9911796707
TMI Blog2025 (1) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... deposited in the bank account of Nirav & Co - survey team of the Investigation Wing and the AO have made detailed enquiry in the case - AO had added these amounts based on the statement of one of the partners of the assessee-firm - HELD THAT:- CBDT has issued the above SOPs/Instructions/Internal guidelines note for handling cases related to demonetization. A verification check list - cash deposit was given for providing assistance to AO for verification of cash deposits and framing of assessment in demonetization related cases. It is found from the assessment order that the AO has not followed the above SOP/Guidelines/Instruction issued by the CBDT while passing the assessment order. It is well-settled that the Instruction /Circulars issued by the CBDT are binding on all officers and persons employed in the CBDT. Hon'ble Supreme Court in case of Navnitlal C. Jhaveri vs. K. K. Sen, [1964 (10) TMI 16 - SUPREME COURT] held that Circulars issued by CBDT are binding on all officers and persons employed in execution of the IT Act, even if they deviate from the provisions of the Act. As stated earlier, the AO has made various additions primarily on the basis of statement of one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and law on the subject, the Learned CIT(A)-4, Surat failed to appreciate the fact that the appellant has not made any sort of use of the bank account pertaining to Nirav R Shah. [4] On the facts and law on the subject, the Learned CIT(A)-4, Surat erred in dismissing the following grounds raised before him: (a) On the facts and in the circumstances of the case, as well as law on the subject, the learned Asst. Commissioner of Income Tax Central Circle - 2, erred in treating the appellant as 'BENIFICIAL OWNER' without any cogent evidence. [Ground No. 10 of Form 31 (b) On the facts and in the circumstances of the case, as well as law on the subject, the learned Asst. Commissioner of Income Tax Central Circle - 2, erred in initiating the provisions of section 115BBE of the I.T. Act, 1961 [Ground No. 11 of Form 35] (c) On the facts and in the circumstances of the case, as well as law on the subject, the learned Asst. Commissioner of Income Tax Central Circle - 2, erred in initiating the provisions of section 271AAC of the I.T. Act, 1961. [Ground No. 12 of Form 35] Your appellant therefore, prays that looking to the fact and law on the subject, the appropriate relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [iv] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition of Rs. 36,17,00,112/- made by the Assessing Officer on account of receipts from M/s. Nirav & Co. under Sec.69 of the Act to Rs. 4,00,00,000/- ignoring the admissions of the partner of the assessee in the statement recorded on oath as well as his own findings that the bank account of M/s. Nirav & Co was controlled by the partner of the assessee-firm viz., Shri Himanshu Shah and the same was used for depositing substantial amount of cash from sources which remained unexplained. [v] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition of Rs. 36,17,00,112/- made by the Assessing Officer on account of receipts from M/s. Nirav & Co. under Sec.69 of the Act to Rs. 4,00,00,000/- by taking the peak amount of the 17 transactions, ignoring the own finding that the sale proceeds recorded in the name of M/s. Nirav & Co are false as unaccounted sales were made to M/s. Nirav & Co. [vi] On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs,13,36,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs without appreciating the fact that the partner of the assessee has failed to explain the details of purchase of Silver from M/s. Maharshi Traders and its sale to Nirav & Co., with supporting documents even during the course of survey proceedings or during the course of assessment/appellate proceedings. [xi] On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 76,00,000/- made by the Assessing Officer on account of disallowances of claim of purchases from Ms. Marshi Traders by observing that this amount also covers the total amount of Rs. 36.17 Cr. being the sales made to M/s. Nirav & Co and considered while deciding the issue of addition of Rs. 36.17 Cr. [xii] In addition and in alternate to Ground No. 1 to 11, on the facts and in the circumstances of the case and in law. the Ld.CIT(A) has erred in deleting all the additions made by the Assessing Officer, without appreciating the fact that the documents/bank statements based on which additions were made, were found during the course of survey proceedings under Sec.133A of the Act at the business premises of the assessee and the assessee has failed to furnish de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t his bank account was fraudulently