9911796707
TMI Blog2024 (9) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of section 68 as against 69A as was originally proposed. In support of the above submission, copies of acknowledgements of submission made before ld. AO, whereby cash books of all the three proprietary concerns were submitted is placed on record. AO though the ld. DR did not controvert this aspect of the matter and therefore, based on the material placed on record it is very much clear that no additional evidence was furnished by assessee during appellate proceedings before ld. CIT(A). Based on these observations ground no. 1 2 raised by the revenue has no leg to stand and thereby the same are dismissed. Addition u/s 68 on account of Cash deposited by assessee in bank account - CIT(A) has deleted that addition by observating that the assessee submitted cash books of all the three proprietorship concerns, all the bank statements, Ledger account of all the expenses claimed in all the three proprietorship concerns, Ledger account of farmers with supporting evidences - The assessee is one of the license holder of the mandi samiti (owned and controlled by the State Government) as per which he became entitled to get one shop area in the above stated type of mandi premises from where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account. The assessee has explained the source of this cash deposit. We also note that the ld. AO of the assessment order has reproduced the details of amount received by the assessee in cash and through recovery of credits (as furnished by assessee) AO pointed out Bilty issued by transporter for consignment of agriculture produce, which was in the name of assessee (though there was no invoice issued in the name of assessee) and a details submission on the same has already been made. Firstly, Bilty is always issued in the name of recipient and assessee, being registered Adatiya in Mandi Samiti was authorized to receive goods for sale. Ld.AO could have verified this fact from the record of Mandi Samiti, which has not been done It is thus submitted that addition made by ld.AO amounts to double addition which is against the principle of taxation. It is further submitted that ld. AO grossly erred in not appreciating the fact that only Real Income can be taxed and moreover in the case of assessee, ld. AO miserably failed to understand the facts that in the business of Adatia only commission income can be taxed. AO has neither rebutted the submission of the assessee that cash depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above, we note that ld. CIT(A) has decided the appeal after considering all the documentary evidence furnished by the assessee and evidence adduced which are not disputed. Assessee has placed on record all the details which are necessary to prove the claim of salary expenses - This factual detail has not been controverted. Therefore, we see no infirmity on the facts of the case while ordering to delete the lumpsum addition of 25% out of the expenses so claimed by the ld. CIT(A). Appeal of the revenue stands dismissed. - Dr. S. Seethalakshmi, Jm And Shri Rathod Kamlesh Jayantbhai For the Assessee : Sh. Tarun Mittal, CA For the Revenue : Sh. Anil Dhaka, CIT ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM Because the revenue was aggrieved from the order of the National Faceless Appeal Centre, Delhi, [for short NFAC/CIT(A) ] passed u/s. 250 of Income Tax Act [for short Act] on 11/03/2024 for assessment year 2020- 21. That order of ld. CIT(A) is passed because the assessee has challenged the finding recorded in the order of assessment dated 27.09.2022 passed under section 143(3) r.w.s 144B of the Income Tax Act by the National Faceless Assessment Unit. 2. In this appeal, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies with compliance dates mentioned in the 'Date of Hearing' cited in the assessee's profile section on top of the assessment order. Ld. AO noted that the replies of the assessee were perused meticulously w.r.t. the reasons of selection of the case along with information available on record and the information documentary evidences furnished by the assessee from time to time and the assessment is completed. Ld. AO from perusal of the replies of the assessee, it has been claimed that during the year under consideration, the assessee derived income under the head 'Income from business / profession' being Adatia (i.e. selling the perishable goods and charging commission thereon). The assessee being sole proprietor runs three commission agency viz. M/s Kanhiya Lal Nenumal, M/s Prashant Kumar Lakhmi Chand and M/s Shri Radhey Radhey Commission Agency and earned a total commission amounting to Rs. 96,11,422/- and has declared income of Rs. 19,28,051/- under the head 'Income from business / profession'. Further, the assessee has also earned interest on deposits maintained with banks and declared income of Rs. 34,119/- under the head Income from other sources' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the year under consideration which was required earlier vide notice u/s 142(1) of the Act dated 18-11- 2021 also. In response thereto, the assessee furnished his reply on 15-02- 2022, wherein he has replicated his earlier reply furnished on 05-02-2022 with some additional detail and didn't furnish copy of cash book. As such, vide notice u/s 142(1) of the Act dated 18-02-2022, the assessee was again requested to provide the information sought vide notice u/s 142(1) dated 09-02-2022. In response thereto, the assessee furnished his reply on 22-02-2022, wherein the assessee furnished the details of the parties who have purchased such agriculture produce alongwith the amount and Commission charged. The reply furnished by the assessee has duly been considered and is evident that the assessee has claimed to have earned a total commission amounting to Rs. 95,11,422/- which includes total amount of commission at Rs. 69,70,634/- at a uniform rate @6% on Agriculture produce sold (Credit) on behalf of the farmers to different parties and @4% on cash sale made on behalf of farmers under the proprietorship concern M/s KANHIYA LAL NENU MAL and @5% on cash sale under the proprietorship co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - the payment made by the assessee through the banking channel are the payments made for the agriculture produce sold by the assessee on behalf of such persons and in supporting thereof the gate pass as issued by the Mandi (governed by the State Government) to such persons while bringing the agriculture produce to assessee's place. The reply of the assessee has been considered aptly but can't be accepted. Because the assessee has received a consignment containing 205 Qtl. Lemon from the consignor Ram Dass Seth Nimbu Wale from Akola Maharashtra which is at a distance of 966 K.M from Jaipur for which he has to pay a total of Rs. 73,000/- as freight plus other incentives to the driver. The ld. AO also noted that the assessee has received another consignment containing Lemon from Sh. Keshav Gambhire Prop. M/s Ankheri Devi Lemon Trading Company, Fakrabad, Distt. Ahmednagar for which he has to pay a total of Rs. 42,000/- as freight plus other incentives to the driver. It can safely be established from the name mentioned on the bill i.e. Sh. Keshav Gabhire Prop. of M/s Ankheri Devi Lemon Trading Co. is not a farmer but a Commission Agent Order Supplier of different categories of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4-2019 to 30-08-2019 and halted till the year end le. 31-03-2020 and that trend also applies in case of freight payment. Vide response dated 15.03.2022, Cash book of assessee's concern Mis Kanhiya Lal Nenumal was furnished by the assessee. However, Cash book of the third concern M/s Radhey Radhey Commission Agency of the assessee and bills/vouchers of the expenses were not submitted. The reply furnished by the assessee contained in the documents furnished on 15-03- 2022 has been perused; it has been noticed from the details of the proprietorship concern of the assessee namely M/s Kanhiya Lal Nenumal, the assessee has claimed to have sold goods (Gross) on behalf of farmers to the extent of Rs. 6,72,58,081/- on which it has earned commission at Rs. 36,77,572/-. The goods sold on behalf of agriculturist also includes cash sale amounting to Rs. 1,78,95,635/- and the goods sold on behalf of the farmers (on credit basis) works out to the tune of Rs. 4,93,62,446/-which as per version of the assessee was passed on to the proprietorship concern M/s Radhey Commission Agency (the assessee being the concern) for collection. From perusal I of cash book of Mis Kanhiya Lal Nenumal, it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence in respect of the genuineness of the claim of expenses incurred in cash and further that the expenses have been incurred wholly, exclusively and necessarily for business needs. In such circumstances disallowance of 25% of expenses incurred in cash, which works out to Rs. 12,63,307/-, were proposed as additions being made to the returned income. Vide show cause notice dated 19.03.2022 asking the assessee to file his objections to the variation proposed in the returned income. In response thereto, the assessee furnished his reply on 23.03.2022. On perusal of the reply of the assessee, the ld. AO noted that the assessee is just trying to refute any finding that leads to conclusion that the assessee was actually trading the goods on his own behalf. In the absence of bill in the case of Ram Das Seth Nimbu Wale, the assessee refuted by claiming that it was a bility and not a bill; in case when a bill/bility is brought into light during the assessment proceedings as in the case of Sh. Keshav Gambhire Prop. M/s Ankheri Devi Lemon Trading Company, the assessee has just chosen another claim that it is also not a bill but a challan issued to farmer, without producing any documentary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing) Officer. satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Therefore, the addition of Rs. 8,60,03,806/- were proposed under the provisions of section 68 of the Income Tax Act, 1961 for unexplained cash deposits in bank accounts. The ld. AO also noted that keeping in view the defects, pointed out above in para 5 given supra, and on the facts and in the circumstances of the case, it is clear that the claim of expenses under various heads have been claimed to reduce the incidence of tax. In such circumstances, disallowances of 25% of expenses incurred in cash, which works out to Rs. 12,63,307/-, are proposed as additions being made to the returned income. 4. Feeling aggrieved from the order of the assessment the assessee preferred an appeal before the ld. CIT(A). Apropos to the various grounds so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated herein below: Decision: I have gone through t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the farmers and make the payment to the respective farmers through banking and other modes as acceptable in the line of agriculture produce. The cash so deposited in the bank during the entire year reflects the proceeds so received on selling of such agriculture produce which is paid to the respective farmer / owner and can be verified from the bank statement. Appellant submitted the break-up of commission earned by in his proprietorship concerns. The AO stated that during the year under consideration a total of Rs. 8,60,03,806/- has been deposited in the bank account of the appellant and only a total of Rs. 10,00,000/- only has been withdrawn in cash. Further, from the ITR filed for the last year i.e. AY 2019-20, it was noticed that the cash in hand as on 31/03/2019 was at Rs. 39,479/-. The sources of such huge cash in the bank accounts of the appellant always remain questionable as appellant didn't furnish copy of cash book. X DEPARTME The appellant has claimed to have earned a total commission amounting to Rs. 95,11,422/- which includes total amount of commission at Rs. 69,70,634/- at a uniform rate @6% on Agriculture produce sold (Credit) on behalf of the farmers to differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ended till the year end i.e. 31/03/2020 and that this trend also applied in the case of freight payment. The AO further stated that the amount of freight entries were passed in the cash book and hence, were not claimed in the Profit Loss A/C. The AO further stated that during the course of assessment proceedings, it was noticed that the appellant has debited various expenses under different heads for which the appellant had failed to bring any documentary/supporting evidence in respect of the genuineness of the claim of expenses incurred in cash and further that the expenses have been incurred wholly, exclusively and necessarily for business needs. The claim of expenses under various