9911796707
TMI Blog2024 (10) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 129 of the I.T. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has only provided cash book and ledger but 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 decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant are considered as under- The submissions with respect 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 foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this amount accordingly. Further, the AO has made addition under 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 proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce is not tenable in the eyes of law. The profit as per the audited books of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... beri Engineering Company v. Deputy Commissioner of Income-tax, Circle-2, Jaipur [2019] 103 taxmann.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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2002] 120 Taxman 595/[2001] 251 ITR 864 (Delhi) that the CIT(A)'s jurisdiction does not extend to introducing an altogether 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Veeranna v. CIT [1972] 83 ITR 750 (AP), Sterling Construction & Trading Co. v. ITO [1975] 99 ITR 236 (Kar) and LokenathTolaram v. CIT [1986] 24 Taxman 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the act. On the matrix as held by the Honourable Delhi high court the above issue falls within the scope of the provision of section 147 of the act and not u/s 251 (1) (a) of 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failure to furnish credible evidence in support of source of cash deposited during demonetization the books of accounts are not found to be reliable and rejected by invoking section 145(3) of 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is impermissible in law. Therefore, the action of the Ld. AO in holding that the assessee could not substantiate the sales with documentary evidences is not based on correct appreciation of the facts. The argument 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. Feeli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon'ble Tribunal and following grounds of appeal were raised in Form No 36: - 1. On the facts and in the circumstances of the case, the order CIT (A) erred in in rejecting the books of account of the assessee by applying the provision of Section 145(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 ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material in its Books of Accounts of current and earlier years. Further, as business concern, sale of material worth Rs. 3,24,44,415/- in cash during the F.Y sounds uncommon. And no such sale has occurred in any previous years. Further, the assessee has not provided any bills and vouchers 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 incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account regularly maintained by the assessee in ordinary course of business are acceptable evidence u/s 34 of Evidence Act. a.3.(ii) The source of cash, which deposited in demonetized currency was duly explained:- During the year under consideration, the assessee deposited Rs. 2,79,00,000/- in demonetized currency. 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 quan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evailing 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 are not required to obtain and keep as per the law. The assessee had cash balance of Rs. 2,79,88,461.88 as on 08-11-2016 in the audited books of account, out of which it deposited Rs. 2,79,00,000/- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offered by the assessee with respect to the transactions of identical nature at his sheer convenience merely on the basis of surmises and conjecture without any evidence or material on record. Thus, bald allegation of ld. AO that the cash deposited in demonetized currency had arisen from some undisclosed source not reflected in the books of account as against the accounted cash sales in books 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 Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot partake the character of evidence. The reliance is placed on following decisions: - i) Dhakeswari Cotton Mills Ltd vs. Commissioner of Income-tax [1954] 26 ITR 775 (SC) ii) Umacharan Shaw & Bros vs. Commissioner of Income-tax [1959] 37 ITR 271 (SC) iii) CIT vs. Kapil Nagpal, DBITA 609/2014 (Delhi HC) iv) Goyal Gases (P.) Ltd vs. Commissioner of Income-tax [1997] 94 TAXMAN 57 (DELHI) It is admitted position of law the suspicion 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts or allegation noted by the ld. AO is duly considered and discussed by the ld. CIT(A) while dealing with the appeal of the assessee. The revenue did not pin point which of the findings of the ld. CIT(A) is incorrect and against the facts placed on record by the assessee. The ld. AR of the assessee during the course of hearing taken us to all the points raised by the AO so as to prove that the contention raised by the AO to prove that the sales made by the 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 conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheja stone to reduce the load over the building. It is normal practice of the builders to account for the income of these items on cash basis. a.3.(vii) No sale after 08-11-2016 The lower authorities failed to understand the nature of the business of the assessee. When the excavation is completed no further stone can be digged out from earth. Similarly when the civil structure work is complete, the waste/scrap from steel or shuttering cannot be obtained. Further there 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h respect to sums credited/offered as income in its books as unsatisfactory solely to extort higher rates of taxes thereon u/s 115BBE of the Act. The AO/CIT(A) in exercising his powers u/s 69A/68 of the Act is not vested with unfettered powers to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjecture. The AO/CIT(A) is bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) is dehors of any credible evidence/material on record is unsustainable both in law and on facts. Findings so made by the AO/CIT(A) deeming the impugned cash deposits arising out of accounted cash sales as unexplained investment/cash credits merely on the basis surmises & conjectures is fallacious and deserves to be deleted. It is also pertinent to mention here before applying the provisions of section 115BBE of the Act the specific show caused notice did not give to the assessee and in absence 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere conjecture and surmise of the Revenue Authorities. The relevant facts of the said case are that the ITO in the course of the assessment noticed that the appellant therein had encashed high denomination notes of the value of ₹ 2,91,000. The ITO asked for an explanation, which the appellant gave stating that these notes formed part of its cash balances including cash balance in the Almirah account. The appellant sought to prove the fact that the high denomination notes encashed by it formed part of its cash balances from 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 app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denomination notes of Rs. 1,000 each which it encashed on 19th Jan., 1946. It was not open to the Tribunal to accept the genuineness of these books of account and accept the explanation of the appellant in part as to Rs. 1,50,000 and reject the same in regard to the sum of Rs. 1,41,000. Consistently enough, the Tribunal ought to have accepted the explanation of the appellant in regard to the whole of the sum of Rs. 2,91,000 and held that the appellant had satisfactorily explained the encashment of the 291 high denomination notes of 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 proba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt is entitled to interfere. [para 23] j) Lakhmichand Baijnath V. CIT [1959] 35 ITR 416 (SC).) Amount credited in business books can normally be presumed as business receipt. When an amount is credited in business books, it is not an unreasonable inference to draw that it is a receipt from business k) CIT v/s. Kailash Jewellery House ITA No. 613/2010 decided by Delhi High Court on 09.04.2010 In the facts of above case cash of Rs. 24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year." Therefore, addition under section 68 of I Tax Act can be made only he the explanation of the assessee is not satisfactory in the opinion of "Assessing Officer". The Assessing Officer has been defined u/s 2(7A) of Income Tax act as under:- "(7A) Assessing Officer" means the Assistant Commissioner 31[or Deputy Commissioner] 32[or Assistant Director] 31[or Deputy Director] or the Income-tax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub-section (2) of section 120 or any other provision 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them ". "Ministers and their departments have several times fallen foul of the same rule, no doubt equally to their surprise....":' c) Hon'ble ITAT Chennai Bench in the case of Smt. Sekar Jayalakshmi vs Income Tax 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 "How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB page 125). The assessee objected the proposed rejection of the books of account by filing detailed reply to ld CIT(A). (Copy at PB page 126-130). However, 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) c.3 Submission of assessee:- (i) The ld CIT(A) rejected the books of account without examining the books of account:- The assessee produced complete set of books of account before the ld AO, who examined the books of account and he has not rejected the books of account, on 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintained by the assessee in ordinary course of business are acceptable evidence u/s 34 of Evidence Act (iv) Verification of cash sale cannot be a valid ground to reject the books of account. The ld CIT(A) rejected the books of account by holding that the assessee has not produced credible evidence in support of cash sales. 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 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in rejecting the books of account and disturbing the trading result." iii) ITAT Delhi in Kishore Jeram Bhai Khaniya, Proprietor, M/s Poonam Enterprises v. ITO ITA No. 1220/Del/2011 ITAT Delhi Judgement dated 13.05.2014) The Hon'ble Tribunal held that We find that so long as the availability of stock in there and there is nothing adverse against the cash memos issued by the assessee, such cash sales cannot be doubted. Here it is pertinent to note that the volume of such cash sales at Rs. 22.06 is to be seen in the light of assessee's total turn- over of Rs. 10.29 crores. It is but natural that if a customer makes cash purchase and lifts the goods, there is no duty cast upon the seller to insist for the address of the purchaser. In the light of the fact that stock record 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in such cases is whether the assessee's accounts are maintained according to the method regularly employed by him, whether they are correct and complete, and whether the income can be properly computed from the accounts. There is no finding that the purchases have been exaggerated or the sales have been suppressed, or that any transaction has not come into the accounts. In these circumstances, the grounds stated by the Tribunal are neither valid nor relevant in rejecting the accounts of the assessee. (c) ST Teresa's Oil Mills Vs State of Kerala 76 ITR 365 (Ker) Accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reason to indicate that they are unreliable. (e) Haridas Parikh Vs ITO 113 TTJ 274 (ITAT Jodhpur):- Hon'ble ITAT Jodhpur Bench has held that unless the AO is able to point out certain transactions which have been left 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vdesh Pratap Singh Abdul Rehman & Bros Vs CIT (1994) 210 ITR 406 (All) 186-187 -Held that absence of stock register may not per se lead to an inference that accounts are false or incomplete. (h) Pandit Bros Vs