9911796707
TMI Blog2024 (12) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The first two interconnected common issues in these six appeals of assessee is, first, as regards to the orders of CIT(A) confirming the action of AO in estimation made on gross profit whereas estimation should have been made on net profit basis and also on historical data and the profit rate in the line of business and second is as regards to enhancement made by CIT(A) by making disallowance u/s.40A(3) of the Act when the AO and CIT(A) made estimation on gross profit. The facts and circumstances are exactly identical in all these years and issues are also exactly identical and grounds raised by the assessee are also identical, hence, we will take the facts & grounds from ITA No.1046/CHNY/2024 for assessment year 2016-17 and will decide the interconnected issues. The relevant grounds of the above two interconnected issues are as under:- vii. The Learned AO/CIT(A) erred in confirming the addition towards gross profit based on the evidences collected from the third party without giving the opportunity of cross examination. viii. The Learned AO/CIT(A) ought to have seen that the legal presumption u/s 132(4A) that the content of the seized material are true and correct is applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed u/s.132(4) of the Act dated 10.11.2020 also confirmed the chats. During the course of search on MJPL, Income-tax Department found transactions of gold, old gold exchange, purchase of gold in cash recorded in ledger maintained in the name of 'AMANULLA KDR' in J-Pack software. According to AO, the transactions recorded in 'Amanulla KDR' in J-Pack software by MJPL are its unaccounted business transaction with various retailers including the assessee firm. The AO further recorded that the J-Pack software is used for recording of accounted and unaccounted transactions of MJPL as stated on oath by Shri Suresh Khatri while replying to question No.27 of statement recorded u/s.132(4) of the Act on 11.11.2020. When the 'Amanullah KDR' extracted from J-Pack software was maintained by MJPL was confronted to salesman and accountant of Shri Mohammad Anees, he replied during statement recorded u/s.132(4) of the Act that transactions recorded in ledger 'Amanullah KDR' pertains to the assessee firm and these transactions are either exchange of old gold or cash transactions entered into by assessee firm with MJPL. He also admitted that the transactions are not recorded in the books of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... total gold ornaments from the assessee firm by MJPL during financial year 2015-16 relevant to this assessment year 2016-17 is of 5417.85 grams, which was treated as unaccounted sales of the assessee firm during the year under consideration and he computed the average value of this gold at Rs. 1,36,05,133/-. The AO computed this by taking the average value of valuation on the basis of RBI data as under:- Average annual value of the 10 gms of gold (24 Carat) during the FY.2015-16 Rs.27414.55/10 gms (As per data taken from official website of Reserve Bank of India) Average annual value of the 1 gm of gold (24 Carat) during the FY 2015-16 Rs.2741.45/gm Average annual value of the 1 gm of gold (22 Carat i.e., 91.6%) during the FY.2016-17 Rs.2511.17/gm Average annual value of the 5417.85 grams of gold (22 Carat i.e. 91.6%) during the FY. 2016-17 Rs.1,36,05,133 Accordingly, he estimated the profit on unaccounted sale of jewellery at Rs. 16,32,616/- and added to the returned income of the assessee. 3.1 The AO also made addition of unaccounted cash pertaining to financial year 2015-16 relevant to this assessment year 2016-17 at a sum of Rs. 10,17,517/- and added the same u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ash during search in its case. The appellant can't be treated as owner of cash basing on entries made in some third-party unaudited accounts. Further, sworn statements of employee and Sri Amanullah alone can't be relied upon to conclude that appellant is owner of cash without any other corroborative evidence. The AO has wrongly used statements recorded subsequent to search to conclude that transactions recorded in 'Amanullah KDR' ledger account in J pack software pertain to appellant. The AO has erroneously Considered RTGS transactions, gold transactions that are recorded in books also as Unexplained jewellery and unaccounted cash. Net profit of 12% adopted by AO to tax profit on Gold purchased from M/s MJPL İs without any basis. The AO ought to have adopted net profit of 1% only which is the usual net profit obtained by appellant. It is also argument of appellant that in case of other retailers who had similar cash and Gold transactions with M/s MJPL wrt unaccounted Gold purchases from that company, department has only taxed Gross profit on unaccounted sales on par with Gross profit admitted by those parties in previous years whereas appellant is discriminated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered that sale receipts from unaccounted sales are utilised for payment of cash for subsequent purchases of Gold from M/s MJPL, similarly investment in old Gold/gold bars which is also used as purchase consideration is also funded by unaccounted sales. When both purchase and sale transactions are not recorded in books, Hon'ble courts in following cases held that only Gross profit from sale transactions is to be subjected to tax. 1. JK Ramesh Gandhi Vs DCIT, ITA No: 547/Chny/2021: During the course of survey, unaccounted purchases & unaccounted sales were noticed. The assessee had admitted unaccounted purchases & unaccounted sales and also offered gross profit on unaccounted sales as income for the AYs 2015-16 to 2017-18 and filed revised return and also paid taxes. The AO, once again, made addition towards unaccounted purchases on the ground that source was not explained. We do not agree with the reasons given by the AO for the simple reason that when survey team was noticed unaccounted purchases & unaccounted sales and also difference has been treated as unaccounted income of the assessee, then question of making further additions towards unaccounted purchases does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounted purchases from M/s MJPL. Gross profit taken is gross profit admitted by those retailers in previous years. 1. Balagopalan Jewellery Mart (PAN AAJFS7538N) : In this case, Account of assessee firm Was found to be maintained in J Pack software under the name Bal Gopal MD'. Modus operandi similar to that of appellant were followed of unaccounted cash, Gold payment wrt Unaccounted purchase of gold from M/s MJPL. But the AO has assessed only Gross profit on unaccounted purchase of gold and others from M/s MJPL by adopting GP rate admitted by assessee in the return filed for the year holding that unaccounted items purchased would have been sold during the year. 2. Mohammad Najeef: In this case, Account of assessee was found to be maintained in J Pack software under the name Safina Tenkhasi. Modus operandi similar to that of appellant were followed of unaccounted cash, Gold payment wrt Unaccounted purchase of gold from M/s MJPL. But the AO has assessed only Gross profit on unaccounted purchase of gold and others from M/s MJPL by adopting GP rate admitted by assessee in the return filed for the year holding that unaccounted items purchased would have been sold during the y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to arrive at unaccounted business income from Unaccounted sale of Unaccounted purchases from M/s MJPL for the Year. The AO may verify above accounts to arrive at correct number of Unaccounted purchases after excluding purchases already disclosed in the books. The Revenue is not in appeal against the order of CIT(A) deleting the addition of unexplained cash added by AO u/s.69A of the Act, amounting to Rs. 10,17,517/-. 4.1 The CIT(A) enhanced the assessment by disallowing cash payment made to the extent of Rs. 10,17,517/- by invoking the provisions of section 40A(3) of the Act. The CIT(A) directed the AO to disallow cash payment of Rs. 10,17,517/- u/s.40A(3) of the Act by observing in paras 7.3.9 & 7.3.10 as under:- 7.3.9 IT is undisputed that cash payment to the extent of Rs 10,17,517/- has been made for purchase of Gold from M/s MJPL. As per provisions of section 40A (3) of IT Act if any assessee incurs any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft exceeds 10,000/-, no deduction can be allowed in respect of such expenditure. It is also not di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n before us, the assessee has not contested that rather admitted that these amounts recorded in 'Amanulla KDR', one ledger found in the J-Pack of computer of MJPL, wherein the unaccounted cash is recorded. The assessee has not disputed the unaccounted sales of unaccounted purchases from MJPL by assessee, but only requested that net profit should be estimated and not the gross profit. The Ld.counsel for the assessee now before us filed the GP/NP ratio of the assessee from assessment years 2016-17 to 2021-22. The assessee filed the following chart:- Details 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Gross Profit % 8.49% 14.04% 8.20% 6.17% 8.52% 8.05% Net Profit % 0.34% 1.64% 1.15% 0.67% 0.90% 1.10% Net Profit % (specific to transactions with Mohanlal Jewellers - MJPL) 0.42% 0.69% 0.90% 0.96% 0.81% 0.72% The ld.counsel for the assessee urged for a fair estimation of net profit on the sale recorded during financial years 2015-16 to 2020- 21 relevant to assessment years 2016-17 to 2021-22 for an amount of Rs. 108 Crores but only the unrecorded not thr recorded or accounted for and for this particular year, the amount is Rs. 16,32,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent sale both are in cash and it is not accounted and no deduction has been claimed on this. He stated that when profit rate is applied, that will take care of everything and there is no need for AO to make scrutiny of the amount incurred on the purchases by the assessee. He relied on the above mentioned proposition for this issue. 8. On the other hand, the ld.CIT-DR stated that the CIT(A) has rightly directed the AO that the addition made on account of unaccounted sales is to be retrospective to the extent of gross profit on unaccounted sales made out of unaccounted purchases from MJPL and gross profit is to be adopted as admitted by assessee on gross sales in the return originally filed by it in the year under consideration and subsequent years. 9. We have heard rival contentions on both the issues, which are intertwined. We noted that the CIT(A) has also restricted addition to the extent of gross profit on unaccounted sales arising out of unaccounted purchases made from MJPL and gross profit is to be adopted is gross profit as admitted by assessee on gold sales made in the return originally filed by it for the relevant assessment years. We noted from the above chart reproduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted purchases and consequent sale, the provisions of section 40A(3) of the Act did not apply, where estimation of gross profit is made by rejecting the books of accounts. This view has been held by various High Courts and particularly the Hon'ble Rajasthan High Court in the case of Jadau Jewellers and Manufacturers (P) Ltd., supra, wherein the Hon'ble High Court has considered this issue as under:- 3 The counsel for the appellant has taken us through the order of the Assessing Officer as well as the Commissioner of Income-tax (Appeals)and contended that the view taken by the Assessing Officer is required to be restored. 3.1 The first issue is now covered by the decision of this court and the Tribunal has followed the same. 3.2 In that view of the matter, the Tribunal has not committed any error in deciding question No. 1. 3.3 Regarding question No. 2, the issue is covered by the decision of the Punjab and Haryana High Court in CIT v. Smt. Santosh Jain (2008] 296ITR 324 (P&H) wherein it has been held as under (page 325) : "We are of the view that when income of the assessee was computed by applying a gross profit rate, there was no need to look into the provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been incurred and claimed in the computation of income. The Supreme Court, in the case of Attar Singh Gurmukh Singh Vs. Income Tax Officer, Ludhiana (191 ITR 667), reiterates this position as well. In the present case, the Tribunal confirms as a finding of fact at para 17 of its order that no expenditure has been incurred except the investment in gold. The consideration paid towards the investment has been duly brought to tax as unexplained income, such income not having been claimed as expenditure in the computation of income. The objection of the Revenue is that the valuation of the gold per gram is not Rs. 500 but more as revealed by other disallowances made in the order of assessment and if the higher rate was taken into consideration, one could assume that certain expenditure has been incurred and claimed. We are not persuaded to accept this submission in so far as there is no necessity to consider any other valuation except that relating to the subject disallowance, being Rs. 500 per gram adopted by the Assessing officer after due consideration and application of mind. We are thus of the view that the provisions of 40 A(3) are wholly inapplicable to the facts and circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were seized in the case of the assessee and thereby confirmed the assessment order, even though it pertained to a totally different AY. vi. The Learned AO/CIT(A) ought to have seen that the electronic evidences seized from the mobile phone of the accountant of the partner of the assessee were not relating to this year and is inadmissible in law. 11.1 During the course of hearing, the ld.counsel for the assessee has not made any argument on this issue and hence, it seems that the assessee is not interested in prosecuting this issue and hence, this common issue in all these six assessment years is dismissed. 12. The next issue raised by assessee in ITA No.1051/CHNY/2024 for the assessment year 2021-22, is as regards to the order of CIT(A) confirming the action of AO in making addition of excess stock jewellery incorrectly added when there was no excess stock. For this, assessee has raised the following ground Nos.13 to 15:- Excess Stock Jewellery Incorrecly Added when No Excess Stock: xiii. The Learned AO/CIT(A) erred in adding excess stock found when compared with book stock at the time of search, without properly verifying the invoices which were pending for entry. xiv. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
