NANDA RAM ,BIKANER V. ITO, WARD-1, , MAKRANA

ITA 191/JODH/2024

AI Insights

The case involves two appeals by Shri Nanda Ram against the orders of the CIT(A) for the assessment years 2014-15 and 2017-18, which were based on the assessments made under sections 143(3) read with 153A of the Income Tax Act by the ITO, Ward-1, Makrana. The primary issues in the appeals were the additions made for under-reported sales and unexplained investments in stock. The Tribunal examined the discrepancies in the sales figures reported to the Income Tax Department and the Sales Tax Department, and the justification for the additions made under sections 69A and 69B for the cash seized and the unexplained investment in stock, respectively.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 38102 (ITAT-JODHPUR)
• Duration Of Justice: 7 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-10-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 28-03-2024
• Other Referred Cases: CIT vs British Paints India Ltd, Shri Sumit Gahlot Vs ITO Ward-1, Bhilwara, Suraj Bhan Oil (P.) Ltd. v. Dy. CIT, Commissioner of Income-tax v. Devi Prasad Vishwanath, Fakir Mohmed Haji Hasan v. Commissioner of Income-tax, K.P. Varghese v. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEENAKSHI VOHRA; ESTABLISHING FACTS
• Assessee Lawyers: S. V. S. KHATRI; VINAYCHAND PRAVEENCHAND; JAIPUR
• Keywords: Set aside; Business income; Revised return; Question of law; Unexplained cash credit; Unexplained expenditure; Unexplained investment; Fair market value; Rejection of books of accounts; Salary income; Gift; Capital Gains; Principle of natural justice; Valuation report; Deemed to accrue or arise in india; Presumptive income
• Section: 143(3); 142(1); 143(2); 250; 143(1); 153A; 139(1); 68; 208; 69; 44AD; 69C; 69B; 13; 69A; 145; 72; 139(5)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR. BEFORE: DR. S. SEETHALAKSHMI, JUDICIAL MEMBER & SHRI RATHOD KAMLESH JAYANTBHAI, ACCOUNTANT MEMBER I.T.A. No. 190/Jodh/2024 & 191/Jodh/2024 Assessment Years: 2014-15 & 2017-18 Shri Nanda Ram V & PO Bilu, Makrana, Nagour [PAN: AMJPR 1085 M ] (Appellant) Vs. ITO, Ward-1, Makrana (Respondent) Appellant by Sh. S. V. S. Khatri, CA Respondent by MS Meenakshi Vohra, CIT- DR & Sh. Rajesh Ojha, CIT Date of Hearing 15.10.2024 & 22.10.2024 Date of Pronouncement 27.11.2024 ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM By way of two separate appeal the assessee challenges the two separate orders passed by the Commissioner of Income Tax (Appeals)- 4, Jaipur dated 29/02/2024 [here in after referred as ld. CIT(A) ] for assessment year 2014-15 & 2017-18 which in turn arise from the order dated 20.12.2018 passed under section 143(3) r.w.s 153A of the Income Tax Act [ for short Act], by ITO, Ward-1, Makrana [ for short ld. AO] for both the years. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 2 2. We have heard the parties on two different dates but since the issue is common we dispose both the appeal by way of common order. 3. First we take up the appeal of the assessee in ITA no. 190/Jodh/2024. In this appeal, the assessee has raised following grounds: - “1.1 On the facts and circumstances of the case and in Law, Ld. CIT(A) erred in confirming the addition of Rs. 8,47,059/- and taxing @ 30%, u/s 115BBE being undisclosed income on account difference in sales of Rs. 35,47,300/- as reported in the ITR and sales of Rs. 43,94,359/- as per information collected by AO from the sales tax department. Whereas ignoring the fact that appellant derives profit as retail trader covered and filed his return of income u/s 44AD of the Act and as such addition should have been restricted to Rs. 67,643/- i.e. income calculated @ 8% of difference sale of Rs. 8,47,059/- u/s 44AD of the Act. 1.2 On facts and circumstances of the case and in Law, Ld. CIT(A) ought to have appreciated the fact that the profit from the business cannot be brought to tax u/s 115BBE r.w.s 68, rather is taxable u/s 28(1) of the Act. 2.1 On facts and circumstances of the case and in Law, Ld. CIT(A) erred in confirming the addition of Rs. 42,83,952/- treated and calculated at his own by AO as unexplained investment in excess stock u/s 69B and taxing @ 30% u/s 115BBE whereas ignoring the fact that appellant derives profit as retail trader covered and filed his return of income u/s 44AD read with the section 44AA of the Act appellant was not required to maintained books of account and he has not maintained the same under such facts and circumstances the figures picked by the ld. AO is not as per books of account and are irrational and as such the addition made by the AO is not justified and liable to be quashed. 2.2 On facts and circumstances of the case and in Law, Ld. CIT(A) ought to have appreciated the fact that the stock as excess calculated by the AO was not on the basis of actual or correct or as per the books of account maintained by the appellant and as such there were no established investment in the stock as per book or as physically and as such the provisions of section 69B are not applicable at all. 3. The Appellant crave liberty to add, amend, alter, modify or delete any of ground/s of appeal on or before its hearing before your honour.” I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 3 4. Succinctly, the fact as culled out from the records is that the assessee submitted his original return of income on 23.04.2015 declaring total income of Rs.2,19,759/-. The assessee is proprietor of M/s Sri Ramakrishna Marbles & Granites and mainly engaged in trading of Marble & Granite. As in this case, a letter dated 15.11.2016 was received from Sub-Inspector of Police Kondapi P.S. Prakasam District containing the details of seizure of the cash of Rs. 17,44,000/- on 15.11.2016 from the possession of the assessee, as Shri Nanda Ram during the course of vehicle checking near Kanumalla Police Check Post at Singarayakonda, could substantiated the source of cash found with any documentary evidence, the police seized that amount. Upon receipt of the information from the Police, summons u/s 131(1) of the IT Act, 1961 dated 21.11.2016 was issued to Shri Nanda Ram and sworn statement u/s 131(1A) was recorded on 21.11.2016. Subsequently, a warrant of authorization u/s 132A was issued by Pr. Director of Income-tax (Inv.), Hyderabad on 09.12.2016 duly executed on Station House Officer, Kondapi Police Station, Prakasam District on 21.12.2016 and the sum so seized was requisitioned. The appraisal report along with relevant documents were received on 11.05.2017 from the Dy. Director of Income tax (Investigation) Unit-IV(2). Vijaywada vide letter dated 04.05.2017 for required action. Since, warrant of I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 4 authorization u/s 132A of the Income tax Act, 1961 was executed, the assessment proceeding u/s 153A of the Act for the year under consideration was initiated issuing notice under section 153A of the Income tax Act, 1961 on 16.01.2018 requiring him to file his return of income within 30 days from receipts of the notice. In response to notice u/s 153A, the assessee submitted his return of income on 25.07.2018 declaring total income of Rs.2,19,760/- which includes business income declared u/s 44AD of the Act. Notice u/s 143(2) was issued on 13.08.2018 and served upon the assessee on 14.08.2018. Notice u/s 142(1) with questionnaire was issued on 17.08.2018. In compliance to these notices, the A/R of the assessee submitted the details required. The assessee was asked to justify the income declared in the ITR. The assessee submitted that the income was declared in the ITR u/s 44AD and the books of accounts were not maintained. The assessee produced some sale and purchase bills for verification. Information was also called for by the ld. AO from sales tax authority regarding the sale made by the assessee. In the ITR, the assessee declared total sales of Rs. 35,47,300/-, whereas as per sale tax retum filed by the assessee, the assessee has made total sale of Rs. 43,94,359/- The assessee was asked to explain the reason for mismatch in the sales declared before two authorities and a notice u/s I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 5 142(1) dated 02.11.2018 requiring his explanation in this regard. The A/R of the assessee vide reply dated 09.11.2018 submitted, which is reproduced hereunder: - \"As per your notice we also found some differences in the sales figures in the records of sales tax department and out personal records this happens only due to some miscalculations done from the assessees end and as per the income tax returns are filed u/s 44AD of Income-tax Act, 1961 we hereby request you to kindly assess the above assessment year on the basis of resumption u/s 44AD taking 8% profit of the receipts.\" The submission of the assessee was examined vis-a-vis with the information received from sales tax authority and found to be not found satisfactory. During the course of hearing on 09.11.2018, the A/R was asked to explain but he failed to furnish proper explanation in this regard and simply requested to apply net profit rate @8% u/s 44AD of the Act. Therefore, ld. AO noted that taken a view that the assessee has invested unexplained income in purchase of goods and sales were made but not disclosed in the total turnover of the assessee. Since the assessee has already booked all the expenditure before filing the ITR as per the provisions of section 44AD of the Income Tax Act, 1961, therefore difference of on account of suppression of sale of Rs. 8,47,059/- (4394359-3547300) is to be treated undisclosed income of the assessee and was added to the total income of the assessee for AY 2014-15 and taxed accordingly. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 6 During the course of assessment proceedings, u/s 153A for AY 2015-16, the assessee claimed that the opening stock as on 01.04.2015 was Rs.33,47,452/-and requested to give credit of opening stock while calculating the amount of unexplained investment in stock. Therefore, the benefit of opening stock as on 01.04.2015 was allowed to assessee in AY 2015-16. The closing stock as on 31.03.2015 is the opening stock as on 01.04.2015. Based on that ld. AO draw a re-casted trading account for AY 2014-15 and it is noticed that the assessee could have been in possession of excess stock of Rs. 42,83,952/-. Therefore, ld. AO noted that it is well settled position of Law, that when, an assessee create an assets in the form of closing stock, the source of investment is be explained. In case of failure on the part of assessee, the Assessing Officer is free to treat it unexplained investment u/s 69B of the Act. Since, no source of investment in excess stock calculated on the basis of re-casted trading account was explained by the assessee, ld. AO left with no alternate but to treat that amount as unexplained investment of the assessee. Therefore, a sum of Rs. 42,83,952/- was treated as unexplained investment of the assessee u/s 69B and the same was added to the total income of the assessee. 