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Judgment
PER BRAJESH KUMAR SINGH, AM,
These two appeals by the assessee are directed against the two separate orders of the Ld. Commissioner of Income Tax (Appeals)-29, New Delhi [hereinafter referred to as the ‘Ld. CIT(A)] both dated 24.12.2024 arising out of the respective Assessment Orders different dated 24.12.2019 and 30.09.2021 passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) by the ITO, Ward-28(1), New Delhi, and ACIT, Central Circle-28, New Delhi (hereinafter referred to as the ‘AO’) respectively pertaining to Assessment Years (A.Y.) 2017-18 and 2018-19. Since common issues are involved in these two appeals, the same are being disposed of by way of this common order for the sake of convenience and brevity. The ITA No. -909/Del/2025 for A.Y. 2017-18 is taken as the lead case.
Brief facts of the case: The original return of income declaring income of Rs. 7,97,310/- was filed on 01.11.2017. The case was selected under CASS for scrutiny in the 'Complete Category’. Subsequently, notice u/s 143(2) was issued on 27.09.2018 and served electronically as well as through speed post upon the assessee. The case was selected for scrutiny for examination on the following reasons:
"Cash deposit during demonetization period"
The AO had information that the assessee had deposited cash of Rs. 5,28,35,000/-during the demonetization period/during the year. The assessee was asked by the AO to explain the nature and source of cash deposit. However, according to the AO, the notices issued remained uncompiled with. Subsequently, the assessee was show-cause vide letter dated 05.12.2019. The assessee submitted reply as under-
"The cash was deposited out of the cash sales during the year. The cash book for the year under consideration is already submitted."
The above reply of the assessee was considered by the AO in light of the details filed and in view of circumstantial evidences available/observed in the case of the assessee. The assessee was also asked about the trend of cash deposit in its case. The assessee had furnished the details of cash deposit for the period prior to the demonetization and subsequent to the demonetization as under:
| Financial Year | Cash deposited from 1st April to 08th Nov. | Cash deposit from 9th Nov to 31st Dec | Cash deposit from 1st Jan to 31st March |
| 2015-16 | 10,93,000/- | 1,15,500/- | 6,18,000/- |
| 2016-17 | 17,95,650 | 5,28,35,000/- | 69,000/- |
| 2017-18 | Nil | Nil | Nil |
On perusal of above trend the AO observed that it could easily be construed that cash deposit prior to demonetization and after demonetization during the year FY 2016-17 was very negligible. The AO noted that the cash deposits during the FY 2015-16 corresponding to the demonetization period was as low as Rs. 1,15,500/-which had no comparability with the cash deposits during demonetization period. Further, the AO noted that the cash deposited in subsequent year i.e. FY 2017-18 was NIL. According to the AO, the trend of cash deposits clearly suggested and proved that assessee had neither inflow of cash out of any explained sources in prior year nor it had cash in post period of demonetization. In light of above factual matrix the AO concluded that the cash available with assessee as deposited during demonetization period was nothing but unexplained cash from unknown sources.
Further, the AO noted that on perusal of financial statements of assessee and form 3CD the AO noted that the turnover of assessee during FY 2015-16 was Rs.1.47 crore which had increased by five times and reached to Rs.11.94 crore unprecedently. According to the AO, the reason for such increase in cash deposits was not supported by evidences. The AO took note of the fact that the assessee had provided cash book, ledger in the form of stock chart, work in progress, finished sales (mainly in cash sale) & purchase but on perusal of the same it was noted by him that either there was no sale during the period till June, 2016 or the sale was very low and that the sales have further been inflated after June, 2016 and abnormally increased October onwards so as to reach at the figure of cash deposits. The AO also observed that cash book furnished by the assessee could not be accepted for explanation of source of cash deposit and that there was no trend for cash sale as was evident as discussed in the assessment order. Based on these facts, the AO noted that the trend of sale shown in the cash book was not genuine but it was an attempt to explain the unaccounted/bogus cash deposits. The AO also noted that from the details in respect sales which was mainly in cash the sale could not be verified. The Ld. AO also noted that the Assessee also did not provide the details of entities to whom cash sale has been made during the period and therefore, the cash available with assessee could not be regarded as cash received out of sales but that the said cash was unexplained. The AO further noted that the trend of sale in prior year and in subsequent year made it clear that the cash deposits was acquired by the assessee through unexplained sources for which assessee had no explanation. The AO also observed that cash book did not stand before the test of circumstantial evidences of the case and did not match with the prior years /subsequent years trend.
