ITO, New Delhi V. M/s. Anand Jewellers, New Delhi

ITA 4583/DEL/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6765 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-01-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 14-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Keywords: Unexplained cash credit; Business income; Depreciation; Additional evidence; Accommodation entries; Onus to prove
• Section: 143(3); 133(6); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH A NEW DELHI BEFORE : SHRI H.S. SIDHU , JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 4583/DEL./2011 ASSTT. YEAR : 2008 - 09 INCOME - TAX OFFICER, VS. ANAND JEWELLERS, WARD 33(2), NEW DELHI. 161, GAFFAR MARKET, KAROL BAGH, NEW DELHI. [PAN: AABFA 0618D] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. K.K. JAISWAL, DR RESPONDENT BY : NONE DATE OF HEARING : 14.01.2016 DATE OF PRONOUNCEMENT : 25 .02.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) - XXVI, NEW DELHI DATED 11.07.2011 ON THE FOLLOWING GROUNDS : '1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 23,95,000/ - MADE BY AO BY TREATING SOURCE OF ACCRETION TO CAPITAL AMOUNT BY SH. A.S. MALIK AS UNEXPLAINED CASH CREDIT RELYING ON ADDITIONAL EVIDENCE N OT BROUGHT ON RECORD DURING ASSESSMENT PROCEEDINGS WITHOUT ALLOWING AN OPPORTUNITY TO THE AO TO EXAMINE THE SAME IN CONTRAVENTION OF RULE 46A ; SINCE DURING ASSESSMENT PROCEEDINGS, ASSESSEE HAD SUBMITTED VIDE LETTER DATED 21 - 07 - 2010 THAT SOURCE OF SAID ACC RETION WAS LOANS FROM M/S PRJ AUTOMOBILES PVT. LTD, RS. 14 LACS, M/S BNT ASSOCIATES LTD., RS.7 LAC AND CAPTAIN VIJAY KUMAR TREHAN RS. 20 LACS , TO WHOM NOTICES WERE SUBSEQUENTLY ISSUED U/S 133(6) WHICH REMAINED UNCOMPLIED WITH AND AMOUNTS REMAIN UNEXPLAINE D; AND THE CIT(A) RELIED ITA NO. 4583/DEL./2011 2 ON ENTIRELY DIFFERENT SUBMISSION OF THE ASSESSEE THAT ALLEGED LOANS WERE RAISED FROM PERSONS OTHER THAN THESE. 2) THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,06,99,740/ - MADE BY AO BY ESTIMATING THE COMMISSION INCOME @1 % OF TOTAL PURCHASES OF RS.1,06,99,74,009/ - BY ESTABLISHING THAT THE ASSESSEE WAS NOT RUNNING REGULAR BUSINESS BUT ONLY PROVIDING ACCOMMODATION ENTRIES SINCE ASSESSEE FAILED TO SUBSTANTIATE SALES; TAKEN TOGETHER WITH THE FACT THAT NEGLIGIBLE EXPENDITURE HA S BEEN SHOWN TO BE INCURRED IN A BUSINESS OF PURPORTED SALE OF RS. 180 CRORE, AND IN VIEW OF IT BEING FACTUALLY ASCERTAINED THAT THERE WAS NO/ NEGLIGIBLE REGULAR BUSINESS ACTIVITY BEING CARRIED OUT BY THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM COMPRISING OF TWO PARTNERS, SHRI ANAND SWAROOP MALIK AND SMT. RANJNA MALIK SINCE 01.04.2006. THE ASSESSEE FIRM IS STATED TO BE ENGAGED IN THE BUSINESS OF BULLION, G OLD, SILVER JEWELLERY, ORNAMENTS AND ALSO IN DIAMOND JEW ELLERY AND PRECIOUS STONES. HE FILED HIS RETURN OF INCOME ON 30.09.2008 DECLARING INCOME OF RS.2,56,020/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSMENT WAS COMPLETED WITH ADDITION OF RS.1,06,99,740/ - ON ACCOUNT OF COMMISSION EARNED ON PROVIDING ACCOMMODATION ENTRIES AND RS.23,95,000/ - ON ACCOUNT OF UNEXPLAINED INCOME IN THE FORM OF CAPITAL INTRODUCTION BY PARTNER SHRI ANAND SWAROOP MALIK. DURING THE ABOVE ASSESSMENT YEAR, THE TOTAL TURNOVER WAS RS.106,66, 34,514/ - . THE G.P. WAS 0.51% AND NET PROFIT WAS AT 0.02% WHEREAS THE ASSESSEE DECLARED HIS TURNOVER OF RS.18,24,30,630/ - WITH GP RATE OF 1.72% AND NP AT ITA NO. 4583/DEL./2011 3 0.4% IN THE IMMEDIATE PRECEDING YEAR. THE AO ASKED THE ASSESSEE FOR THE REASONS FOR DECREASE IN PROFIT MARGIN RATE. THE ASSESSEE COULD NOT OFFER ANY SATISFACTORY EXPLANATION. THE ASSESSEE PROVIDED THE DETAILS OF PURCHASES AND SALES BEFORE THE AO WHICH IS AS UNDER : SALES: GAGAN JEWELLERS RS.26,76,790/ - SR CHAINS & JEWELLERS RS.4,50,495/ - KUNDAN MAL ROOP CHAND JEWELLERS PVT. LTD. RS.8,70,297/ - UNI GOLD JEWEL CRAFT RS.26,74,554/ - GOLLU CHAIN HOUSE RS.3,96,040/ - KANGAN JEWELLERS RS.99,010/ - OTHERS INCLUDING CASH SALES RS.105,94,67,328 / - PURCHASES: S.K. IMPEX RS.13,39,77 ,226/ - KALYAN LAKSHMI OVERSEAS RS.2,31,19,421/ - N K GOLD MEDALLION PVT. LTD. RS.3,37,42,654/ - ANISHKA JEWELLERS RS.87,10,43,943/ - GAGAN JEWELLERS RS.27,56,638/ - OTHER INCLUDING CUSTOMER RS.53,34,167/ - 3. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESSEE HAS MADE TOTAL PURCHASES AT RS.87,10,40,943/ - FROM ANSHIKA JEWELLERS WHICH IS SISTER CONCERN. M/S. ANSHIKA JEWELLERS WAS REGISTERED IN MMTC, BUT THE ASSESSEE WAS NOT SO REGISTERED WITH MMTC. THE ASSESSEE HAS MADE DIRECT PAYMENT TO MMTC ON BEHALF OF THE ANSHIKA JEWELLERS. ON SCRUTINY OF CASH CREDIT LIMIT BANK ACCOUNT, THE AO FOUND THAT BEFORE MAKING PAYMENT TO MMTC, THE DEPOSIT WAS MADE IN CASH INTO THE BANK. THE AO ASKED THE ASSESSEE REGARDING SALES MADE BY HI M, BUT THE ASSESSEE COULD NOT SUBMIT THE DETAILS OF THE PURCHASERS TO ITA NO. 4583/DEL./2011 4 WHOM THE SALES WERE MADE SATING THAT THE PURCHASERS MAY DENY THE DEALS TO COVER UP ITS OWN UNDISCLOSED TRANSACTIONS OF UNACCOUNTED MONEY. THE ASSESSEE HAS MADE 99.32% OF TOTAL SALES IN C ASH TO ABOUT 1500 PURCHASERS. ON THE BASIS OF ABOVE, THE AO CONCLUDED THAT THE ASSESSEE IS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES AND ADDED 1% AS COMMISSION AMOUNTING TO RS.1,06,99,740/ - ON TOTAL PURCHASES MADE. 4. FURTHER, THE ASSESSING OFFICER FOUND THAT ONE OF THE PARTNERS SHRI A.S. MALIK HAS INTRODUCED FRESH CAPITAL OF RS.36 LACS. ON BEING ASKED FOR THE SOURCE OF CAPITAL INTRODUCTION, THE ASSESSEE SUBMITTED THAT THE SOURCE OF CAPITAL OF SH. ANAND SWAROOP MALIK A RE LOANS FROM M/S PRJ AUTOMOBILES PVT. LTD, (RS. 14,00.000), M/S BNT ASSOCIATES LTD. (RS.7,00,000/ - ) AND CAPTAIN VIJAY KUMAR TREHAN (RS.20 , 00,000/ - ). NOTICES U/S 133(6) OF THE I.T. ACT WERE ISSUED TO THESE PARTIES FOR VERIFICATION OF LOAN TRANSACTIONS WITH THE PARTNER OR ASSESSEE. THE REQUISITE INFORMATIONS HAVE NOT BEEN RECEIVED FROM M/S PRJ AUTOMOBILES PVT. LTD. AND M/S BNT ASSOCIATES LTD. DIRECTLY. THE NOTICE U / S 133(6) ISSUED TO M/S BNT ASSOCIATES LTD. HAS RECEIVED BACK UNSERVED WITH THE COMMENTS 'NO SU CH COMPANY AT SUCH ADDRESS'. HOWEVER, AS PER EXPLANATION OF ENTRIES OF SAVING ACCOUNT OF SH. A. S. MALIK WITH INDIA OVERSEAS BANK SUBMITTED BY THE AR OF THE ASSESSEE, SH. MALIK RECEIVED RS.7,00,000/ - + RS.7,00,000 FROM PRJ ITA NO. 4583/DEL./2011 5 AND RS. 7, 00 , 000 / - FROM BNT OUT OF WHICH RS.20,95,000/ - WAS GIVEN TO M/S ANISHKA JEWELLERS. AGAIN SH. MALIK RECEIVED RS.10,00,000/ - FROM ? (NOT VERIFIABLE) OUT OF WHICH RS. 7 , 00 , 000 / - SHOWN AS CAPITAL INTRODUCED AND RS.3,00,000/ - GIVEN TO SH. GULSHAN . AGAIN SH. MILIK RECEIVED RS.10,00,000/ - FROM ? (NOT VERIFIABLE) OUT OF WHICH RS.5,00,000/ - SHOWN AS CAPITAL INTRODUCED AND RS.5,00,000/ - GIVEN TO OSYRUS. NO FURTHER DETAILS OR EVIDENCE ON NATURE OF TRANSACTIONS OF THE PARTNERS WITH THESE PERSONS HAVE BEEN GIVEN. HENCE, THE SOURCE OF ADDITION TO CAPITAL BY SH. A. S. MALIK AND UTILIZATION OF CAPITAL WERE HELD TO BE DOUBTFUL. HOWEVER, CONSIDERING THE DETAILS AND EXPLANATION GIVEN BY THE AR OF THE AS SESSEE, AN AMOUNT OF RS. 12, 05 , 000/ - (RS.5000 + RS.7,00,000 + RS.5,00,000) WHICH REMAINED WITH THE ASSESSEE OUT OF THE LOANS RECEIVED BY THE PARTNER, WAS TREATED AS CAPITAL INTRODUCTION BY SH. A. K.. MALIK AND THE REMAINING AMOUNT OF RS.23,95,000/ - (RS.36,0 0,000 - RS.12,05,000) WAS TREATED AS UNEXPLAINED INCOME OF THE FIRM ROUTED THROUGH ITS PARTNER SH. A. S. MALIK. ACCORDINGLY, THE SAME WAS ADDED TO THE INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF LD. AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD .CIT(A).THE ASSESSEE SUBMITTED BEFORE THE CIT(A), CONFIRMATION OF LOANS AND EVIDENCES OF CREDITWORTHINESS OF THE CREDITORS AND GENUINENESS OF THE TRANSACTIONS WHICH WERE NOT FILED BEFORE THE AO. THE LD. CIT(A) DELETED THE ITA NO. 4583/DEL./2011 6 ADDITIONS. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 6. THE LEARNED DR RELIED ON THE ORDER OF THE AO AND THE CONTENTIONS RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. HE SUBMITTED THAT THE AO HAS PASSED A REASONED ORDER AND THE SAME DO ES NOT REQUIRE ANY INTERFERENCE. 7. THE PRESENT CASE LASTLY CAME UP FOR HEARING BEFORE THE BENCH ON 08.10.2015. ON THE REQUEST OF DR, THE CASE WAS ADJOURNED FOR 14.01.2016 IN THE PRESENCE OF BOTH THE PARTIES. ON THE DATE OF HEARING, NEITHER THE ASSESSEE N OR ITS AUTHORIZED REPRESENTATIVE APPEARED NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW OF FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE DECIDING THE PRESENT CASE EXPARTE QUA ASSESSEE AFTER HEARING THE LD. DR. 8. WE HAVE HEARD THE LD. D R AND PERUSED THE ORDER PASSED BY THE REVENUE AUTHORITIES AND WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS ADJUDICATED AND DECIDED THE ISSUE INVOLVED IN GROUND NO. 1, VIDE PARA NO. 8.1 TO 8.4 PAGE 30 TO 34 OF THE APPELLATE ORDER. FOR THE SAKE CONVENIENCE, TH E RELEVANT PARAS OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : 8.1. IT IS OBSERVED THAT THE ASSESSING OFFICER HAS ADDED PART OF THE CAPITAL INTRODUCED BY THE PARTNER, SH. A.S, MALIK, BY TREATING IT AS UNEXPLAINED INCOME OF ITA NO. 4583/DEL./2011 7 THE FIRM ROUTED THROUGH ITS PAR TNER, ON THE GROUND THAT THE ASSESSEE COULD NOT SATISFACTORILY EXPLAIN THE SOURCES OF ENTRIES IN THE BANK ACCOUNT OF THE PARTNER. THIS, HOWEVER, CANNOT BE TAKEN AS A GROUND FOR MAKING SUCH ADDITION IN THE HANDS OF THE FIRM IN THE ABSENCE OF ANY COGENT REAS ONS OR EVIDENCE TO THE CONTRARY BROUGHT ON RECORD AND IN VIEW OF THE WELL SETTLED POSITION OF LAW ON THIS ISSUE. 