ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1) , RAIPUR V. .SHRI KANHAIYA LAL GANGWANI, RAIPUR

ITA 182/RPR/2019

AI Insights

The case involves the Assistant Commissioner of Income Tax, Raipur, as the appellant, and Shri Lokesh Gangwani, the legal heir of Late Shri Kanhaiya Lal Gangwani, as the respondent. The dispute centers on the addition of Rs.3,37,62,820 as unexplained cash credit under Section 68 of the Income-tax Act, 1961, which the A.O initially added to the assessee's income for the assessment year 2007-08. The Commissioner of Income-Tax (Appeals) later deleted this addition, leading the revenue to appeal before the Tribunal. The Tribunal's decision focused on whether the A.O's recharacterization of the sale proceeds as unexplained cash credits was justified, given that the books of account were not rejected under Section 145(3) and the sales were accepted.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 35700 (ITAT-RAIPUR)
• Duration Of Justice: 5 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 12-09-2019
• Other Referred Cases: Roshan Di Hatti v. CIT [1977] 107 ITR 938 [SC], Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 [SC], Pavan Kumar M Sanghvi Vs. ITO [(2018) 404 ITR 601(Guj HC)], CIT Vs. Precision Finance Pvt Ltd [1994 2008 ITR 465], A. Govindarajulu Mudaliar Vs. CIT (1958) 34 FIR 807 (SC), CIT Vs. M. Ganapathi Mudariar (1964) 53 FIR 623 (SC), CIT Vs. Kamdhenu Vyapar Co Ltd (2003) 263 FIR 692 (Cal), Pr. CIT(Central)-I Vs. NRA Iron& Steel Pvt Ltd in SLP (Civii) No. 29855 of 2018, Rameshwar Prasad Bagla [68 ITR 653(Allahabad)], Homi Vs CIT 41 FR 135,142 by (Supreme Court), CIT-II vs. Jansampark Advertising & Marketing (P.) Ltd. reported in [2015] 56 taxmann.com 286 (Delhi), Peter Vaz Vs. CIT, Central Circle, Bangalore (2021) 128 taxmann.com 180 (Bom.), Sanjay Sawhney Vs. Pr. CIT (2020) 316 CTR 392 (Del), ITO-2, Raigarh Vs. Shri Bishambhar Dayal Agrawal ITA No. 223/RPR/2016, 27.10.2023, Income-tax Officer Vs. Parmanand Gupta, ITA No.82/RPR/2017 & CO No.02/RPR/2022, dated 04.08.2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.L.ANURAGI
• Assessee Lawyers: SUNIL KUMAR AGRAWAL
• Keywords: Business income; Additional evidence; Corroborative evidences; Unexplained cash credit; Bonafide belief; Search and seizure; Reason to believe
• Section: 147; 143(3); 143(1); 68; 131; 22; 13; 145(3)

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ रायपुर मɅ। IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.182/RPR/2019 Ǔनधा[रण वष[ / Assessment Year : 2007-08 The Assistant Commissioner of Income Tax Circle-1(1), Raipur (C.G.) .......अपीलाथȸ / Appellant बनाम / V/s. Shri Lokesh Gangwani Legal heir of Late Shri Kanhaiya Lal Gangwani C/o. Shop No.14, Dhilon Complex, Jawahar Nagar, Raipur (C.G.) PAN: ADWPG5252B ……Ĥ×यथȸ / Respondent Assessee by : Shri Sunil Kumar Agrawal, CA Revenue by : Shri S.L. Anuragi, CIT-DR सुनवाई कȧ तारȣख / Date of Hearing : 24.09.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 09.12.2024 2 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the revenue is directed against the order passed by the Commissioner of Income-Tax (Appeals)-1, Raipur, dated 21.03.2019, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 31.03.2015 for the assessment year 2007-08. The revenue has assailed the impugned order on the following revised grounds of appeal: \"1. Whether on points of law and on facts and in the circumstances of the case, the Id. CIT(A) was justified in deleting the addition of Rs.3,37,62,820/- made by the AO on account of credit in bank accounts in the form of DDs treating as unexplained cash credit u/s. 68 of the IT Act?\" 2. Whether on points of law and on facts & in the circumstances of the case, the Id. CIT(A) was justified in deleting the addition of Rs.3,37,62,820/- by ignoring the facts as brought on record by the AO that the assessee failed to prove the identity, genuineness and creditworthiness of the purchasers as per the parameters of the legal provisions u/s.68 of the IT Act?\" 3. \"Whether on points of law and on facts and in the circumstances of the case, the Id.CIT(A) was justified in deleting the addition of Rs.3,37,62,820/- when the onus was on the assessee to prove the genuineness of the transactions which was questioned by the AO, and the assessee failed to produce the evidence on which the AO could make a proper assessment of the assessee's income?\" 4. Whether on points of law and facts and in the circumstances of the case, the Id. CIT(A) was justified in deleting the addition of Rs. 3,37,62,820/- as the ld. CIT(A) having concurrent powers of the AO u/s.250(4) of the Act, was not justified in deleting the addition made by the AO on the ground that the onus is on the assessee to prove the source of a sum of money found to have been received by him which the assessee actually evaded to discharge, as such a finding by the Id. CIT(A) is contrary to the ratio of the 3 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 judgements of the Hon'ble Supreme Court in the cases of Roshan Di Hatti v. CIT [ 1977] 107 ITR 938 [SC], Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR 1 [SC] ?\" 5. \"Whether on points of law and on facts and in the circumstances of the case, the ld.CIT(A) was justified in accepting the fresh evidence produced by the assessee, if any without allowing the AO, proper opportunity to examine the same, thereby violating the provision on law under Rule 46A of IT Rules?\" 6. \"'Whether on points of law and on facts and in the circumstances of the case, the ld.CIT(A) was justified in deleting the additions made by the AO, thereby giving a decision in favour of the assessee and against the revenue though there is no nexus between the conclusion of fact and primary fact upon which conclusion is based?\" 7. On the facts and in the circumstances of the case whether the Id.CIT(A) was justified in deleting the addition of Rs.3,37,62,820/- thereby not considering and not distinguishing the findings of the AO which is well supported by the ratio of following judgments pronounced by higher court of law. (i) Pavan Kumar M Sanghvi Vs. ITO [(2018) 404 ITR 601(Guj HC)] (ii) CIT Vs. Precision Finance Pvt Ltd [ 1994 2008 ITR 465] (iii) A. Govindarajulu Mudaliar Vs. CIT (1958) 34 FIR 807 (SC) (iv) CIT Vs. M. Ganapathi Mudariar (1964) 53 FIR 623 (SC) (v) CIT Vs. Kamdhenu Vyapar Co Ltd (2003) 263 FIR 692 (Cal) (vi) Pr. CIT(Central)-I Vs. NRA Iron& Steel Pvt Ltd in SLP (Civii) No. 29855 of 2018 (vii) Rameshwar Prasad Bagla [68 ITR 653(Allahabad)] (viii) Homi Vs CIT 41 FR 135,142 by (Supreme Court) (ix) CIT-II vs. Jansampark Advertising & Marketing (P.) Ltd. reported in [2015] 56 taxmann.com 286 (Delhi) 8. Any other ground that may be adduced at the time of hearing.\" 4 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 2. Also, the assessee has filed an application under Rule 27 of the Income Tax Appellate Tribunal, Rules, 1963 raising the following preliminary objection: \"Gr. No.1. 1. On the facts and circumstances of the case and in law, addition of Rs.3,37,62,820 is invalid treating it as income from undisclosed sources u/s.68; as it is credits into bank while is receipts from debtors against accounted/disclosed sales of Rs.10,32,42,259 in the books of account u/s.44AB; sales has been accepted; books of account not been rejected applying sec. 145(3); addition is merely based on presumption & surmises, is not justified and is liable to be deleted.\" As the assessee based on the aforesaid application has assailed an issue, adjudication of which would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our aforesaid view is fortified by the judgments of the Hon’ble High Court of Bombay in the case of Peter Vaz Vs. CIT, Central Circle, Bangalore (2021) 128 taxmann.com 180 (Bom.) and that of the Hon’ble High Court of Delhi in the case of Sanjay Sawhney Vs. Pr. CIT (2020) 316 CTR 392 (Del). Also involving identical facts, the ITAT, Raipur in the case of ITO-2, Raigarh Vs. Shri Bishambhar Dayal Agrawal ITA No. 223/RPR/2016, 27.10.2023 had admitted the preliminary objection raised by the assessee under Rule 27 of the Income Tax Appellate Tribunal Rules, 1963. 5 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 3. Succinctly stated, the assessee who is engaged in the business of wholesale trading of chemicals, starch and liquid glucose, had filed his return of income for A.Y.2007-08 on 31.10.2007 declaring an income of Rs.3,58,720/-. The return of income filed by the assessee was processed as such u/s. 143(1) of the Act. 4. As is discernible from the record, the A.O based on information received from the Dy. Director of Income Tax (Inv.)-III, Raipur (in short ‘DDIT’) that there were unexplained credits of Rs.3,37,62,820/- in the bank accounts of two proprietary concerns of the assessee, viz. (i) credits (through DDs) in bank account No.6592000100003701 with Karnataka Bank, Branch: Raipur of M/s. Usha Chemicals : Rs.2,55,21,895/-; and (ii) credits (through DDs) in bank account No.6592000100003601 with Karnataka Bank Ltd. of M/s. Shri Ram Chemicals: Rs.82,40,925/-, initiated proceedings u/s. 147 of the Act. The DDIT (Inv.) had shared with the A.O that the deposits in both the aforementioned bank accounts were made through various demand drafts (DDs) of Rs.49,995/- on each day during the whole year. Also, the A.O was informed that most of the DDs were made in cash with the same bank. The DDIT (Inv.) further shared with the A.O that the assessee in his statement recorded on oath u/s. 131 of the Act, on being called upon to put forth an explanation about the source of the aforesaid deposits in his bank account, had claimed that the same were the sale proceeds for the subject year. The DDIT (Inv.) further 6 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 informed the A.O that though it was the claim of the assessee that the DD’s were deposited in his bank accounts by the purchasers, but he had failed to place on record any documentary evidence i.e. proper sale bills to substantiate his claim. Also, the A.O was informed that the assessee had failed to submit details based on which the purchasers who had deposited the DD’s in his bank accounts could be identified, i.e. their names along with the respective addresses. 5. The A.O, based on information as was shared by the DDIT (Inv.), held a bonafide belief that the income of the assessee chargeable to tax amounting to Rs.3,37,62,820/- [Rs.2,55,21,895/- (+) Rs.82,40,925/-] had escaped assessment within the meaning of Section 147 of the Act. Notice u/s. 148 of the Act, dated 26.03.2014 was issued by the A.O. The \"reasons to believe\", based on which, the A.O had arrived at a Bonafide belief that the income of the assessee of Rs.3,37,62,820/- chargeable to tax had escaped assessment and thus, had initiated proceedings u/s.147 of the Act are culled out as under: \"Reasons for issue of notice u/s.148: In this case a piece of information has been received in respect of the above mentioned assesses front Dy. Director of Income tax (inv.)-III, Raipur vide his letter F.No.DDIT(Inv,)-III/RPR/ STR/2013-14/1180 dated 21.03.2014 that the assessee has unexplained credit of Rs.33762820/- during the F.Y 2006-07 relevant to the A.Y.2008-09. As per the information communicated, the assessee is the proprietor of two concerns namely Shri Ram Chemicals and Usha Chemicals. He had bank account with Karnataka Bank Ltd, Raipur bearing account no. 7 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 6592000100003701 relating to Usha Chemicals for the period 01.04.2006 to 31.03.2007 in which total deposits through DDs amounting to Rs.2,55,21,8957- was found made. In another bank account of Karnataka bank Ltd, Raipur having no.6592000100003601 relating to Shri Ram Chemicals, total deposits through DDs amounting to Rs.82,40,925/- was found made during the period 01.04.2006 to 31.03.2007. These deposits in both the accounts were made through various DDs of Rs.49,995/- each day during whole the year. Most of the DDs were made by cash in the same Bank. As intimated, the assessee was asked to explain the sources of these deposits. He stated on oath u/s.131 of the Act that the amounts deposited were out of sales made by him during the F.Y.2006-07. The purchaser deposited the money through DDs as claimed by him, but in support of these deposits in the above bank accounts, he could not produce even any documentary evidences i.e. Proper sales details. He also failed to submit any details or identification regarding the persons, their name and addresses to whom sale was made in respect of the deposits through DDs. In substance, he could not explain properly about the above deposits. The assessee has filed return of income on 31.10.2007 declaring total taxable income of Rs.358720/-. From the above facts, it is clear that the assessee has understated the income in the return of income so filed for the A.Y. 2007-08. Considering the facts and circumstances of the case, I have reason to believe that income of Rs.3,37,62,820/-(25521895 + 8240925)- chargeable to tax has escaped assessment and the case is required to be reopened u/s. 147 of the Act.\" 6. During the course of the assessment proceedings, the assessee objected to the legality of the proceedings initiated in his case u/s. 147 of the Act, which, however was rejected by the A.O. 7. Apropos the credits of Rs.3,37,62,820/- made by DDs in the aforementioned bank accounts, the assessee vide his reply dated 17.01.2015, submitted before the A.O that each entry of deposits in the bank accounts made by DD/cash/cheque was sourced out of funds that 8 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 he had received from the buyers of the products against the sales made to them. Also, it was the assessee’s claim that the amounts withdrawn from the bank accounts were utilized for the purpose of his business. It was further stated by him that all the entries of deposits/withdrawals in his bank accounts were duly accounted in his books of accounts. Also, it transpires that the assessee to support the aforesaid factual position had produced before the A.O his books of accounts and supporting evidence. However, the A.O did not find favour with the explanation of the assessee. It was observed by him that the documentary evidence filed by the assessee did not contain the details of the source of deposits made in the aforementioned bank accounts of both the proprietary concerns, viz. (i) M/s. Usha Chemicals: Rs.2,55,21,895/-; and (ii) M/s. Shri Ram Chemicals : Rs.82,40,925/-. Accordingly, the A.O vide his letter dated 03.02.2015 directed the assessee to explain the source of the DDs deposited in his bank accounts a/w. names and addresses of the parties, and also, the details of sales and other transactions in lieu whereof the said amounts were received by him. Apart from that, the A.O directed the assessee to explain as to why the respective DDs deposited in his bank account were not accounted for in his books of account. Also, the A.O in order to verify the veracity of the claim of the assessee that the DD’s deposited in his bank account were the sale proceeds generated in the course of his 9 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 business, directed him to file a copy of account of all the parties from whom the same were received. 8. In reply, the assessee vide his letter dated 12.02.2015 is stated to have filed before the A.O the details of source of deposits in his bank accounts i.e. the names of the parties from whom DDs were received. However, the A.O in the backdrop of the aforesaid details filed by the assessee, observed that the assessee had not credited any amount in the accounts of the parties concerned giving description of the DDs and the corresponding amounts deposited in his bank account. The A.O, further observed that the deposits in both the bank accounts were made through DDs of Rs.49,995/- on each day during the whole year. Also, it was observed by the him that the DDs were made in cash from the same bank. The A.O based on the aforesaid facts and after carrying out further verifications called for an explanation of the assessee on two issues, viz. (i) which all parties had purchased the DDs and deposited the same in his bank accounts; and (ii) to explain that as to how the outstation parties which were out of Raipur and to whom, goods were claimed to have been sold had regularly deposited DDs in his bank accounts at Raipur. 9. In reply, the assessee submitted before the A.O that the DDs deposited in his bank accounts was the consideration which he had received against sale bills and the same were credited in the respective 10 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 accounts of the parties. As regards the query raised by the A.O that as to why the outstation parties were continuously depositing DDs in his bank account, the assessee had come forth with two fold contentions, viz. (i) that the outstation parties carried out their transactions at Raipur through their brokers/agents; and (ii) alternatively, the requisite details as to how the outside parties were managing their affairs could to the best be answered by them only. It was, thus, the claim of the assessee that his interest as regards the affairs of the outside parties was only restricted to the recovery of the sale proceeds. The assessee further submitted before the A.O that the complete details of the DDs of Rs.49,000/- to Rs.50,000/- deposited in his bank accounts was already furnished by him in the course of the assessment proceedings. It was further submitted by the assessee that the amounts of DDs deposited in his bank accounts were credited to the respective customer accounts as appearing in his books of account against the corresponding sales made to them. Accordingly, the assessee based on his aforesaid submissions, had claimed, that now when the “nature” and “source” of the DDs credited in his bank accounts were duly explained, thus, there was no justification for the A.O in seeking to treat the same as unexplained cash credit u/s. 68 of the Act. 10. The A.O, observed that the assessee had failed to provide details of the persons who had purchased the DDs along with their respective addresses. Also, it was observed by him that the details of the banks from 11 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 which the DDs were purchased was also not discernible from the record. The A.O, further observed that it could also not be gathered as to whether the DDs were prepared by presenting cash, cheque or by withdrawing the amount from the bank account. Although, it was observed by the A.O that the assessee had mentioned the names of the parties against the amounts credited in bank accounts, but at the same time, hewas of the view that there was no justification for the said parties to have deposited/paid the amount of the sale consideration vide DDs below an amount Rs.50,000/-. The A.O fortified his conviction based on the fact that now when the banking facilities of cheque/cash transfer/multi cheques/RTGS were well available, there was no plausible explanation for depositing of the sale consideration by the outstation purchasers through DDs. The A.O was of the view that it was incomprehensible that why the purchasers had not availed the other modes of banking facilities for making payments of the purchase consideration to the assessee. The A.O held a firm conviction that now when the respective purchasers had banking facilities at their own place of business, therefore, it was difficult to fathom that as to why they would get DDs prepared on each second or third day and deposit the same in the bank accounts of the assessee at Raipur. Accordingly, the A.O observed that the sales disclosed by the assessee suffered from serious doubts and thus, the amounts deposited in his bank account through DDs were to be held as unexplained cash credits u/s. 68 of the Act. 12 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 11. Accordingly, the A.O holding a conviction that the assessee had failed to discharge the onus that was cast upon him i.e. explaining the source of generation of the DD’s, name of the banks where DDs were drawn, details of persons by whom DDs were drawn, details of cash and cheque presented for making DDs etc., therefore, held the entire amount of Rs.3,37,62,820/- (supra) as unexplained cash credit u/s. 68 of the Act. Accordingly, the A.O vide his order passed u/s. 143(3) of the Act, dated 31.03.2015 after making the aforesaid addition determined the income of the assessee at Rs.3,41,21,540/-. 12. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals), who after deliberating at length on the issue qua the submissions of the assessee allowed the appeal by observing as under: - \"2.3 I have gone through the submission of the appellant and also perused the assessment order. Facts being as above the appellant has assailed the impugned assessment order on technical ground as well as on merits. It has been contended that the reasons recorded u/s. 148 has not been communicated to the appellant. Moreover, the notice u/s. 148 has not been issued within time and also has not been served on the appellant. Vide letter dated 17/01/2015 the appellant has furnished income tax return, capital account, balance sheet for AY 2006-07 & 2007-08, copy of audit report of M/s. Shriram Chemicals and M/s. Usha Chemicals. Copy of all bank accounts of both the concerns and, sources of each and every entry in the bank by way of DD/cash/cheque. The appellant also requested the AO to provide copy of reasons recorded for re- opening the assessment u/s 148. Vide letter dated 03/02/2015 the AO has requested the appellant to furnish copies of bank statements. Vide letter dated 12/02/2015 the appellant has submitted these details. Vide letter dated 24/03/2015 (para-6 inter alia) the appellant informed the AO that he has discharged his 13 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 duties u/s. 68 and the onus was then lied with Department, also that the money against sale did not constitute cash credit u/s 68 but was sale proceeds in respect of assessee's business. Vide letter dated 30/03/2015 appellant reminded the AO for reasons to reopen assessment, was not informed to the appellant in spite of the request for the same. On the above facts, I find that the notice u/s.148 and subsequent proceedings leading to the assessment order are affected with these defects. The AO has not doubted the business or trade in chemical being run by the appellant. He has accepted the sale and purchase of the assessee as per books of account. Appellant has sales of Rs. 7,96,62,903/- and Rs.2,35,79,356/- in M/s. Usha Chemicals and M/s. Shriram Chemicals respectively. Purchases have been made to affect sales of these magnitudes. Aspersion has been cast on the genuineness of purchases. If the amount of credit in the bank account is questionable, then how the sale proceeds have been received by the appellants. These doubts has also not been raised by the AO. In other words, sales of assessee's business has also been accepted. There is no other credit in assessee's books which can be alluded as sale proceeds. The only credits in accounts is by way of these DDs. There is no question not to accept assessee's contention that the DDs are not towards sale proceeds of assessee's business. AO has claimed that he could not produce even any documentary evidences i.e proper sale details. He also failed to submit any details of identification regarding the persons, their name and address to whom sale was made in respect of deposits through DDs. In substance he could not explain properly about the above deposits\". To this the appellant has replied that each and every entry of deposit in bank account by DD/cash/cheque is out of funds received from buyers of product. Appellant has submitted to the AO annexures showing details of each deposit and bill number then how could the AO comment that assessee has not credited any amounts in the name of the parties giving description of DDs. Does he mean that no payment has been recorded against customers. Then is it that money of such customers are appearing as sundry debtors. There is no such finding in the assessment order. Or does the AO mean that the DDs in question are any addition to the sale proceeds otherwise received by the appellant. Just because in the ledgers it has not been mentioned that sale proceeds were received through DDs, it has lead to the AO. to presume that DDs are unexplained. Also the appellant cannot be asked to explain the source of DDs once he has stated that the DDs were towards sale proceeds and provided name of buyers from whom DDs were received. If AO has any doubt about the same, the onus was on him to make necessary enquiries from buyers and confirm his doubt that they have not 14 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 made any purchases from the appellant. He cannot simply added the amount as assessee's income. In fine the addition has been made without making any inquiry and just on the basis of suspicions without based on any evidence. Therefore, the addition made by the AO is deleted and ground taken by the appellant is allowed. 3.0 The appeal is allowed.\" 13. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 14. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 15. At the very outset, we may herein observe, that a perusal of the Index forming part of the Paper Book No.1 reveals that documents placed at Sr. No.20 to 22 and Sr. No.26 to 28 have been filed by the assessee for the first time before us. Also, a perusal of the Index of Paper Book No.-2, reveals that all the documents at Sr. No.1 to Sr. 14 i.e. Page No.231 to 361 of APB have been filed before us for the first time. As filing of the aforesaid documents is not supported by any application seeking liberty for admission of the same as additional evidence under Rule 29 of the Income 15 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 Tax Appellate Tribunal Rules, 1963, therefore, we decline to take cognizance of the same. 16. Shri Sunil Kumar Agrawal, Ld. Authorized Representative (for short ‘AR’) for the assessee at the threshold assailed the addition of Rs.3,37,62,820/- made by the A.O u/s. 68 of the Act. Elaborating on his contention, the Ld. AR submitted that as it was a matter of fact borne from record that the A.O while framing the assessment vide his order passed u/s. 143(3) of the Act, dated 31.03.2015 had not rejected the books of accounts of both the assessee’s proprietary concerns, viz. (i) M/s.Shri Ram Chemicals; and (ii) M/s. Usha Chemicals u/s.145(3) of the Act, but had rather accepted the sales disclosed by the assessee; therefore, having held so, there was no justification for him to have recharacterized the corresponding sale proceeds of Rs.3,37,62,820/- as unexplained cash credit u/s. 68 of the Act. The Ld. AR in support of his aforesaid contention, had relied on the order of the ITAT, Raipur in the case of Income-tax Officer Vs. Parmanand Gupta, ITA No.82/RPR/2017 & CO No.02/RPR/2022, dated 04.08.2022. The Ld. AR, submitted that involving identical facts, the A.O in the aforementioned case too had after accepting the sale proceeds of Rs.5,11,81,663/- of imported silk yarn that was sold by the assessee to weavers across the country, thereafter, held the said amount as unexplained cash credit u/s. 68 of the Act. On appeal, the Tribunal taking cognizance of the fact that though the A.O had accepted 16 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 the sales duly accounted for in the books of accounts, but thereafter had dubbed the amounts so received as unexplained cash credit u/s. 68 of the Act, vacated the addition. The Ld. AR, submitted that the Tribunal in its aforesaid order, had specifically observed, that now when the A.O had while framing the assessment vide his order passed u/s. 143(3) of the Act, dated 18.06.2010 not rejected the books of account u/s. 145(3) of the Act, but also accepted the profit/income element pertaining to the purchase/sale transactions as was disclosed by the assessee before him from his business, therefore, it was incomprehensible that as to how the amount so accepted as sale proceeds could have thereafter been recharacterized as unexplained cash credit u/s. 68 of the Act. The Ld. AR submitted that as in the present case the A.O had rejected the books of accounts, and had rather accepted the profit/income element received by the assessee from both the aforementioned proprietary concerns, viz. M/s. Shree Ram Chemicals : Rs.1,58,384/-, Page 11 & 13 of APB; and (ii) M/s. Usha Chemicals : 2,00,337/-, Page 11 & 19 of APB, therefore, after having accepted the sales of the assessee and subjecting the profit/income element arising therefrom to tax as the latter’s business income, there was no justification for the A.O to have doubted the veracity of the purchase /sale transactions and recharacterize the sale proceeds/consideration as unexplained cash credit u/s. 68 of the Act. 17 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 17. The Ld. AR in his attempt to dispel all doubts raised by the A.O as regards the veracity of the sale transactions carried out by the assessee, had drawn our attention to the confirmation of account of one purchaser party, viz. M/s. Bansal Sales Corporation to whom sales of Rs.1,46,34,789/- (out of total sales of Rs.7,96,62,903/-) were made by M/s. Usha Chemicals during the year under consideration. Also, the Ld. AR had taken us through a “Chart” that was stated to have been filed before the A.O, wherein the complete details of the purchasers parties from whom cheques/DDs were received and deposited in the bank account No.6592000100003601 with Karnataka Bank Ltd. Branch: Raipur of M/s.Shri Ram Chemicals a/w. details of the corresponding sales bills were mentioned, Page No.64 to 75 of APB. Also, the Ld. AR had taken us through a “chart” wherein the details of the sale bills a/w. corresponding cash deposits aggregating to Rs.7,81,400/- in his bank account No.6592000100003701 with Karnataka Bank Ltd., Branch: Raipur of M/s.Usha Chemicals were mentioned, Page 63 of APB. Accordingly, the Ld. AR submitted that now when the A.O had accepted the duly audited books of account of both the proprietary concerns of the assessee, viz. (i) M/s. Shri Ram Chemicals ; and (ii) M/s. Usha Chemicals, and also accepted his sales, therefore, there was no justification for him to have held the sale consideration as unexplained cash credit u/s. 68 of the Act. 18 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 18. Per contra, Shri S.L Anuragi, Ld. CIT-Departmental Representative (for short ‘DR’) relied on the order of the A.O. The Ld. DR submitted that as the assessee had failed to substantiate that the amount of DDs/cheques deposited in his bank accounts aggregating to Rs.3,37,62,820/- (supra) were the sale proceeds, by placing on record complete details of the purchasers a/w. their confirmations despite the fact that the A.O had specifically directed him to do so, therefore, the same was rightly held as unexplained cash credit u/s. 68 of the Act. 19. We have thoughtfully considered the contentions advanced by the Ld. Authorized Representatives of both the parties in the backdrop of the orders of the lower authorities as regards the issue in hand, i.e. as to whether or not the A.O is right in law and facts of the case in treating the amount of Rs.3,37,62,820/- (supra) as unexplained cash credit u/s. 68 of the Act. 20. We principally concur with the Ld. AR that as the A.O had not rejected u/s. 145(3) of the Act the books of account of the assessee’s proprietary concerns, viz. (i) M/s. Shri Ram Chemicals ; and (ii) M/s. Usha Chemicals, and in fact, had accepted their respective profit/income based on their audited books of accounts and brought the same to tax, therefore, he could not have thereafter recharacterized the said amounts as unexplained cash credit u/s. 68 of the Act. As pointed out by the Ld. AR, a 19 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 similar view had been arrived at by the Tribunal in the case of Income-tax Officer Vs. Parmanand Gupta, ITA No.82/RPR/2017 & CO No.02/RPR/2022, dated 04.08.2022, wherein on the issue in hand it was held as under: “20. As observed by us hereinabove, the A.O had acted upon the information that was received from DDIT (Inv.)-II, Raipur and called upon the assessee to put forth an explanation as regards the nature and sources of cash deposits of Rs. 5,22,81,663/- in his bank accounts during the year under consideration. Although, it was the claim of the assessee that the cash deposits in question represented the sale proceeds of yarn, however, the same was rejected by the A.O for the reason that the assessee had failed to place on record the complete names of the purchasers a/w their addresses. 21. On appeal, the CIT(Appeals) was of the view that though it was an admitted fact that the assessee had imported silk yarn from China and sold the same to the various weavers who were spread across the country, but on account of beggaries of their occupation could not furnish their complete contact details, however, for the said standalone reason the AO could not have justifiably recharacterized the aforesaid amount of duly accounted sale proceeds that were deposited by the outstation based purchasers in the bank accounts of the assessee, as an unexplained cash credit u/s.68 of the Act. For the sake of clarity the relevant observations of the CIT(Appeals) are culled out as under: \"Decision- I have considered the rival submission of both the parties. The assessee imports the silk from China and received the import items at Chennai and as per standing instruction the forwarding agent at Chennai despatches the goods on the destinations. From the facilitation counter the weavers deposit the cash and received the delivery of the silk, so as to work upon the yarn. He has furnished the import evidence and payment of custom duty. He had furnished the cash book and sales account. He had furnished the invoices issued in the names of various persons as mentioned by the learned AR. I am not able to convince myself with the findings of the learned AO because he had made addition of Rs.5.228 crores which was part of 20 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 turnover of the assessee. The inability of the assessee to furnish the names of the parties who had purchased the yarn from him can be understood but the basic fact should not have been forgotten by the AO that he should also have tried to confirm at least from sales account viz-a-viz the bank account of the assessee. After import of the silk yarn assessee has not consume the whole imported silk. He had sold to various weavers and they may not be in the position to furnish the details of contact because of beggaries of the occupation. In my considered view the deposits in the bank appearing as HEFT and RTGS and cash represent the sale proceeds from various sundry debtors and the same is reflected in the sales account. The addition made by the AO is hereby-s deleted. The ground of appeal is allowed. (Relief Rs. 522,81,663/-)\" After having given a thoughtful consideration to the aforesaid observation of the CIT(Appeals), we find no reason to take a different view. At this stage, we may herein observe that it is a matter of fact borne from record that the assessee had duly accounted for the aforesaid amount of Rs.5,22,81,663/- as his sale proceeds for the year under consideration. As observed by the CIT(Appeals), it is a matter of fact borne from record that the assessee had imported silk yarn from China, which, thereafter, had been sold to the various weavers etc. who were spread across the country. Although the A.O had dubbed the aforesaid amount of Rs.5,22,81,663/- as unexplained cash credits u/s.68 of the Act, however, we find that at the same time he had accepted the sales as were duly accounted by the assessee in his books of account. In sum and substance, though the A.O had on the one hand accepted that the amounts in question were the sale proceeds that stood credited in the books of account of the assessee and had brought the profit resulting therefrom as disclosed by the assessee to tax in his hand, but at the same time had held the said amounts as unexplained cash credits within the meaning of section 68 of the Act. Apart from that, the re-characterization of the duly accounted sales of the assessee which were earlier accepted by the AO in the original assessment that was framed by him vide his order passed under Sec. 143(3), dated 18.06.2010, without rejecting his books of accounts under Sec. 145(3) of the Act is beyond comprehension. In sum and substance, the recharacterisation of the duly accounted cash sales of the assessee as unexplained cash credits u/s 68 by the AO without rejection of the books of account of the assessee u/s 145(3) of the Act is beyond comprehension. As stated by the ld. AR, and rightly so, the acceptance of the cash sales as disclosed by the assessee a/w simultaneous re- characterization of the same as unexplained cash credits u/s 21 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 68 had clearly subjected the assessee to a double tax jeopardy.” However, we find that in the aforementioned case of ITO Vs. Parmanand Gupta (supra), the A.O while framing the original assessment vide his order passed u/s. 143(3) of the Act, dated 18.06.2010, had accepted the sales as were duly accounted for by the assessee in his books of accounts. Also, no shortcomings either in the books of accounts or the material placed by the assessee to irrefutably fortify his claim that the amount of Rs.5.22 crore (approx.) deposited in his bank account was sourced from the sale proceeds of silk yarn that he had imported from China and sold during the subject year to various weavers spread across the country, had surfaced. In fact, the A.O in the aforementioned case, while framing the assessment vide his order passed u/s. 143(3) of the Act, dated 18.06.2010, had after necessary verifications accepted the sales disclosed by the assessee in his books of account. In the present case, before us, we are afraid that it is matter of fact borne from record that assessee had not been able to conclusively establish that the amount of Rs.3,37,62,820/- deposited in the bank accounts of his proprietary concerns, viz. (i) M/s. Shri Ram Chemicals; and (ii) M/s. Usha Chemicals were beyond doubt the sale proceeds that he had received from the purchasers. 22 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 21. At this stage, it would be relevant to point out, that though the A.O while framing the assessment, had specifically directed the assessee to place on record the confirmations of the purchasers but the needful was not done to his satisfaction. The assessee had even before us filed a confirmation of only one purchaser, viz. M/s.Bansal Sales Corporation, Gwalior, and had not brought on record those of the other parties. We principally concur with the Ld. AR that as the A.O had not rejected the books of account of the assessee u/s. 145(3) of the Act and had apparently accepted his sales a/w. the consequential profit/income that was offered by him for tax, therefore, there could have been no justification for him to have recharacterized the sale proceeds as unexplained cash credit u/s. 68 of the Act. At the same time, we cannot shut our eyes to the fact that the assessee had failed to conclusively prove that the entire amount of Rs.3,37,62,820/- credited in the books of accounts of his two proprietary concerns, viz. (i) M/s. Shri Ram Chemicals ; and (ii) M/s. Usha Chemicals were the sale proceeds that was received by him from the purchasers. Our aforesaid conviction is all the more fortified by the fact that the depositing of DDs of Rs.49,995/- claimed to have been made in the bank accounts of the assessee after every two or three days by the outstation purchaser parties, instead of making the requisite remittance of the sale consideration through RTGS/cheque etc., undeniably raises serious doubts as regards the veracity of the said claim of the assessee, which also 23 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 do not find any support from the principle of preponderance of human probabilities. 22. Be that as it may, we are of the view, that in the totality of the facts involved in the present case, the matter in all fairness requires to be restored to the file of the A.O with a direction to verify the veracity of the assessee’s claim that the amount of Rs. 3,37,62,820/- (supra) credited in his bank accounts was sourced out of the sale proceeds. The assessee is directed to substantiate his aforesaid claim in the course of the set-aside proceedings by placing on record the requisite confirmations a/w. other documentary evidences to the satisfaction of the A.O. In case, the assessee is able to substantiate his claim that the amount of Rs. 3,37,62,820/- (supra) or any part thereof credited in his bank accounts was sourced out of the sale proceeds of his proprietary concerns, viz. (i) M/s. Shri Ram Chemicals; and (ii) M/s. Usha Chemicals, then the addition made by the A.O, to the said extent, shall stand vacated. Needless to say, the A.O in the course of set-aside proceedings shall afford a reasonable opportunity of being heard to the assessee. 24 ACIT, Circle-1(1), Raipur Vs. Shri Kanhaiya Lal Gangwani ITA No. 182/RPR/2019 23. In the result, appeal of the revenue is allowed for statistical purposes in terms of our aforesaid observations. Order pronounced in open court on 09th day of December, 2024. Sd/- Sd/- ARUN KHODPIA RAVISH SOOD (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; Ǒदनांक / Dated : 09th December, 2024. ***SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. The Pr. CIT, Raipur-1 (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "