SHAILESH KUMAR JAIN, KOTA V. ACIT, INCOME TAX DEPARTMENT

ITA 266/JPR/2024

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0410 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 13-05-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 04-03-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Rejection of books of accounts; Business income; Principle of natural justice; Corroborative evidences; Assessment record; Condonation of delay; Bogus
• Section: 68; 145; 143(3); 69A; 44AB; 145(3)

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC’’ JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: Hon’ble SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No.266/JP/2024 fu/kZkj.k o"kZ@Assessment Year : 2017-18 Shri Shailesh Kumar Jain 20-D, New Colony, Gumanpura Kota 324 007 cuke Vs. The ACIT Circle-1 Kota LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABTPJ 8146 J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Nikhlesh Kataria, CA jktLo dh vksj ls@Revenue by: Mrs. Monisha Choudhary, Addl. CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 14/05/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 06/08/2024 vkns'k@ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 29-12-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2017-18 raising following grounds of appeal. ‘’1 The order passed u/s 143(3) is bad in law and on the facts of the present case for the lack of jurisdiction and other reasons and hence the same may please be quashed. 2 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA 2 The ld. AO erred in law as well as on the facts of the case in applying the provisions of section 69A of the Act though the same has no application in the facts of the present case and ld. CIT(A) erred in sustaining the same and hence, consequent addition is bad in law and be deleted 3 The ld. AO erred in law as well as on the facts of the present case in making addition u/s 69A of the cash disclosed in the regular business of the assessee without rejecting the books of accounts of the assessee and ld. CIT(A) erred in confirming the consequent addition and hence the same may please be deleted 4 The ld. AO erred in law as well as on the facts of the present case in treating business receipts as unexplained cash deposit and ld. CIT(A) incorrectly confirmed the same and hence consequent addition is prayed to be deleted. 5. Rs.2624280/-The Id. AO erred in law as well as on the facts of the present case in making the addition on account of unexplained cash and Id. CIT(A) erred in confirming the same and hence, the same is prayed to be deleted 2.1 During the course of hearing, the ld. AR of the assessee has not pressed the Ground No. 1. Hence, the same is dismissed being not pressed. 3.1 Now the solitary issue of the assessee is that ld. CIT(A) has erred in confirming the addition of Rs.26,24,280/- u/s 69A of the Act. 4.1 At the outset of the hearing, the Bench noticed that there was delay of 07 days in filing the appeal of the assesse for which the assessee has filed an application for condonation of delay with the prayer to condone the delay that his employee Shri Ramesh Kumar Verma who had been working with the assessee for 3 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA past two years and looking after all tax related matter had missed to inform about the receipt of the order to the assessee and the AR Shri M.D. Soni, CA. To this effect, Shri Ramesh Kumar filed an affidavit praying therein that the mistake happened due to oversight only without any mala fide intention. 4.2 On the other hand, the ld. DR objected to such delay but submitted that the Court may decide the issue as deem fit and proper in the case. 4.3 After hearing both the parties and perusing the materials available on record including the affidavit of Shri Ramesh Sharma, employee of the assessee, the Bench found that there is a merit in the submission of the ld. AR of the assessee. Hence, the delay of 07 days in filing the appeal is condoned. 5.1 Brief facts of the case are that the assessee being an individual has carried on business in Proprietorship firms in the name and style of Hindustan Ispat Udyog and Punaviya Steels. It was noticed by the AO that the assessee had deposited a sum of Rs.63.07 lacs during the demonetization period w.e.f. 10-11-2016 to 19-11- 2016 in different bank accounts. However, as per the assessee, the same was a part of the regular business activity and in support of the same, the books of accounts were produced but the AO was of the view that no explanation was offered by the assessee with regard to the payments received from debtors after demonetization. Therefore, apart from making addition u/s 69A of the Act, another addition of Rs.1.00 lac was made on estimate basis towards disallowance of direct expenses. 4 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA 5.2 Aggrieved by the order of assessment, the assessee preferred an appeal before the ld. CIT(A) who after providing opportunity of hearing to both parties deleted the addition of Rs.1.00 lac, however, upheld remaining addition made u/s 69A of the Act and thus partly allowed the appeal of the assessee. 5.3 Aggrieved by the order of the ld. CIT(A), the assessee preferred the present appeal before this Bench on the ground mentioned hereinabove. 