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TMI Blog2024 (9) TMI 1448X X X X Extracts X X X X X X X X Extracts X X X X ..... given credit to the assessee while making the addition therefore, we direct the ld. AO to reduce the profit already declared by the assessee @ 5.74 % and balance amount 4.26 % can be considered as trading addition in the hands of the assessee. Application of provision of sec. 145(3) without rejecting method of accounting and stock valuation - HELD THAT:- We note that the assessee is not challenging the rejection of the books based on the detailed observation made by the ld. AO but contend that the method of accounting as well as the stock valuation was not rejected. We note that once the books of account is rejected based on detailed 6 reasons by the ld. AO, it may not be a particular part of the record but once the same is rejected on various reasons we do not find any infirmity in the finding recorded by the ld. CIT(A) and that of the ld. AO. Therefore, ground no 1 raised by the assessee stands dismissed. - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai For the Assessee : Sh. Sunil Porwal, CA (Th. V.C.) For the Revenue : Smt. Monisha Choudhary ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The present appeal is preferred by the above named assessee, feeling dissatisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts after hearing the parties. As the assessee as contended in the affidavit that he was prevented with sufficient cause based on the reasons mentioned in the affidavit and we concur and thereby condone the delay. 5. In this appeal, the assessee has raised following grounds: - 1. That the Ld. CIT(A) confirming the application of provision of sec. 145(3) without rejecting method of accounting and stock valuation. 2. That the Ld. CIT(A) confirming the application of provision of sec. 69A for cash deposit in bank, whereas same are out of regular books as maintained. 3. Any other matter with prior permission of the chair. 6. Succinctly, the fact as culled out from the records is that the assessee E-filed his return of Income on 23.09.2017 declaring total Income of Rs. 6,02,080/-. The case was selected under complete scrutiny for the reason (i) Cash deposit during demonetization period. Notice u/s 143(2) of the Income tax Act, 1961 was issued on 13.08.2018, fixing the case for hearing on 28.08.2018, which was duly served upon the assessee by registered mail ID. Notice u/s 142(1) was issued to the assessee on 25.04.2019, 06.06.2019, 23.08.2019, 04.09.2019. In compliance with statutory not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the method of accounting and stock valuation. 3.1. The assessment order and the submissions made by the appellant were perused carefully. 3.2 In the assessment order, the AO has categorically stated in the second last para that- In view of above, books of accounts of the assessee are rejected u/s 145(3) and cash deposited upto Rs. 3,65000/- (10% of cash ceposit) in Maharashtr bank A/c No. 6097106811 during demonetization period is treated as unexplained deposit/money under sec. 69A and taxed under sec. 11588E of the 1.T. Act and penal provisions initiated apart from the interest under sec 234A,B C. 3.3. Further, in the preceding para, the AO has made a detailed description of the discrepancies found by him in the books of accounts maintained by the appellant. The discrepancies as enumerated by the AO in the assessment order were as under- 1. You have shown total sales of Rs. 1,04,81,531 during F.Y. 2016-17 declaring Net profit of Rs. 602078/- in compare to total turnover in F.Y. 2015-16 Rs. 7,10,600/- showing Net profit of Rs. 347129/- and no debtors, creditors, stock in trade shown in return for A.Y. 2016-17 which was filed u/s 44AD. 2. As per Ledger a/c of sale you have shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the instant case. 3.8. Further, the Hon'ble Courts also expect the AO to bring on record the specific defects in the books of accounts of the assessee before invoking the provisions of section 145(3) which he has done. 3.9. During the assessment proceedings, the appellant was given an opportunity to justify the discrepancies in his books of accounts. 3.10. The appellant furnished his reply on 25.11.2019 stating as under -- That the trade of gold jewellery is such that it is usually in CASH cusome do not wish to disclose his name nor is warranted in Income-Tax Law Further each day sales purchases have been verified by you in person no single discrepancy found therein in cash-book stock register. 3.11. The above reply was considered by the AO during the assessment proceedings and the various discrepancies and mismatch was again described in the body of the assessment order itself. The relevant portion is being reproduced as under Assessee has shown large cash in hand Rs. 41,32,290/- on 08.11.2016 from sale. Assessee has stated that large cash in hand was due to sale of Navratra Diwali. Assessee has not given justifiable reasons of having large cash in hand as Diwali Navrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which has been enumerated in para 3.6 of this appellate order. 3.18. Therefore, the contention of the appellant that the AO has applied section 145(3) without rejecting the method of accounting and stock valuation is misplaced, misconstrued and misinterpretation of section 145(3), which allows the AO to reject books of accounts if he is not satisfied with the correctness or completeness of the accounts maintained by the appellant. 3.19 In the instant case, the AO has invoked first point of section 145(3) which postulates that the AO is not satisfied about the correctness and completeness of the books of accounts of the appellant. 3.20 In light of the above, the Ground No. 1 is dismissed. 4. Ground No. 2-In Ground No. 2, the appellant contends that section 69A is meant for application in the case of cash deposits in banks whereas he contends that the amount are out of his regular books of accounts. 4.1. In this regard, it is stated that as the AO had categorically rejected the books of accounts in the body of the assessment order and resorted to make an assessment invoking section 69A 4.2 Section 69A envisages that- Where in any financial year the assessee is found to be the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Case was selected under complete scrutiny for the reason CASH DEPOSIT DURING DEMONETIZATION PERIOD total cash deposit on 21.11.2016 (of demonetization period 09.11.2016 to 30.12.2016) is Rs. 36,50,000/- (Containing OLD SBN) out of cash balance as on 09.11.2016 of Rs. 41,32,290.00. (3) The details of sales, job receipts for the last 3 year are as under:- Period Sales Jobs G.P. N.P. G.P.% N.P.% Business started in September 14 (as on 31.03.2015) Rs. 3,97,800/- Rs. 2,67,100/- Rs. 56100/- Rs. 321485/- 14.10% 80.81% As on 31.03.2016 Rs. 3,98,600/- Rs. 312000/- Rs. 64800/- Rs. 347129/- 16.26% 87.29% As on 31.03.2017 Rs. 1,04,81531/- Rs. 2,66,500/- Rs. 4,52,363/- Rs. 6,02,078/- 4.32% 5.74% (4) That the assessee is further subject to VAT TAX (Composition tax under copy of VAT Tax return for the year is as enclosed forwarded to A.O. also Tin 08550014509 (under vat tax). (5) The A.O. has observed (Page 2 of Ao s order 2nd Para) that assessee had received income / profit from jewellery and he has cash deposited only Rs. 160000/- upto 26.10.2016 and no cash deposited after demonetization period. Similarly in F.Y. 2015-16 assessee has made cash deposit in bank Rs. 9,10,000/- only. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill A.O. do not prove any deviation in accounting policies valuation merely cash sales, realization of debtors no name of customer in sales bills cannot justify the action of A.O. for initiating the provisions of section 145(3) of Act. (Page 15 to 18) (5) That the G.P.% N.P.% are also subject to rate variation (Increase) in closing stock to sales as evident from valuation s purchases.) (6) That as per standard operating procedures (SOP) mentioned in the CBDT instruction on OPERATION CLEAN MONEY (OCM); as per which it is important to check whether the case of the assessee falls into statistical analysis; which suggests that there is a looking of non existent sales whereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. (7) Further the A.O. is to look into that whether there is any difference between cash sales to cash deposit ratio or there is substantial downfall or increase in the gross profit and net profit compared to earlier years. (8) The assessee has maintained day to day stock register of items traded gold silver has also maintained day to day cash book specifying the sales cash flow NO DEFECTS therein found; nor has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) ITA No. 298/JPR/2013 A.Y. 2005-06 Cosmopolitan Tr. Corporation V/s ITO 2(1) JPR. Further even if any addition made it is BUSINESS INCOME not UNEXPLAINED MONEY Refer Shri Shyamlal Goyal Sendliwa V/s ACIT Circle 2 Indore (29.06.2022) That even cash surrender to tax is income u/sec. 28 to 44 of Act. Thus the provision of section 69A of Act do not apply. It is business income liable to tax u/sec. 28 to 44 thus no provision of section 69A could apply. Similar view have been held by various courts in favour of assessee deciding that since Cash deposit (Demonetization period), when investment / source disclosed in books of accounts than no provision of section 69A can be invoked. Refer (1) (2024) 160 taxman.com 1249 (Vishakapathnam ITAT) Shoha Devi Dilip Kumar V/s ITO dated 31.01.2024 (2) ITO V/s Tatiparti Satya Narayana (It Appeal No. 76 (VIZ) of 2021 dated 16.03.2022 (Para 6). (3) (2024) 161 taxman.com 293 (Amritsar ITAT) Mohd Ashraf War V/s ITO dated 02.04.2024. (4) Fine Gujrnwala Jewellers V/s ITO (2023) 151 Taxman.com 340 (Delhi ITAT) Para 10. 9. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee is proprietary of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not given the credit of the profit already reflected in the books of account and therefore, while doing so the ld. AO has not reduced that profit which we considered is required to be given credit to the assessee while making the addition therefore, we direct the ld. AO to reduce the profit already declared by the assessee @ 5.74 % and balance amount 4.26 % can be considered as trading addition in the hands of the assessee. Based on these observations the ground no. 2 raised by the assessee is partly allowed. 12. So far as the ground no. 1 raised by the assessee is concerned as is evident from the assessment order that the books of account of the assessee was rejected by the ld. AO by mentioning the various defects on page 3 of assessment order. Even the ld. CIT(A) has dismissed that ground based on the merits discussed by the assessing officer in his order. Before us ground no. 1 raised by the assessee reads as That the Ld. CIT(A) confirming the application of provision of sec. 145(3) without rejecting method of accounting and stock valuation. Here we note that the assessee is not challenging the rejection of the books based on the detailed observation made by the ld. AO but con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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