9911796707
TMI Blog2025 (4) TMI 1470X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justified in deleting the addition made u/s 68 of the Income-tax Act, 1961 for unexplained cash amounting to Rs. 5,98,78,500/- and instead making estimation of net profit of 4% of turnover (i.e. 4% of Rs. 21,82,76,474) without appreciating the fact that the assessee failed to discharge the onus to prove the identity, creditworthiness and genuineness of the parties to whom cash sales were made during the year?" 2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is justified in deleting the addition made u/s 68 of the Income tax Act, 1961 for unexplained cash amounting to Rs. 5,98,78,500/- and instead making estimation of net profit of 4% of turnover (i.e 4% of Rs 21,82,76,474) without appreciating the fact that from the statement of the Director of the Company, Siri Priyank Shah, recorded on 20.12.2019 it is evident that the argument of cash sales put forth by the assessee company as the source of cash which was deposited after demonetization is non- genuine, false and has no credibility and is liable for rejection?" 3. "Whether on the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal against the addition on account of estimation of business income @4% of the total turnover of 21,82,76,474/-i.e. Rs. 87,31,059/-.The assessment order has been very exhaustive and therefore, relevant parts thereof are reproduced as below for the sake of brevity and easy reference: "The assessee company is primarily engaged in the business of manufacturing of precious gold, silver & diamond jewellery. During the course of assessment proceedings, it was observed that a large cash deposit was made in its bank accounts after the demonetization period. Accordingly, notice u/s. 133(6) of the Income Tax Act was issued to SBI, Goregaon (East) branch asking to furnish the bank statement of the assessee for the year under consideration. The bank statement was perused and it was found that the assessee had indeed deposited cash to the tune of Rs. 5,98,78,500/- in its State Bank of India account No. 32883046667 and 32864877991.The assessee company was asked to give details regarding the cash deposits made after demonetization and the source of the same from where the said amount was generated. In response, the assessee submitted that the cash deposits to the tune of Rs. 5,98,78,500/- wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oor to door by the assessee company. This aspect is further highlighted by the fact that the assessee company has shown no manpower to deliver hundred of products were booked by the assessee company in the profit & loss accounts which again lends credence to the fact that no actual sales were made and consequently no deliveries were made. The cash deposited is nothing but the unaccounted income of the assessee company which it has stashed and was forced to deposit after demonetization. 3.5 In light of the above findings, a show cause notice was issued to the Assessee company. After considering its reply, point wise rebuttal of assessee's reply is as follows: 3.6.3 The assessee's claim regarding that there is no bar on business model of the company is unacceptable in the light of the facts that such type of B to C business involving hundreds of high value cash transactions was never ever seen again in assessee's case. Such a lucrative and already rewarding business was discontinued by the assessee. This clearly shows that the cash sales as claimed by the assessee are not genuine and in fact an effort to bring in undisclosed income in the books of accounts. Such cash sales were n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u at best appears to be a copy of visitors book which is maintained by the assessee. Thus, again assessee has failed to give a valid and credible reply to the questions raised. Therefore the claim of assessee with regard to cash sales is hereby rejected 3.6.6 The assessee company has failed to disclose the identity of the alleged cash sales. The assessee company has stated that goods were delivered to customer at their place but failed to give any submission regarding their verification. Delivering goods door to door is not your regular business practice and it is not a industry practice that hundreds of products delivered manually in a short span of ten days. Everything right from manufacturing to delivery all happened in a span of ten days and concluded just before demonetization. No expenses with regard to delivery of alleged sales is recorded. Delivering goods costs money and non recording of cost pertaining to delivery amply shows that the claim of assessee is hollow. This clearly shows that your claim of cash sales is not genuine and it is just an effort to bring undisclosed income in the books of account. Had there been no demonetization no such cash sales would have happe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has failed to reply to a pointed question. Therefore the claim of assessee with regard to cash sales is rejected. 3.6.11 ............ 3.6.12 The reply of the assessee in this regard is full of stories. The proximity of assessee's premise to western express highway was useful to assessee only once to the assessee as far as cash sales are concerned that to just before demonetization. This lends no credibility to the claim of the assessee. ...............Therefore the claim of assessee with regard to cash sales is rejected. 3.6.14 The assessee has again failed to give reply to this query regarding huge cash in hand held. ............. 3.7 The assessee company has claimed to made cash sales just before demonetization. The cash sales as claimed by the assessee are made with a clear departure from its regular course of business. These sales were made to end consumers and not to business entities which is the normal course of assessee's business. Nothing on record was brought despite why such sales never happened again or earlier. The assessee company failed to explain why the company stopped venture in to B to C business despite having tremendous response. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 278 (SC) ) Further, the Hon'ble Supreme Court in the case of Vijay Kumar Talwar v. CIT [2011] 330 ITR 1, has made observation which is reproduced as below 3.11 As held by the Hon'ble Supreme court in the case of Sumati Dayal vs CIT (1995AIR 2109) the fact should be examined by considering the surrounding circumstances and applying the test of human probability. So considering the surrounding circumstances and facts/trend of business as stated above and also applying the test of human probability, I am of view that the account of assessee does not represent the true state of affair and books of account have been manipulated to inflate cash sales and also to suppress cash expenses to cover up its unexplained cash. So in the light of these facts the books of accounts of the assessee are hereby rejected u/s 145 of the Income-tax Act, 1961, and the income of the assessee is computed in the succeeding para. 3.12. The assessee, despite being provided a number of opportunities in this case, has not provided details of parties to whom cash sales were made during the year............... The assessee has provided no details of the parties to whom it has claimed to made cash sales dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the AO in light of provisions of Sec.68 of the Act, that the assessee has not satisfactorily explained cash receipts is warranted and has merits. The AO cannot dispute sales declared by the appellant because no details of purchaser in cash of jewellery was submitted by the appellant. I find that there is abnormal deviation in business model of the appellant when compared to earlier periods. The appellant has made deposit of cash amounting to Rs 5,98,78,500 during the demonetization period in his bank account and the cash deposits were made from the cash sales executed by the company from the period of 28.10.2016 to 08.11.2016. The appellant has shown cash sales only just before demonetization period for 10 days and that even though such type of business to customer was lucrative, the appellant had not given any cogent reason why it discontinued it. The appellant is primarily only into B2B model and not business to customer model. This business to customer model was not seen in earlier assessment years nor seen after demonetization period. The claim of the appellant that the business to customer model was not lucrative after demonetization does not hold much water as when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... struction Pvt. Ltd. Vs. ACIT, Tax appeal No.16 of 2010, dated 10.05.2011 had observed, that once the A.O had rejected the books of accounts, then, he could not have held the profit which is supported by the books of accounts to be correct. The Hon'ble ITAT, "B" Bench, Pune in the case of ACIT, Central Circle-2(1), Pune Vs. M/s ISMT Limited, ITA Nos. 2751 & 2752/Pun/2016; dated 06.12.2021observed by drawing support from a host of judicial pronouncements, that once the books of accounts of an assessee are rejected by the A.O under Sec. 145(3) of the Act, then he cannot rely upon on the same books of account for the purpose of making any addition, and the only course of action available with him is to determine the income by application of a flat rate of profit by taking into consideration the business conditions of the assessee as in comparison to profits disclosed by other assessee's in the similar line of business. Similar views have been followed by the Hon'ble High Court of Punjab & Haryana in the case of CIT vs. Gian Chand Labour Contractors, 316 ITR 127 (P&H), the Hon'ble Supreme Court in the case of CIT Vs. K.Y Pilliah& Sons (1967) 63 ITR 411 (SC), the Hon'ble High Court of Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 2016 to 26/11/2016 in the Bank post demonetization. It submitted that various account books and other related details were filed before the AO including Cash Book, BankBooks, StockRegister, Cash sales vouchers, Purchaseand sales Register, Excise Register, details of VAT, Salary, Labour Charges Paid, Debtors and Creditors, Exhibitions conducted during the last five years and vouchers thereof, justification of Cash sales as well as various supporting evidences, Bank Certificate Declaring the cash deposited was part of cash sales, etc. 6.1 It is further submitted that the all purchases of the assessee were accepted. In fact, enquiry was conducted by the Assessing Officer by sending a notice under section 133(6) of the Act to the purchase parties and all of them has responded. Without Purchases sales cannot take place. All cash sales and credit sales are entered in the books of account of the assessee company which has maintained books of account in form of computerised Ledger, Cash Book, Bank Book, Sales register, purchase register and stock book. Assessee company's accounts are duly Audited by Tax Auditor and VAT Auditor. The books of account were submitted to the ld. AO and ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entire disputed Sales could not be made. Further, on perusal of the provisions of Section 145(3) of the Act, it is submitted that the correctness of Sales cannot be challenged without pointing out any specific mistake or deficiency in the books of account or without recording a firm finding that the profits and gains cannot be properly deduced from such books of accounts. In this regard, the Assessee have correctly shown sale transactions as revenue from operation in the book of accounts as per notified accounting standards prescribed. Further, the same sale is being reduced from inventory in the books of accounts. The same books are audited and tax audit report have been uploaded with the Department. The inventory details are also matching in between tax audit and books of accounts. Further, the amount received in bank account against sale of gold is also duly recorded in the books of accounts. The assessee has duly explained that it had received cash against sale of gold and consequently, the sale bills is properly issued against the sale. 6.4. It is also contented that there is no cash trail or any material vis-a-vis trail of money. Sales were recorded in the books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n confirmed by these parties. However, I find that mere confirmation does not mean that the purchases are all genuine. There may be collusion between the appellant and the seller. One has to look at other evidences. 2. I find that the law does not mandate colleting PAN details of the persons, if sale value of jewellery does not exceed Rs. 2 lakhs as per Rule 114B of Income Tax Rules, 1962. But that does not mean that no details needs to be collected of the buyer. The name and address are generally collected in all cases. It is seen that the appellant has not been able to provide any details of the name and address of buyers. 3. It may be noted that the appellant is primarily a manufacturer of precious jewellery and primarily engaged in 'Business to Business' (B2B) model and does not have any retail store.. Therefore it is not a case where the buyers just came into the shop and purchased the jewellery and left without giving any details. 4. Here, the appellant claimed to have participated in exhibitions etc where sales were affected in July/August/Sept but delivery made only from 28.10.2016 to 08.1.2016. Therefore, then if it was genuine sales, the appellant would have surely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly and valuable items through delivery boys. It may also be noted that in exhibitors or events, customers can be from different states and towns or far off places. How deliveries were made in such cases are not clear. 11. The appellant has also failed to give satisfactory reply to the query regarding huge cash in hand held. The appellant had huge bank loans and keeping such huge cash in hand without paying it to creditors and repayment of bank loans or interest raises doubts about its genuineness." 7.1 From the foregoing paras, we therefore, observe that the ld.CIT(A) has admitted that the assessee did not satisfactorily discharge onus cast upon it to furnish names and addresses of the persons and admitted that the observation of the AO in light of provisions of Sec.68 of the Act, that the assessee has not satisfactorily explained cash receipts is warranted and has merits. Thus, he upheld the findings of the AO in so far as the application of provisions of section 68 of the Act are concerned. It is also worth stating here that the assessee in the various grounds of appeal in its appeal in ITA 2053/MUM/2024 has not contested this concurrent finding of the lower authorities but ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total turnover being the addition, does not need any interference and is accordingly upheld. The grounds of appeal of the revenue in so far as related to application of flat rate for making addition are therefore dismissed. 9. In the result, appeal of the Revenue is partly allowed. In ITA 2053/MUM/2024 (A.Y. 2017-18), 10.In the above captioned appeal, the assessee has taken following grounds of appeal: 1. The NFAC erred in making an estimation of net profit @ 4% of the total turnover of Rs. 21,82,76,474/- (1.e. Rs. 87,31,059/-) inspite of the fact that the said cash sales had already been included in the total sales turnover of the Assessee company. 2. The NFAC erred in estimating the net profit @4% of the total turnover instead of considering the gross profit percentage as the assessee company is in the business of manufacturing. 3. Without prejudice to the above, the NFAC failed to appreciate that the Assessing Officer had doubted the cash sales of Rs. 5,98,78,500/-only and not the entire turnover, thus, even if the profit had to be estimated it ought to consider only the amount of cash sales. 4. Without prejudice to the above, the NFAC ought to have considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