8.2. IT HAS BEEN SUBMITTED BY THE LD. COUNSEL IN THIS REGARD AS FOLLOWS: A) DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ENQUIRED ON ADDITION TO PARTNER'S CAPITAL A/C AND ASKED FOR CERTAIN CONFIRMATIONS WHICH WERE DULY SUBMITTED. B) COPY OF BANK STATEMENT OF THE PARTNER, MR. ANAND SWAROOP MALIK, FROM WHERE THE AMOUNTS WERE GIVEN TO THE APPELLANT FIRM WAS ALSO DULY SUBMITTED. C) THE AO ASKED FOR DETAILS OF FOLLOWING CREDIT ENTRIES, WHICH WERE DULY SUBMITTED BY THE APPELLANT: AMOUNT DATE INSTRUMENT NO. NAME OF PERSON FROM WHOM RECEIVED REMARKS 700000/ - 28.04.2007 83888 PRJ AUTOMOBILES P. LTD. PAN:AAACP8091K BANK STATEMENT AND CONFIRMATION WERE PLACED ON RECORD. 700000/ - 30.04.2007 482364 BNT ASSOCIATES LTD. PAN:AABCB1103F BANK STATEMENT AND CONFIRMATION WERE PLACED ON RECORD. 700000/ - 30.04.2007 438726 KUNTH PROPERTIES P. LTD. PAN:AACCK0499A BANK STATEMENT AND CONFIRMATION WERE PLACED ON RECORD. 1000000/ - 03.08.2007 660042 VIJAYTREHAN PAN:AADPT7340M BANK STATEMENT AND CONFIRMATION WERE PLACED ON RECORD. 1000000/ - 22.11.2007 660051 VIJAY TREHAN PAN:AADPT7340M ITA NO. 4583/DEL./2011 8 BANK STATEMENT AND CONFIRMATION WERE PLACED ON RECORD. D) IT IS, HOWEVER, NOT UNDERSTOOD WHY THE DETAILS OF THESE ENTRIES WERE REQUIRED. SOME OF THESE ARE NOT EVEN RELATED TO THE AMOUNTS RECEIVED BY THE APPELLANT. E) THE CORRECT DETAILS OF AMOUNT RECEIVED BY APPELLANT FIRM (TOTAL RS.36,00,000) FROM ITS PARTNER AND ITS SOURCES (OF THE PARTNER) ARE AS GIVEN BELOW: DATE OF RECEIPT BY FIRM AMOUNT RECEIVED BY APPELLANT DATE OF RECEIPT BY PARTNER SOURCE OF PARTNER RECEIVED FROM REMARKS 28.05.2007 700000 ANISHIKA JEWELLERS PROP. PANKAJ MALIK PAN CONFIRMATION, ITR ACKNOWLEDGEMENT AND BANK STATEMENT OF PANKAJ MALIK IS ENCLOSED 28.05.2007 1400000 PANKAJ MALIK PAN CONFIRMATION, ITR ACKNOWLEDGEMENT AND BANK STATEMENT OF PANKAJ MALIK IS ENCLOSED 28.05.2007 2100000 RECEIVED BY APPELLANT FIRM 03.08.2007 1000000 VIJAY TREHAN PAN CONFIRMATION, AND BANK STATEMENT OF VIJAY TREHAN IS ENCLOSED 08.08.2007 700000 RECEIVED BY APPELLANT FIRM 20.09.2007 300000 GULSHAN THE SAME WAS ADVANCED TO HIM ON 09.08.2007 BY ANAND SWAROOP MALIK VIDE A CHQ. NO. 194625 WHICH IS EVIDENT FROM BANK STATEMENT ITSELF. PAN OF GULSHAN, HIS CONFIRMATION AND HIS BANK STATEMENT IS ENCLOSED. 21.09.2007 300000 RECEIVED BY APPELLANT FIRM 23.11.2007 1000000 VIJAY TREHAN PAN CONFIRMATION, AND BANK STATEMENT OF ITA NO. 4583/DEL./2011 9 VIJAY TREHAN IS ENCLOSED 23.11.2007 500000 RECEIVED BY APPELLANT FIRM F) THE APPELLANT HAS EXPLAINED ITS SOURCE OF CAPITAL WHICH, IN ANY CASE, THE AO HAD NEVER HELD IN DOUBT, I.E., THE AMOUNT INTRODUCED IN THE APPELLANT FIRM IS FROM THE PARTNER'S BANK ACCOUNT FURTHER, THE SOURCE OF THE SOURCE, THOUGH NOT REQUIRED BY LAW, IS ALSO PROVED AS BROUGHT OUT ABOVE. G) ALL THE PAYMENTS WERE RECEIVED THROUGH A/C PAYEE CROSSED CHEQUES THROUGH PROPER BANKING CHANNELS A ND ARE DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT, WHICH IS EVIDENT FROM THE DOCUMENTS PLACED ON RECORD. H) THE BASIC REQUIREMENT OF SECTION 68 AS HELD IN CIT VS. OASIS HOSPITALITIES P. LTD. [2011 - ITRV - HC - DEL - 031] ITA NO. 2093 OF 2010 WITH ITA NO. 2094 O F 2010 WERE PROVED BY THE ASSESSEE AS FOLLOWS: IDENTITY: PAN IS SUBMITTED. GENUINENESS: THE MONEY IS RECEIVED BY CHEQUE AND IS TRANSMITTED THROUGH BANKING OR OTHER INDISPUTABLE CHANNELS. THIS WAS NEVER HELD IN DOUBT BY THE AO. CREDITWORTHINESS: THE PAYERS HAD SUFFICIENT BALANCE IN THEIR ACCOUNTS TO ENABLE THEM TO ADVANCE THE MONEY. 8.3. THE LD. COUNSEL HAS ALSO PLACED RELIANCE ON THE FOLLOWING CASE LAWS WHICH ARE FOUND TO BE WELL IN SUPPORT OF HIS CASE: IN CIT VS. TAJ BOREWELLS (2007) 291 IT R 232 (MAD), IT WAS HELD: 'THE ASSESSEE FIRM HAD EXPLAINED THE SOURCE OF THE CAPITAL AND HENCE THE SAME CANNOT BE ASSESSED AS UNDISCLOSED INCOME IN THE HANDS OF THE FIRM. IF THE AO DOUBTED THE GENUINENESS OF THE SOURCE OF THE PARTNERS, HE SHOULD HAVE CONS IDERED THE SAME IN THE HANDS OF THE PARTNERS ONLY AND NOT IN THE HANDS OF THE FIRM.' IN CIT VS. METACHEM INDUSTRIES (2000) 245 ITR 160 (MP), IT WAS HELD: 'ONCE THE FIRM HAS SATISFACTORILY EXPLAINED THAT THE CREDIT ENTRIES IN THE NAME OF ITA NO. 4583/DEL./2011 10 PARTNERS REPRE SENTS THE AMOUNT INVESTED BY THEM THE BURDEN OF PROOF STOOD DISCHARGED AND THE AMOUNT CANNOT BE TREATED AS INCOME OF THE FIRM UNDER S. 68.' IN SMT SHANTA DEVI VS. CIT (1998) 171 ITR 532 (P&H), IT WAS HELD: 'BOOKS HAVE TO BE THE BOOKS OF THE ASSESSEE HIMSELF AND NOT OF ANY OTHER ASSESSEE. ADDITION IN RESPECT OF CASH CREDIT FOUND IN THE BOOKS OF PARTNERSHIP FIRM IN WHICH ASSESSEE WAS A PARTNER, CANNOT BE MADE IN THE ASSESSEE'S HANDS.' IN CIT VS. VALUE CAPITAL SERVICES PVT. LTD. (2008) 307 ITR 334(DEL), THE HON'BLE HIGH COURT OF DELHI HAS HELD THAT: 'THERE WAS AN ADDITIONAL BURDEN CAST ON THE REVENUE TO PROVE THAT THE INVESTMENT MADE BY THE APPLICANT ACTUALLY EMANATED FROM THE COFFERS OF THE ASSESSEE SO AS TO ENABLE IT TO BE TREATED AS UNDISCLO SED INCOME'. IN THE INSTANT CASE, THE LD. A,0. DID NOT BRING ANY MATERIAL TO PROVE THAT THE PAYMENTS RECEIVED BY THE APPELLANT FOR ADDITION IN CAPITAL ACTUALLY EMANATED FROM THE COFFERS OF THE APPELLANT SO AS TO ENABLE IT TO BE TREATED AS UNDISCLOSED INCOM E OF THE APPELLANT. 8.4. IN VIEW OF THE ABOVE DISCUSSION, IT IS HEREBY HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION IN THE HANDS OF THE FIRM ON ACCOUNT OF CAPITAL INTRODUCED BY THE PARTNER AS ABOVE. THE ADDITION OF RS. 23,95, OOO/ - MADE ON THIS COUNT IS, ACCORDINGLY, HEREBY DELETED. 9. AFTER GOING THROUGH THE AFORESAID FACTS AND FINDINGS ON THE ISSUE IN DISPUTE, THE LD. FIRST APPELLATE AUTHORITY HAS PASSED THE WELL REASONED ORDER ON THE BASIS OF DOCUMENTARY EVIDENCE AND AS PER LAW. THE APPELLANT HAS FILED PAPER BOOK ON 11.03.2013 CONTAINING PAGES 1 TO 163. HE PLACED RELIANCE ON THE FOLLOWING CASE LAWS : (I). CIT VS. TAJ BOREWELLS (2007) 291 ITR 232 (MAD), (II). CIT VS. METACHEM INDUSTRIES (2000) 245 ITR 160 (MP), (III). SMT SHANTA DEVI VS. CIT (1998) 171 ITR 532 (P&H), ITA NO. 4583/DEL./2011 11 (IV). CIT VS. ORISSA HOSPITALITY PVT. LTD. 2011(ITR - V - HC - DEL - 031) ITA NO. 2093 OF 2010 WITH ITA NO. 2094 OF 2010. (VI). CIT VS. VALUE CAPITAL SERVICES PVT. LTD. (2008) 307 ITR 334(DEL) 10. THE REVENUE HAS RAISED TH E ISSUE BEFORE US REGARDING RULE 46A, BUT WE FIND THAT AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES AND CASE LAW CITED BY THE ASSESSEE, THE IMPUGNED ADDITION SHOULD BE MADE IN THE HANDS OF THE PARTNERS AND NOT IN THE HANDS OF THE ASSESSEE FIRM. THEREFORE, THERE IS NO QUESTION OF ADDITIONAL EVIDENCE. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE CIT(A). WE UPHOLD THE IMPUGNED ORDER ON THE ISSUE INVOLVED IN GROUND NO. 1. 11. ON GROUND NO. 2, THE LD. DR RELIED UPON THE ORD ER OF THE AO AND SUBMITTED THAT THE AO HAS PASSED THE REASONED ORDER, WHICH NEEDS NO INTERFERENCE AND THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,06,99,740/ - MADE BY AO BY ESTIMATING THE COMMISSION INCOME @1% OF TOTAL PURCHASES OF RS.1,06,99 ,74,009/ - BY ESTABLISHING THAT THE ASSESSEE WAS NOT RUNNING REGULAR BUSINESS BUT ONLY PROVIDING ACCOMMODATION ENTRIES SINCE ASSESSEE FAILED TO SUBSTANTIATE SALES; TAKEN TOGETHER WITH THE FACT THAT NEGLIGIBLE EXPENDITURE HAS BEEN SHOWN TO BE INCURRED IN A B USINESS OF PURPORTED SALE OF RS. 180 CRORE, AND IN VIEW OF IT BEING FACTUALLY ASCERTAINED ITA NO. 4583/DEL./2011 12 THAT THERE WAS NO/ NEGLIGIBLE REGULAR BUSINESS ACTIVITY BEING CARRIED OUT BY THE ASSESSEE. 12. WE HAVE HEARD THE LD. DR AND PERUSED THE ORDERS PASSED BY THE AUTHORITIES BELOW AND WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS ADJUDICATED AND DECIDED THE ISSUE INVOLVED IN GROUND NO. 2 FROM PARA NO. 7.1 TO 7.5 FROM PAGE NO. 18 TO 29 OF THE IMPUGNED ORDER. FOR SAKE OF CONVENIENCE, RELEVANT PARAS OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : 7.1. IT IS OBSERVED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION @ 1% OF THE TOTAL PURCHASES MADE BY THE ASSESSEE BY ASSUMING THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING BOGUS ACCOMMODATION ENTRIES, PRIMARILY ON THE GROUND THAT MOST OF THE SALES WERE MADE IN CASH AND THE ASSESSEE HAD DEPOSITED CASH IN ITS BANK ACCOUNT BEFORE MAKING THE PAYMENT BY CHEQUE AGAINST THE PURCHASES. THIS, HOWEVER, CANNOT BE TAKEN AS A GROUND, LET ALONE A SUFFICIENT ONE, FOR MAKING SUCH ADDITION IN THE ABSENCE OF ANY COGENT REASONS OR EVIDENCE TO THE CONTRARY BROUGHT ON RECORD. IT IS ALSO A WELL SETTLED POSITION OF LAW THAT THE AO CANNOT PROCEED TO MAKE AN ARBITRARY ADDITION AND BASE HIS CONCLUSION PURELY ON CONJECTURE AND SURMISES. IT IS ALSO OBSERVED THAT THE ASSESSING OFFICER HAS NO EVIDENCE OR MATERIAL WHATSOEVER ON RECORD TO SUPPORT ANY SUCH THEORY. 7.2. IT HAS BEEN SUBMITTED BY THE LD. COUNSEL IN THIS REGARD THAT THE FA CTS OF THE CASE ARE THAT THE APPELLANT IS A PARTNERSHIP FIRM CONDUCTING THE BUSINESS OF TRADING IN GOLD BULLION HAVING ITS PRINCIPAL PLACE OF BUSINESS AT 161, GAFFAR MARKET, KAROL BAGH, NEW DELHI - 110005. THE APPELLANT, FOR THE YEAR UNDER APPEAL, HAD FILED ITS RETURN OF INCOME U/S 139(1) OF THE ACT DECLARING THE INCOME AT RS.2,56,020/ - . THE ASSESSMENT HAS, HOWEVER, BEEN COMPLETED U/S 143(3) OF THE ACT VIDE ORDER DATED 28.12.2010 AT A TOTAL INCOME OF RS.1,30,94,740/ - . THE LD. A.O. WHILE FRAMING THE ASSESSMENT HAS ERRED ON FACTS AND IN LAW IN: HOLDING, WITHOUT REJECTING THE BOOKS OF ACCOUNT, THAT THE TRANSACTIONS OF PURCHASES AND SALES OF GOLD BULLION/JEWELLERY AS RECORDED IN THE BOOKS OF ITA NO. 4583/DEL./2011 13 ACCOUNT ARE SHAM, AS THE SALES HAVE BEEN MADE IN CASH, CASH HAS BEEN DEPOSITED IN BANK BEFORE MAKING PAYMENT FOR PURCHASES BY CHEQUE, AND NO EXPENDITURE HAS BEEN CLAIMED ON ADVERTISEMENT, SECURITY GUARD ETC. HOLDING, WITHOUT ANY BASIS OR MATERIAL, THAT THE APPELLANT IS CONDUCTING THE BUSINESS OF GIVING BOGUS ACCOMMODA TION ENTRIES AND ALLEGEDLY EARNING A COMMISSION OF 2% OF THE AMOUNT THEREOF, BUT KEEPING IN VIEW THE POSSIBLE EXPENSES, ESTIMATED THE COMMISSION @ 1% ON TOTAL PURCHASES OF RS. 106,99,74,049/ - , I.E., COMMISSION OF RS.1,06,99,740/ - . IGNORING THE INCOME OF RS.2,56,020/ - DECLARED BY THE APPELLANT AND IN ITS PLACE TREATING THE AFORESAID AMOUNT OF RS.1,06,99,740/ - AS THE INCOME FROM PURPORTED ACCOMMODATION ENTRIES WITHOUT THE BOOKS OF ACCOUNT BEING REJECTED. 