation period was NIL and likewise in the financial year 2015-16, the total cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordingly. Penalty proceedings under section 271AAC(1) are initiated separately. (Addition : Rs. 3,28,75,000/-) 11. A question which possibly arises is whether this amount to double taxation. The undersigned is of view that it does not amount to double taxation of same income as cash deposits during demonetization period is not generated from business activity and it is from undisclosed sources and to be taxed as income from other sources. Further, in the case of Kale Khan Mohammad Hanif v. CIT [1963] 50 1TR 1 (SC). Hon'ble Supreme Court held that "the income is treated as one from an undisclosed source which the question postulates, it is not treated as income of the disclosed source which has previously been assessed to tax and, therefore, there is in such a case no double taxation." 12. One more issue pertinent to discuss here is that if books of account have been rejected and tax is levied on estimated income, whether A.O. can make an addition for cash credit u/s. 68 of the Act or not. There is nothing in law which prevents the Assessing Officer in an appropriate case in taxing the cash credit, the source and nature of which is not satisfactorily explained, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to this effect is required to be made. It is the trite law that once the books of accounts have been rejected, the only resort available to the revenue is to determine the income of the assessee in the manner provided under section 144 of the Act to the best of the judgment. The Hon'ble Supreme Court in Kachwala Gems v. Jt. CIT [2007] 288 ITR 10/158 Taxman 71 held that rejection of books of account under section 145 justified and best judgment assessment under section 144 of the Act needed. 10.1 The Hon'ble Bombay High Court in Bastiram Narayandas v. CIT [1994] 210 ITR 438/74 Taxman 454 held that rejection of books of account justified under section 145 and best judgment assessment under section 144 needed. 10.2 The Hon'ble Gujarat High Court in the case of CIT Vs. Dhiraj R. Rungta reported in 40 taxmann.com 284 held that once rejection of books of account is justified under section 145 of the Act, no other addition can be made referring the same set of books to the income of the assessee. 10.3 The next controversy arises how to make the best judgement in the manner provided under section 144 of the Act after rejecting the accounts under the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod in the bank as unexplained cash credit which is against the spirit of the law as discussed above. First of all, the provisions of section 68 of the Act cannot be applied to the amount shown as sales in the books of accounts otherwise it is going to lead to the double addition which is undesirable. In holding so, we draw support and guidance from the judgement of CIT vs. Vishal exports overseas Ltd in tax appeal No. 2471 of 2009 vide order dated 3-07-2012 wherein the order of the ITAT was upheld that the sales cannot be treated as unexplained cash credit under section 68 of the Act. 13. At this juncture it is necessary to deal with the case law cited by the revenue authorities in the case of Shri Kale Khan Mohamed Hanif Vs. CIT reported in 50 ITR 1 for making the addition under section 68 of the Act. In our humble understanding, in this case the issue was involved for the addition under section 68 of the Act whereas in the case on hand, the sales have been assumed as unexplained cash credit under section 68 of the Act. Thus, we are of the view that the facts of the case are distinguishable and accordingly, the sales cannot be treated as unexplained cash credit under section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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