heads have been claimed to reduce the incidence of tax and consequently in such circumstances the book version disclosed by the appellant could not be accepted and the provisions of section 145(3) would come into play in the present case. Disallowances of 25% of expenses incurred in cash, which worked out to Rs. 12,63,307/-, were proposed as additions being made to the returned income of the appellant by the AO. The correctness and completeness of the books of accounts maintained by the appellant w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndi Samiti or by the Income Tax Department at any stage in any manner in the past. During the year under consideration, appellant was running three entities in proprietorship with the trade names, i) M/s Prashant Kumar Lakhmichand - operating as Adatia (Mandi License at APB 1276), ii) M/s Kanhaiya Lal Nenumal - operating as Adatia (Mandi License at APB 1277), iii) M/s Radhey Radhey Commission Agency - operating as factor (doing payment collection work). The appellant submitted Cash books of all the three proprietorship concerns owned by the appellant, all the bank statements owned by the appellant, Ledger account of all the expenses claimed by the appellant in all the three proprietorship concerns, Ledger account of farmers with supporting evidences, Details of agriculture produce sold by the appellant on behalf of the farmers from all the concerns, Receipts issued to farmers in confirmation of agriculture produce sold on their behalf, Available Bank details of Farmers. Regarding cash deposit u/s 68 of the Income Tax Act, 1961 it is pertinent to mention here that the AO had rejected the entire books of accounts u/s 145(3) of the Income Tax Act, 1961 and then went on to make further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n rejected, entries therein cannot be relied for addition to income. However, after holding as above, the Commissioner of Income Tax (Appeals) enhanced the flat rate from 10% to 12.5%. The revenue filed an appeal whereas the respondent filed cross-objections before the Tribunal. Vide the impugned order, the Tribunal has dismissed the appeal filed by the revenue and accepted the cross-objections filed by the assessee by holding as follows: 9. As far as ground taken by the assessee in his cross objection regarding the application of rate of 12.5% by the CIT(A) against the rate of 10% applied by the A.O. concerned, in our opinion, looking into the facts that the assessee is a Labour Contractor, the CIT(A) was not fair and reasonable to apply the G.P. rate of 12.5% against the rate of 10% applied by the A.O., which was also agreed by the assessee. The D.R. has also conceded that it would be very fair and reasonable to apply the net profit rate of 10% in the case of the assessee. 10. In view of the above discussion, the ground of the assessee taken in the C.O. as well as the C.O. of the assessee succeeds and hence it is concluded that it is fair and reasonable to apply a net rate of 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee relies upon Commissioner of Income Tax Versus G.K.Contractor (2009) 19 DTR (Raj) 305. We have heard counsel for the parties, perused the impugned orders and are of the firm opinion that there is no illegality or infirmity in the findings recorded by the Tribunal. An Assessing Officer may, while considering a return of income, inspect the account books and, if satisfied, that account books do not reflect the true income of an assessee, reject the same. Account books once rejected, are ruled out of consideration and cannot be pressed into service whether by the assessee or the revenue. Thus, when account books are rejected, it would follow, as a necessary corrolary, that entries in the account books whether suspicious or not cannot be relied by the revenue or the assessee. To hold otherwise, would, in essence, render account books valid for certain purposes and invalid for others, a course impermissible in law. The Assessing Officer rejected the account books in their entirety and thereafter proceeded to assess income by applying a flat rate of profit of 10%. After applying a flat rate of profit of 10%, the Assessing Officer added Rs. 1,98,298/- to the income of the assessee on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ain. He simply stated the he sold the crops/food grains on behalf of the framers and makes the payment to the respective framers through banking and other modes but he failed to prove the same. Further he failed to furnish cash book during the assessment proceeding. Therefore, AO add the total amount Rs 8,60,03,806/- as the income of the assessee u/s 68 of the I.T. Act. Further during the assessment proceeding it seen that assessee has claimed total expenses amounting to Rs. 77,62,673/- out of which cash expense incurred by him is Rs. 50,53,229/-. The AO issued notice to persons to whom the assessee has paid salary but no response received from the respective persons. Therefore, AO disallowed the 25% of cash expense incurred by him amounting to Rs. 12,63,307/-. Thus, AO completed assessment u/s 143(3) r.w.s. 144B of the Act on 27.09.2022 by making addition of Rs. 8,60,03,806/- u/s 68 of the Act and addition of Rs. 12,63,307/- Aggrieved by the above order passed by the AO, the assessee filed appeal before the Ld. CIT(A). Decision of CIT(A): The CIT(A) vide order dated 11.03.2024 allowed the appeal of the assessee by holding that the assessee submitted Cash book of all the three prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vided as recorded at para 4.2 of the assessment order. The assessee is not making the payment to farmers but the trading firms and therefore, the claim of the assessee is incorrect on facts [page 8 of AO]. The assessee is paying the freight payment but the same is not debited in the profit and loss account. Moreover the payment is in violation of section 40A(3) of the Act. The bank balance reported in the ITR does not match with the bank statement placed on record. The slips issued by the assessee do not contain the name of the person on whose name the amount got debited in the bank account of the assessee. The slips furnished by the assessee do not bear the name of any of the proprietorship concern name and therefore, that slips are not reliable. As regards the contention that vehicle entered in the mandi is issued the gate pass. The said gate pass contains the vehicle no., sender s name. In