CIT (1954) 26 ITR 159 (Pun) PB 188-194-Held that absence of stock register is not sufficient ground to reject the books of account. (i) Ashok Refractories Pvt Ltd Vs CIT (2005) 279 ITR 475 (Cal) PB 195-201 - Held that absence of stock register may not per se lead to an inference that accounts are false or incomplete. Therefore, in view of submission, the ld CIT(A) has not justified in rejecting the books of account by invoking the section 145 and the action of ld CIT(A) deserves to be set aside 3.3 Ground No 3:- Not pressed Prayer of assessee:- The humble assessee prays your honor kindly to allow the appeal filed by the assessee" 6. To support the contention so raised in the written submission reliance was placed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 (Allahabad)(MAG.) 163-169 16 R.B. Jessaram Fatehchand (Sugar Dept.) v/s Commissioner of Income Tax [1970] 75 ITR 33 (Bombay) 170-177 17 CIT v/s. Kailash Jewellery House ITA No. 613/2010 Delhi High Court dated 09.04.2010 178-179 18 Gurumukh Singh Vs CIT 12 ITR 393, 427 (FB) 180-207 19 As in the case of CIT Vs. Associated Transport Pvt. Ltd. [1994 (1) TMI 18 - CALCUTTA HIGH COURT] 208-210 20 Ghanshyam K. Khabrani vs. ACIT [2012] 346 ITR 443 (Bom) 211-216 21 CIT v. SPL'S Siddhartha Ltd. [2012] 345 ITR 223 (delhi) 217-220 22 M. DURAI RAJ vs. COMMISSIONER OF INCOME TAX HIGH COURT OF KERALA (1972) 83 ITR 484 (KER) 221-227 23 ST Teresa's Oil Mills Vs State of Kerala 76 ITR 365 (Ker) 228-230 24 CIT vs. A.R.J. Security Printers (2003) 183 CTR (Del) 323 : (2003) 264 ITR 276 (Del) 231-233 25 CIT vs. Neo Poly Pack (P) Ltd. (2000) 245 ITR 492 (Del) 234-235 26 Avdesh Pratap Singh Abdul Rehman & Bros Vs CIT (1994) 210 ITR 406 (All) 186-187 236-237 27 Pandit Bros Vs CIT (1954) 26 ITR 159 (Pun) 238-244 28 Ashok Refractories Pvt Ltd Vs CIT (2005) 279 ITR 475 (Cal) 245-251 ITAT Jaipur Bench 29 ACIT Circle-1 Jaipur vs M/s Uttam Chand Deshraj (ITAT Jaip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee is in the business of development of immovable property. The assessee has excavated the land which is under development. For the basement of the property to be developed was rock land. Assessee excavated 10 feet which of two basements and five feet four foundation of the property. Thus, effectively total 25 cubic feet of land area more than 10,000 sq. feet dig out and thereby the assessee has sold and offered and income of Rs. 3,24,44,415/- as other operating revenue, vide note No. 23 of audited accounts placed on record at page No. 44 of the paper book. The assessee has offered profit for an amount of Rs. 3,08,39,992/- on this operating income. If that income was not offered the assessee would be in loss for the year under consideration. The assessee has already offered income which is duly reflected in the audited accounts. Ld. AO has not invoked the provisions of section 145(3) and thereby without doing so made the addition of the sales already reflected in the books of accounts and the same cannot be separately made in the hands of the assessee. The assessee based the provisions of section 2(12A) of the Act maintained records which were produced before the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also filed a report of ld. AO which reads as under:- "Subject:--Calling of report on Appellate proceedings in the case of Suwalka and Suwalka Properties and Builders Pvt. Ltd., PAN- AAHCS7054C for the A.Y. 2017- 18 before the Hon'ble ITAT-reg. Respected Sir, Kindly refer to your office letter No.432 dated 12.08.2024 on the above mentioned subject wherein report was sought in the case of the assessee before the Hon'ble ITAT. In continuation to earlier factual report vide this office letter No. 183 dated 12.08.2024, it is further submitted that the assessee Company engaged in the business of real estate as a builder and developer. The assessee company E-filed its Return of income on 06.03.2018 declaring total income of Rs. 3,67,82,720/- for the A.Y. 2017-18. Subsequently, assessment order u/s 143(3) of Income Tax Act, 1961 was passed by the AO at assessed income of Rs. 6,46,82,720/ on 22.12.2019 after making addition of Rs. 15,00,000/- on account of lump sum addition out of other expenses and Rs. 2,64,00,000/- on account of cash deposited during demonetization period. Aggrieved by the aforesaid addition the assessee company has preferred the appeal before CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Submission of Assessee before ITAT 3.1 Ground No 1 & 2 are inter connected and basically relate to holding the receipts of Rs. 2,64,00,000/- from cash sales which was deposited in bank account in demonetized currency as unexplained cash credit u/s 68 and taxing the same at higher rate u/s 115BBE of I. Tax Act by rejecting the books of account of the assessee. 3.1.1 Issues Involved in the appeal Basically three issues are emerged from the appeal of the assessee filed before Hon'ble Tribunal. (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. B) Whether the CIT(A) can apply the provisions of section 68 of Income Tax Act. (C) Whether the books of account of the assessee can be rejected by CIT(A) by applyin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... including the cash deposited during demonetization in its total income for the year will amount to double taxation is not found convincing. The assessee has not provided any bilis and vouchers in support of its claim of sale of Rs. 3,24,44,415/- and it could not establish that the cash obtained from such sale is deposited during demonetization. During the assessment proceedings, the assessee has only provided cash book and ledger but not provided any other documents in support of its claim despite being called several times by the then A.O.. Since, during the assessment proceedings, the assessee could not establish that such sale has occurred during the year under consideration, Hence, the A.O. has rightly made addition of Rs. 2,64,00,000/- as treated unexplained money. (ii) During the appellative proceedings before ITAT, the assessee has also raised grounds:- (B) Whether the CIT(A) can apply the provisions of section 68 of Income Tax Act. (C) Whether the books of account of the assessee can be rejected by CIT(A) by applying the provisions of section 145(3) of 1. Tax Act. As discussed above, the sale of Cheja Stone is not considered as genuine business of the assessee by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. While considering the scope and powers of the appellate authority, under the Income Tax Act, 1961, courts have consistently held that the power of the first appellate authority are coterminous with that of the Assessing Officer and that the appellate authority can do what the Assessing Officer ought to have done and also direct the latter to do what he has failed. Appeal is also a continuation of original proceedings and unless some fetters are placed upon the powers of the appellate authority by express words, the appellate authority can exercise all the powers as that of the original authority. Reliance is placed on the observations of the Apex Courts in CIT v. Kanpur Coal Syndicate [1964] 53 ITR 225, the Court held that powers of the Commissioner are co-terminous with that of the ITO and the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. A question regarding powers of the first appellate authority came up for consideration before the Supreme Court in CIT v. NirbheramDaluram [1977] 224 ITR 610/91 Taxman 181. Following their carlier decisions in Kanpur Coal Syndicate's case (supra) and Jute Corpn. of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial tax rate as per provisions of section 115BBE of the Act. So, considering the overall fact already discussed in the orders of the lower authorities, ld. DR supported the orders of the lower authority. 10. We have heard the rival contentions and perused the material placed on record. In this appeal the assessee has effectively taken two grounds of appeal. Ground no. 1 raised by the assessee challenging the action of the ld. CIT(A) in rejecting the books of accounts of the assessee as per provision of section 145(3) of the Act and that too without asking the assessee to produce the books and without examination of the same he has rejected the books results. Ground no. 2 raised by the assessee challenging the action of the ld. CIT(A) holding that so far as the addition made by the ld. AO for an amount of Rs. 2,64,00,000/- provision of section 68 will apply instead ld. AO applied 69A of the Act. 11. The apple of discord for raising both the grounds is that the assessee has deposited as sum of Rs. 2,79,00,000/- during the demonetization period in the bank account. Ld. AO granted relief for an amount of Rs. 15,00,000/- as the assessee has disclosed a sum of Rs. 15,00,000/- in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book and ledger but not provided any other documents in support of its claim despite being called several times. Since, the assessee could not establish that sale 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 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. 12. When the matter carried to the first appellate stage, the ld. CIT(A) so far as the contention of the assessee that the income for an amount of Rs. 2,64,00,000/- taxed twice was accepted and directed the ld. AO reduce that amount from the income of the assessee. But while directing so ld. CIT(A) invoked the provision of section 145(3) of the Act and hold that assessee failed to furnish credible evidence in support of the source of cash deposited and hence he rejected the books results. He also holds a view that instead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy been accepted. There cannot be a double addition while considering that sales as part of the records and the profit of the same is already subjected to tax and making again the cash deposited into the bank account as unexplained money as per provision of section 68 of the Act when the ld. AO has not rejected the book results and without reducing the sales from the books so maintained by the assessee. Thus, the same income cannot be taxed twice, one as sales and another considering the cash deposit as unexplained. The ld. CIT(A) has rejected the book results simply mentioning that ; In response to the show cause notice, the appellant was required to furnish verifiable evidences to prove that genuine sale was made from which the cash was received which was deposited during demonetization. However, the appellant failed to furnish any evidence required by show cause notice. Because of failure to furnish credible evidence in support of source of cash deposited during demonetization the books of accounts are not found to be reliable and rejected by invoking section 145(3) of the Income Tax Act. The cash credited in the name of sale is treated as unexplained credits in the books of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144. As it is evident that the provision of section 145(3) can be invoked in the following circumstances: • When the Assessing Officer 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. • When the accounting standards notified under Section 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 bench also observed that when the provision of section 145(3) is to be invoked the assessment is to be completed as per the manner provided in section 144 of the Act and the proper opportunity is required to be given by pointing out the defects in the books of account w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we hold a view that the revenue cannot be accept the part of the sales as explained and part of the sales not explained on the same set of evidence. Therefore, 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 account. 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. We get support of our view from the decision of our High Court of Rajasthan in the case of Smt. Harshila Chordia vs Income-tax Officer [2008] 298 ITR 349 (Rajasthan) "wherein it was held that no addition could be made in respect of the amount standing in the books 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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