5. Aggrieved from the above order of Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). Apropos to the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 7 grounds so raised by the assessee in first appeal, the relevant finding of the ld. CIT(A) is reiterated here in below: “4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the under year consideration. The contentions/submissions of the appellant are being discussed and decided as under:- From the Assessment order, material on record and submissions of the appellant, it is evident that the sales as per sales tax return filed was higher than the sales declared in the income tax return. The sales declared as per the sales tax return was as Rs. 43,94,359/- whereas the sales as per the Income- tax return was Rs. 35,47.300/- resulting into undisclosed sales of Rs. 8,47,059/- which was added as undisclosed income by the learned assessing officer. The contention of the appellant that only net profit @ 8% should be added as income under reported sales since the assessee has adopted the provisions of 44AD of the Income Tax Act, 1961 is incorrect for the reason that the appellant has already disclosed his income from business in his return of income and a detection of undisclosed income in the form of unreported sales was unearthed by the learned Assessing Officer during the assessment proceedings. The Id. AO has observed in the assessment order that \"During the course of hearing on 09 11.2018, the A/R was asked to explain but he failed to furnish proper explanation in this regard and simply requested to apply net profit rate @6% u/s 44AD of the IT Act, 1961. Therefore, it is evident that the assessee has invested unexplained income in purchase of goods and sales were made but not disclosed in the total turnover of the assessee\". This is not factually rebutted in the appeal. In the present appeal, the appellant has not been able to show through the quantitative reconciliation that the unexplained sales were made out of bonafide purchases. In the notices issued by this office it was requested to file copy of the submissions made before the assessing authority in case the same are relied upon. But nothing is filed in this regard. The business income was already declared by the appellant in the return of income filed and any amount of undisclosed business income detected by the income tax department has to be taxed in full instead of part i.e. the profit element as well as the cost of the unexplained purchases. Hon'ble Supreme Court of India in the case of CIT VS British Paints India Ltd (1991) 188 ITR 44 (SC) has held that it is the duty of the assessing officer to determine the taxable income by making such computation as he considers appropriate in the given situation. Hence, the addition made by the learned Assessing Officer is hereby confirmed. Accordingly this ground of appeal is hereby dismissed. 5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 8 order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- From the Assessment order, material on record and submissions of the appellant, it is evident that the closing stock was declared by the appellant as Rs. Nil while filing the return of income resulting into addition by learned Assessing Officer for unexplained stock. The contention of the appellant that the figures were not seriously declared in the return of income filed is incorrect but the remedy given by the learned Assessing Officer in the form of addition made is correct. Section 149 of the Act provides for verification of income-tax return and in the income tax return also assessee has to give a declaration that all the figures and details mentioned in the return form are true and correct and nothing has been concealed. Further the appellant has not substantiated his submissions in the appeal along with the supporting documents. During the assessment proceedings, opportunities were given by the learned Assessing Officer to the appellant to explain the undisclosed stock but the appellant grossly failed in doing so. The appellant has also contended that the provisions of section 44AD and 44AA of the I.T. Act, 1961 specifically provides that the books of account is not required to be maintained. The submission of the appellant has been considered. As submitted by the appellant, ITR contains the financial particulars being 1) sundry debtors, 2) sundry creditors, 3) stock in trade and 4) cash balance. Thus the assessee is required to submit correct particulars in this regard in the income tax return. During the appeal proceedings the appellant has submitted that \"the true facts of the case is that the appellant has not write down seriously any such 4 figures in fall the returns filed or some time no figure was filled or some time left blank under such facts and circumstances the cognizance of such figures are no justice to the appellant the same is evident from the fact that the closing stock for the AY 2013-14 was left blank in ITR and displayed under the ITR to O whereas there remains no such position le, stack was there. Further under the original ITR filed for the AY 2014-15 the figure of closings stock for the AY 2014-15 was Rs.3.47,452/-whereas under the ITR filed u/s 153A for the AY 2014-15 by mistake the figure was wrongly filled or punched to Rs.33,47,452/- (ie. by typography error one digit being 3 was punched or filled twice and as such figure changed from Rs. 3,47,452/- to Rs.33,47,452/- )\". Considering the submissions of the appellant and the finding in the assessment order, it is seen that the learned assessing officer has worked out the addition considering the figures provided by the appellant himself. in in case the appellant submits that there was error in the income tax return in the figures, the onus is on the appellant to prove the same. Section 69B of the Act provides that the assessee should explain the source of unexplained investment to the satisfaction of the Assessing Officer. If assessee fails to do so, the Assessing Officer is bound by the law to make additions. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 9 The judgment relied by the appellant in the case of Shri Sumit Gahlot Vs ITO Ward-1, Bhilwara decision of hon'ble ITAT, Jodhpur Bench, Jodhpur vide Appeal No.176/Jodh/2019 A.Y. 2015-16 decided on 24.03.2023, is on different facts and is not applicable to the present appeal. It was held by the Hon'ble ITAT that in case of 44AD addition for sundry creditors u/s 68 cannot be made, whereas, in the present appeal the addition is on account of unexplained stock The Hon'ble Madhya Pradesh High Court in absence of explanation by the assessee sustained an addition in the case of Suraj Bhan Oil (P.) Ltd. v. Dy. CIT [2022] 138 taxmann.com 19/286 Taxman 680/446 ITR 539 (MP). The Assessing Officer treated the excess value of stock shown in statements submitted to the Bank as an unexplained investment in stock. As a result, the same was added to the total income of the assessee- company under section 69B of the Act. In this case assessee-company was engaged in manufacturing and trading edible oils and grains. The assessee-company filed return of income for the assessment year 2005-06 declaring a total income of Rs. 1,68,917/. The return was processed under section 143(1) of the Act and the case was selected for scrutiny. The Assessing Officer (AO) examined the stock statement received from assessee's bank. He found the difference in closing stock of raw material, stock-in-process, and finished goods, as well as, in the quantity of stock. Thus, a notice under section 142(1) was issued and the assessee company was called upon to explain & give justification for the difference in closing stock with reference to the books of account, purchase and sale vouchers. expense vouchers, bills, and all bank statements. The assessee failed to explain and reconcile the quantity of stock shown in the audit report and the quantity shown in stock statement furnished to the State Bank of India and thus AO treated the excess value of stock shown in statements submitted to the Bank as an unexplained investment in stock from undisclosed sources. As a result, the same was added to the total income of the assessee-company under section 698 of the Act. On appeal, the CIT(A) reduced the addition made by AO, However, the Tribunal set aside the order of CIT(A). Aggrieved-assessee filed the instant appeal before the High Court. The High Court held that the entire controversy revolves around the question of whether the assessee had been able to explain the difference of stock between the stock submitted to the bank and the stock indicated in the audit report. There was no dispute that no evidence had been produced by the assessee of the sale and purchase of raw material and finished goods during the relevant period. Therefore, the assessee was bound to explain the aforesaid difference either before the Assessing Officer or before Commissioner (Appeals) or before the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 10 Tribunal. The entire gamut of matter was in the realm of facts and did not give rise to substantial question of law. It was held that the addition was justified. Further, the Hon'ble Supreme Court in the case of Commissioner of Income- tax v. Devi Prasad Vishwanath (1969) 72 ITR 194 (SC)[01-08-1968] has held as under:- \"There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained and the business income estimated by him under section 13 of the Income tax Act after rejecting the books of account of the assessee as unreliable. This was so decided in Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50.1TR 1 C), Whether in a given case the Income-tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case, The High Court, in disposing of the application under section 66(2), expressed the view that because the amount of Rs. 20,000 was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source. But it was not open to the High Court to direct the Tribunal to state a case on a question which was never raised before or decided by the Tribunal at the bearing of the appeal. The question again assumes that it was for the Income- tax Officer to indicate the source of the income before the income could be held tasable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed\". As per the headnotes \"Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922) Method of accounting System of accounting Assessment year 1946-47 Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessce and no further burden lies on ITO to show that income is from any particular source Held, yes\". As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 11 Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed. Further it is held by Hon'ble Allahabad High Court in the case of Commissioner of Income-tax-I v. G.S. Tiwari & Co. [2014] 41 taxmann.com 17 (Allahabad)/[2014] 220 Taxman 111 (Allahabad) (Mag.)/[2013) 357 ITR 651 (Allahabad)[30-05-2013) that (headnote extract) In course of assessment. Assessing Officer noted that assessee had not maintained proper books of account. He thus rejected book results and estimated net profit rate of 8 per cent under section 44AD - Assessing Officer also made certain addition under section 68 in respect of unexplained cash credit Commissioner (Appeals) as well as Tribunal held that once addition was made on estimate basis under section 44AD, no separate addition could be made in respect of cash credit under section 68 Whether there is nothing in law which prevents Assessing Officer in an appropriate case in taxing both sundry credit, source and nature of which is not satisfactorily explained, and business income estimated by him after rejecting books of account of assessee as unreliable Held, yes. The relevant part of the judgement is as under:- \"10. It may be mentioned that in the case of CTT v. Maduri Rajaiahgari Kistajah [1979] 120 ITR 294 (AP), it was observed that where a particular business income of the assessee has been estimated and determined and in such a case certain sundry creditors are found, the AO may be precluded from adding the said unexplained sundry creditors as undisclosed income from the business, the income of which was determined on estimate basis. But where the unexplained sundry creditors are not referable to the business income of the assessee which was estimated, the AO is not precluded from tresting the unexplained sundry creditors as income from other sources such as salaries securities or any other income from a business, the source of which was not disclosed by the assessee. Where certain unexplained sundry creditors are found in the account books of the assesser whose business income is determined on estimate basis and not on the basis of his returned income, the AO is not prevented from treating the unexplained sundry creditors standing in the books of account as income from undisclosed sources. 11. In the instant case, the consistent plea of the assessee was that the sundry creditors are genuine but at any point of time the assessee take the stand that the sundry creditors are referable to the income of the business which has been determined on estimate basis. Hence, the assessee must be held to have failed to establish that the unexplained sundry creditors were referable to the business income. The addition of the unexplained sundry creditors as income from other sources by the AO, therefore, was held valid. 12. Further, the Hon'ble Apex Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 observed that where there is an unexplained credit, it is open to the AO to hold that it is income of the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 12 assessee, and no further burden lies on the AO to show that the income is from any particular source. It is for the assessee to prove that, even if the sundry creditors represents income, it is income from a source which has already been taxed. There is nothing in law which prevents the AO in an appropriate case in taxing both the sundry credit, the source and nature of which is not satisfactorily explained, and the business income estimate by him after rejecting the books of account of the assessee as unreliable.\" The judgements in the cases of Commissioner of Income-tax v. Devi Prasad Vishwanath (supra) and Commissioner of Income-tax-I v. G.S. Tiwari & Co. (supra) are in the context of making addition under section 68/69 etc, after the rejection of the books of accounts. In the rejection of the books of accounts, generally the income can be worked out on the basis of applying the profit rate on the turnover which is the similar principle as in section 44AD of the Act. Accordingly the principal in the above judgements of honourable Supreme Court and honourable Allahabad High Court are applicable to the present appeal. The appellant has also contended that the provisions of section 44AD and 44AA of the L.T. Act, 1961 specifically provides that the books of account is not required tobe maintained. The submission of the appellant has been considered. As submitted by the appellant, ITR contains the financial particulars being 1) sundry debtors, 2) sundry creditors, 3) stock in trade and 4) cash balance. Thus the assessee is required to submit correct particulars in this regard in the income tax return. Further the same time the law is to be applied in a bonafide manner meaning thereby that even if there is no requirement to maintain the books of accounts, at the same time the section does not permit an escape route for making investment in the stock for which the source is unexplained. Further, in this regard, section 68/69 etcetera are not part of the business income and whereas section 44AD is for the purposes of computation of business income only. The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' because the provisions of sections 69, 69A, 698, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income. However when these are unexplained in terms of sections 68/69/69A etc. these become income and I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 13 become taxable. These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These sections are in the nature of complete code in itself. In this regard it is held by Hon'ble Gujarat High Court in Fakir Mohmed Haji Hasan v. Commissioner of Income- tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)[10-08-2000) that \"6.2 The opening words of section 14 'Save as otherwise provided by this Act clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 698 and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' because the provisions of sections 69, 69A, 698, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head, \"Income from other sources. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 698 and 69C in view of the scheme of those provisions.\" Further the case of the appellant is also covered by section 69A of the Act. As the scope of this section is very wide as it covers \"valuable article\". For the purposes of section 69A of the Act it is not mandatory that books of accounts should be in existence. This section refers to books of accounts \"if any\" whereas there is no such flexibility or option given in section 68. This phrase \"if any\" needs to be given full play in the interpretation of section 69A of the Act. The interpretation of the same is that:- In case the books of accounts are maintained and such valuable article etc. found is recorded in the same in that case section 69A will not be applicable. The same may fall under section 69 or 698. In case the books of accounts are not maintained, and the assessee is found to be owner of valuable article etc. in that case assessee is required to explain the nature and source of the acquisition of the same. In view of the above applicability of section 69A of the Act is also upheld in alternative. In view of the above discussion, the addition made by the learned Assessing Officer is upheld and is hereby confirmed and this ground of appeal is hereby dismissed 6. Ground of Appeal No. 3 is as under: I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 14 Ground No. 3: The addition made by the A.O. is not of such nature which can be covered by the provisions of section 69B of the L.T. Act, 1961 and therefore provisions of section 115BBE cannot be applied in the case of appellant i.e. tax rate cannot be charged at the rate of 30 percent on the addition made as such. 6.1 The appellant did not make submission on the Ground of Appeal No. 3 The same is treated as not pressed.” 6. As the assessee did not find any favour, from the appeal so filed before the ld. CIT(A)/NFAC, the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds so raised by the assessee, ld. AR of the assessee, has filed the written submissions in respect of the grounds raised by the assessee and the same is reproduced herein below: 1. This is an appeal filed by the appellant/ assessee against the order of CIT[A], Jaipur-4 dated 29.02.2024 for AY 2014-15 [passed u/s 250 of the I.T. Act, 1961 vide the DIN: ITBA/APL/M/250/2023-24/1062034666(1)] in the matter of order passed u/s 143(3) read with section 153A of the I.T. Act, 1961 of I.T.O. Ward-1, Makrana on 20.12.2018. 2. 1.1 The grievance of the assessee relates to erred in confirming the addition of Rs.8,47,059/- being difference in sales as reported under the ITR to Rs.35,47,300/- and sales of Rs.43,94,359/- as per the information collected by the A.O. from the sales tax department treated as undisclosed income. Whereas assessee submitted that he derives profit as retail trader covered and filed his return of income u/s 44AD and considering the same addition should be restricted to Rs.67,643/- being net income calculated @8% of difference in sale of Rs.8,47,059/- u/s 44AD of the Act. 1.2. On the facts and circumstances of the case and in law, Ld. CIT(A) erred and ought to have appreciated the fact that sales under reported being the profit from the business and as such cannot be brought to tax u/s 115BBE rather is taxable u/s 28(1) of the Act. 2.1. The grievance of the assessee relates to erred in confirming the addition of Rs.42,83,952/- u/s 69B read with section 115BBE, being treated unexplained investment in stock calculated by the A.O. at his own whereas assessee filed his return of income declaring the income u/s 44AD. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 15 2.2. On facts and circumstances of the case and in law, Ld. CIT(A) ought to have appreciated the fact that the stock as excess calculated by the A.O. was not on the basis of actual or correct or as per the books of account maintained by the appellant and as such there was no established investment in the stock as per book or as physically and as such the provisions of section 69B are not applicable at all. 3. The facts in brief are that assessee filed his regular return of income for the AY 2014-15 on 23.04.2015, declaring income from business u/s 44AD, at a total income of Rs.2,19,759/-. The Break-up of the total income declared was as under : Sr. No. Particulars Amount Rs. 1. Income from business, proprietary concern M/s. Sri Ramakrishna Marbles & Granites Gross turnover Income declared u/s 44AD 35,47,300 2,83,869 2. Income from other sources 1,249 3. Gross Total Income 2,85,118 4. Deductions under Chapter VIA 65,360 5. Total Income Taxable 2,19,758 In the case of assessee, i.e. from Shri Nanda Ram a sum of Rs.17,44,000/- in cash were found and seized on 15/11/2016 during the course of vehicle checking at near Kanumalla Police Check Post, Singarayakonda, District Prakasam, State Andhra Pradesh, where assessee was doing his business and having and owning said cash out of his business and was going to deposit the said sum into his bank account branch situated at there. On account of above referred sum seized from the assessee and requisitioned, department initiated proceedings u/s 153A against the assessee for the AY 2011-12 to 2017-18. In the proceeding u/s 153A assessee filed his return of income for the AY 2014- 15 on 25/07/2018 in the same manner and same total income of Rs.2,19,758/- which includes income from business of Rs.2,83,869/- declared u/s 44AD. Whereas the seized amount of Rs.17,44,000/- declared as income in the return of income filed for the AY 2017-18 u/s 153A. 4. As regards the addition of Rs.8,47,059/- on account of under reported sales figure in the ITR compared to sales tax department. Observation of the A.O.: I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 16 In this regards A.O. observes that it is evident that assessee has invested unexplained income in purchase of goods and sales were made but not disclosed in the total turnover of the assessee. Since the assessee has already booked all the expenditure before filing the ITR as per the provisions of section 44AD of the Income Tax Act, 1961, therefore difference on account of suppression of sale of Rs.8,47,059/- (Rs.43,94,359-Rs.35,47,300) is to be treated undisclosed income of the assessee and is added to the total income of the assessee for AY 2014-15 and taxed accordingly. Assessee’s submissions: The true facts of the case are that assessee duly declared sales in the original ITR and ITR filed u/s 153A, whereas information as called from the sales tax department of Andhra Pradesh, collected and interpreted by the A.O. that sale is under reported by Rs.8,47,059/- in the ITR. Whereas the same was not cross examined or re-confirmed by the assessee but offered to include additional net profit @8% of additional sales as found under the provisions of section 44AD and the said should be added to the total income of the assessee. Thus the A.O. should have been considered the additional net profit of Rs.67,765/- from business (calculated @8% of additional sale of Rs.8,47,059/-) as against the whole of the additional sales of Rs.8,47,059/- treated as additional net profit or net income of the assessee i.e. @100% of additional sales has been assumed or estimated as net profit or net income, of the assessee by the A.O., which is 100% incorrect, irrational and invalid. Therefore, the same should be re-considered and relief should be provided to the assessee by restricting the addition to the extent of Rs.67,765/- as against of Rs.8,47,059/- under the provisions of section 44AD read with the section 44AA. Order of CIT[A] on the issue: The contention of the appellant that only net profit @8% should be added as income under reported sales since the assessee has adopted the provision of 44AD of the Income Tax Act, 1961 is incorrect for the reason that the appellant has already disclosed his income from business in his return of the income and a detection of undisclosed income in the form of unreported sales was unearthed by the learned Assessing Officer during the assessment proceedings. The ld. has observed in the assessment order that “During the hearing on 09.11.2018, the A/R was asked to explain but he failed to furnish proper explantion in this regard and simply requested to apply net profit rate @6% (not 6% percent but 8%) u/s 44AD of the I.T. Act, 1961. Therefore, it is evident that the assessee has invested unexplained income in the purchase of goods and sales were made but not disclosed in the total turnover of the assessee”. This is not factually rebutted in the appeal. In the present appeal, the appellant has not been able to show though the quantitative reconciliation that the unexplained sales were made out of bona-fide purchases. In the notice issued by this office it was requested to file copy of the submissions made before the assessing authority in case the same are relied upon. But nothing is I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 17 filed in this regards. The business income was already declared by the appellant in the return of income filed and any amount of undisclosed business income detected by the Income Tax Department has to be taxed in full instead of part i.e. the profit element as well as the cost of the unexplained purchases. Hon’ble Supreme Court of India in case of CIT Vs British Paints India Ltd. (1991) 188 ITR 44 (SC) has held that it is the duty of the assessing officer to Determine the taxable income by making such computation as he considers appropriate in the given situation. Hence the addition made by the learned Assessing Officer is hereby confirmed. Assessee’s submissions on the order of CIT[A] : The case of CIT Vs British Paints India Ltd. (1991) 188 ITR 44 (SC) S. 145: Method of accounting – Valuation of inventories – Finished goods – Goods valued below cost – Stock in trade- Rejection of method of valuation is held to be justified . Facts The assessee is a limited liability company engaged in the business of manufacture and sale of paints. It contended before the authorities that it had been its consistent practice to value the goods in process and finished products exclusively at cost of raw materials and totally exclude overhead expenditure. The justification for this practice, according to the assessee, was that the goods being paints had limited storage life and, if not quickly disposed of, they were liable to lose their market value. This contention of the assessee was rejected by the ITO observing that at no time had the assessee claimed any deduction on account of deterioration or damage to goods. The officer held that there was no justification to recognize a practice, as claimed by the assessee, of valuing its stock otherwise than in accordance with the well- recognized principle of accounting which required the stock to be valued at either cost (raw material + overhead expenditure) or market price, whichever was the lower. The Tribunal rejected the assessee’s submission. High Court accepted the contention of the assessee. Department preferred an appeal before Supreme Court. Issue Whether the Assessing Officer was justified in rejecting the method of valuation of inventories? View Any system of accounting which excludes, for the valuation of the stock-in- trade, all costs other than the cost of raw material for the goods in process and finished products, is likely to result in a distorted picture of the true state of the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 18 business for the purpose of computing chargeable income. Such a system may produce a comparatively lower valuation of the opening stock and the closing stock, thus, showing a comparatively low difference between the two. In a period of rising turnover and rising prices, the system adopted by the assessee, as found by the Tribunal, is apt to diminish the assessment of the taxable profit of a year. The profit of one year is likely to be shifted to another year which is an incorrect method of computing profits and gains for the purpose of assessment. Each year being a self-contained unit, and the taxes of a particular year being payable with reference to the income of that year, as computed in terms of the Act, the method adopted by the assessee has been found to be such that income cannot properly be deduced therefrom. It is, therefore, not only the right but the duty of the Assessing Officer to act in exercise of his statutory power, as he has done in the instant case, for determining what, in his opinion, is the correct taxable income Held Section 145 confers sufficient power upon the officer- nay, it imposes a duty upon him – to make such computation in such manner as he determines for deducing the correct profits and gains. This means that where accounts are prepared without disclosing the real cost of the stock-in-trade, albeit on sound expert advice in the interest of efficient administration of the company, it is the duty of the ITO to determine the taxable income by making such computation as he thinks fit. ITO was justified in rejecting assessee’s method of valuation and in holding that assessee’s products were liable to be valued at 100 per cent of cost along with overhead expenditure. (AY 1963-64, 1964-65) (CA No. 1918- 19 of 1976 Sir, from the above it is clear that the above referred case was on the section of 145 i.e. where accounts are prepared and while determining the value of stock there were defects in valuation of stock and as such A.O. rejected the books results Therefore, held that the A.O. has the power to compute the true profit under such situations. Sir, in the case of appellant as per the provisions of section 44AD read with section 44AA no books of account is required to be maintained mandatorily and assessee has also not maintained the proper and regular books of account, except the details of sales, and these relaxation and easy way out has been provided by statues under the presumptive income u/s 44AD and as such the action as taken by the A.O. was not proper and in accordance with the spirit of statues particularly the underreported sales was on account of mistake or skip of figure and as such the net profit @8% on under reported sale should be included or added to the total income of the assessee and not the 100% of sales. Further there is no established or verified fact that no purchases against the said sales were made by the assessee in ordinary manner or in the absence of books of account and no facts of creating any corresponding asset/s worth of Rs.8,47,059/- from the said sales in form of stock, debtors, cash or bank balance etc. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 19 Under such facts and circumstances the observation and order the of CIT[A] is not proper and your honors are kindly requested to please provide the required and appropriate relief and natural justice to the assessee. We hope your honor would consider the same. 5. As regards the addition of Rs.42,83,952/- on account of unexplained investment of assessee: Observation of the A.O.: In this regards A.O. at his own re-casted the trading account and noticed that the assessee have in possession of excess stock of Rs.42,83,052/- and the same is being treated as unexplained investment of assessee u/s 69B and the same is added to the total income of the assessee. The re-casted trading account by the A.O. is as under: Op. Stock As per ITR filed for AY 2013-14 [Closing stock declared nil] 0 Sales (As per ITR u/s 153A) 35,47,300 Purchases (as per sales Tax Department) 23,26,931 Closing Stock (As per ITR u/s 153A) 33,47,452 Profit declared u/s 44AD 2,83,869 Unexplained investment in goods 42,83,952 Total 68,94,752 68,94,752 Assessee’s submissions: The provisions of section 44AD and 44AA of the I.T. Act, 1961 specifically provides that the books of account is not required to be maintained where the assessee adopts to determine the income under the provisions of section 44AD of the I.T. Act, 1961. In view of such specific provisions of section 44AD and 44AA of the I.T. Act, 1961 assessee has not maintained the books of account but he has kept the records of sales to declare the same and pay the tax thereon under the ITR. Whereas ITR contains the financial particulars being 1) sundry debtors, 2) sundry creditors, 3) stock in trade and 4) cash balance which were some time even not filled or otherwise filled on the basis of memories or estimated basis as no complete and regular books of account were maintained or was not supposed to maintain under the provisions of section 44AD read with section 44AA of the I.T. Act, 1961. In view of the above referred provisions of the Act no cognizance of such figures should have been taken by the A.O. whereas the A.O. has taken the same to get entangled and serve the purpose to make addition/s. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 20 The information under section 44AD the ITR was filled, not filled or filled with half- hearted or ignored to fill on the basis of memories or estimated as there were no proper and regular books of account maintained by the assessee, the same is evidenced from the fact that opening stock in the re-casted trading account has been taken by the A.O. at Rs.0, whereas true fact of the case is that the assessee did not fill the figure of closing stock for the AY 2013-14 and as such A.O. took the figure at “0” whereas this cannot be the real or genuine fact. The A.O. has taken the figure of purchase from the sales tax department then why he has not considered the whole trading account filed with the sales tax department he has picked the figure as per his convenience just to prove or make the addition justified. It was duly explained by the assessee before the A.O. that in the original return closing stock of Rs.3,47,452/- was filled whereas while filing the return u/s 153A, where the same return as filed under the original return was filed, but due to mistake stock was punched to Rs.33,47,452/- by mistake while filing the return u/s 153A as “3” was punched twice/ two time by mistake of overflow keys under the ITR i.e. it was all because of mistake whereas the A.O. has not considered the same as mistake but as a boon. The basic concept of gross profit, expenses and net profit has been overlooked while re-casting the above referred trading account which is also incorrect and not the proper. It is worth noting or considering that casting of trading account is not envisaged under the provision of section 44AD. Whereas the A.O. has played or operated with any fruit full figure with him with stubbornness and force and to re-cast the said above referred trading account with his own notion and estimation and the same is not and cannot be 100% true and correct as the same is not on the basis of actual figures as per the books of account or physical inventories taken thus the figures as established or derived is based on hypotheses and surmises and can-not be real or true as such observation of the A.O. that assessee is having unexplained investment of Rs.42,83,952/- in goods is completely baseless, irrelevant and unestablished with 100% surety. Sir, Here very much important point is that as per the return filed by the assessee there were no such trading account from which it can be inference that assessee was having that much closing stock was there or involvement in purchase of good to the extent have been there. It is only by virtue of figures as cooked and calculated by the A.O. at his own and derived or calculated any unexplained investment where there is no evidence from the books of account or physical verification of stock about that much stock was there and that much purchases or unexplained purchases were there all the figures have been cooked and calculated at his own and without any sound base of establishing all such figures as such all the futile exercise made by the A.O. is baseless and as such on that basis no established investment has been proved it is all in the air and not in actual proof or in shape. Thus A.O. at his own taken the figure of opening stock at Nil, closing stock at a figure which was wrongly punched with one extra number feeding which distorted whole value of stock from Rs.3,47,452/- to 33,47,452/- and as such cooked and established the figure at his own and afterwards says that there was undisclosed investment in the goods as per the re-casted trading account which is totally incorrect and I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 21 unrealistic and in the air as such the addition made by the A.O. on that basis is not at all realistic or correct and as such the addition made by the A.O. on that basis should not be acceptable or sustainable and liable to be quashed. In view of the above referred facts and circumstances the addition as calculated at his own by the A.O. is not correct, legitimate and valid one and as liable to be provide relief to the assessee. This view also finds support from the case law of Shri Sumit Gahlot Vs ITO Ward-1, Bhilwara decision of hon’ble ITAT, Jodhpur Bench, Jodhpur vide Appeal No.176/Jodh/2019 A.Y. 2015-16 decided on 24.03.2023. The relevant findings and judgment under the order are as under (copy of the case law is attached herewith for your ready reference and perusal): 3.5 The assessee has offered income on presumptive basis u/s 44AD of the Act is not required to maintain regular books of account. Ld. AO has not disputed the amount of revenue/gross receipt declared by the assessee by placing any contrary material. The details called for by the AO mainly include the sundry debtors and creditors. In this case, the assessee is not required to maintain proper books of accounts since he has opted for presumptive taxation u/s 44AD of the Act. Under these given facts and circumstances of the case, firstly we fail to find any merit in the action of Ld. AO calling for the details of sundry creditors and further making addition u/s 68 of the Act for unexplained creditors of Rs.28,964/-. Section 68 of the Act comes into operation only where any sum is found credited in the books of the assessee maintained in the previous year and the assessee offers no explanation about the nature and source thereof or explanation offered by him, is not in the opinion of the AO satisfactory then such sum so credited may be charged to tax as income of the assessee. Since the assessee is admittedly not required to maintain the books of account, therefore, there is no basis for invoking the provision of section 68 of the Act. Thus we delete the addition of Rs.28,964/- made for unexplained sundry creditors and allow Ground No. 4. Order of CIT[A] on the issue: Considering the submission of the appellant and the finding in the assessment order, it is seen that the learned assessing officer has worked out the addition considering the figures provided by the appellant himself. IN the case the appellant submits that there was error in the income tax return in the figures, the onus is on the appellant to prove the same. Section 69B of the Act provides that the assessee should explain the source of unexplained investment to the satisfaction of the Assessing Officer. If assessee fails to do so, the Assessing Officer is bound by law to make additions. The judgment relied by the appellant in the case of Shri Sumit Gehlot Vs ITO Ward-1, Bhilwara decision of hon’ble ITAT, Jodhpur Bench, Jodhpur vide Appeal No.176/Jodh/2019 A.Y. 2015-16 decided on 24.03.2023, is on different I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 22 facts and is not applicable to present appeal. It was held by the Hon’ble ITAT that in case of 44AD addition for sundry creditors u/s 68 cannot be made whereas, in the present case of 44AD addition for sundry creditors u/s 68 cannot be made, whereas, in the present appeal the addition is on account of unexplained stock. The Hon’ble Madhya Pradesh High Court in absence of explanation by the assessee sustained an addition in the case of Suraj bhan Oil (P.) Ltd. v Dy. CIT [2022] 138 taxmann.com 19/286 Taxman 680/446 ITR 539(MP) Further, the Hon’ble Supreme Court in the case of Commissioner of Income Tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (sc) (01-08-1968) has held that “There is nothing in law which prevents the IncomeTax Officer in an appropriate case in taxing bot the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income Tax Act, after rejecting the books of account of the assessee is unreliable. Further, it is held by Hon’ble Allahabad High Court in the case of Commissioner of Income-Tax-1 v. G.S. Tiwari & Co. [2014] 41 taxmann.com 17 (Allahabad) that (headnote extract) – In course of assessment, Assessing Officer noted that assessee had not maintained proper book of account-He thus rejected books results and estimated net profit rate of 8 per cent u/s 44AD – Assessing Officer also made certain addition under section 68 in respect of unexplained cash credit – Commissioner (Appeals) as well as Tribunal held that once addition was made on estimate basis under section 44AD, no separate addition could be made in respect of cash credit under section 68 – Whether there is nothing in law which prevents Assessing Officer in an appropriate case in taxing both sundry creditors, source and nature of which is not satisfactorily explained, and business income estimated by him after rejecting books of account of assessee as unreliable – Held, yes. Further, the Hon’ble Apex Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 observed that where there is an unexplained credit, it is open to the AO to hold that it is income of the assessee, and no further burden lies on the AO to show that the income is from any particulars source. The judgment in the case of Commissioner of Income-tax v. Devi Prasad Vishwnath [supra] and Commissioner of Income-tax –I v. G.S. Tiwari & Co. (supra) are in the context of making addition under section 68/69 etc. after the rejection of books of accounts. In the rejection of the books of accounts, generally the income can be worked out on the basis of applying the profit rate on the turnover which is the similar principle of section 44AD of the Act, Accordingly the principle in the above judgments of honourable Supreme Court and honourable Allahabad High Court are applicable to present appeal. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 23 In case the books of accounts are maintained and such valuable article etc. found is recorded in the same – in that case section 69A will not be applicable. The same may fall under section 69 or 69B. In case the books of accounts are not maintained, and the assessee is found to be owner of valuable article etc. in that case assessee is required to explain the nature and source of the acquisition of the same. In view of the above applicability of section 69A of the Act is also upheld in alternative. In view of the above discussion, the addition made by the learned Assessing Officer is upheld and hereby is confirmed and this ground of appeal is hereby dismissed. Assessee’s submissions on the order of CIT[A] : With regards to the non-applicability of case law of Sumit Gehlot is concerned the same is pronounced for the case dealing with the section 68 whereas all the sections of 68/69/69A/69B/69C/69D are to deal with the similar type of problems, additions and nature of transactions on account of unexplained credits or unexplained investments etc. With regards to the other case laws referred in the order it is very much pertinent to note that in all the cases first there were books of accounts were maintained and books of accounts were there and in all the cases books of accounts were rejected and on that basis profit were calculated by applying the estimated profit rate as provided under the section 44AD and further also in all such cases there were finding that stock was wrongly valued by not considering all the overhead or there was finding of any corresponding assets in shape or reality which was not covered from the business or remained undisclosed or unexplained from the books of account. Sir, there is no such occasion or incidence in the case of assessee or appellant and as such there is no applicability of such case laws in the case of assessee or appellant. Considering the above referred all the facts, circumstances and case law your honors are humbly requested to kindly provide relief to the assessee for invalid and illogical addition of Rs.42,43,952/- made by the A.O. under the assessment order. It may please your honors ” I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 24 7. To support the contention so raised in the written submission reliance was placed on the following evidence / records : Sr. No. Particulars Page No. 1 Written submissions under the appeal before ITAT 01-12 2 Assessment order u/s 143(3) r.w.s 153A Dated 20.12.2018 13-17 3 Order of the CIT(A) u/s 250 dated 29.02.2024 18-46 4 Written submissions before the CIT(A) Dated 27.02.2024 47-56 8. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the AO made the addition of alleged difference of sale merely based on the difference of sales reported by the assessee with that of the sales reported with the sale tax department and made the entire sales as income instead of making the addition for profit alleged to have been regularly shown by the assessee. As regards the addition u/s. 69B for the alleged excess stock there is in fact no such excess stock found and therefore, the addition is required to be deleted. 9. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). The ld. DR also submitted that the assessee does not maintain any regular books so the difference in the sale is the unexplained receipt of the assessee is unexplained income of the assessee required to be sustained and the working of excess stock is based on the information furnished by the assessee himself and I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 25 therefore, now the assessee denying that error committed in working the correct stock is required to be sustained and thereby she stand by the finding recorded in the orders of the lower authority. 10. We have heard the rival contentions and perused the material placed on record. Ground no. 1.1 & 1.2 raised by the assessee deals with the alleged difference of Rs. 8,47,059/- in the sales reported by the assessee in ITR and the sale reported with the sales tax department, ld. AO collected that information from sales tax department. Ground no. 2.1 & 2.2. deals with the alleged difference in stock for an amount of Rs. 42,83,952/- made by AO and sustained by the ld. CIT(A). The brief facts related to this issue is that in the case of the assessee, a letter dated 15.11.2016 was received from Sub-Inspector of Police Kondapi P.S. Prakasam District containing the details of seizure of the cash of Rs. 17,44,000/- on 15.11.2016 from the possession of the assessee Shri Nanda Ram. As the assessee during the course of vehicle checking near Kanumalla Police Check Post at Singarayakonda, could substantiated the source of cash found with any documentary evidence, the police seized that amount. Upon receipt of the information from the Police, summons u/s 131(1) of the IT Act, 1961 dated 21.11.2016 was issued to Shri Nanda Ram and sworn statement u/s 131(1A) was recorded on I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 26 21.11.2016. Subsequently, a warrant of authorization u/s 132A was issued by Pr. Director of Income-tax (Inv.), Hyderabad on 09.12.2016 duly executed on Station House Officer, Kondapi Police Station, Prakasam District on 21.12.2016 and the sum so seized was requisitioned by the revenue. The appraisal report along with relevant documents were received on 11.05.2017 from the Dy. Director of Income tax (Investigation) Unit-IV(2). Vijaywada vide letter dated 04.05.2017 for required action. Since, warrant of authorization u/s 132A of the Income tax Act, 1961 was executed, the assessment proceeding u/s 153A of the Act for the year under consideration was initiated issuing notice under section 153A of the Income tax Act, 1961 on 16.01.2018 requiring him to file his return of income within 30 days from receipts of the notice. In response to notice u/s 153A, the assessee submitted his return of income on 25.07.2018 declaring total income of Rs.2,19,760/- which includes business income declared u/s 44AD of the Act. Notice u/s 143(2) was issued on 13.08.2018 and served upon the assessee on 14.08.2018. Notice u/s 142(1) with questionnaire was issued on 17.08.2018. The assessee was asked to justify the income declared in the ITR. The assessee submitted that the income was declared in the ITR u/s 44AD and the books of accounts were not maintained. The assessee produced some sale and purchase bills for I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 27 verification. Information was also called for by the AO from sales tax authority regarding the sale made by the assessee. In the ITR, the assessee declared total sales of Rs. 35,47,300/-, whereas as per sale tax return filed by the assessee, he reported total sale of Rs. 43,94,359/- The assessee was asked to explain the reason for mismatch in the sales declared before two authorities and a notice u/s 142(1) dated 02.11.2018 requiring his explanation in this regard. The A/R of the assessee vide reply dated 09.11.2018 submitted, which is reproduced hereunder: - \"As per your notice we also found some differences in the sales figures in the records of sales tax department and out personal records this happens only due to some miscalculations done from the assessees end and as per the income tax returns are filed u/s 44AD of Income-tax Act, 1961 we hereby request you to kindly assess the above assessment year on the basis of resumption u/s 44AD taking 8% profit of the receipts.\" The ld. AO examined the information received from sales tax authority and submission of the assessee but found to be not found satisfactory. During the course of hearing on 09.11.2018, the A/R was asked to explain but he failed to furnish proper explanation in this regard and simply requested to apply net profit rate @8% u/s 44AD of the Act. Therefore, ld. AO noted that taken a view that the assessee has invested unexplained income in purchase of goods and sales were made but not disclosed in the total turnover of the assessee. Since the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 28 assessee has already booked all the expenditure before filing the ITR as per the provisions of section 44AD of the Income Tax Act, 1961, therefore difference of on account of suppression of sale of Rs. 8,47,059/- (4394359-3547300) was considered as undisclosed income of the assessee and was added to the total income of the assessee for AY 2014-15 and taxed accordingly. The ld. AO also noted that the opening stock as on 01.04.2015 was Rs.33,47,452/-and requested to give credit of opening stock while calculating the amount of unexplained investment in stock. Therefore, the benefit of opening stock as on 01.04.2015 was allowed to assessee in AY 2015-16. The closing stock as on 31.03.2015 is the opening stock as on 01.04.2015. Based on that ld. AO draw a re-casted trading account for AY 2014-15 and it is noticed that the assessee could have been in possession of excess stock of Rs. 42,83,952/-. Therefore, ld. AO noted that it is well settled position of Law, that when, an assessee create an assets in the form of closing stock, the source of investment is be explained. In case of failure on the part of assessee, the Assessing Officer is free to treat it unexplained investment u/s 69B of the Act. Since, no source of investment in excess stock calculated on the basis of re-casted trading account was explained by the assessee, ld. AO left with no alternate but to treat that amount as unexplained investment of I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 29 the assessee. Therefore, a sum of Rs. 42,83,952/- was treated as unexplained investment of the assessee u/s 69B and the same was added to the total income of the assessee. Thus, in the proceeding u/s. 153A of the Act that two additions were made which are not based on any incriminating material in case of first addition since the dispute is related to the declaration of the turnover only for which the ld. AR of the assessee contended that the same should not be taxed at full but the profit embedded in that transaction be added @ 8 % whereas before us the revenue could not establish that this difference is on account of the net turnover reported by the assessee or that of the gross with sales tax included in that figure. Thus, when the assessee also could not differential this figures in the sales we direct the ld. AO to tax 8 % being the estimated profit on this transaction as income of the assessee. In the light of this observation ground no. 1.1 & 1.2 stands partly allowed. 11. As regards the other issue as we have noted that in earlier paras that the ld AO made the addition as per provision of section 69B of the Act. The said provision reads as under: Amount of investments, etc., not fully disclosed in books of account. 69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 30 assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. As is evident from the above provision of law that the same can be invoked only if; (a) It is found that the assessee has made investment or the assessee is found be the owner of any bullion, jewellery or other valuable article,and (b) it is found that the amount expanded on making such investment or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in that behalf in the books of account maintained by the assessee, and (c) either the assessee offers no explanation about such excess amount, or the explanation offered by him is not satisfactory. As we note that these cumulative circumstances needs to be existed, which are failed and the Ld. AO in the assessment order merely on the presumption and assumption added the amount on the re-casted trading account. Based on these facts no addition u/s. 69B of the Act can be made in the hands of the assessee. We get support of our view from the decision of the our Hon’ble Jurisdiction High Court in the case of Smt. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 31 Amar Kumari Surana v. Commissioner of Income-tax [ 89 TAXMAN 544 (RAJ.) ] wherein the it has been held as under : 5. In second appeal before the Tribunal, after considering the material on record, it gave a finding of fact that the correct value of the plot of land and sale consideration have not been shown by the assessee in her account-books and in any case the investment cannot be less than Rs. 68,400. Therefore, the Tribunal upheld the addition sustained by the AAC under section 69B. 6. The aforesaid questions have been referred in the statement of case under section 256(2) by the Tribunal. The learned counsel for the assessee has not disputed the fact that the petitioner has shown Rs. 45,000 as cost of the plot purchased by her in C-scheme and that has been shown in sale- deed also. As per the valuation report comparable cases referred in valuation report were considered but no explanation has been given by the assessee or her husband before the ITO as to why the plot has been sold roughly at half of the rate, prevalent in area to the assessee by Vinaychand Praveenchand, Jaipur. 7. Mr. Ranka submits that no addition can be made under section 69B only on the basis of fair market value of the asset. The burden is on the department to prove that value of the asset has been shown less than the fair market value and also to prove that real consideration is exceeding the consideration shown in account books by the assessee. 8. Mr. Ranka has placed reliance on the decisions of their Lordships in cases of New Excelsior Theatre (P.) Ltd. v. M.B. Naik, ITO [1990] 185 ITR 158 (All.), Dinesh Kumar Mittal v. ITO [1992] 193 ITR 770 (Bom.), CIT v. Raja Narendra [1994] 210 ITR 250/74 Taxman 157 (Raj.), CIT v. Smt. Prem Kumari Surana [1994] 206 ITR 715 (Raj.), CIT v. Pratap Singh Amrosingh Rajendra Singh Deepak Kumar [1993] 200 ITR 788 (Raj.), CIT v. Godavari Corpn. Ltd. [1993] 200 ITR 567/68 Taxman 344 (SC), CIT v. H.H. Maharao Bhim Singhji [1988]173 ITR 79/36 Taxman 270 (Raj.), Abdul Qayume v. CIT [1990] 184 ITR 404/50 Taxman 171 (All.), M.D. Jewellers v. CIT [1994] 208 ITR 196/73 Taxman 493 (Raj.), CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), CIT v. Pradyuman Kumar Kachhawa [1985] 156 ITR 105/23 Taxman 568 (Raj.) and K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 (SC). In the above referred cases mainly the question was involved under section 52(2) for reopening the case under section 147A/147B of the Act and the decision in the case of K.P. Varghese (supra)is a leading case. The principles laid down in the case of K.P. Varghese (supra)have been followed in the subsequent cases. 9. The main emphasis of Mr. Ranka is on the decision of their Lordships in the case of K.P. Varghese (supra)which is the leading authority on the issue, whether on the basis of fair market value any addition can be made in the hands of purchaser/seller, invoking the provisions of sub-section (2) of section 52. 10. Section 69B reads as under : I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 32 \"Amount of investments etc., not fully disclosed in books of account - Where in any financial year the assessee has made investments or is found to be the owner of any bullion jewellery, or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year.\" 11. It is true that merely on the basis of fair market value no addition can be made under section 69B but on the basis of sufficient material on record some reasonable inference can be drawn that the petitioner has invested more amount than the one shown in account books, then only the addition under section 69B can be made. The burden is on the revenue to prove that real investment exceeds the investment shown in account books of the assessee. 12. Their Lordships of the Supreme Court in the case of K.P. Varghese (supra)have observed as under : \". . . This burden may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received by him and there is an understatement or concealment of the consideration in respect of the transfer. Sub-section (2) has no application in the case of an honest and bona fide transaction where the consideration received by the assessee has been correctly declared or disclosed by him, and there is no concealment or suppression of the consideration. We find that in the present case, it was not the contention of the revenue that the property was sold by the assessee to his daughter-in-law and five of his children for a consideration which was more than the sum of Rs. 16,500 shown to be the consideration for the property in the instrument of transfer and there was an understatement or concealment of the consideration in respect of the transfer. It was common ground between the parties and that was a finding of fact reached by the income-tax authorities that the transfer of the property by the assessee was a perfectly honest and bona fide transaction where the full value of consideration received by the assessee was correctly disclosed at the figure of Rs. 16,500 ...\" (p. 618) 13. The consistent finding of the ITO, the AAC and the Tribunal is that the petitioner has not shown the correct value of the property in her account books and thereby concealed the investment made for purchase of the plot of land in C-scheme, Jaipur. The Tribunal has considered the valuation report of the Valuer in respect of the plot in question and also the fact that notice was given to the assessee as to why the value of the plot should not be taken as has been valued by the Valuer. The assessee failed to give any reason, as to why the value, valued by the valuer should not be accepted. The Tribunal has also considered the size of the plot, location and potential use of the plot of land. It is also noticed by the Tribunal that the assessee has failed to show that in area of I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 33 C-scheme the value of plots is lesser than the rate which has been shown in valuation report. 14. In the valuation report, the costs have also been given of the neighbouring plots which were sold during the relevant period in C- scheme. One plot was purchased by Smt. Prem Kumari in that area at the rate of Rs. 75 per sq. yd. Smt. Padam Kumari had purchased the plot of land in that area at the rate of Rs. 60 per sq. yd. Smt. Shobha Kumari has purchased plot of land at the rate of Rs. 60 per sq. yds. As such the plot in question which was purchased by the assessee was measuring 1799.99 sq. yds. The value has been estimated by the Tribunal as Rs. 68,400. The cost of the land which has been shown by the assessee comes to Rs. 36 per sq. yd., that is, roughly half of the rate prevalent in C-scheme. 15. It is true that merely on the basis of valuation report and fair market value no addition can be made. But in the case in hand after obtaining the valuation report of plot of land notice has been given to the assessee to show cause as to why the value of plot of land in question may not be taken as per valuation report and on the basis of comparable cases. 16. Admittedly in account-books of the assessee the investment of Rs. 45,000 has been shown to purchase the plot of land measuring 1799.99 sq. yds. which comes roughly at the rate of Rs. 36 per sq. yd. Mr. Ranka has not seriously disputed the value of the plot of land as has been estimated by the income-tax authorities but his main emphasis is on the question that under section 69B the department should establish the fact that more consideration has been passed than the consideration shown in account- books/sale-deed. Therefore, considering the report of valuer and com parable cases cited above and also the fact that sufficient opportunity was given to the assessee to show cause as to why the value of plot of land should not be taken on the basis of the rate prevalent in the area, we find no justification to interfere in the value finally estimated by the Tribunal. 17. Now, it brings us to see whether the revenue has established the fact that some more consideration has been passed by the assessee to Vinaychand Praveenchand than that shown in sale deed. 18. There is no direct evidence that the assessee has paid more than Rs. 45,000 to Vinaychand Praveenchand for purchase of plot of land, but at the same time it cannot be ignored that no evidence has been adduced by the assessee before the ITO as to why the plot of land has been sold to the assessee for roughly at half of the rate than the prevalent market rate. 19. In the case of K.P. Varghese (supra)their Lordships of the Supreme Court have observed that even if market value is more than the value/consideration received in respect of the transfer, it would amount to gift under the Gift-tax Act, 1958. The Income-tax Act and the Gift-tax Act are parts of an integrated scheme of taxation and the same amount which is chargeable as gift could not be intended to be charged also as capital gains. 20. In the case of K.P. Varghese (supra), the house property was sold to daughter-in-law and five of her children. Therefore, the case of K.P. Varghese (supra)is covered under the provisions of section 4 and the difference I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 34 between market value and consideration paid would amount to gift under section 4(1)(a)of Gift-tax Act, but that should be born out from the record that the particular case is of deeming gift. In that case certainly, no capital gain tax can be charged. But in the case on hand, there is no material on record which shows that property has been sold for less consideration and the difference between market value of property and consideration shown in account books can be a case of deemed gift under section 4(1)(a). Neither the assessee is a relation of seller nor of any reason has been advanced before the ITO as to why less consideration has been paid than the prevalent market rate. Not even a single reason has been given as to why the property has been sold to the assessee for roughly half of the prevalent market rate. In absence of that the only inference that can be drawn is that the petitioner has, in fact, concealed the actual consideration paid to seller. 21. It is true that the burden is on the department to establish the fact that the property has been sold for lesser consideration that the market value. It is also to be established that actual consideration is more than the consideration shown in account books/sale deed. In the case of K.P. Varghese (supra)their Lordships have observed that before invoking the powers under sub-section (2) of section 52 of the Act, the burden is on the revenue to prove that the actual consideration was more than that disclosed by the assessee. But their Lordships have further observed that this burden may be discharged by establishing the facts and circumstances, from which reasonable inference can be drawn that the assessee has not correctly declared or disclosed the consideration received or paid by him. As stated above, in the locality of C- scheme the adjoining plots were sold at the rate of Rs. 60 or 75 per sq. yd. and if we take the estimated rate taken by the AAC and the Tribunal, the rate of plot in question comes to Rs. 36 per sq. yd. that is, roughly half of the rate than the prevalent market rate in the area. Admittedly, no reason has been shown by the assessee as to why the plot of land has been sold to her half of rate of market rate. Nor any other reason has been shown to the ITO at the time of assessment. Even, in spite of specific query, the assessee failed to point out any mistake/lacuna in ascertaining the value of plot of land by the valuer. In these circumstances, the only reasonable inference that can be drawn is that the assessee has shown less amount in the account books and sale-deed that the actual consideration paid. Considering, the comparable cases and the facts of the case we find no ground to interfere in the addition made under section 69B. In view of the above discussion, we find nothing wrong in the view taken by the Tribunal. Therefore, we answer the question in the affirmative, that is, in favour of the revenue and against the assessee. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 35 Respectfully following the binding precedent and facts as discussed herein above the grounds of appeal no. 2.1 & 2.2 raised by the assessee is allowed. In the result, the appeal of the assessee in ITA no. 190/Jodh/2024 is partly allowed. 12. Now we take up the appeal of the assessee in ITA no. 191/JP/2024. In this appeal the assessee has raised the following grounds of appeals; 1.1 0n facts and circumstances of the case and in Law, Ld. CIT(A) erred in confirming the income of Rs.17,44,000/- being unexplained money u/s 69A and taxing @ 30% u/s 115BBE Whereas ignoring the fact that appellant explained, at first instance that the amount as found and seized during the vehicle checking near Kanumalla Police Check Post on 15.11.2016, as going to deposit the said amount of Rs.17,44,000/- in the bank account of my business concern bearing No.903 which is in IDBI Bank at Ongole. The said amount was sale proceeds of a one & half month and same was declared under the business. Appellant derives profit as retail trader covered and filed his return of income u/s 44AD of the Act. 1.2. On facts and circumstances of the case and in Law, Ld. CIT(A) ought to have appreciated the fact that the profit. from the business cannot be brought to tax u/s 115BBE r.w.s.69A rather is taxable u/s 28(1)/44AD of the Act. 2.1. 0n facts and circumstances of the case and in Law, Ld. CIT(A) erred in confirming the addition of Rs.20,54,679/- treated and calculated at his own by A.O. as unexplained investment in goods purchased u/s 69B and taxing @ 30% u/s 115BBE Whereas ignoring the fact that appellant derives profit as retail trader covered and filed his return of income u/s 44AD read with the section 44AA of the Act appellant was not required to maintained books of account and he has not maintained the same under such facts and I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 36 circumstances the figures. picked by the A.O. were not as per books of account and are irrational and as such the addition made by the A.O. is not justified and liable to be quashed. 2.2. On facts and circumstances of the case and in Law, Ld. CIT(A) ought to have appreciated the fact that the unexplained investment in goods purchase as calculated at his own by the AO was not on the basis of actual or correct or as per the books of account maintained by the appellant and as such there were no established investment in the said goods purchased as derived and as such it is fire in air and as such the provisions of section 69B are not applicable at all. 3. The Appellant crave liberty to add, amend, alter, modify or delete any of ground/s of appeal on or before its hearing before your honour.” 13. As we note that the grounds of appeal raised by the assessee in ground no. 2.1 & 2.2 in this appeal are similar on facts with that of appeal of the assessee in ITA no. 190/Jodh/2024 vide ground no. 2.1 & 2.2 raised by the assessee. Since the issue being identical, we do not deem it fit to discuss the arguments afresh, and hold that decision taken by us in ITA no. 190/Jodh/2024 for A. Y. 2014-15 as noticed above, shall apply mutatis mutandis in the case of the assessee so far as ground no. 2.1 & 2.2 for A. Y. 2017-18 is concerned. Thus, the ground no. 2.1 & 2.2 raised by the assessee in ITA no. 191/Jodh/2024 stands allowed. appeal ITA No.83/JP/2024 of the assessee deserves to be allowed. 14. Vide ground no. 1.1 & 1.2, the assessee challenges the finding of the lower authority in confirming the addition of Rs. 17,44,000/- being the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 37 unexplained money u/s 69A of the Act. The brief facts related to the dispute is that in this case, a letter dated 15.11.2016 was received from Sub-Inspector of Police Kondapi P.S. Prakasam District containing the details of seizure of the cash of Rs. 17,44,000/- on 15.11.2016 from the possession of the assessee, as Shri Nanda Ram during the course of vehicle checking near Kanumalla Police Check Post at Singarayakonda, could substantiated the source of cash found with any documentary evidence, the police seized that amount. Upon receipt of the information from the Police, summons u/s 131(1) of the IT Act, 1961 dated 21.11.2016 was issued to Shri Nanda Ram and sworn statement u/s 131(1A) was recorded on 21.11.2016. The relevant questions and answers to the disputes are as under: Q4 On 15.11.2016, Sub-Inspector of Police, Kondapi PS, Prakasam (Dt.) has found and sized cash amounting to Rs. 17,44,000/- from your possession, during their checking check post on Singarayakonda while you were travelling by car bearing Reg. No. AP29AP5208. Please confirm it. Ans. Yes, I confirm that the Sub Inspector of Police, Kondapi PS, Prakasam (Dt.) has found and seized cash amounting to Rs. 17,44,000/- from my possession at the said place. Q.5. Please state the purpose of carrying the above cash with you and explain the source thereof. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 38 Ans. Sir, I was going to deposit the said amount of Rs. 17,44,000/- in the bank account of my business concern bearing No.903 which is in IDBI Bank at Q6 Do you have any receipts or vouchers for the above mentioned cash so collected? Please produce the same. Ans. At present, I have not any receipts or vouchers or vouchers for the above mentioned cash. In view of the above, I offered the said amount of Rs. 17,44,000/- as additional income over and above my regular income for the Asst. Year 2017-18. Further, I have paid advance tax of Rs 5,25,000/-on the above declared additional income and submitting the copy of challan for your kind perusal. Subsequently, a warrant of authorization u/s 132A was issued by Pr. Director of Income-tax (Inv.), Hyderabad on 09.12.2016 duly executed on Station House Officer, Kondapi Police Station, Prakasam District on 21.12.2016 and the sum so seized was requisitioned. The amount requisitioned, was deposited into PD account of Pr. CIT(Central), Hydrabad on 31.12.2016. Notice u/s 143(2) was issued on 11.04.2018 and served upon the assessee on 16.04.2018. Notice u/s 142(1) with questionnaire was issued on 07.06.2018. On 17.07.2018, AR of the assessee filed the reply stating that “The assessee is going to revise his ITR for A. Y. 2017-18 to offer the surrendered amount (Rs. 17,44,000) in ITR. The ITR will be I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 39 submitted as early as possible. The delay is caused as the proper records for the income above period is not provided by the assessee”. On 14.08.2018 the assessee revised his ITR u/s. 139(5) declaring the total income at Rs. 24,28,030/- as against the original return of income filed by the assessee at Rs. 6,84,030/- filed on 04.11.2017. Vide notice u/s. 142(1) dated 17.08.2018 the assessee was asked to submit the documents on the basis of the revised ITR also to explain the nature of amount seized. The assessee vide reply dated 19.09.2018 submitted that he has offered the income of Rs. 17,44,000/- in the revised ITR as his income earned out of the business activities. The ld. AO issued a specific show cause notice to the assessee to explain the source. The assessee submitted that the source of income is from the Marble trading, therefore, the seized amount is to be treated as business income only. The ld. AO did not agree to this proposition and for that he has advanced following reasons: “(I) The assessee is filing his ITR u/s 44AD for the year under consideration, as well as previous years. In other words, regular books of accounts were not maintained by the assessee, which can establish that the seized amount pertained to regular business activities of the assessee. (II) In order to establish the seized amount as business income, the assessee changed the financial particulars of Debtors, Creditors, Closing Stock for last six years, as evident from the ITRs filed by him originally u/s 139(1) and the ITRs filed u/s 153A of the IT Act, 1961. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 40 (III) In the original ITR the assessee declared profit u/s 44AD of Rs.7,19,684/- on total sales of Rs.71,34,875/- giving Net profit rate 10.08%. However, in revised return, the assessee declared net profit u/s 44AD of Rs. 24,63,864/-on total sales of Rs. 71,34,875/- giving Net profit rate 34.53%. The net profit rate is quite abnormal in compare to other trader in similar line of business. Further, the original Net Profit rate ie @ 10.08% is near about to the NP rate declared for last years. (IV) Since, neither at the time of seizure nor during the course of assessment proceedings, the assessee produced any specific documentary evidence for source of the cash under consideration, the contention of the assessee that the amount so seized was from cash sale or realization of debtors, cannot be accepted. (V) It is the primary burden on assessee to prove that particular amount is from specific source. If the assessee failed to do so, the particular amount is to be treated as 'Unexplained Income' of the assessee as defined u/s 68/69/69A of the IT Act, 1961. (VI) The assessee deposited cash of Rs.2,40,000/- during the period of demonetarization, in old currency. Since the assessee sale as well as purchase the goods in cash, taking into account the monthly sale/purchase, house hold expenses the cash deposited in old currency i.e. Rs.2,40,000/- is treated as cash available with assessee out of regular business transaction.” Based on the above reason, ld. AO considered that amount as amount chargeable to tax u/s. 69A of the Act. 15. When the issue raised before the ld. CIT(A), he has confirmed the finding of the ld. AO and held that the income so disclosed was unaccounted and unexplained money and is rightly held by the ld. AO that income chargeable to tax as special rate. 16. Before us the ld. AR of the assessee vehemently argued that the assessee has disclosed the income earned out of the business activity and the same has already been accepted and remains not disputed. The I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 41 only issue that the assessee is challenging the levy of special rate of tax against that income offered by the assessee in the return of income filed in response to notice u/s. 153A of the Act. 17. On the other hand the ld. DR relied upon the finding recorded in the order of the lower authority. The ld. DR has submitted that the assessee was found in possession of cash and has failed to establish the details of the person from whom the money has been received and therefore, merely offering the income by the assessee in ITR does not absolve assessee to disclose the source of income offered. 18. We have heard the rival contentions and perused the material placed on record. Ground no. 1.1 & 1.2 raised by the assessee deals with charge of income offered by the assessee in the revised return of income filed by the assessee u/s. 139(5) of the Act. The brief fact to this aspect of the matter is that in this case the assessee cash was found to have been in possession of assessee for an amount of Rs. 17,44,000/- found by Sub-Inspector of Police Kondapi P.S. Prakasam District on 15.11.2016 from Shri Nanda Ram-assessee. He was found to have the cash while verification vehicle checking near Kanumalla Police Check Post at Singarayakonda. As the assessee could substantiate the source of cash found with any documentary evidence, the police seized that amount. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 42 Upon receipt of the information from the Police, summons u/s 131(1) of the IT Act, 1961 dated 21.11.2016 was issued to Shri Nanda Ram and sworn statement u/s 131(1A) was recorded on 21.11.2016. In that statement the assessee stated that the amount received is the amount of the sale proceeds of the sales made by the assessee and he was going to deposit the cash into the bank account of the assessee. The stand of the assessee since day one was clear and therefore, considering that income which the assessee has offered is the full amount and the assessee has not claimed any deduction to that cash amount found in possession. Considering that fact that the assessee has claimed all expenses when the ITR filed on 04.11.2017 and thereafter in the assessment proceeding the assessee revised the return of income on 14.08.2018 as per provision of section 139(5) of the Act wherein that income found being the sales proceeds of the business were offered by the assessee. The revenue neither in the search proceedings nor in the post search proceeding brought anything contrary which the assessee declared at the time when he was confronted at the first place. The assessee vide reply dated 19.09.2018 submitted that he has offered the income of Rs. 17,44,000/- in the revised ITR as his income earned out of the business activities. The ld. AO issued a specific show cause notice to the assessee to explain the source. The assessee submitted that the I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 43 source of income is from the Marble trading, therefore, the seized amount is to be treated as business income only. The ld. AO did not agree to this proposition and for that and invoked the provision of section 69A read with the provision of section 115BBE of the Act and therefore, the assessee has submitted that the money so from in possession was not unexplained money but the same was sourced from the sales done by the assessee. This primary fact placed on record by the assessee has not been proved wrong as the assessee is already found to be engaged in the trading business of Marble and Granite in the name and style as M/s. Ramkrishna Marble and Granite. The bench also noted from the assessment order that the ld. AO has not invoked the provision of section 69A of the Act but has invoked the provision of section 69B of the Act. The provision of section 69A & B reads as under: Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. Amount of investments, etc., not fully disclosed in books of account. 69B. Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery or other valuable article, and the Assessing Officer finds that the amount expended on making such I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 44 investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year. Considering the facts and circumstance of the case the invocation of provision of section 69B in the case of the assessee relating the cash found is not applicable and as there is not finding as to the invocation of provision of section 69A and also the assessee has day one stated that the cash found is only of the sale proceeds that he has received and that fact has not been disproved by the revenue. As the regards the receipt received from the customer cannot be added we get support from the decision of our Hon’ble Jurisdictional High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj) wherein the court has held that “Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them”. In the light of this observations ground no. 1.1 & 1.2 raised by the assessee stands allowed. In the result appeal filed by the assessee in ITA no. 191/Jodh/2024 stands allowed. I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 45 Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Dated: 27/11/2024 Ganesh Kumar, Sr. PS Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order Date Initial 1. Draft dictated on Sr.PS/PS 2. Draft placed before author Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order I.T.A. No. 190 & 191/Jodh/2024 Assessment Year: 2014-15 46 "