that gate pass when the sender is firm how can it be believed that it is from a farmer. The farmer cannot come from far away of 800-1000 kms. So, for both the addition so made in the hands of the assessee the ld. DR relied upon the order of the ld. AO and prayed to sustain the addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supporting documents as mentioned in submission 876-888 8. Copy of Reply dated 05.03.2022 filed before ld.AO alongwith: 889 (i) Cash book of Prashant Kumar Lakhmichand 890-1021 9. Copy of Reply dated 15.03.2022 filed before ld.AO alongwith: 1022 (i) Cash Book of Kanhaiyalal Nenumal 1023-1147 10. Copy of Reply dated 23.03.2022 filed before ld.AO alongwith: 1148-1170 (i) Cash Book of Radhey Radhey Commission Agency 1171-1273 (ii) Certificates issued from Mandi dated 23.03.2022 in the name of Kanhaiyalal Nenumal and Prashant Kumar Lakhmi Chand 1274-1275 (iii) Licenses issued by Mandi in the name of Kanhaiyalal Nenumal and Prashant Kumar Lakhmi Chand 1276-1277 (iv) Details of Proceeds from Farmers Sale 1278-1287 (v) Bank Statements duly highlighting entries of Cash deposit 1288-1408 (vi) Bank Statements duly highlighting payments to farmers 1409-1443 (vii) Ledgers of farmers alongwith details of Agriculture produce 1444-1538 (viii) Ledger of Vasudev Commission Agency in the books of Prashant Kumar Lakhmichand 1539-1551 (ix) Copy of ledger of farmers 1552-1575 11. Copy of Reply dated 10.08.2022 filed before ld.AO alongwith: 1576-1578 (i) Party ledgers in the books of Kanhaiyalal Nenuma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me which entire of it is vouched and is in full consonance with several previous years in assessee s own case and the expenditure incurred in such manner and based on such vouchers have been fully allowed in the past. During the year under consideration, assessee was running three entities in proprietorship with the trade name:- i) M/s Prashant Kumar Lakhmichand operating as Adatia (Mandi License at APB 1276) ii) M/s Kanhaiya Lal Nenumal operating as Adatia (Mandi License at APB 1277) iii) M/s Radhey Radhey Commission Agency operating as factor (doing payment collection work) Return of Income for the year under appeal was filed on 29.12.2020 declaring total income at Rs. 15,53,040 (APB 3-7). Case of assessee was selected for scrutiny. Information and documents as sought by ld.AO were furnished by assessee from time to time and verbal submissions were also made through video conferencing. Ld. AO completed the assessment vide order dated 27.09.2022 passed u/s 143(3) r.w.s.144B of the Income Tax Act, 1961 whereby books of accounts were rejected by invoking provisions of section 145(3) and following additions / disallowances were made: (i) Addition u/s 68 on account of Cash deposit in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however after considering reply dated 23.3.2022 as was filed by assessee in response to show cause notice, ld.AO at page 21 of assessment order has observed as under: W.r.t., invoking of provisions of section 69A of the Income Tax Act, 1961 by relying on various case laws, it is pertinent to mention here that these were initiated on the basis of intentional delay in production of Cash Book maintained for all of his proprietorship concerns, within stipulated period, absence of which the sources of cash deposits in the bank remain unexplained. Hence, the case laws referred by the assessee in his reply w.r.t. invoking the 69A of the Income Tax Act, 1961 dealt accordingly. Thereafter, while concluding assessment proceedings, ld.AO eventually considered all the documentary evidences furnished and made addition by invoking the provisions of section 68 as against 69A as was originally proposed. In support of the above submission, copies of acknowledgements of submission made before ld.AO, whereby cash books of all the three proprietary concerns were submitted is enclosed. It is therefore submitted that no additional evidences were furnished by assessee during appellate proceedings before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the produce are gathered and the successful bidder after making the payment as per the conditions between the broker (Adatia like the assessee) and the customer, take delivery of the goods (produce). It is also relevant to state that in no case any advance payment is ever made to the producer i.e. the principal of the goods and only after the successful bid and after receiving consideration from the successful bidder, payment is made to the farmer / agriculturists after deducting charges on account of freight and unloading etc. which is paid by the assessee in advance on their behalf. The mode and manner of the payment is fully dependent upon the instructions given by the principals i.e. the farmer / agriculturist. It is also a matter of fact and is to be noted that the entire process starting from the entering the produce into the mandi premises till its disposal in the shape of sale is closely supervised and controlled by the officials the Krishi Upaj Mandi Samiti, a State Government Undertaking who not only records all these transactions in their records but also periodically verifies such records from the respective shop owners. The State Government has levied Mandi Tax @1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o is purchasing agriculture produce is borne by the customer only. Besides this the freight of the vehicle through which the produce is brought to the mandi is though paid by the adatia like the assessee, however the same is borne by the agriculturists therefore, the same is never claimed by the assessee as expenses and an entry of the payment is made in the cash book where the payment made to truck driver is recorded and debited to the account of such agriculturist who brought the produce to the shop of the assessee. In lieu of commission charged, the license holders i.e. the shop keepers like the assessee are responsible for soliciting the sale of produce and after making recovery of the produce so sold to the customers either in cash or on credit basis as per terms and conditions decided between them, made the payment to the agriculturist of the value of their produce after deducting the freight and unloading charges wherever applicable. In the case of the assessee, both in cash as well as through banking channels the payments are being made to the agriculturists. However, in most of the cases of credit consignment sales, the payments have been received in cash for which the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Balance Sheet as per ITR and copy of Balance Sheet furnished during the course of assessment proceedings. On this basis ld. AO has alleged that assessee might have engaged in the trading business which as not disclosed and the cash deposit in the bank account of his commission agency firm belonged to such undisclosed trading activity and accordingly treated the said cash deposit as unexplained cash credit and made the addition of entire cash deposited into bank at Rs. 8,60,03,806/- u/s 68 of the Income Tax Act. While alleging so the ld. AO has failed to appreciate the fact that the bank accounts under which the said cash was deposited belonged to and pertaining the transactions carried out by the proprietorship firms of the assessee namely M/s Kanhaiya Lal Nenu Mal and M/s Prashant Kumar Lakhmi Chand where the consignment sale of more than 17.00 crores were carried out and part of the same was received in cash and duly recorded in the books of accounts maintained. Had there been any other trading business which is not disclosed that there must exits other undisclosed bank account where the cash from undisclosed business was deposited but as submitted above, the entire cash was dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person collected the produce from the group of agriculturists and bring or sent such produce to the Mandi for sale for which such person issued its goods transfer memo only and no sale bill is generated as he never made any sale of such produce and send them to the assessee for sale at best price. When such produce is received by the assessee, assessee also sold such produce on adat basis only and the sale proceeds are paid to the sender agriculturists after making deduction of expenses relating to such sale such as transportation, unloading etc. Also in support of his business activity of Adatia, assessee submitted following documents before ld.AO alongwith other details during the course of assessment proceedings: i) License of Adatia issued by mandi owned and controlled by Rajasthan State Government (APB 1276-1277) ii) Cash book of all the three proprietorship concerns owned by the assessee (APB 890-1021, 1023-1147, 1171-1273) iii) All the bank statements owned by the assessee (APB 8-222) iv) Ledger account of all the expenses claimed by the assessee in all the three proprietorship concerns (APB 225-226 238-320) v) Ledger account of farmers with supporting evidences (APB 1444-15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent by the farmer to the assessee for being sold in Mandi at Jaipur on adat basis and the bilty so pasted in the assessment order is the proof of such goods transporting to Jaipur, no matter what the distance it is coming from. Also, with this image, the assessee has uploaded below mentioned other documents with the bilty on 02.03.2022 containing (APB 876-888): 1. Gate pass of Krishi Mandi when such vehicle carrying the lemon entered in the mandi premises at Jaipur 2. Dharam Kanta Slip of Terminal Market Muhana Mandi, Jaipur 3. Registration certificate of the truck as issued by RTO 4. PAN Card of the truck owner alongwith declaration All the above documents so enclosed prove beyond doubt that the agriculture produce from wherever location has come for sale on adat basis in Mandi premises at Jaipur, has received a gate pass of Mandi controlled by State Government. Therefore, it cannot be presumed that such agriculture produce is sold to the assessee more particularly when there is no invoice available in the name of assessee and the pasted image clearly reflect the bilty of the transporter containing the name of consigner and consignee and the sales of such agriculture produce is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ody can compel any agriculturist to sell their produce in a particular market. It all depends upon the sweet will of the farmer who always in the search of better price coupled with the genuine person who can sell their produce without cheating them. Therefore, such observations of the ld. AO deserves to be ignored and excluded. Further, ld. AO has emphasized on the category of license issued by Mandi Samiti by observing at page 45 of the assessment order as under: On this claim of the assessee, from the perusal of the copy of licenses issued by the Mandi Samiti, it is observed that one concerns of the assessee namely Kanhiya Lal Nenu Mal holds the license of ^d* oxZ nyky i.e. a broker and the concern M/s. Prashant Kumar Lakhmi Chand holds the license of la;qDr O;kikjh ^d* oxZ nyky i.e. Combined license of broker and trader. While observing so, the ld. AO considered the licenses of Mandi which are issued on printed format and only tick mark is done while issuing it. Therefore to avoid any confusion the assessee uploaded the license cum letter issued by Mandi Samiti dated 23.03.2022 (APB 1148-1170) which were uploaded on 23.03.2022 and read as under:- In view of above submission is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited in the bank account maintained by the assessee remained unexplained and the provisions of section 68 of the Income tax Act, 1961 were rightfully applicable in the case of the assessee which mandates that- where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation thereof or the explanation offered by him is not, in the opinion of the [Assessing] officer, satisfactory the sum so credited may be charges to income tax as the income of the assessee of that previous year. Therefore, addition of Rs. 8,60,03,806/- were proposed under the provisions of section 68 of the Income Tax Act, 1961 for unexplained cash deposits in bank accounts, besides initiation of penalty proceedings u/s 271AAC of the Income tax Act, 1961, vide show cause notice dated 14.09.2022. It is thus clear that conduct of ld.AO has been very casual and arbitrary. It is submitted that in the case under consideration, the elements as required to invoke deeming provision of section 68, are missing as the nature and sources of the bank deposits are verifiable from the Regular Cash Books (which has not been disputed) maintained by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee are in accordance with accounting principles and policies and trading results declared by assessee are in consonance with industry norms and deserves to be accepted as such. With regards to addition of cash deposits of Rs. 8,60,03,806/- made u/s 68 by treating the same as unexplained, at the outset it is submitted that provisions of section 68 are not applicable to the facts of the case. Ld. AO, while making the addition u/s 68 of the Income Tax Act has made various observations which all are not in parity with the actual facts and the submissions on the same is as under:- 1. At page 2 of the assessment order the ld. AO has observed that various opportunities were given to the assessee for submitting the precise details and at every occasion, the incomplete response was submitted , however, the assessee has attended the proceedings on all the dates which came to his knowledge and furthermore various documents and submissions has been uploaded on each date and the approximate number of total pages uploaded during the course of assessment proceedings on the online portal are more than 2000 and the main concern which appears from the assessment order is the understanding of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments made to farmers from the bank accounts of the assessee and AO himself has observed at page 28 to 30 that various payments has been made to farmers and their names are also mentioned in the assessment order. However, on his own whims and fancies has held the deposits as made out of some other trading business though he himself has accepted that such deposits were utilized for making payments to the farmers. 4. The ld. AO has applied the provision of section 145(3) of the Income Tax Act, 1961 and rejected the books of accounts and in such a situation he was required to assess the income on the basis of material available on record however, after invoking the provisions of section 145(3) he has not doubted the Commission earned by assessee and at the same time he has taxed the cash deposit of Rs. 8,60,03,806/- under the head Income from Other Sources which clearly brings on record the fact of double taxation for the sole reason that : (a) The Commission earned is accepted as such, meaning thereby the cash deposited in the bank account, is accepted to be out of sale made by assessee in the capacity of Adatiya ; (b) The cash deposit has been added under the head Income from Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his juncture, as submitted above, it is reiterated that the sale made on behalf of farmers is either (i) Cash or (ii) on Credit. In case of cash sales, net consideration after reducing freight and unloading charges is given to seller, whereas in case of credit sales, assessee charges commission @ 6% for providing credit facility to the buyer. Basically, it is not possible for farmers coming from outside places to revisit/make regular follow ups for recovery of sale consideration (in case of credit sales). On the other hand, assessee is a local person and has specifically engaged agencies for recovery (ugai) in case of credit sales. Also, not only assessee, but all the adatias operating in Mandi follow this practice. Accordingly, cash deposits made in bank account represent the amount recovered from buyers on behalf of farmers whose produce has been sold on credit, by assessee in Mandi. Under the circumstances, the addition made by the ld. AO u/s 68, fails the very first criteria of there being a credit entry in the books of accounts laid down under the Act. It was also submitted before ld.CIT(A) that ld.AO on one hand, accepted the commission income of Rs. 95,11,422/- declared by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued Mandi Samiti to cross verify the Sales or to bankers to confirm that payments were made to farmers and subsequent deposits were on account of their sale consideration. In this regard the reliance is placed on the decision of hon ble Supreme court in the case of Orissa Corporation reported in 155 ITR at 159 wherein it has been held that AO has power to issue summons to make enquires if he has any doubts about the credits in the books of accounts which in the present case has filed to do. Section 5 of the Income Tax Act, 1961 provides for scope of income chargeable to tax and to the extent relevant to the issue it reads: accrues or arises or is deemed to accrue or arise to him . . . . . What is chargeable to tax is income, which has accrued or arisen to a person. The concept of accrual was considered in E. D. Sassoon Co. v. CIT, (1954) 26 ITR 27 (SC) and it was held: What is sought to be taxed must be income and it cannot be taxed unless it has arrived at a stage when it can be called income . In the present case assessee has earned commission income in respect of Sales made on behalf of farmers, which has already been taxed. In this regard reliance is placed on the following: T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialize. In view of above, it is submitted that in the present case, ld.AO has taxed entire cash deposits in bank by ignoring the fact that actual income earned by virtue of such cash deposits is Commission which has already suffered tax. Such an act of the ld. AO is taxation of an income twice. It is a settled proposition of law that an income cannot be taxed twice unless otherwise expressly provided. Hon ble Supreme court in the case of Laxmipat Singhania v. CIT (72 ITR 291) held that Taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over the payment of tax on the taxpayer unless the language of the statute is so compellingly certain that the court has no oth er alternative than to accept it. Hon ble Apex court in case of Jain Brothers and Others vs. Union of India and Others (1970) 77 ITR 107 (SC), has held as under:- It is not disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition by the courts that addition u/s 68 can only be made when there is a credit entry in the books of accounts and the assessee fails to explain that credit entry and thus any addition of the amount not being a credit entry in the books of accounts has been rightly deleted by ld.CIT(A) more particularly when such deposits is on account of sales made, commission on which is not disputed. In the circumstances, it is humbly prayed that the addition of Rs. 8,60,03,806/- made by ld.AO u/s 68 by holding the cash deposit in bank as unexplained and also the invocation of provisions of section 115BBE are not applicable to the facts of the case and has been rightly deleted by ld.CIT(A) and order so passed deserves to be upheld. Departmental Ground of Appeal No.4: In this ground of appeal, department has challenged the action of ld.CIT(A) in deleting the disallowance of Rs. 12,63,307/- made by ld.AO being 25% of expenses on ad hoc basis. In this regard, at the outset it is submitted that ld.AO after rejecting books of accounts has relied upon the same set of books for making disallowance out of the expenses claimed, which is not permissible. With regard to the disallowance made, it is submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a (आडतिया) under the license granted by Krishi Upaj Mandi created and controlled by State Government and make sale by auction of the agriculture produce belonging to the cultivators. The products are like lemon, green chillis brought by farmers on consignment sale basis and having commission income from the transaction. Goods sent by farmer under firm name and through invoice for sale of goods It is common practice that a farmer collect the produce of few cultivators and send it to the mandi for sale by bidding on consignment basis. Many a times and for the sake of clear identification such collecting farmers utilize a title name that does not change either the identity of the cultivator or the collecting farmer bringing consolidated agriculture produce for bidding. The Bilty send alongwith the produce is considered as the invoice which is a total wrongful appreciation of the facts on record and the documents in hand. Freight charges paid has not been claimed as expenditure though recorded in the books of accounts Since the assessee acts as Adatia (आडतिया), the freight charges are always to be borne by the prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ense 25% of the expenses incurred in cash were disallowed mainly for the reason that summons issued u/s 133(6) to the employees were remained uncompiled with. According to the AO, out of the total expenses claimed at Rs. 77,62,673/- expenses of Rs. 50,53,229/- were incurred in cash. Total expenses towards salary was of Rs. 38,46,000/- out of which Rs. 12,30,775/- was through banking channels. The expenses incurred are in consonance with the past history and the volume of business undertaken by the assessee. With regard to salary expenses, most of the employees are having income below taxable limits and not filing return, therefore, were not aware of any summons issued to them. One of them made reply and accepted the employment with the assessee in past as presently he is not working with assessee. Except this no other instance is pointed out before making adhoc disallowance. In view of above, it is submitted that ld. CIT(A) has decided the appeal after considering all the documentary evidences furnished by assessee and evidences adduced, which order may please be upheld. 8. In the rejoinder to the arguments of the ld. DR the ld. AR of the assessee vehemently submitted that there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee supported the order of the ld. CIT(A). 9. We have heard the rival contentions and perused the material placed on record. The brief facts of the case are that the assessee e-filed his return of income on 29-12-2020 declaring net taxable income at Rs. 15,53,040/-. The case was selected for Complete Scrutiny under CASS with the reasons namely, 'Low income compared to large commission receipts' and 'Large cash deposits in bank account(s)'. As contended by the assessee he is aged 64 years and is assessed to tax for last more than 40 years. Since inception he is engaged in the business of Aadatia (आडतिया) of agriculture products mainly the Lemons, Green Chilies and other perishable vegetables and is having income from commission from such activity being carried out from his establishment in the Shop area allotted and situated in the Mandi premises which mandi has been developed and controlled by the KRISHI UPAJ MANDI SAMITTEE, an organization created as well as functioning under the control and management by the Government of Rajasthan with the primary objects to fulfill its commitment for a fair price in such open mandi wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... containing as much as 2258 page. The paper book has been filed by the assessee well in advance on 28.06.2024 and the matter was heard on 30.07.2024. In the meantime, the ld. AO did not challenge the certification made by the assessee that all the records produced, were before the ld. AO. Why we write these dates because the assessee has specifically made certification on the detailed paper book. Even the ld. CIT(A) vide para 4 of this order specifically mentioned that During the course of appellate proceedings, no Additional Evidence was filed by the appellant. Since that is the dispute the ld. AO through the ld. DR did not pinpoint which are the records which were discussed and relied on by the ld. CIT(A) were not before him. The bench noted from the written submission in the form of Scrutiny report filed that no wherein that it is stated which part of the ld. CIT(A) deals with that the additional evidence produced by the assessee. The bench also noted that the ld. AO after considering the cash book so produced and other records pinpointed allegation as discussed in the body of the order. Not only that after considering the books of account supported by the evidence the ld. AO op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, 1961 dealt accordingly. Thereafter, while concluding assessment proceedings, ld.AO eventually considered all the documentary evidence furnished and made addition by invoking the provisions of section 68 as against 69A as was originally proposed. In support of the above submission, copies of acknowledgements of submission made before ld. AO, whereby cash books of all the three proprietary concerns were submitted is placed on record. The ld. AO though the ld. DR did not controvert this aspect of the matter and therefore, based on the material placed on record it is very much clear that no additional evidence was furnished by assessee during appellate proceedings before ld. CIT(A). Based on these observations ground no. 1 2 raised by the revenue has no leg to stand and thereby the same are dismissed. 11. Vide Ground no. 3 revenue has challenged the finding of ld. CIT(A) in deleting the addition of Rs. 8,60,03,806/- made by ld. AO u/s 68 of the Tax Act on account of Cash deposited by assessee in bank account. The ld. AO while making the addition noted that the assessee failed to furnish the details of such cash deposited with the evidence and the evidence which the ld. AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The assessee is one of the license holder of the mandi samiti (owned and controlled by the State Government) as per which he became entitled to get one shop area in the above stated type of mandi premises from where he carried out his Adat activity as per the rules and regulations formed by the State Government and implemented through the Government Officers in the relevant Mandi Samiti by observing the prescribed practice that as and when a vehicle carrying the agriculture produce enters into the premises of the mandi samiti, the same measured in terms of weight and nature of goods and thereafter prescribed gate pass is issued by the mandi samiti which contains the details of the produce brought into along with the details of the sender / person who brings the produce and the details of Adatia to whom such produce is being assigned for sale by auction. With this, the produce is brought to the shop of such adatia where such produce is unloaded from the vehicle and after making entry of such goods into the register authenticated by the Mandi Samiti, the same is sold through open auction process, where the prospective bidders bid for the produce are gathered and the successful bid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isualization of the complete process being followed at Mandi right from goods brought by farmers for sale till auction and completion of sale, the same was demonstrated by placing on record the relevant photographs. The sales made on behalf of the farmers are subject to mandi tax which is collected from the customer along with the commission and from the agriculturist, an amount is charged on account of labour for unloading of agriculture produce from the truck and loading it to the vehicle of customer who is purchasing agriculture produce is borne by the customer only. Besides this the freight of the vehicle through which the produce is brought to the mandi is though paid by the adatia like the assessee, however the same is borne by the agriculturists therefore, the same is never claimed by the assessee as expenses and an entry of the payment is made in the cash book where the payment made to truck driver is recorded and debited to the account of such agriculturist who brought the produce to the shop of the assessee. In lieu of commission charged, the license holders i.e. the shop keepers like the assessee are responsible for soliciting the sale of produce and after making recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleging so the ld. AO has failed to appreciate the fact that the bank accounts under which the said cash was deposited belonged to and pertaining the transactions carried out by the proprietorship firms of the assessee namely M/s Kanhaiya Lal Nenu Mal and M/s Prashant Kumar Lakhmi Chand where the consignment sale of more than 17.00 crores were carried out and part of the same was received in cash and duly recorded in the books of accounts maintained. The entire cash was deposited in the bank accounts regularly maintained by the assessee therefore under no circumstances such deposit could be held unexplained. Even otherwise the addition of cash deposits of Rs. 8,60,03,806/- made u/s 68 by treating the same as unexplained cannot be made as the assessee has submitted the cash book all the three concerns and the cash so deposited into the bank account is duly reflected in the books of account. The assessee has explained the source of this cash deposit. We also note that the ld. AO at page 4 and 6 of the assessment order has reproduced the details of amount received by the assessee in cash and through recovery of credits (as furnished by assessee) and same is reproduced here in below:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee is not up to the satisfaction of the AO. In the appellant s case the addition of Rs. 8,60,03,806/- is made by alleging cash deposits in bank as Income from other sources . At this juncture, as submitted above, it is reiterated that the sale made on behalf of farmers is either (i) Cash or (ii) on Credit. In case of cash sales, net consideration after reducing freight and unloading charges is given to seller, whereas in case of credit sales, assessee charges commission @ 6% for providing credit facility to the buyer. Basically, it is not possible for farmers coming from outside places to revisit/make regular follow ups for recovery of sale consideration (in case of credit sales). On the other hand, assessee is a local person and has specifically engaged agencies for recovery (ugai) in case of credit sales. Also, not only assessee, but all the adatias operating in Mandi follow this practice. Accordingly, cash deposits made in bank account represent the amount recovered from buyers on behalf of farmers whose produce has been sold on credit, by assessee in Mandi. Under the circumstances, the addition made by the ld. AO u/s 68, fails the very first criteria of there being a credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubts, notices could have been issued Mandi Samiti to cross verify the Sales or to bankers to confirm that payments were made to farmers and subsequent deposits were on account of their sale consideration. Based on these discussion so recorded and ongoing through the detailed order of the ld. CIT(A) we see no infirmity in the finding of the ld. CIT(A) while deleting the addition of Rs. 8,60,03,806/- in the hands of the assessee. In the light of these discussion ground no. 3 raised by the revenue stands dismissed. 12. Ground no. 4 raised by the revenue challenges the action of ld. CIT(A) in deleting the disallowance of Rs. 12,63,307/- made by ld.AO being 25% of expenses on ad hoc basis. Revenue, while challenging that action contended that the ld. CIT(A) failed to provide the justification with supporting evidence while directing to delete that addition. The bench noted that the assessee out of the three concerns claimed the expenses in three concerns as detailed here in below : S. No. Name of firm Expenses claimed 1 M/s Prashant Kumar Lakhmi Chand 45,96,083.00 2 M/s Kanhaiya Lal Nenumal 30,19,210.00 3 M/s Radhey Radhey Commission Agency 1,47,380.00 77,62,673.00 The assessee as ment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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