5.4 During the course of hearing, the ld. AR of the assessee has reiterated his arguments as were raised before the ld. CIT(A) and also relied upon written submission put forth before the Bench. 5.5 On the contrary, the ld. DR relied upon the orders passed by the Revenue Authorities and specifically submitted that the assessee could not furnish the source of cash in hand and also corroborative evidences as well as documentary evidences. Thus, the ld.CIT(A) rightly sustained the addition as made by the AO. 5.6 The Bench has heard both the parties and perused the materials available on record and also the judgements cited by the respective parties. From the records, the Bench noticed that it is an undisputed fact that the assessee is dealing in Iron and Scrap and depositing of cash is a regular feature of the assessee. Since the assessee is having some other clients who mostly purchased the goods for agriculture or construction purposes. Therefore, transaction in cash is inevitable and done day to day basis. It was specifically pointed out by the ld. AR of the 5 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA assessee that until last year the assessee had only one Proprietorship firm i.e. Punavia Steels, however after death of his father in the preceding year, it also started another Proprietorship firm in the name of Hindustan Ispat Udyog from current financial year and therefore, trading activities was normally higher during the year as compared to the preceding year. In this regard, the ld.AR of the assessee has also drawn my attention to the copy of the Certificate which has been placed at PB page 83. Therefore, in these scenario, it was emerged for us to have study of comparative analysis of turnover and cash deposit in this year and also in the preceding year which is reproduced as under:- Sr. Financial year Hindustan Ispat Udyog Punaviya Steels* Total PB Turnover Cash Deposit Turnover Cash Deposit Turnover Cash Deposit 1 2015-16 - - 28422520 7384000 28422520 7384000 30 2 2016-17 (up to 30-12- 16) 56946535 19721950 10562995 3511000 67509530 23232950 3 2016-17 (up to 31-3- 2017) 85972331 24037950 10562995* 3511000* 96535326 27548950 4 2017-18** 129057444 15259000 - - 129057444 15259000 After analyzing the comparative table, the Bench noticed that in the preceding year the assessee deposited cash to the tune of Rs.73,84,000/- in a small turnover of Rs.2,84,22,520/- and in the year under consideration, it deposited total cash of Rs.2,75,48,950/- but the turnover also increased by more than 03 times and in the subsequent year when substantial cash gone out of economy, the assessee still 6 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA deposited a whooping cash of Rs.1,52,59,000/- in F.Y. 2017-18. Therefore, keeping in view the previous and subsequent conduct of the assessee, the Bench could reasonable assume that the cash deposit is in line with the nature of the business of the assessee and there is no unusual increase in cash deposit and thus completely bona fide. Even otherwise from the documents placed on records, the Bench noticed that keeping the substantial amount of cash is a regular feature of the assessee and even the opening cash balance stood at Rs.23,31,956/- as would appear from the balance sheet placed at PB Page 36. This opening balance was very well available for deposits as the same remained unquestioned by any the lower authorities. Although, the ld. DR pointed out that name and addresses and PAN of debtors were not submitted by the assessee but in this regard, it was pointed out and demonstrated before the Bench that complete ledger account including cash book, bank book, all ledger accounts were submitted by the assessee before the lower authorities and even otherwise the law nowhere required to keep KYC of debtors but in any case the assessee paid VAT on the sale made by it which stood accepted by the lower authorities. Therefore, when sales, purchases, stock, closing and opening balances of debtors stood accepted then there remains no question of doubting the receipt from debtors. Apart from this, it was pointed out by the ld. DR during the course of arguments that no evidence of merger of fathers firm M/s. Hindustan Scrap Traders was placed on record by the assessee. In 7 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA this regard, it was specifically submitted by the ld.AR of the assessee that there was no formal merger as both the firms were partnership firms and not incorporated entities. The fact is that the entire business which was being done in Hindustan Scrap Traders got automatically shifted to the firm of the assessee because after death of father Hindustan Scrap Traders was closed as is evident from the increase in turnover of the assessee which is more than 03 times during the year under consideration. Therefore, after accepting the turnover of the assesse by the Revenue, this observation hold no ground otherwise. From the record, the Bench noticed that the turnover of the assesee exceeded the ceiling provided under the provisions of Section 44AB of the Act and accordingly it was required to get the same audited by qualified Chartered Accountant. The ld. AR of the assessee pointed out that the assessee duly got audited its books of accounts as per the provisions and the audit report was duly submitted before the AO. The copy of audited financial statement was also placed on record at PB Page 31-37 in case of Hindustan Ispat Udyog and PB Page 38-45 in case of Punaviya Steels. The assessee has also maintained complete books of account consisting of cash book, bank book, ledger, sales book, purchase book, bills and vouchers and the same were already produced before the AO as is apparent from the perusal of the Para 2 of Page 1 of the assessment order. The Bench further noticed from the order of assessment that same were duly produced for verification and the AO test checked 8 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA the same. The documents placed on record by the assessee is at PB Page 84 to 243. The AO has not pointed out any defect in the books of account so produced by the assessee and moreover the AO has nowhere rejected the books of accounts by invoking the provisions of Section 145 of the Act. In such circumstances the same books cannot be made the basis of making of addition on account of unexplained cash deposit. In this regard, although the assessee has relied upon several decisions wherein it was held that where the assessee has maintained complete books of accounts and no defect what whatsoever has been pointed out in the books of accounts so maintained then no addition on account of cash deposit could be made. To this effect, few relevant and recent decisions are as under:- (1) Gems & Art Plaza vs DCIT 38 NYPTTJ 88 (Jd) (Tri) (Case laws 59-71) “12. We heard the rival submission and considered the documents available in the record. First, we are adjudicating the appeal ITA No. 353/Jodh/2023. The assessee deposited cash by claiming that the amount was originated from the sale of stock. It is never a question that the assessee has never controverted that assessee has in sufficient stock and purchased on the date of announcement of demonetisation on dt. 8th Nov., 2016. The assessee sold goods from his shop. Before that date, the assessee was sufficiently covered by the stock. The assessment was completed by the sales tax authority and the turnover and purchased was duly accepted. It is further submitted that from the documentary evidence the source, purpose and sequence of event duly established that there was direct nexus of cash deposit in bank account out of sales realization in cash. It is settled position of law that when the learned AO had not doubted the sales, purchases, stock and gross profit declared by the assessee then the cash deposit out of such sales cannot be doubted. The authority below had treated the normal transaction in respect of business receipt as something unusual and out of the ordinary only as undiscerningly which is against the principle of natural justice. 9 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA 12.1 We respectfully, relied on the order of the Anand Metal Corporation (supra). Further, the assessee’s books was rejected under s. 145(3) for non maintenance of stock register. The assessee claimed that the assessee is dealing with the items which are not possible for her to maintain stock register. The learned Authorised Representative respectfully relied in the order of the Hon’ble jurisdictional High Court in the case of Malani Ramjivan Jagannath (supra). 12.2 We also respectfully followed the order of the Hon’ble jurisdictional High Court in the case of non maintenance of stock register cannot be the reason for rejection of books of account. The assessee was eligible to prove the stock, the purchased and the assessment order of the sales tax authority. There are no discrepancies on purchase and stock of goods. On mere suspicion the sale of goods cannot be treated under s. 69A of the Act. The learned Departmental Representative was unable to submit any contradictory orders/judgments before the bench. Accordingly, the ground of the appeal bearing ITA 353/Jodh/2023 is allowed.” (2) ACIT vs. Nitin Shukla ITA no.98/RPR/2020 dt.8-6- 2023 (Case laws 32-58) 20. We have considered the rival contentions and perused the orders of the authorities below along with the relevant documents placed on record. The judicial pronouncement placed before ITAT to substantiate the contentions by the other parties. The factual matrix of the present case shows that there was a deposit of Rs. 2.90 Crs of old demonetized notes by the assessee after announcement of demonetization on 08.11.2016. It is an admitted fact that the assessee has opening balance of more than Rs. 2.90 crs when the demonetisation was pronounced, and this fact is not disputed by the department. The ld. AO has observed that there was no cash sales between 1st April, 2016 to 4th November, 2016. However, the assessee is in a trade wherein cash sales is a regular feature which is demonstrated by placing necessary evidence before us. Like, the abstract of cash sales of previous year and for the current year. It was also the fact that total turnover of the assessment year under consideration was Rs. 105.18 crs out of which Rs. 18.21 crs was in cash and it was the observations of the ld. CIT(A) that the same cannot be considered as unusual which is further substantiated by the figures of the sale in the previous year wherein the total turnover of the assessee was 200.53 cr and cash sales was Rs. 92.62 crs. It is also admitted fact that books of accounts of the assessee were accepted by the revenue, thereby they have accepted the purchase sales, stock, bank accounts etc. of the assessee. The ld. AO on one hand has accepted the books of accounts of 10 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA the assessee on the other hand treated the sale of the assessee has bogus, shows that ld. AO is blowing hot and cold at the same time which is unacceptable. The ld. CIT(A) has observed that when the purchases were accepted, the respective sale cannot be doubted. The addition u/s 68 of the Act cannot be made in respect of the amount which were found to be properly recorded into the books of accounts and no negative inference towards such transactions in the books of accounts were drawn by the revenue. We are drawing guidance from the case laws referred to hereinabove wherein it is clearly held that any addition on account of treating the sale of the assessee as bogus without rejecting the books of accounts is unjust, unfair and bad in law. Respectfully following decisions relied upon, we are of the considered opinion that in the circumstances when the assessee has sufficient opening cash balance at the time of pronouncement of demonetization which was not disputed by the department, if the same is being deposited by the assessee in its bank accounts, the same cannot be treated as unexplained or bogus unless any contrary observations borne from available records or otherwise brought on by the revenue against the assessee. Ld CIT(A) has appreciated the facts of the case, considered all the aspects correctly and has appropriately allowed the appeal of the assessee. The case of the Vaishnavi Bullion (supra), since has distinguishing facts and circumstances not comparable with the present case, the same cannot be applied to rescue the contention of the revenue. The department was unable to brought before us anything which inspires us to agree with the contentions of the department to substantiate their claim that the deposits made by the assessee out of its cash sales were not explained or are bogus, we therefore having no distinguished view then the view taken by ld. CIT(A), upheld the finding of the ld. CIT(A) and therefore, decided this issue against the revenue. In the result, grounds no 2 to 7 on this single issue of the appeal of the revenue are dismissed. (3)Mahesh Kumar Gupta vs. ACIT 223 TTJ 393 (Jp) (Case laws 10- 31) 9.7 In the light of the detailed discussions and finding that has been recorded by us in the preceding para we are of the considered view that the action of the learned AO making an addition under s. 68 for an amount of Rs. 80,00,000 as unexplained cash deposit without rejecting the books of account is unwarranted based on the discussion so recorded here in above. Even the learned AO has not found any defects in the details submitted by the assessee and audited books were considered and accepted while finalizing the assessment. Similar view has been taken by 11 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA this Co-ordinate Bench of Jaipur in the case of Asstt. CIT vs. Chandra Surana in ITA No. 166/Jp/2022 [reported at (2023) 221 TTJ (Jp) 515 : (2023) 223 DTR (Jp)(Trib) 49—Ed.] wherein the similar view has been taken. The relevant finding is reproduced herein below : "2.6 We have heard both the parties and perused the materials available on record. From the assessment records, it is noted that the AO made an addition of Rs. 2,90,93,500 in declared income by holding that said amount of cash deposited by the assessee in his bank account during the demonetization period is nothing but the undisclosed income of assessee which was shown under the garb of cash sales and thus it is liable to be added under s. 68 of the Act and taxable @ 60 per cent under the provision of s. 115BBE of the Act. It is also noted from the order of the learned CIT(A) at para 4.1 wherein the learned CIT(A) has described para 1.4 of assessee written submission that complete regular books of accounts, bill, vouchers and day to day stock register having complete quantitative details have been maintained by the assessee. The said books of accounts are audited. A copy of audited statement of account along with complete quantitative details have been submitted along with the return of income. The assessee maintained manual item-wise stock register. The said stock register was bulky and so could not be produced in e-proceedings but was produced before the AO in course of hearing as is evident from submission dt. 27th Sept., 2019. The fact of maintenance of stock register manually is stated in tax audit report also. Thus the cash sales transaction is recorded in regular books of accounts, sales are made out of stock-in-trade. The assessee also filed copies of sales invoice Nos. 82 to 158 of Bangaluru and 110 to 216 of Kolkata outlets before AO which were of 28th Oct., 2016 and these were earlier produced before Investigation Wing in financial year 2016-17 i.e., after the sales were made and same were verified by the Investigation Wing also. This view of the learned CIT(A) indicates hat the assessee has maintained regular books of accounts, bills, vouchers and day-to- day stock register having complete quantitative details and said books of accounts are audited. The assessee vide submission dt. 27th Sept., 2019 had produced stock record during the course of hearing. The cash sales transactions are recorded in regular books of accounts and the sales are made out of stock-in-trade for which no adverse finding had been observed by the AO except for the change in the methodology in issuing bills as mentioned at pp. 7 to 8 of the assessment order. Further, the learned CIT(A) observed that the AO had treated the cash deposited in the bank during the demonetization period in demonetized currency as unexplained cash credit under s. 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales, etc. was evident from the entries in the audited books of accounts of the assessee. In this case, 12 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA the books of account of the assessee had been audited by an independent auditor. The cash sales and receipts are duly supported by relevant bills which were produced in the course of assessment proceedings before the AO and it is not the case of the AO that the assessee did not have sufficient stock for making the sales. Hence, it cannot be said that the figures of sales and purchases are not supported by the quantitative details and the AO did not make any enquiry on the material supplied by the assessee. Thus, the AO neither brought any material on record to establish that the sale bills are bogus nor provided any evidence that such sales are bogus. It is also an open fact that the demonetization of Rs. 500 and Rs. 1,000 note was declared by the Hon'ble Prime Minister at 8 PM on 8th Nov., 2016 and after this announcement the persons reached the jewellery shop to buy jewellery in exchange of notes. Thus all such scenario indicates that the assessee had duly substantiated its claim from the documentary evidences and also with the facts. It is also observed from the assessment order that the AO had not rejected the books of account of the assessee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition of Rs. 2,90,93,500 made by the AO by applying the provisions of s. 68 of the Act, it is noted that provisions of s. 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P&L a/c. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of s. 68 of the Act. In view of the above deliberations and case laws relied upon by both the parties, we find that the AO was not justified in making an addition of Rs. 2,90,93,500 under s. 68 of the Act which has rightly been deleted the learned CIT(A) and we concur with his findings. Thus, the appeal of the Revenue is dismissed." 9.8 Respectfully following the consistent view and after considering the factual matrix of the cash on hand in our considered view the addition made cannot sustain and therefore, we vacate the addition of Rs. 80,00,000 made under s. 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sales accepted by the AO. In terms of these observations, ground No. 1 raised by the assessee is allowed.’’ 13 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA It is important to mention here that the AO has already accepted the trading results declared by the assessee while the sales, purchases, stock, other income and expenses of the assessee. Therefore, no addition was warranted by the Revenue Authorities. The assessee has also pointed out that turnover was duly disclosed before the VAT Authorities as the product which are being traded by the assesse are taxable under the provisions of VAT and the assessee had been paying taxes on the total turnover declared . In this regard, the copies of quarterly return which are placed on record at PB Page 50-77 and copies of Annual VAT Return which are also placed on PB Page 78-82 wherein turnover of the assessee in Hindustan Ispat Udyog as per books of account duly matched with the annual VAT return and similar is the case of M/s. Punaniya Steels. Since the source of cash deposit made by the assessee stood fully explained by the books of accounts which were duly audited as per provisions of law and also assessed by the VAT Authorities and therefore, on the contrary Revenue could not produce any defects in the books of accounts nor able to point out any discrepancies in the details submitted by the assesee. Hence, in this view of the matter, the Bench has no other option except to accept the books of account placed on record by the assessee and thus the addition so sustained by the ld. CIT(A) is directed to be deleted. 14 ITA NO. 266/JP/2024 SHRI SHAILESH KUMAR JAIN VS ACIT, CIRCLE -1, KOTA 6.0 In the result, the appeal of the assessee is partly allowed with no orders as to costs. Order pronounced in the open court on 06 /08/2024. Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 06/08/2024 *Mishra vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. The Appellant- Shri Shailesh Kumar Jain, Kota 2. izR;FkhZ@ The Respondent- The ACIT, Circle -1, Kota 3. vk;dj vk;qDr@ The ld CIT 4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur 5. xkMZ QkbZy@ Guard File (ITA No. 266/JP/2024) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asstt. Registrar