used by someone else. In view of the above, assessee was asked to explain the nature and source of cash deposit in the bank account of M/s Nirav & Co. The assessee was also asked to explain about purchase of 176 kgs. silver worth Rs. 76 lakh from M/s Maharishi Traders. The assessee was also asked to explain entries in the impounded books A/1 to A/3 found from the assessee's premises. The show-cause and reply of the assessee are reproduced at 2.3 and 2.4 of the assessment order. In the reply, the assessee stated that the bank account of M/s Nirav & Co. was opened at least two years before the demonetization period. The bank account was opened and operated by Shri Nirav R Shah, proprietor of M/s Nirav & Co. The assessee further replied that the cash was deposited in account of M/s Nirav & Co under instruction and guidance of Shri Nirav R Shah. Only because Shri Nirav R Shah is backing out from his acts and misleading the Department, the assessee cannot be blamed. It was further submitted that the assessee sold gool to M/s Nirav & Co. against the payment received from M/s Nirav & Co. from its bank account. The assessee-firm had purchased gold bullio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above, the assessee was held to be beneficiary owner of the cash of Rs. 36,17,00,000/- which was added u/s 69 of the Act to the total income of assessee. 7. The AO also noted that the assessee had received funds of Rs. 13,36,00,000/- during the year from the bank account of M/s S.R. Traders which was opened during the demonetization period on 15.11.2016. The total deposits in the said account was Rs. 24,35,98,500/- out of which Rs. 13,36,00,000/- was transferred to the assessee. The AO issued show-cause notice in response to which assessee made submission which is at para-4.2 and 5.3 in assessment order. The assessee submitted that it had sold gold to M/s S.R. Traders against the payment received from its bank account. The assessee sold goods out of its purchases of gold bullion from various bullion merchants at Ahmedabad to whom payments were made through account payee cheques. The assessee has maintained month-wise quantitative details of bullion and as well as month-wise purchase and sale both in quantity and in rupees. The explanation of the assessee was not accepted because M/s S.R. Traders was a non-existing entity. The address of M/s S.R. Traders was found to be non- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to purchase bullion. This cycle of purchase and sale of bullion continued during the period of demonetization till the date of survey. The CIT(A) has reproduced the findings of Special Judge CBI Court No.5 Ahmedabad at para 8.4 and he observed that the bank account was operated by Shri Nirav R Shah since 2014 but he lodged complaint with the police on 26.12.2016, after the date of survey u/s 133A of the Act in the premises of assessee on 23.12.2016. The CIT(A) held that deposit of cash in the bank account of M/s Nirav & Co by Shri Himanshu Shah was in connivance with Shri Nirav R Shah. He noted that there were 17 transactions over a period of 25 days where cash deposited was first used to buy bullion, the said bullion was sold, cash was generated, the said cash was again deposited to buy the bullion and such cycles continued for 17 transactions. Hence, only the peak credit of these deposits can be brought to tax as "unexplained investment" u/s 69 of the Act and not the total deposit of Rs. 36.17 crore. He further held that sale proceeds recorded in the books of account in the name of M/s Nirav & Co. are false as no sales were made to M/s Nirav & Co. The appellant sold the bullion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... various dates post-demonetization in old high denomination notes of Rs. 500/ - & 1000/-. He also submitted that there was not a single cash deposit in the bank account of M/s Nirav & Co after demonetization period. This clearly shows that the assessee firm was either having undisclosed income/money as on 08.11.2016 or accepted and deposited unaccounted old notes of Rs. 1000/Rs.500 beyond the prescribed time limit which otherwise was not allowable as per Law. The assessee failed to explain as to how almost all the cash deposited in the bank account of M/s Nirav & Co were immediately transferred to bank of the assessee firm. Also, Shri Nirav R. Shah has no capacity to deposit and transfer such huge sums to the assessee. In the invoices prepared by the assessee, the address of M/s Nirav & Co is mentioned as "M/s Nirav & Co, Nanpura Surat" which is quite vague. The party was not found to be in existence at such address. The ld. CIT-DR also submitted that CIT(A) failed to appreciate the fact that there were huge cash credits in the bank accounts of M/s Nirav & Co which was operated by the partner of assessee firm, Shri Himanshu R. Shah, but the CIT(A) simply held that only peak credit i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een these parties. The account of M/s Nirav & Co has been opened by Shri Himanshu Shah acting as an introducer. The cash was handled as well as deposited by Mr. Himanshu Shah, as admitted in his statement. Almost all of the cash from M/s Nirav & Co and majority of the cash from M/s SR traders were immediately transferred to the account of the assessee firm. The Ld. CIT-DR submitted that, as admitted by Mr. Maharishi Chokas in his statement, the account was opened in the name of M/s Nirav & Co for the purposes of Mr. Himanshu Shah and his firm. Besides the money transferred from M/s Nirav & Co to the assessee firm Rs. 1 crore rupee was also routed through M/s DN Traders into the balance sheet of assessee firm. The Ld. DR submitted that gold in the form of bullion is purchased in the units of 100 grams and at the then prevailing rate, these units would cost above 3 lakhs. The assessee has admitted in statement that the sales in the name of M/s Nirav & Co. have actually been sold to the retail customers in cash. The firm could not have sold to the retail customers in cash for a bill of 3 lakhs rupees. In order to have turnover of about Rs. 34 crores, the assessee would have to sell to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han Rs. 10 crore of cash has been deposited. The cycle of such transactions would take at least 3 to 4 days but total of almost Rs. 20 crore have been deposited in first four days in the account of M/s Nirav & Co which is not possible. The whole amount deposited in the accounts of M/s Nirav & Co and M/s S.R Traders, were immediately transferred to the account of assessee firm which represents the unaccounted income of the assessee firm and needs to be taxed as unexplained investment u/s 69 r.w.s. 115BBE of the Act in absence of any further details submitted by the assessee. Reliance was placed on the decision in case of Vaishnavi Bullion (P) Ltd. vs. ACIT, [2022] 145 taxmann.com 197 (Hyderabad). The ld. CIT-DR submitted that facts of the present case are similar to the facts of Vaishnavi Bullion (P.) Ltd. (supra). In the said case, huge cash deposits in the bank account of the assessee were found after demonetization was announced. The assessee had initially claimed that it had received advances of less than Rs. 2 lakhs each from 2153 customers for purchase of gold bullion on the date of demonetization. It was held by the Tribunal that in absence of availability of gold with the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Co. was made under connivance. The bank account of M/s Nirav & Co. was already in existence since 06.06.2014 and assessee had given only the introduction and nothing more for last 2 years. The Investigation Team recorded the statement of bank official, Shri Jyotindra Gajiwala on 26.12.2016 and in reply to Q. No. 9 he stated that the account of M/s Nirav & Co. was operated on 15.09.2014 and 10.11.2014 and assessee was not concerned with the transactions on these dates. The Investigation Wing and the AO have not examined Mr. Nirav Shah on these credit entries. In the course of the proceedings before CIT(A), assessee filed the affidavit of Shri Himanshu R. Shah executed on 18.01.2020 retracting the admission made his statement recorded at the time of the survey. Even otherwise, the statement on oath u/s. 131(1A) cannot be taken in the course of the survey and hence the statement made by Shri Himanshu R. Shah do not carry evidentiary value. Reliance was placed on the following decisions: (i) CIT vs. S. Khader Khan Son - 25 taxmann.com 413 (SC); (ii) CIT vs. S. Khader Khan Son - 300 ITR 157 (Mad) and (iii) Paul Mathews & Sons vs. CIT - 129 Taxman 416 (Ker). The ld. AR submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again u/s 68 of the Act would tantamount to double taxation of the same income. 13.4 The ld. AR also submitted that AO in fact didn't make the addition u/s 68 of the Act but he invoked section 69 observing that that there are enough circumstantial evidences to suggest that the assessee was the actual beneficiary of the cash deposit made in the bank account of Nirav & Co. He submitted that the Section 69 is attracted only when the investments found are not recorded in the books of account, if any, maintained by the assessee and assessee doesn't offer explanation about nature and source of the investment. Here, the amount received from the Nirav & Co. was properly recorded in the books of account of the assessee firm and there is no question of applicability of Section 69 of the Act. 13.5 The ld. AR relied on the decision of Hon'ble Supreme Court in case of Sreelekha Banerjee vs. CIT, 49 ITR 112 and submitted that the department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof. He also relied on the following decisions of the Hon'ble Supreme Court where the additions were deleted as they were made on basis of the surmises and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said that assessee would receive the abnormal profit as margin of profit involved in trading of bullion is very low of about 1% only. The assessee actually showed the overall gross profit of 1.57%. 13.9 In view of the above discussion, the ld. AR submitted that even if the statement of the assessee carries evidentiary value, the assessee has shown the correct affairs in its audited books of account regarding the income earned on sale of the bullions. The statement recorded u/s. 131 at the of the survey cannot be used partially and it should be accepted in toto meaning thereby that deposits in the bank account of M/s Nirav & Co. represented the sales made by the assessee or M/s Nirav & Co. In the course of the survey no evidence was found to conclude that assessee earned more income which can be deduced on the basis of the materials found at the time of the survey. After the transfer of various sums from bank account of the M/s Nirav & Co., the amounts were used by the assesses to purchase bullion which was not doubted by the revenue. This fact indicates that that no undisclosed investment was unearthed by the revenue in the course of the survey conducted against assessee afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only business income and has always shown returned income from business u/s. 28 of the Act. Therefore, the amount deposited in the bank account is required to be considered as business income only and there is no question of presuming to have any other source of income and hence, provision of Section 115BBE cannot be attracted. For this, ld. AR relied on the following decisions: (i) J.K. Chokshi vs. ACIT Tax Appeal 149 of 2003 (Guj.); (ii) Green Associates vs. PCIT - Tax Appeal No. 1199 of 2018 (Guj.); (iii) DCIT v/s. Radhe Developers India Ltd. - 329 ITR 1 (Guj.) and (iv) CIT vs. Mhaskar General Hospital in Tax Appeal No. 1474 of 2009 (Guj.) 13.13 Without prejudice, the ld. AR submitted that the amendment to section 115BBE was made through Taxation Laws (2nd amendment Act, 2016) which received the assent of the President on 15.12.2016 and was published vide gazette dated 15.12.2016. The law is well settled that the Income-tax Act, 1961 as it stands amended on the 1st day of April of any financial year apply to the assessments of that year. Any amendments in the Act which come into force after the 1st day of April of financial year would not apply to the assessment to that year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bullion to customers in cash and the actual sales were never recorded. Sale invoices were raised in the name of Nirav & Co. because money was transferred to the bank account of assessee from Nirav & Co. Entire operation of sale in cash, collection of cash from customers, deposit of cash in the bank account of Nirav & Co. has been done by Shri Himanshu R. Shah, partners of the appellant firm. The CIT(A) has allowed relief of Rs. 32,17,00,112/- and sustained addition of Rs. 4,00,00,000/-, being peak credit as unexplained investment in bank deposit. 14.3 Ground No.4 was addition of Rs. 13,36,00,000/- u/s 68 on protective basis. The addition was deleted because substantive addition was made in case of M/s S. R. Trader in whose bank account cash of Rs. 24,35,98,500/- was made out of which Rs. 13,36,00,000/- had been transferred to the bank account of the appellant. 14.4 Ground No.5 was addition of bogus purchases of 176 kgs of silver worth Rs. 76,00,000/- purchased from M/s Maharishi Traders. The CIT(A) deleted this addition by treating sale consideration of this purchase as part of cash deposit of Rs. 36,13,00,112/- in the bank account of Nirav & Co. on which peak credit was held to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court in case of CIT vs. Vijay Agricultural Industries 294 ITR 610 (All) and Hon'ble Delhi High Court in case CIT vs. D.K.Garg ITA No.115/2005 dated 04.08.2017. (ii) As the amount of cash credits were standing in the names of different persons which all along the assessee had been claiming as genuine deposit, withdrawal / payment of amount to different set of persons would not at all entitle the applicant to claim benefit of peak credits. It has been so held in the case of Bhaiyalal Shyam Behari vs. CIT, 276 ITR 38 (All.). 15.2 While determining the peak credit, the withdrawal of cash, if not utilized elsewhere, is considered as available for making deposits. The highest unexplained cash deposit is considered as the peak credit. The determination of the peak credit reduces the taxable income. However, where withdrawal are through cheques, the benefits of those withdrawals will not be available to explain the deposits. Therefore, the decision of CIT(A) to allow peak credit to assessee was not correct. 15.3 The appellant claimed to have sold the bullion during the demonetization period and the demonetized currency was deposited in the bank account of Nirav & Co. The CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the assessee remains unexplained as the assessee has not been able to explain the nature and source of such cash deposits along with documentary evidence either before the AO or CIT(A). 16. The assessee has been changing his stand with respect to the cash deposits in the impugned bank account so as to shift the onus of ownership. The assessee has claimed that cash deposits represent cash from bullion business. The assessee's cash deposits of a single day is huge and as per the extant rules, purchase/sales of golds above Rs. 2,00,000/- have to be accompanied with a valid PAN. The assessee has not furnished the details of the parties from whom it has made the so called purchases and the corresponding sales. Neither the requisite details were furnished nor the stock was presented before the survey party. In absence of corroborative details and evidence; which would be in possession of assessee, if the assessee is claiming that the source of cash deposits is from sale of gold and silver bullion, the amount of Rs. 36,17,00,112/- cannot be accepted as explained. 17. The survey team of the Investigation Wing and the AO have made detailed enquiry in the case. It is not the case that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account. The AO has given a categorical finding that the said firm i.e., M/s S. R. Trader was a non-existent party and there was no shop/ establishment in the address provided by the said firm in the bank KYC. Hence, genuineness of the transaction is not established. Therefore, the finding of fact of CIT(A) at para 8.7 of his order i.e., falsification of sales is equally applicable for transactions with M/s S. R. Traders. The sale proceeds recorded in the name of M/s S. R. Traders are false and no sales were actually made to M/s S. R. Traders. The assessee sold bullions to other customers and actual sales were never recorded in the books of assessee. 20. From the facts discussed above, it is clear that assessee had deposited Rs. 36.17 crore and Rs. 13.36 crore in the bank accounts of M/s Nirav & Co. and M/s S. R. Traders during post-demonetization period from 10.11.2016 to 05.12.2016 and from 23.11.2016 to 30.11.2016 respectively. The AO had added these amounts based on the statement of one of the partners of the assessee-firm, namely, Shri Himanshu R. Shah. He also relied on the report of the Investigation Wing, Surat. He has, however, not conducted any inquiry and verification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. Shah, one of the partners of the assessee-firm, and the survey/inquiry report of the Investigation Wing. He has not followed the SOP / Instruction / Guidelines issued by CBDT. In order to ensure uniformity in approach of AOs in handling OCM cases, it was incumbent upon the AO to follow such SOP/Instruction etc. The Co-ordinate Bench of ITAT, Bangalore in case of M/s Bhavana Co-operative Credit Society Niyamita vs. ITO, in ITA No.739/Bang/2021, dated 16.09.2022 has, under similar circumstances, set aside the matter to the AO for verification and to pass fresh assessment after hearing the assessee. The relevant part of the said order is reproduced below for ready reference: "9.1 We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017-ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-ITA.II. These instructions gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim. Accordingly, the appeal in ITA No.739/Bang/2021 stands allowed for statistical purposes." 22. Similar decisions have been given in cases of M/s Bhoopalam Marketing Services Pvt. Ltd. vs. ACIT, ITA No.375/Bang/2022, dated 15.09.2022 and Sasanur Hospital vs. PCIT, ITA No.415/Bang/2022, dated 27.09.2022. Since the AO has not followed the SOP, Guidelines etc. issued by the CBDT while passing the impugned assessment order, we deem it proper to set aside the order of CIT(A) and restore the matter to the file of AO for verification of all the details and evidences as mandated under the said SOP/ Guidelines etc. The AO is also directed to verify all details filed by the assessee before the lower authorities and the Tribunal and to consider claim of the assessee in accordance with law. We make it clear that we are not giving any opinion on the merits of the addition made by the AO. We have only held that the theory of peak credit is not applicable in the present case. We also make it clear that the verificat ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