7.3. IT HAS BEEN SUBMITTED THAT THE FACTS RELATING TO EACH OF THE ISSUES RAISED BY THE LD. A.O. IN THE ASSESSMENT ORDER ARE SERIALLY DEALT WITH AS UNDER: ASSESSEE MADE PURCHASE/SALE FROM GAGAN JEWELLERS BUT NO LABOUR CHARGES WERE SHOWN IN P & L A/C. IT IS PERTINENT TO NOTE THAT THE APPELLANT'S TRADIN G CONSISTS OF GOLD BULLION WHICH FORMS NEARLY 98% OF HIS TOTAL TURNOVER. FROM GAGAN JEWELLERS TOO, THERE WAS TRADING IN GOLD OF MORE THAN 60%; AND IN GOLD TRADING THERE IS NO QUESTION OF ANY LABOUR CHARGES. IN JEWELLERY TRADING, ALL SALES/PURCHASES ARE INC LUSIVE OF LABOUR CHARGES, HENCE THERE IS NO QUESTION OF ANY DISCLOSURE OF LABOUR CHARGES SEPARATELY IN THE PROFIT & LOSS A/C. THIS PRACTICE IS PREVALENT AMONGST ALL BULLION AND JEWELLERY TRADERS INCLUDING THE APPELLANT. HENCE, THE LD. AO'S BASIS OF OPINION IS FACTUALLY WRONG. NO DETAILS OF CASH SALES MADE TO CUSTOMERS. THE LD. AO STATED THAT THE APPELLANT WAS NOT ABLE TO GIVE DETAILS OF PERSONS TO WHOM CASH SALES WERE MADE AMOUNTING TO RS.105 CRORE. THIS IS THE NORMAL TRADING PATTERN OF BULLION TRADERS O R JEWELLERS, OR FOR THAT MATTER, ANY RETAIL TRADER. ALSO, THERE IS NO REQUIREMENT UNDER ANY LAW TO HAVE THE DETAILS OF SUCH CUSTOMER. WHENEVER A CUSTOMER GOES FOR BUYING ANY ARTICLE FROM ANY RETAIL OR WHOLESALE SHOP, STORE OR MALL, THE OWNER GIVES HIM THE DESIRED PRODUCT ON RECEIPT OF CASH. IF THE SHOPKEEPER WANTS TO HAVE DETAILS OF THE CUSTOMERS TO WHOM HE MAKES CASH SALES, IT WOULD NOT BE FEASIBLE AT ALL. IN THE APPELLANT'S CASE TOO, MAJORITY OF SALES IS IN CASH, AND IN CASH SALES, THE IDENTITY OF THE CUS TOMER CANNOT BE KNOWN TO THE APPELLANT, AS THE GOODS ARE DELIVERED ON RECEIPT OF CASH. INVARIABLY IN ALL CASH SALES OF JEWELLERY OR BULLION, BE IT BANKS, MMTC OR ANY ITA NO. 4583/DEL./2011 14 OTHER BIG JEWELLER, MORE THAN 95% OF THE SALE IS IN CASH AND SO IS THE CASE OF THE APPELLA NT. THE FOLLOWING FACTS PROVE BEYOND DOUBT THAT THE APPELLANT HAS MADE CASH SALES, WHICH ARE ALL GENUINE: THE FIRM IS ESTABLISHED SINCE MORE THAN LAST 30 YEARS AND DOING SAME BUSINESS ON CASH SALE BASIS SINCE INCEPTION. SALE BILLS WERE PRODUCED BEFORE THE LD. AO AND HE HAS HIMSELF MENTIONED THAT THERE ARE MORE THAN 1500 CUSTOMERS, WHICH HE NEVER DOUBTED. THE APPELLANT HAS BANKER'S CASH CREDIT LIMIT OF MORE THAN RS. 5 CRORE AND BANK OFFICIALS VISIT THE PREMISES OF THE AP PELLANT'S PREMISES ON REGULAR BASIS FOR INSPECTION ETC. AND THE STOCKS ARE ALSO HYPOTHECATED TO THE BANKERS. REGULAR SALES STATEMENTS ARE VERIFIED BY THE BANKERS TO ENABLE THE CC LIMITS. VAT RETURNS EVIDENCING THE SALES WERE PRODUCED BEFORE THE LD. AO AND REQUIRED VAT WAS DULY PAID BY THE APPELLANT ON REGULAR BASIS, WHICH THE AO NEVER HELD IN DOUBT. SALE PROCEEDS FROM CASH SALES ARE DEPOSITED IN THE BANK ON REGULAR BASIS, WHICH THE LD. AO HAS HIMSELF STATED IN HIS ORDER AT SEVERAL PLACES. PROPER STOCK RE CORDS WERE MAINTAINED AND DETAILS WERE DULY AUDITED AND SHOWN IN TAX AUDIT REPORT, WHICH THE LD. AO NEVER DOUBTED. IT HAS, THUS, BEEN SUBMITTED THAT FROM THE ABOVE FACTS, IT IS QUITE EVIDENT THAT THE APPELLANT MADE CASH SALES WHICH ARE DULY RECORDED IN I TS BOOKS OF ACCOUNT AND DULY SUPPORTED BY BILLS/VOUCHERS, BANK STATEMENTS AND VAT RETURNS. THE BANKS, VAT AUTHORITIES, INSURANCE COMPANIES, ETC. ALL DEALING WITH THE APPELLANT HAVE FOUND THEM GENUINE FOR THE LAST MORE THAN 30 YEARS. THE VERY BASIS OF THE L D. AO THAT NON - AVAILABILITY OF DETAILS OF CUSTOMERS TO WHOM CASH SALES IS MADE, MAKES THE SALES NON - GENUINE IS TOTALLY BASELESS AND WITHOUT ANY LOGIC. PURCHASES ARE DOUBTFUL. THE LD. AO STATED THAT SALES ARE DOUBTFUL AS PURCHASES ITSELF ARE DOUBTFUL. DETAILS OF PURCHASES ASKED BY THE AO (PARTY - WISE ABOVE RS.25 LAKH) WERE SUBMITTED AS UNDER: S. NO. DETAIL OF PARTIES FROM WHOM PURCHASES MADE ABOVE RS. 25 LAKH EACH AMOUNT (IN RS.) ITA NO. 4583/DEL./2011 15 1 ANISHKA JEWELLERS A/C MMTC LTD. 161, HARDHIYAN SINGH ROAD, KAROL BAGH, NEW DELHI 110005 87,10,43,943/ - 2 KALYAN LAXMI OVERSEAS A/C MMTC LTD. KRISHNA HOUSE, A - 14, NEW GUPTA COLONY, NEW DELHI 110009 2,31,19,421/ - 3. NKGOLD MEDALLION P. LTD. 10, ESPLANADE ROAD, CHANDNI CHOWK, DELHI 110006 3,37,42,654/ - 4 S. K. IMPE X 1241, GALI KUCHA BAGH, CHANDNI CHOWK, DELHI 110006 13,39,77,226/ - 5 GAGAN JEWELLERS 11/2426, BEADON PURA, KAROL BAGH, NEW DELHI 110005 27,56,638/ - 6 OTHERS (BELOW RS. 25 LAKH EACH) 53,34,167/ - TOTAL 106,99,74,049/ - THE FOLLOWING FACTS PROVE BEYOND DOUBT THAT THE APPELLANT HAS MADE PURCHASES, WHICH ARE ALL GENUINE: THE FIRM IS ESTABLISHED SINCE MORE THAN LAST 30 YEARS AND DOING THE SAME BUSINESS SINCE INCEPTION. THE DETAILS OF PURCHASES MADE (PARTY - WISE) WERE FILED WITH THE LD. AO AS ABOVE, WHICH HE NEVER DOUBTED AND EVEN SENT ENQUIRIES U/S 133(6) TO ALL AND MOST OF THEM RESPONDED TO THE SAME. THE APPELLANT HAS BANKER'S CASH CREDIT LIMIT OF MORE THAN RS. 5 CRORE AND BANK OFFICIALS VISIT THE PREMISES OF THE APPELLANT'S PREMISES ON REGU LAR BASIS FOR INSPECTION ETC. AND THE STOCKS ARE HYPOTHECATED TO THE BANKERS. IF PURCHASES ARE HELD BOGUS AS STATED BY THE LD. AO, THEN HOW ARE THE BANKERS HYPOTHECATING THE STOCKS, AS THE STOCKS ARE THERE AS A RESULT OF PURCHASES ONLY. ENQUIRIES WERE MADE BY THE AO FROM THE BANKERS AND NOTHING ADVERSE WAS FOUND. ALL PAYMENTS WERE MADE BY A/C PAYEE CHEQUES TO THE CREDITORS FROM WHOM PURCHASES WERE MADE, WHICH THE AO HAS TAKEN ON RECORD. MAJOR PURCHASES OF RS. 87 CRORE APPROX. WERE MADE FROM M/S ANISHKA JEWELLERS, PROP. PANKAJ MALIK, (A RELATED CONCERN), AS THEY ARE REGISTERED WITH MMTC LTD. FOR PURCHASE OF BULLION. IN FACT, MOST OF THE PAYMENT WAS MADE TO MMTC BY THE APPELLANT ITSELF. THE LD. AO HAS STATED THAT .PURCHASE FROM MMTC ITA NO. 4583/DEL./2011 16 (A GOVERNMENT CONCERN) MADE THROUGH A/C PAYEE CHEQUES IS BOGUS, WHICH IS TOTALLY BASELESS. ENQUIRIES WERE MADE BY THE AO FROM MMTC LTD. AND NOTHING ADVERSE WAS FOUND. INCOME - TAX DEPARTMENT IN THE CASE OF M/S AN ISHKA JEWELLERS, PROP. PANKAJ MALIK, HAS ACCEPTED ITS SALES MADE VIDE ITS ASSESSMENT ORDER U/S 143(3) FOR A.Y. 2008 - 09. IF ITS SALES ARE HELD GENUINE BY IT DEPARTMENT, HOW CAN ITS CORRESPONDING PURCHASES BE HELD AS NON - GENUINE? COPY OF THE ASSESSMENT ORDER PASSED U/S 143(3) IN CASE OF M/S ANISHKA JEWELLERS IS ENCLOSED TO SUBSTANTIATE THE SAME. THE LD. AO HAS ALSO STATED THAT THOUGH APPELLANT MADE CASH SALES OF RS. 105 CRORE, BUT ANISHKA JEWELLERS HAS MADE CASH SALES OF ONLY 15.75 CRORE OUT OF TOTAL SALE OF RS. 128 CRORE. IT MAY BE NOTED THAT ANISHKA JEWELLERS HAS MADE SALES OF RS. 87 CRORE APPROX. TO THE APPELLANT ITSELF WHICH WAS NOT IN CASH. THE LD. AO HAS ALSO STATED THAT THE NOTICE WAS RETURNED UNSERVED IN THE CASE OF M/S KALYAN LAXMI OVERSEAS. TO THE A PPELLANT'S KNOWLEDGE, THE LD. AO HAD MADE ENQUIRIES FROM THE APPELLANT'S CREDITORS BY ISSUING 133(6) AND ALMOST ALL OF THEM HAD CONFIRMED THE TRANSACTIONS WITH THE APPELLANT. HOWEVER, IN ONE CASE, I.E., M/S KALYAN LAXMI OVERSEAS, THE NOTICE WAS RETURNED UN SERVED. AS PER THE APPELLANT'S INFORMATION, M/S KALYAN LAKSMI OVERSEAS IS NO MORE IN THE BUSINESS NOW. HOWEVER, IT IS PERTINENT TO NOTE THE FOLLOWING FACTS REGARDING M/S KALYAN LAXMI OVERSEAS: DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT DID BUSINES S WITH THE SAID CONCERN. M/S KALYAN LAXMI OVERSEAS IS REGISTERED WITH MMTC LTD., A GOVERNMENT UNDERTAKING UNDER OGL GOLD SCHEME. ALL PAYMENTS ON ACCOUNT OF M/S KALYAN LAXMI OVERSEAS WERE MADE TO MMTC LTD. DIRECTLY. M/S KALYAN LAXMI OVERSEAS WAS REGIS TERED WITH VAT AUTHORITIES. COPY OF ITS VAT REGISTRATION IS ENCLOSED TO SUBSTANTIATE THE SAME. LEDGER A/C OF M/S KALYAN LAXMI OVERSEAS IS ENCLOSED, WHICH WAS DULY SETTLED DURING THE YEAR. ITA NO. 4583/DEL./2011 17 IT HAS, THUS, BEEN SUBMITTED THAT CONSIDERING ALL THE ABOVE SUBMIS SIONS AND ESPECIALLY AS ALL THE PARTIES HAVE CONFIRMED THEIR TRANSACTIONS AND ALL PAYMENTS WERE MADE BY A/C PAYEE CHEQUES, THE PURCHASES ARE PROVEN BEYOND DOUBT. ENQUIRY BY THE INSPECTOR. THE LD. AO FORMED HIS OPINION ON THE BASIS OF INSPECTOR'S REPORT TOO. HOWEVER, IT IS SUBMITTED THAT THE REPORT OF THE INSPECTOR IS TOTALLY FALSE AND WITHOUT ANY BASIS, WHICH IS SUBSTANTIATED AS BELOW; THE INSPECTOR VISITED 1ST FLOOR OF THE PREMISES AT 161, HARDHIYAN SINGH ROAD, GAFFAR MARKET, KAROL BAGH, NEW DELHI, AND FOUND NO BUSINESS ACTIVITIES. THE INSPECTOR IS CORRECT THAT THERE WAS NO BUSINESS ACTIVITY AT THE 1ST FLOOR, AS THE BUSINESS ACTIVITIES OF THE APPELLANT ARE NOT AT 1ST FLOOR BUT ARE AT THE 2ND FLOOR. HENCE, THE TOTAL REPORT OF THE INSPECTOR IS FACTUALLY W RONG AS HE DID NOT VISIT THE PREMISES OF THE APPELLANT AT ALL AND GAVE A WRONG REPORT. RECENTLY TAKEN PHOTOGRAPHS OF THE PREMISES OF THE APPELLANT ARE ENCLOSED TO SUBSTANTIATE THAT BUSINESS IS BEING CARRIED AT SECOND FLOOR. PHOTOGRAPHS OF THE RELATED CONC ERN (M/S ANISHKA JEWELLERS) AT GROUND FLOOR ARE ALSO ENCLOSED TO SUBSTANTIATE THAT IT IS A SEPARATE ENTITY DOING SEPARATE BUSINESS. THE FIRM IS ESTABLISHED SINCE LAST MORE THAN 30 YEARS AND DOING THE SAME BUSINESS FROM THE SAID PREMISES SINCE 1987. THE APPELLANT HAS BANKER'S CASH CREDIT LIMIT OF MORE THAN RS. 5 CRORE AND BANK OFFICIALS VISIT THE PREMISES OF THE APPELLANT'S PREMISES ON REGULAR BASIS FOR INSPECTION ETC. IF THE BANKERS CAN SEE THE BUSINESS PREMISES AND ADVANCE HUGE MONIES, HOW COME THE INSP ECTOR COULD NOT SEE IT? VAT AUDIT WAS CONDUCTED BY THE VAT DEPARTMENT AT THE APPELLANT'S PREMISES AND THEY FOUND THE BUSINESS DONE, BUT THE INSPECTOR COULD NOT AS HE HAD VISITED THE WRONG PREMISES. THE APPELLANT IS A MEMBER OF KAROL BAGH JEWELLERS' ASSOCI ATION AND THE CERTIFICATE STATING THE SAME IS PLACED ON THE WALL OF THE PREMISES OF THE APPELLANT, WHICH THE INSPECTOR DID NOT OBSERVE. COPY OF THE CERTIFICATE REGARDING SAME IS ENCLOSED. ITA NO. 4583/DEL./2011 18 THE INSPECTOR STATED THAT HE DID NOT FIND THE STOCK ON DISPLAY. THI S WAS SO AS HE HAD VISITED WRONG PREMISES. THE APPELLANT HAD NORMAL BUSINESS STOCK AND THE SAME IS INSURED TOO. COPY OF INSURANCE OF STOCK OF THE APPELLANT IS ENCLOSED TO SUBSTANTIATE THE SAME. COPIES OF CASH COLLECTION FROM APPELLANT'S PREMISES BY BANKERS WITH RECENT BANK STATEMENT IS SUBMITTED IN EVIDENCE THAT BANKERS VISIT APPELLANT'S PREMISES ON ALMOST ALTERNATIVE DAYS TO COLLECT CASH TO DEPOSIT THE SAME IN BANK. IT HAS, THUS, BEEN SUBMITTED THAT THE REPORT OF THE INSPECTOR CANNOT BE RELIED UPON AT ALL AS HE VISITED THE WRONG PREMISES AND ALL HIS OBSERVATIONS ARE BASED ON THE WRONG PREMISES. DEPOSIT IN CASH BEFORE ISSUE OF CHEQUE. THE ID. AO HAS STATED THAT THE APPELLANT HAS DEPOSITED CASH BEFORE ISSUE OF CHEQUE FOR PURCHASES. IT IS TO BE NOTE D THAT THE APPELLANT'S MAJOR SALES ARE IN CASH AND THE SALE PROCEEDS ARE BEING REGULARLY DEPOSITED IN BANK. WHEN SALE IS IN CASH, THEN CASH WOULD NATURALLY BE DEPOSITED IN THE BANK TO CLEAR THE DUES AND TO PAY FOR PURCHASES. THIS IS A NORMAL BUSINESS PRACT ICE AND NOTHING ADVERSE CAN BE CONCLUDED OUT OF THE SAME. PURCHASES FROM ANISHKA JEWELLERS. THE LD. AO HAS ALSO FORMED AN OPINION THAT PURCHASES FROM M/S ANISHKA JEWELLERS ARE NOT GENUINE. HOWEVER, THE FOLLOWING FACTS PROVE BEYOND DOUBT THAT THE PURCHASE S FROM M/S ANISHKA JEWELLERS ARE ALL GENUINE: M/S ANISHKA JEWELLERS IS A SOLE PROPRIETORSHIP CONCERN OF MR. PANKAJ MALIK, SON OF PARTNER OF THE APPELLANT. M/S ANISHKA JEWELLERS IS REGISTERED WITH MMTC LTD., A GOVERNMENT UNDERTAKING, UNDER OGL GOLD SCHEME . THE APPELLANT IS NOT REGISTERED WITH MMTC LTD. UNDER OGL GOLD SCHEME AND IT PURCHASES GOLD FROM MMTC LTD. THROUGH M/S ANISHKA JEWELLERS. AS M/S ANISHKA JEWELLERS MADE CERTAIN PURCHASES ON BEHALF OF THE APPELLANT FROM MMTC LTD., IT REQUESTED THE APPELLANT TO MAKE THE PAYMENT FOR THE SAME DIRECTLY TO MMTC, WHICH THE APPELLANT DID. IN FACT, MOST OF THE PAYMENTS WERE MADE BY THE APPELLANT DIREC TLY TO MMTC FOR ITA NO. 4583/DEL./2011 19 PURCHASE OF GOLD. THE PAYMENTS HAVE INVARIABLY BEEN MADE THROUGH ACCOUNT PAYEE CHEQUES ONLY. INCOME TAX DEPARTMENT IN THE CASE OF M/S ANISHKA JEWELLERS, PROP. PANKAJ MALIK, HAS ACCEPTED ITS SALES, VIDE ITS ASSESSMENT ORDER U/S 143(3) FOR A .Y. 2008 - 09. IF ITS SALES ARE HELD GENUINE BY IT DEPARTMENT, HOW CAN THE CORRESPONDING PURCHASES BE HELD AS NON - GENUINE? COPY OF THE ASSESSMENT ORDER PASSED U/S 143(3) IN CASE OF M/S ANISHKA JEWELLERS IS ENCLOSED TO SUBSTANTIATE THE SAME. IT HAS, THUS, BE EN SUBMITTED THAT IN VIEW OF THE ABOVE FACTS, ALL THE PURCHASES FROM M/S ANISHKA JEWELLERS ARE GENUINE. EXPENSES TO RUN THE BUSINESS. THE LD. AO IS OF THE OPINION THAT THE APPELLANT DID NOT INCUR CERTAIN ESSENTIAL EXPENSES TO RUN THE BUSINESS, HENCE THE F IRM IS BOGUS. THE APPELLANT'S SUBMISSIONS IN THIS REGARD ARE AS BELOW: FURNITURE & FIXTURE AND ITS MAINTENANCE - THE AO HAS STATED THAT VALUE OF FURNITURE AND ITS MAINTENANCE COST IS VERY LOW. IT IS SUBMITTED THAT THE APPELLANT FIRM IS VERY OLD AND OPERATI NG FROM THIS PREMISES SINCE 1987. THE VALUE OF FURNITURE IN BALANCE SHEET IS AT WDV OF RS.9144/ - . THIS IS NOT THE COST BUT WDV AFTER SO MANY YEARS. FURTHER, THE PHOTOGRAPHS OF THE APPELLANT'S OFFICE PREMISES ENCLOSED SUBSTANTIATE THAT THE OFFICE IS A SMALL ONE AND DOES NOT REQUIRE MUCH FURNITURE AND CONSEQUENTLY ITS MAINTENANCE IS ALSO NOT TOO HIGH. HENCE, THE AO'S OBSERVATION IS FACTUALLY INCORRECT. EXPENSES OF ADVERTISEMENT - THE AO HAS STATED THAT THERE ARE NO EXPENSES OF ADVERTISEMENT. IT IS SUBMITTED THAT THE APPELLANT'S MORE THAN 98% TRADING IS IN BULLION FOR WHICH ADVERTISEMENT IS NOT REQUIRED. THE APPELLANT KNOWS HOW TO CONDUCT HIS BUSINESS AND HAS BEEN DOING SO SUCCESSFULLY SINCE YEARS. HENCE, THE AO'S OBSERVATION IS NOT CORRECT. EXPENSES ON SECUR ITY GUARD - THE AO HAS STATED THAT THERE ARE NO EXPENSES ON SECURITY GUARD. THE AO NEVER ASKED ALL THESE QUESTIONS TO THE APPELLANT OTHERWISE THE APPELLANT WOULD HAVE SURELY REPLIED. THE PARTNER OF THE APPELLANT FIRM HAS THREE VALID WEAPON LICENCES, WHICH THE APPELLANT FEELS IS MUCH BETTER TO SAVE ITS ASSETS RATHER THAN A SIMPLE SECURITY GUARD. HENCE, THERE ARE NO SECURITY GUARD EXPENSES OF THE APPELLANT. ITA NO. 4583/DEL./2011 20 REPLIES FROM EMPLOYEES - THE LD. AO SENT NOTICES U/S 133(6) TO TWO EMPLOYEES OF THE APPELLANT, ONE RES IDING AT ROHINI AND ANOTHER AT GHAZIABAD. BOTH OF THEM RESPONDED, TO WHICH ALSO THE AO OBJECTS THAT THE REPLIES ARE ON PLAIN PAPER AND WITHOUT ENVELOPE. HOW DOES THE AO BELIEVE THAT THESE SIMPLE EMPLOYEES SHOULD HAVE THEIR LETTERHEADS? THE EMPLOYEES RESPON DED IN A SIMPLISTIC MANNER BY WRITING ON A PLAIN PAPER AND DELIVERING THE SAME PERSONALLY TO THE AO'S OFFICE. WHAT ELSE DID THE LD. AO EXPECT IS NOT UNDERSTANDABLE. COMPUTING INCOME ON ESTIMATE BASIS. THE LD. AO HAS, THUS, COMPUTED THE INCOME OF THE APPE LLANT ON ESTIMATE BASIS WITHOUT CONSIDERING THE FOLLOWING FACTS: THE ACCOUNTS OF THE APPELLANT ARE DULY AUDITED BY A CHARTERED ACCOUNTANT, TO WHICH THE AO NEVER OBJECTED OR HELD IN DOUBT. BOOKS OF ACCOUNT AND SALES INVOICES WERE PRODUCED BEFORE THE AO WHICH HE NEVER REJECTED OR HELD IN DOUBT. BANKERS ADVANCED CC LIMITS TO THE APPELLANT TO THE TUNE OF RS. 5 CRORE, AND THE AO MADE ENQUIRIES FROM THE BANKERS AND FOUND NOTHING ADVERSE. DETAILS OF QUANTITY - WISE PURCHASES/SALES WERE DULY AUDITED UNDER FORM 3CD, WHICH ALSO THE AO NEVER HELD IN DOUBT. THE AO SENT VARIOUS ENQUIRIES AND NOTICES U/S 133(6) TO CREDITORS, EMPLOYEES, BANKERS, ETC. AND ALL RESPONDED AND THE AO FOUND NOTHING ADVERS E. IT HAS FURTHER BEEN SUBMITTED THAT THE LD. AO RELIED ON THE INSPECTOR'S REPORT WHICH WAS FACTUALLY INCORRECT AS HE HAD VISITED WRONG PREMISES, AS BROUGHT OUT EARLIER. FURTHER, THE LD. AO HAS NOT EVEN MENTIONED ANY PROVISION OF LAW UNDER WHICH THE INCOM E WAS ESTIMATED BY HIM. THE LD. AO ESTIMATED INCOME AT 1% OF THE PURCHASES/ THOUGH ALMOST ALL PURCHASES WERE MADE BY A/C PAYEE CHEQUES AND VIRTUALLY ALL OF THEM HAVE CONFIRMED THEIR TRANSACTIONS WITH THE APPELLANT, AND MAJOR PAYMENTS WERE MADE TO MMTC LTD. , A GOVERNMENT UNDERTAKING. 7.4. IT HAS, THUS, BEEN SUBMITTED THAT THE ADDITION HAS BEEN MADE PURELY ON ESTIMATE BASIS, BASED ON CONJECTURE AND SURMISES, WITHOUT THERE BEING ANY MATERIAL OR EVIDENCE TO SUBSTANTIATE THE CONCLUSION THAT THE BUSINESS IS SHAM AND THAT THE APPELLANT IS PROVIDING BOGUS ACCOMMODATION ENTRIES. THE SUBSEQUENT ACTION OF ESTIMATING THE NET COMMISSION THEREOF @ 1% OF THE TOTAL ITA NO. 4583/DEL./2011 21 PURCHASES AT RS.L,06,99,740/ - AS TAXABLE INCOME OF THE APPELLANT IS, THUS, WHOLLY AGAINST THE FACTS AND BAD IN LAW. 7.5. IN VIEW OF THE ABOVE DISCUSSION, IT IS HEREBY HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION AS ABOVE. THE ADDITION OF RS.1/06,99,7407 - MADE ON THIS COUNT IS, ACCORDINGLY, HEREBY DELETED. THE ASSESSING OFFICER IS, ACCORDIN GLY, HEREBY DIRECTED TO TAKE THE APPELLANT'S INCOME FROM BUSINESS AT RS.2,56,020/ - AS DECLARED IN ITS RETURN OF INCOME. 13. AFTER GOING THROUGH THE AFORESAID FACTS AND FINDINGS ON THE ISSUE IN DISPUTE, THE LD. FIRST APPELLATE AUTHORITY HAS PASSED WELL RE A SONED ORDER ON THE BASIS OF DOCUMENTARY EVIDENCE AS PER LAW. THE ASSESSEE HAS FURNISHED VAT RETURN AND VAT AUDIT REPORT. THE TOTAL TURNOVER DECLARED BEFORE THE VAT AUTHORITIES ARE TALLIED WITH THE TURNOVER DECLARED IN THE INCOME - TAX RETURN. THE ASSESSEE H AS TAKEN CASH CREDIT LOAN FROM PNB, PUNJABI BAGH, NEW DELHI AGAINST HYPOTHECATION OF STOCK. AS PER SUBMISSIONS, HE HAS FULFILLED THE REQUIREMENT OF BANK AGAINST CASH CREDIT LOAN TAKEN. THEREFORE, THE PURCHASE AND STOCK DECLARED BEFORE THE BANK CANNOT BE QU ESTIONED. AFTER GOING THROUGH THE AO S ORDER AND THE PAPER BOOK SUBMITTED, WE OBSERVE THAT THE INSPECTOR HAS SUBMITTED WRONG REPORT. REGARDING VERY LOW AMOUNT OF DEPRECIATION, THE ASSESSEE WAS CARRYING HIS BUSINESS SINCE LAST MANY YEARS, THEREFORE, THEIR W DV HAS GONE DOWN. THE AO HAS COMPUTED 1% INCOME ON TOTAL PURCHASES ON ESTIMATE BASIS WHEREAS THE ACCOUNTS OF THE ASSESSEE HAVE BEEN AUDITED BY THE CHARTERED ACCOUNTANT AND SUBMITTED THE TAX AUDIT REPORT IN APPROPRIATE FORM ITA NO. 4583/DEL./2011 22 AND THE ASSESSING OFFICER HAS NOT DISTURBED THE FINANCIAL RESULTS. THE SALES AND PURCHASE INVOICES WERE PRODUCED BEFORE THE AO, BUT HE DID NOT REJECT ANY SINGLE PAPER AND ACCEPTED THE SAME. HE ISSUED NOTICE U/S. 133(6) TO THE CREDITORS, BANKERS AND ALL HAVE RESPONDED TO THE AO. THE MAJOR PART OF THE PURCHASES W AS FROM ANSHIKA JEWEL L ERS, THE SISTER CONCERN AND PAYMENTS WERE MADE DIRECTLY TO THE MMTC LTD., WHICH IS A GOVERNMENT ORGANIZATION. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER PASSED BY THE LD. CIT(A). WE UPHO LD THE IMPUGNED ORDER ON THE ISSUE INVOLVED IN GROUND NO. 2. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.02.2016 . SD/ - SD/ - ( H.S. SIDHU ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 25.02.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI