9911796707
TMI Blog2024 (10) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... book results which are otherwise verified, and no defects were found by the ld. AO and ld. CIT(A) and that when ld. AO and CIT(A) has already considered the part of the amount deposited into the bank account as business receipt and the part of the same was not considered. CIT(A) has not satisfied the condition as required as per provision of section 145(3) of the Act and that too without pointing out any defects in the books of accounts. The ld. CIT(A) merely rejected the book results because the assessee deposited cash in demonetized currency, and that was the reasons to reject the book results which is not a valid reason to invoke the provision of 145(3). Section 145(3) can be invoked when the AO is not satisfied about the correctness or completeness of the accounts of the assessee, when the method of accounting provided in Section 145 (1) has not been regularly followed by the assessee and when the accounting standards notified u/s 145 (2) have not been regularly followed by the assessee. From the observations recorded in the order of the lower authority none of the conditions are satisfied and thus same is not evident from the finding of the lower authority. Not only that the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of the assessee, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them. As the fact of this cash being similar that part of the sales is considered by the revenue has explained and part of it not is not correct and therefore, we hold that cash deposited by the assessee out of sales proceeds of stone cannot be considered attributable to the provision of section 68 or that of 69A of the Act. Based on these observations ground no. 2 raised by the assessee is allowed. - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai AM For the Assessee : Sh. Vijay Goyal, CA For the Revenue : Sh. Anup Singh, Addl. CIT ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM As the above named assessee was aggrieved by the finding recorded in the order passed by the Commissioner of Income Tax (Appeals), Udaipur-2 vide his order dated 17/01/2024 [ for short CIT(A) ]the assessee preferred the present appeal. The dispute relates to the assessment year 2017-18. The order under challenged was passed by ld. CIT(A) because the assessee preferred the first appeal before him challenging the assessment order dated 22.12.2019 passed u/s. 143(3)of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961. In response to that, the assessee submitted reply online from time to time which are considered and placed on record by the AO. 3.1 Ld. AO in the assessment proceeding noted that the assessee Company has shown various expenses including other expenses of Rs. 3,85,98,705/- in P L account including miscellaneous expenses of Rs. 23,02,592/- and business promotion expenses of Rs. 70,000/-. Above expenses in P L account are not satisfactorily explained and assessee failed to submit supporting documents like bill- vouchers to substantiate his claim. Employee register and wages register were not produced for examination. Further day to day stock register has not been produced for examination. Certain expenses are paid in cash mode and self made vouchers are maintained which are not verifiable. Correctness and completeness of the books of accounts cannot be accepted in absence of proper documentation. Further, the probability of involvement of personal expenses cannot be ruled out in personal nature expenses. Therefore, these expenses claimed by assessee are not open for verification. Hence, after considering all the facts and circumstances of the case, ld. AO made a lump sum ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut not provided any other documents in support of its claim despite being called several times. Since, the assessee could not establish that such sale has occurred during the year under consideration, the contention of the assessee is not found satisfactory and the amount of demonetized currency deposited during the demonetization period after considering the amount of Rs. 15.00 lacs surrender under the P.M.G.K.Y scheme by the assessee company, at Rs. 2,64,00,000/- (2,79,00,000/- - 15,00,000/-) was added to the total income of the assessee treated as unexplained money as per provision of section 69A of the IT Act, 1961 and tax is charged u/s 115BBE of the IT Act. 4. Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below: 6.4 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- The appellant has raised groun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect to the Additional Ground are given first and then, without prejudice to the said submissions, with respect to Ground Nos. 2(a) and 2(b). It is argued that the cash sales are duly recorded in the books of accounts but the Ld AO has not considered the explanation of the assessee satisfactory and made addition under section 69A, In such a situation the addition is not tenable in the eyes of law because assessee had recorded such transactions in its books of account and once they are recorded, then no explanation is required to be to be offered so far as section 69A concerned. In the case of the assessee, the cash sales are duly recorded in the books of account but the Ld. AO has not considered the explanation of the assessee satisfactory and made addition under section 69A in such a situation, the addition is not tenable in the eyes of law because assessee had recorded such transactions in his books of account and once they are recorded, then no explanation is required to be offered so far as section 69A is concerned. Therefore, such addition is liable to be quashed. The argument of the appellant is considered and found to be partly acceptable. The AO has not believed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 69A which is not found to be applicable on the facts of the case. The addition should have been made under section 68 as the source of cash deposited during the demonetization period remains unexplained. Therefore, the addition of Rs. 2,64,00,000/- made by the AO is upheld u/s 68 of the Act as the source of the cash deposited in the bank account remain unexplained. In view of the above findings, the argument of the appellant that section 69A is not applicable on the facts of the case are treated as disposed of as the addition is being upheld u/s 68 of the I.T. Act. The decisions relied upon by the appellant in this regard are not found to be applicable in view of these findings. The appellant has raised further Ground No. 2 (a) Cash deposited in bank accounts during demonetization period treated as unexplained money and stated that the Ld. AO has erred in making addition of Rs. 2,64,00,000 to the total income of the assessee u/s 69A, by treating it as unexplained money In the Ground No. 2(a) taken without prejudice to Additional Ground, the appellant stated that during the course of assessment proceedings, details/information/documents were called from the assessee by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f account ought to have been considered by the Ld. AO. It is argued that no doubt the Ld. AO was duty bound to examine the genuineness of sales and source of cash deposited in bank in demonetized currency but this exercise was carried out without considering the facts, documents and submissions of the assessee in right perspective, which lead to wrong addition in the income of the assessee. From the perusal of the assessment order, it is explicit that the detailed submissions of the assessee, duly supported by documentary evidence, have been brushed aside by briefly making some observations in brief. As discussed above, the sale of Cheja Stone is not considered as genuine business of the assessee by the AO. Therefore, the source of cash deposited during demonetization period remains unexplained which is upheld u/s 68 of the Income Tax Act. The appellant has explained that the source of cash deposited during demonetization period is out of sales of Cheja Stone. However, in the absence of supporting evidence furnished during assessment proceedings, the source of cash remain unexplained and same is treated as unexplained credit in the books of accounts and added u/s 68 of the Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nn.com 196 (Jaipur-Trib.). The ITAT in the above decision relied upon by the appellant held that the Assessing Officer made certain disallowances of expenses while completing the assessment under section 143(3) whereas the Commissioner (Appeals) invoked the powers to enhance the assessment by rejecting the books of account and consequently the income of the assessee was enhanced by applying the G.P. rate to estimate the income of the assessee. Therefore, it is clear that the said issue and aspect of not accepting the book results of the assessee was never taken up by the Assessing Officer in the scrutiny assessments of the assessee. However, in the present case, the source of cash from sale of Cheja Stone as claimed by the assessee is not accepted by the AO. Therefore, the AO has not accepted the book result which is evident from the assessment order. However, the AO did not invoke the section 145(3) while making the addition. The ITAT in the above order also held that the subject matter of assessment is the matters which were taken up by the Assessing Officer during the scrutiny assessment are very much subject matter of appeal so far as the power of the Commissioner (Appeals) exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther new source of income as it has been done in the facts of the instant case. Faced with this situation, we accept the assessee's vehement arguments challenging business profits addition of Rs. 65,58,156/- On observing the decision it is noted that the ITAT held that the CIT(A)'s jurisdiction does not extend to introducing an altogether new source of income. In the present case of the appellant, no new source of income is introduced. The addition made by the AO is only being strengthened. Therefore, the reliance placed by the appellant is not found to be applicable on the facts of the case. It is further noted in that case by the ITAT as under - 20. In the facts of the present case only issue considered and discussed by the assessing officer is with respect to claim of the assessee u/s 54F of the act which was rejected after inquiry and further claim alternatively made u/s 54 of the act was also rejected relying up on the decision of the Honourable Supreme court. The issue of verification of capital gain was not the issue which was at all dealt with by the assessing officer, or even a question of verification made by Id AO. There was no inquiry made by the Id AO on the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axman 486/161 ITR 82 (Bom). Hence issue no 11 enlisted in para no 13 of the order is decided in favour of the assessee. In view of our decision on issue no (i), issue no (ii) does not survive and issue no (iii) is dealt with separately. In view of this we allow ground no 1,2,3,14,15 and 16 of the appeal of the assessee. 21. As we have held that Id CIT (A) has exceeded his jurisdiction in enhancing the income of the assessee by considering the new sources of income not at all considered by the Id AO, consequently we allow the ground no 9,10,11,12 and 13 of the appeal of the assessee where the addition u/s 68 of the act has been made by the Id CIT (A) enhancing income of the assessee holding that sale consideration received by the assessee on sale of property is chargeable to tax as undisclosed income u/s 68 of the act. In the above order relied upon by the appellant CIT (A) has exceeded his jurisdiction in enhancing the income of the assessee by considering the new sources of income not at all considered by the Id AO. However, in the case of the appellant the addition of Rs. 2,64,00,000/- was not only considered by the AO but the addition was also made by the AO. Therefore, the reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the act. Further the Honourable Delhi high court in para no 27 has also held that power of the under:- 38. Considering the fact that the Assessing Officer in the assessment order has neither discussed the issue nor made any addition u/s 58(2)(vib), therefore, respectfully following the decision cited above, we are of the considered opinion that the Id.CIT(A) has no power to adjudicate the issue by introducing a new source of income and his order has to be confined to those items of income which is subject matter of original assessment. We accordingly set aside the order of the CIT(A) and direct the Assessing Officer to delete the addition. The grounds of appeal raised by the assessee are accordingly allowed. In that came, it was held that the CIT(A) has no power to adjudicate the issue by introducing a new source of income which the Assessing Officer in the assessment order has neither discussed nor made any addition. However, in the present case, the addition which is being confirmed is not only considered by the AD but the AD made addition also. Therefore, the decision relied upon by the AD is not found to be applicable on the facts of the case In the absence of any statutory p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act. The cash credited in the name of sale is treated as unexplained credits in the books of accounts of the appellant. Therefore, the addition is made as proposed in the show cause notice u/s 68. The appellant further argued that the Ld. AO wrongly applied the provisions of section 115BBE with a motive to levy the tax on the higher slab rate. It is also pertinent to mention here that before applying the provisions of section 115BBE of the Act, the specific show cause notice was not given to the assessee and in absence of specific show cause notice, the provisions of this section cannot be applied in mechanical manner. When addition u/s 68 of the Act is made taxing it at the rate prescribed u/s 155BBE of the Act was a natural corollary. It is provided in the Act itself. The AO has to tax as per provisions of section 115BBE if addition is made u/s 68 or section 69, 69A etc. I find that there is no provision regarding issuing show cause for applying tax rate as provided in section 115BBE. It is natural consequence if addition is made under these sections. Therefore, the argument of the appellant are not found to be acceptable that specific show cause was required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the appellant are considered. In the ground number 2 (a) the issue raised is similar as raised in the ground number 4 which has already been dismissed. Therefore, this issue raised in ground no. 2(a) is also treated as dismissed in accordance the discussion in the earlier paragraphs. The issue raised by the appellant in ground no. 2(b) is with regard to double taxation of the same amount. This is found to be admissible as the amount of addition made of Rs. 2,64,00,000/- is the same amount which is treated by the assessee as sale in the books of accounts. The sale is not found to be genuine and therefore addition is made under section 68. In these circumstances, the amount which is not considered as part of sale needs to be reduced from the returned income and thereafter the addition is to be made under section 68 as discussed in preceding paragraphs. The appellant gets partial relief accordingly. The ground number 2 is treated as partly allowed. 5. Feeling not satisfied with the finding so recorded by the ld. CIT(A) on the issue of applicability of section 145(3), 69A and 115BBE of the Act on the issue the assessee preferred the present appeal on the grounds as reiterated her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the Income Tax Act, 1961 without asking the assessee to produce the books of account and without examining the books of accounts. 2. On the facts and in the circumstances of the case, the Ld CIT (A) erred in sustaining the addition of Rs 2,64,00,000/- on account of cash deposited in bank accounts in the demonetized currency, as unexplained cash credit of the assessee by applying the provisions of section 68 of the Act as against addition made by ld AO u/s 69A and taxing the same by applying provisions of section 115BBE of I.Tax Act alleging the same as undisclosed income of appellant and further erred in reducing the same income from business income declared by the assessee and adding the same as Income from other sources. The entire findings of lower authorities are based on presumption, assumption and having no material or irrelevant material and without providing the adequate opportunity of submission of documents. The addition was made without considering the submission and documents of the assessee in the judicial perspective. 3. The appellant prays for leave to Add, to amend, to delete, or modify the all or any grounds of appeal on or before the hearing of appeal. 3) Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs in support of sale of such material worth Rs. 3,24,44,415/- and it could not establish that the cash obtained from such sale is deposited during demonetization. The assessee has only provided cash book and ledger but not provided any other documents in support of its claim. The ld AO made the addition of Rs. 2,64,00,000/- (2,79,00,000/- 15,00,000/-) as unexplained money as per provision of section 69A of the IT Act, 1961 and taxed u/s 115BBE of the IT Act a. 2 Finding of CIT(A) :- The gist of findings of ld CIT(A) is as under:- a) The ld CIT(A) rejected the books of account by invoking section 145(3) of I.Tax Act by holding that assessee failed to furnish credible evidence in support of the source of cash deposited during the demonetization, hence the books of account of assessee are not reliable. (Page 38 of order) b) The ld CIT(A) reduced the amount Rs. 2,64,00,000/- from business income of the assessee and upheld the addition of Rs 2,64,00,000/- as income from other sources u/s 68 of Income Tax Act treating the cash deposited during demonetization as unexplained credit as against unexplained investment held by ld AO u/s 69A and taxing the same under 115BBE of the Act, 1961. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncy. The cash so deposited by the assessee was accumulated cash which was received against cash sale of Masonry Stone (Cheja Stone), Fire woods, and scrap steel. The lower authorities failed to appreciate the nature of cash sales. The assessee is not in the business of Cheja Stone (Masonry Stones), or wood or steel scrap but the assessee was constructing huge sized multi-storeyed building at Plot No 1,2,3,4 with two basements, stilt and building upto height of 30 meters. The building plan was sanctioned by Kota Development Authority vide letter dated 15/10/2015. The most of the land in Kota is stony or say rocky and the assessee s land was also situated in a stony/rocky area. Whenever the excavation was made, it is natural that either sand is digged out in sandy land or stone is digged out in rocky land. Since the land of the assessee was stony or say rocky, huge quantity of stone was digged out while excavation of two basements and foundation of building. These stones are used as masonry stones/cheja stone. Further, in shuttering process, while casting of roofs, rafts, columns, beams wooden shuttering is also used and during this process some shuttering is damaged and becomes wast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - in bank accounts from 10-11-2016 to 31-12-2016. The copy of cash book from the period 01-11-2016 to 31-12-2016 is at paper book page 54-60. The assessee surrendered Rs. 15 Lakh before D.D.I.T Kota under P.M.G.K.Y scheme just to purchase the peace of mind so the lower authorities treated Rs. 2,64,00,000 = (2,79,00,000-15,00,000) as unexplained. The ld. AO neither found any concrete and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of non-existing of stock as on the date of sales and non-existing cash in the books of account, there is no such findings in the assessment order. A perusal of the finding of Ld. AO in the Assessment Order which clearly show that the cash sales are duly recorded in the books of account but the Ld. AO has not considered the explanation of the assessee satisfactory and made addition under section 69A which is not tenable in the eyes of law because assessee had recorded such transactions in its books of account and once they are recorded, then no explanation is required to be to be offered so far as section 69A is concerned. The ld CIT(A) invoked section 68 as against 69A applied by the ld AO and taxed the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account and also which is regular feature of the trade of assessee. The conclusion of ld. AO is dehors of any credible evidence/material on record is unsustainable both in law and on facts. Addition so made by the lower authorities deeming the impugned cash deposits arising out of accounted cash sales as unexplained cash credits merely on the basis surmises conjectures is fallacious and deserves to be deleted. a.3.(iv) The Ld AO/CIT(A) rejected the explanation of the assessee without making any inquiry. The AO and CIT(A) neither followed the principle of law nor principle of evidence rather appeared to be bent upon making huge additions without any basis. The lower authorities have not made independent inquiry on this issue. The vast power has been given to Assessing Officer under Income Tax Law. a) It is settled law that the AO is quasi-judicial authority and should be governed in his function by judicial consideration and must conform to the rules of natural justice and must proceed without bias- Tin Box Co. Vs CIT 249 ITR 216 (SC). b) It is also settled law that the AO must act honestly on the material before him and not vindictively, capriciously, or arbitrarily- Gurumukh S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... picion can be initiating point for investigation but not the final basis of assessment/reassessment/addition. i) PCIT v. Aditya Birla Telecom Ltd. [2019] 105 taxmann.com 206 (Bombay) ii) Rustagi Engineering Udyog (P.) Ltd vs. Deputy Commissioner of Income-tax [2016] 382 ITR 443 (Delhi). iii) Principal Commissioner of Income-tax vs. Meenakshi Overseas (P.) Ltd [2017] 82 taxmann.com 300 (Delhi) iv) CIT vs. Shri Jawahar Lal Oswal, DBITA 49/1999 (Punjab Haryana HC) v) Commissioner of Income-tax v. Neel Giri Krishi Farms (P.) Ltd. [2013] 218 Taxman 95 (Allahabad)(MAG.) a.3.(v) Cash sales cannot be treated as unexplained credit entry u/s 68 of I.Tax Act. The cash deposited in the demonetized currency added as income of the assessee by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in statement of profit loss, therefore there is no occasion to consider the same as unexplained credit entry of the assessee by applying the provisions of section 68 of the Act. It is further relevant to mention h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company as on the date of demonetization is correct and possible looking to the strength of staff, space of demonstration and parking and the considering availability of stock on hand as proved that the sales made by the assessee company is genuine sales recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. As regards the receipt of the cash from the customer the ld. AR of the assessee relied upon the findings of the jurisdiction high court judgement in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC). In this case the Jurisdictional Hon ble High Court have held that So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was sales of cheja stone after 08-11-2016 of Rs. 2,38,850/- in legal tender currency and which the ld AO himself treated as explained. A.3.(viii) Section 115BBE cannot be applied in the case of assessee:- As stated in the forgoing paras the whole purpose of the lower authorities in singling out the cash deposited in demonetized currency as arising out of unexplained sources and is to somehow trigger the provisions of section 115BBE read with section 68 of the Act to the income already offered for tax by the assessee (as cash sales) at a higher rate of tax of 77.25% (i.e. flat rate of 60% plus surcharge @ 25% on such tax and cess as applicable). Section 115BBE of the Act is a machinery provision to levy tax on income and it should not enlarge the ambit of section 68 of the Act to create a deeming fiction to tax any sum already credited/offered to tax as income. Section 68 of the Act traditionally applies to unexplained cash credit like loans, deposits, advances, share capital, etc. and not to sums already offered to tax as income by the assessee in its return of income at the highest slab rate. Such recourse is unwarranted keeping in mind the objective to introduce section 115BB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the taxpayer. From the facts of the case at hand, it is clear that the AO/CIT(A) has acted unreasonably and capriciously in rejecting the genuine explanations offered by the Assessee in respect of the impugned cash deposits as unsatisfactory solely with the aim of fastening exorbitant tax liability on the assessee under the garb of section 69A/68 of the Act. Such recourse primarily hedged on surmises, conjecture, assumptions, presumptions and whims of the ld. AO/CIT(A) is clearly unwarranted and the additions so made is unsustainable in the eyes of law and thus deserves to be quashed. The ld. AO/CIT(A) while making the impugned addition u/s 69A/68 and rejecting the explanation offered by the Assessee with respect to the nature and source of the cash deposited in bank accounts during the demonetization period in demonetized currency and have acted merely on surmises, conjectures, suspicion, presumptions and assumptions. The humble submissions of the assessee highlighting the glaring internal inconsistencies in the orders of the ld. AO the repeated violations of the provisions of law by them are as under: i) The AO has treated the cash deposited in the banks during the demonetization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of specific show cause notice the provisions of this section cannot be applied mechanically. Reliance is placed on the decision of Hon ble Jodhpur bench of ITAT in the case of Suraj Kanwar Devra v/s ITO 2(2), Udaipur in ITA No. 50/Jodh/2021 dated 23.11.2021 Without prejudice to our forgoing submission we may further submit that amendment provisions of section 115BBE of the Act as amended by the Taxation (Second Amendment) Act, 2016 are applicable from 15.12.2016 and are not retrospective in operation and therefore not applicable to the cash deposited in the bank prior to 15.12.2016. The Tax laws as the Taxation (Second amendment) Act, 2016 was amended on 15.12.2016 and received the ascent of President of India on the said date. It was submitted that though the amendment was applicable for assessment year 2017-18 but only on income referred to in said section pertaining to the date after 15.12.2016. The amendment provisions are not retrospective in operation and are not applicable in the present case and therefore the ld. CIT(A) has been wrongly taxed the addition made u/s 68 of the Act by applying the amended provisions. a.3.(ix) In support of our submission given in paras hereina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain entries in its accounts wherein the fact that moneys were received in high denomination notes had been noted. Portions of these entries to the effect that moneys had been received in high denomination notes were found by the ITO to be subsequent interpolations made by the appellant with a view to advance its case that the cash balances contained the high denomination notes encashed by it. The ITO rejected the appellant's explanation that the high denomination notes formed part of its cash balances and treated the sum of ₹ 2,91,000 as the appellant's secreted profits from business and included it in its total income and assessed the appellant. Before the Tribunal, the appellant stated that the said entries were made in sheer nervousness after the coming into force of the High Denomination Bank Notes (Demonetization) Ordinance, 1946, on 12th Jan., 1946, as the appellant did not know that it had specific proof in its possession of having the high denomination notes as part of its cash balances. The Tribunal held that there was no other reason to suspect the genuineness of the account books in which these interpolations were made. If the entire account books were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,000 each on 19th Jan., 1946. [para 14] The Tribunal, however, appears to have been influenced by the suspicions, conjectures and surmises which were freely indulged in by the ITO and the AAC and arrived at its own conclusion, as it were, by a rule of thumb holding without any proper materials before it that the appellant might be expected to have possessed as part of its business, cash balance of at least Rs. 1,50,000 in the shape of high denomination notes on 12th Jan., 1946,-a mere conjecture or surmise for which there was no basis in the materials on record before it. [para 15] Unless the Tribunal had at the back of its mind the various probabilities which had been referred to by the ITO it could not have come to the conclusion it did that the balance of Rs. 1,41,000 comprising of the remaining 141 high denomination notes of ₹ 1,000 each was not satisfactorily explained by the appellant. [para 18] If the entries in the books of account were genuine and the balance in Rokar and the balance in Almirah on 12th Jan., 1946, aggregated to ₹ 3,10,681-13-9 and if it was not improbable that a fairly good portion of the very large sums received by the appellant from tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs. 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon ble High Court dismissed the appeal filed by the Department. Promulgated l) 2021 (9) TMI 1192 - ITAT VISAKHAPATNAM DY. COMMISSIONER OF INCOME TAX CIRCLE-3 (1) VISAKHAPATNAM VERSUS SRI JAYA PRAKASH BABU VALLURI AND (VICE-VERSA) Cash deposits made during demonetization period, which was added back to income u/s 69A - HELD THAT:- CIT(A) observed that the assessee is maintaining regular books of accounts and the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this Act, and the 33 [Additional Commissioner or] 34 [Additional Director or] 35 [Joint Commissioner or Joint Director] who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;] Therefore, CIT(A) is not assessing officer so he cannot invoke the provisions of section 68 for making the addition particularly when the Assessing Officer has satisfied about the ingredients of section 68 of Income Tax Act. In the case of the assessee the ld. AO has not framed an opinion that the explanation given by the assessee was not satisfactory but he framed an opinion after examining the facts, documents and explanation that the additions cannot be made u/s 68 but it should have been made u/s 69A of Income Tax Act, 1961 then the jurisdiction of CIT (A) in limited to deciding the matter whether the addition u/s 69A is correct or not. In the appellate proceeding the addition cannot be confirmed by applying all together different section by invoking a section for which satisfaction is required to be by Assessing Officer and the assessing officer after consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer [2023] 150 taxmann.com 120 (Chennai - Trib.) held that CIT(A) isn t empowered to change section under which AO made an addition during assessment. The relevant finding is reproduced as under:- In this case, the Assessing Officer made addition of Rs. 6,00,000/- as unexplained credit. However, the Assessing Officer has not mentioned the relevant section under which, the addition was made, but unexplained credit comes under section 68 of the Act. In the appellate order, in page No. 7, para (v), the ld. CIT(A) has noted that However, I am also in agreement with the appellant that the provisions of section 68 are not applicable to the appellant . Therefore, the ld. CIT(A) treated the addition of Rs. 6,00,000/- as unexplained money under section 69A of the Act and confirmed the addition. Section 68 of the Act deals with unexplained Credit in the books of the assessee and section 69A of the Act deals with unexplained money, bullion, jewellery or other valuable article . Both are entirely different. Though the Assessing Officer has not mentioned the section 68 of the At in his order, the very fact that he calls it unexplained credit and not unexplained money as done by the ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand ld CIT(A) rejected the books of account without asking the assessee to produce the books of account and without examining the books of account. (ii) 145(3) cannot be applied as no finding of ld CIT(A) on the ingredients of section 145(3) of I. Tax Act To apply the provisions of section 145(3) of Income Tax Act, there must be finding on the ingredients of section 145(3) of I,Tax Act. that a) books of account are not correct or incomplete or b) the assessee is not following the proper method of accounting regularly or c) not following the accounting standards notified by Central Government. In the case of the assessee, there is no such finding of the ld CIT(A) (iii) The assesses maintains proper books of account and books of account are audited under the Companies Act as well as under Income Tax Act. Books of account defined in section 2(12A) of I.Tax Act. According to Section 2(12A) of the Income Tax Act, 1961, books or books of account, include ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as electronic data. Section 145 does not specify any set of accounts to be maintained by an assessee. Also, Rule 6F of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stony or say rocky and the assessee s land was also situated in a stony/rocky area. Whenever the excavation was made, it is natural that sand is digged out in sandy land and stone is digged out in rocky land. Since the land of the assessee was stony or say rocky, huge quantity of stone was digged out while excavation of two basements and foundation of building. These stones are used as masonry stones/cheja stone. Further, in shuttering process old damaged wooden shuttering becomes waste and similarly steel scrap which is in the form of small cut of tor steel which also cannot be otherwise used are always sold as scrap. The assessee sold these stones and scrap in cash from time to time during the period 01/04/2016 to 15/11/2016. The assessee produced before the lower authorities copy of :- (i) Fire wood sale ledger (PB page 61-64), (ii) Steel Scrap Sale Ledger (PB page 65-70), and (iii) Cheja Stone Ledger (PB page 71-98), It is admitted fact that each transaction should be analyzed with the point of view of the businessman, generally prevailing practice in the trade and its acceptability in the eye of law. A transaction cannot be treated as non-genuine for wants of the details which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was available with the assessee, which evidenced the making of sale, we fail to appreciate as to how any addition can be made by treating cash sales as bogus .We are dealing with a situation in which the assessee has himself offered the amount of cash sales as his income by duly including it in his total sales. Once a particular amount is already offered for taxation, the same cannot be again considered u/s 68 of the Act. In fact, such addition has resulted into double addition. (v) The defects pointed out by the ld CIT(A) are not defect at all. The true profit can be deduced from the books of account maintained by the assessee. The assessee is maintaining proper books of account, and following the accounting policies and accounting standards regularly. Each case has to be considered on its own peculiar facts, having regard to the nature of business. Action of the Ld CIT(A) clearly demonstrates that he could not gather any details or find any irregularity in maintenance of the books so as to justify rejection of books in toto. Therefore, we pray your honor to quash the reasoning offered by the Ld CIT(A) for rejecting the books as legally unsustainable proposition. We further rely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ft to be entered in the books of account or that the assessee has sold some of the items at a price higher than what is disclosed in the books of account or if proper particulars, bills, vouchers, are not forthcoming etc., the books of account cannot be rejected without assigning specific reasons. In the instant case merely because different range and nature of items are being dealt with by the assessee and the maintenance of quantitative stock of each and every item is not practically possible, the books of account maintained by the assessee which are free from any defect cannot be rejected merely because the average GP rate was slightly lower than the average GP rate of the earlier year. (f) Vishal Infrastructure Ltd Vs ACIT 104 ITD 537 (ITAT Hyderabad) PB 167- 185:- Hon ble ITAT Hyderabad A Bench held that the undisputed fact is that the assessee which is a limited company has been consistently following a particular method of accounting. Its accounts are audited both under the Companies Act as well as under s. 44AB. Such audited accounts are being filed with the Registrar of Companies as well as with the IT Department for more than 7 years. The Revenue has scrutinized the accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on the following evidence / records / decisions: S. No. Particulars Page No. 1. Copy of ITR and computation of total income of AY 2017-18 1-4 2. Copy of Audit Report, Audited Balance sheet and Statement of Profit and Loss along with all annexure of AY 2017-18 5-49 3. Copy of Notice dated 09/08/2018 issued u/s 143(3) of the Income Tax Act, 1961 50-53 4. Copy of Cash book for the period 01/11/2017 to 31/12/2017 54-60 5. Copy of Fire Wood Sales Account for the period 01/04/2016 to 31/10/2017 61-64 6. Copy of Steel Scrap Sales Account for the period 01/04/2016 to 31/10/2017 65-70 7. Copy of Cheja Stone Sales Account for the period 01/04/2016 to 15/11/2017 71-98 8. Copy of Written Submission filed before CIT(A) 99-124 9. Copy of Show Cause Notice issued by CIT(A) vide notice dated 29/12/2023 125 10. Copy of Reply 03/01/2024 filed against show cause notice issued by CIT(A) 126-130 11. Copy of Order of Hon ble Rajasthan High Court in the case of Pr Commissioner of Income Tax, Alwar v/s Bajargan Traders, Jaipur vide DB Income Tax Appeal No. 258/2017 131-135 12. Copy of order of Hon ble ITAT Lucknow in the case of Sunny Kapoor vs Income Tax Officer (2022) 142 taxmann.com 577 136-138 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s CIT (2005) 279 ITR 475 (Cal) 245-251 ITAT Jaipur Bench 29 ACIT Circle-1 Jaipur vs M/s Uttam Chand Deshraj (ITAT Jaipur Bench ITA No 419/JP/2010 Order dated 25/03/2011) 252-255 30 2022 (10) TMI 116 - ITAT Jaipur ACIT, Central Circle-2, Jaipur Vs M/S Motisons Jewellers Ltd. and (Vice-Versa). 256-308 31 2022 (11) TMI 1333 - ITAT Jaipur Other Citation: [2023] 104 ITR (Trib) 455 (ITAT [Jai]) Asstt. Commissioner Of Income-Tax, Central Circle-1, Jaipur. Vs Shri Mahendra Kumar Agarwal. 309-340 32 2022 (11) TMI 1334 - ITAT Jaipur Income Tax Officer, Ward 1 (2) , Jaipur. Versus. Shri Raj Kumar Nowal. 341-373 33 2022 (12) TMI 750 - ITAT Jaipur The ACIT Central Circle-2 Jaipur Versus Shri Chandra Surana. 374-383 34 2023 (3) TMI 1148 - ITAT JAIPUR Mahesh Kumar Gupta Versus ACIT Circle-04, Jaipur. 384-408 35 M/s MotisonsGobal Private Limited vs ACIT in ITA 388 389/JP/2017 vide order dated 02/11/2017 409-593 Other ITAT Bench 36 Kishore Jeram Bhai Khaniya, Proprietor, M/s Poonam Enterprises v. ITO ITA No. 1220/Del/2011 ITAT Delhi dated 13.05.2014 594-598 37 2021 (5) TMI 447 - ITAT VISAKHAPATNAMASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1 VISAKHAPATNAM VERSUS M/S HIRAPANNA JEWELLERS AND (VI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained records which were produced before the Assessing Officer. Ld. AO did not find a single defect in the books of accounts so reproduced. The ld. AR of the assessee also submitted that the books of accounts of the assessee audited under the two separate laws i.e. under the Income Tax Act and under the provisions of the Companies Act. Both auditors not made any single adverse remark about the maintenance of the account maintained by the assessee under both the laws. Thus considering the provisions of section 34 of the evidence Act the books of accounts cannot be thrown away and separate addition of the amount already refracted in the books of accounts cannot be made, based on the provisions of section 68/69A of the Act. Even when the matter carried before ld. CIT(A), he also did not find any defect in the books of the accounts produced Ld. CIT(A) did not appreciate the fact that the assessee is not in regular manufacturer of the stone but it is in the possession of rocky land which was under development and n that digging process excavated stones which assessee sold. The cost of excavated the area under development is already refracted in the books and allowed, whereas conseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any has preferred the appeal before CIT(A) had partly allowed the appeal on 17.01.2024. Aggrieved from the assessment order, the assessee filed appeal before Ld CIT(A), Udaipur-2. The Id CIT(A) partly allowed the appeal of assessee. The gist of findings of Id CIT(A) is as under: - a) Out of total disallowance of Rs. 15,00,000/- out of other expenses, the Id CIT(A) sustained the addition of Rs. 1,92,993/- and remaining disallowance of Rs. 13,07,007/-was deleted. b) The Id CIT(A) rejected the books of account by invoking section 145(3) of I. Tax Act by holding that assessee failed to furnish credible evidence in support of the source of cash deposited during the demonetization, hence the books of account of assessee are not reliable. (Page 38 of order) c) The Id CIT(A) reduced the amount Rs. 2,64,00,000/- from business income of the assessee and upheld the addition of Rs 2,64,00,000/- as income from other sources u/s 68 of Income Tax Act treating the cash deposited during demonetization as unexplained credit as against unexplained investment held by Id AO u/s 69A and taxing the same under 115BBE of the Act, 1961. (page 30, 38 and 39 of order) 2) Now aggrieved from the order of Id CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) by applying the provisions of section 145(3) of 1. Tax Act. The submission of the assessee on the above said issues are as under- A) Treated the cash sales of Cheja (Masonry) Stone, fire wood, and scrap steel which was deposited in demonetized currency as unexplained credit entries u/s 68 of 1. Tax Act and taxing the same in higher bracket of tax by applying provisions of section 1158BE. The comments on assessee 'submission before ITAT is being submitted hereunder which is based on assessment records as available with this office(i) During the year under consideration, the assessee company has deposited Rs. 2,79,00,000/- in its various bank accounts during demonetization period. The assessee accepted this fact and mentioned the same amount in return filed by it on 06.03.2018. The assessee was asked vide notice u/s 142(1) on various dates during assessment proceeding to explain the source of cash deposited during the demonetization period from 09.11.2016 to 31.12.2016. The assessee submitted that it had sold cheja stone and other material in cash of Rs. 3,24,44,415/- during the year and the cash deposited during the demonetization period is cash earned from such sale. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the source of cash deposited during demonetization period remains unexplained which is upheld u/s 68 of the Income Tax Act by the CIT(A). However, in the absence of supporting evidence furnished during assessment proceedings, the source of cash remain unexplained and same is treated as unexplained credit in the books of accounts and added u/s 68 of the Income Tax Act. In this regard it is submitted that there is no provision regarding issuing show cause for applying tax rate as provided in section 115BBE. It is natural consequence if addition is made under these sections. Therefore, the argument of the assessee are not found to be acceptable that specific show cause was required to be given for applying section 115BBE. In this regard ITAT RAJKOT BENCH IN THE Vijubha Jitubha Jadeja v. Principal Commissioner of Income-tax [2023] 154 taxmann.com 615 (Rajkot. Trib.) held as under- Further the AO having made addition u/s 68 of the Act, taxing it at the rate prescribed u/s 155BBE of the Act was a natural corollary. Admittedly the law itself prescribes a special rate of tax for additions made u/s 68, 69,69A/B/C of the Act u/s 115BBE of the Act. Therefore the argument and decisions relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terated that the appellate powers conferred on the Commissioner under section 251 could not be confined to the matter which had been considered by the ITO. In view of the above discussion, the argument of the assessee before ITAT and cited case laws thereon are not found to be acceptable. Copy of assessment order and order of CIT(A) is being enclosed for your ready reference. The factual report is again being submitted for kind perusal and necessary action. 9. The ld. DR in addition to the report of AO vehemently argued that out of total sales of Rs. 3,24,44,415/- sales made by the assessee additions of Rs. 2,64,00,000/- only has been made u/s 69A of the Act and thereby higher rate of tax as per provision of section 115BBE of the Act. As the assessee failed to substantiate the sale of stone with corroborative / cogent evidence about the sale of material of chajar stone. The assessee specifically asked to give the bills issued for the sale of stone but assessee could not furnish such records to substantiate the receipt. Ld. AO has already given the reason at page No. 3 of his assessment order stating that the assessee has not shown any stock of such material in books of accounts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- was considered as chargeable to tax in accordance with the provisions of section 69A of the Act as unexplained money. Brief facts related to the dispute is that assessee company deposited a sum of Rs. 2,79,00,000/- in its various bank accounts during demonetization period. The assessee accepted this fact and mentioned the same amount in return filed by it on 06.03.2018. Vide notice u/s 142(1) on various dates during assessment proceeding the assessee was asked to explain the source of cash deposited during the demonetization period from 09.11.2016 to 31.12.2016. The assessee submitted that it had sold cheja stone and other material in cash of Rs. 3,24,44,415/- during the year under assessment and the cash deposited during the demonetization period is received from such sale made by the assessee. Further, the assessee stated that regarding deposit during demonetization, a surrender of Rs. 15.00 Lac has been made before D.D.I.T Kota under P.M.G.K.Y scheme and Rs. 7,48,500/- was deposited as tax FDR of Rs. 3,75,000/- was also made under the scheme for just to purchase the peace of mind . As submitted by the assessee that they sold material worth Rs. 3,24,44,415/- from 01.04.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pply the provision of section 68 of the Act so far as the credit of sales amount in dispute. The assessee way of this appeal challenges that finding of the ld. CIT(A) before us. 13. Thus, at this stage the assessee challenged the order of the lower authority on three counts first one is that the cash sales of Cheja (Masonry) Stone, firewood, and scrap of steel reported by the assessee in the books of account and out of that sales cash so generated forms part of the cash deposited into the bank account partly in demonetized currency as unexplained credit entries u/s 68 of the Act and taxing the same in higher bracket of tax by applying provisions of section 115BBE. Second is that whether based on the fact ld. CIT(A) can apply the provisions of section 68 of Income Tax Act or not, and the third issue is that whether the books of account of the assessee can be rejected by CIT(A) by applying the provisions of section 145(3) of the Act. 14. On 29.12.2023 ld. CIT(A) issued a show cause notice asking the assessee to show cause as to why the books of accounts maintained by them should be rejected as no verifiable evidence are available to prove that genuineness of the sales was made from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e show cause notice u/s 68. As is not disputed that ld. AO has not rejected the books and not passed order u/s. 144 of the Act. Ld. CIT(A) has done so based on the mere surmise and conjecture as noted herein above. As is also evident from the orders of the lower authority that the assessee has produced all the details that has been required by the ld. AO and they have not found the records defective. Merely the ld. AO and the ld. CIT(A) made suspicions on the records of sales of stone that too on account of rocky land excavated and thereby sold stone so excavated. Relevant receipt is reflected in the books of accounts. Out of the sum of received part of the amount considered as explained and part of the same as not genuine for the same set of records. We note that the ld. CIT(A) has not advanced single a reason or basis of rejection of the book results which are otherwise verified, and no defects were found by the ld. AO and ld. CIT(A) and that when ld. AO and ld. CIT(A) has already considered the part of the amount deposited into the bank account as business receipt and the part of the same was not considered. While doing so ld. CIT(A) has not satisfied the condition as required a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o support our view based on the provision of the Act and decision of the Hon ble Jurisdiction Rajasthan high court in the case of CIT Vs. Pink City Developers [99 taxmann.com 422 (Rajasthan) ]. In that case our Hon ble High court held that; 7. The counsel for the respondent contended that the Tribunal while considering the objection of section 145(3) of the Income-tax Act has rightly observed as under : (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144. 8. Taking into considerations, the overall facts and circumstances of the case, we are of the opinion that the Tribunal while confirming the order passed by the Commissioner of Income-tax (Appeals) has not committed any error, therefore, the issue is answered in favour of the assessee and against the Department. Here we note that out of the sales of worth Rs. 3,24,44,415/- sales worth Rs. 2,64,00,000/- was not cons ..... X X X X Extracts X X X X X X X X Extracts X X X X
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