The AO further noted that another factor in this case was that the said cash was not deposited by the assessee in its regular bank account at Vijaya Bank, but it was deposited in Axis Bank a/c no 911020065121683 which was dedicated in the name of Padmakriti (division of AUM Jewels). The assessee explained that there was a litigation going with Vijaya Bank and therefore, the cash was not deposited in the Axis Bank.
The same and other facts was explained by the assessee vide letter dated 20.12.2019 and the relevant extracts of the same are reproduced as under:
“The cash in hand could not be deposited in the bank account due to the following reasons: The assessee was not able to deposit the cash regularly in Vijaya Bank as the litigation was going on with this bank account. This account was declared NPA by the bank unlawfully. Since one of the main condition of the bank before giving loan was that the assessee is not allowed to open another bank account with the same name in any bank, therefore there was no bank account with the assessee to deposit the cash out of the sale proceeds from jewellery business. The assessee was pursuing this matter legally before Hon'ble High Court (Allahabad) and also to Hon'ble Supreme Court. If the cash was deposited in the Vijaya bank, the bank would have appropriated the same towards outstanding balances which was in dispute. Due to this reason and circumstances, the cash arising from the sale of jewellery business was not deposited in bank regularly and the large amount was accumulated with the assessee in cash. In the mean time, the demonetization was declared and the whole amount was compulsorily deposited in Axis Bank a/c no 911020065131683 which was dedicated in the name of padmakriti (division of AUM Jewels) to ensure its value.
“Apart from this, the main source of cash in hand is the sale of opening stocks in hand which was sold during exhibition cum sale. The main reason for offering discounts on sale is that the five year lease period for the rented business premises was going to expire on 20.12.2016, so assessee has to clear its old stock and the large sales were made in cash during the exhibition period. The quantity wise date wise stock purchased from registered dealer and unregistered customers are already submitted. The quantity wise date wise stock of sales are also submitted and same are duly entered in Form 3CD for tax audit purposes". (emphasis supplied by us)
However, this reply of the assessee was also not accepted by the AO and added the sum of Rs. 5,26,07,671/- u/s 68 of the Act r.w.s. 115BE of the Act. The relevant extract of the order of the AO is reproduced as under:
“The reply filed by assessee as above is not acceptable for the fact that Assessee can not stay away from its legitimate liabilities which is to be paid to the authority which may be any government department. If plea of the assessee is to be accepted can we say that he was also purchasing goods for its business activity in cash. In the time of demonetization he has deposited cash in different bank namely Axis Bank and if his claim is to be accepted, he must to have deposited in this bank from the beginning so that the business could run smoothly. If the cash deposited in the bank during the demonetization period was out of his cash sale the same must to been deposited from beginning as was done during the demonetization period by depositing in another bank account.
4.2.In view of above it is concluded that the transaction which resulted abnormal sale and abnormal cash in the hands of assessee, as being claimed by the assessee, he has no explanation for that. The historical trend and future trend does not support contention of assessee. It is held that assessee has failed to explain source of cash deposit satisfactorily and therefore, the cash deposit is treated as unexplained cash credit in the books of assessee. However, credit is being given for monthly average of cash deposit in the bank account of the assessee pre-demonetization period which comes to Rs. 2,27,329/- for two months. Therefore, cash credit of Rs. 5,26,07,671/-(Rs. 5,28,35,000/- - Rs. 2,27,329/-) is treated as deemed income of assessee u/s 68 of the Income Tax Act, 1961 to be taxed u/s 115BBE of the I. T. Act, 1961.” (emphasis supplied by us)
Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee. The relevant extract of the said order is reproduced as under:
“6.1Under these grounds of appeal the appellant firm pleaded that it had offered explanation for the cash deposit amount under consideration. From perusal of the submission and assessment order, it can be inferred that the turnover of the appellant firm was increased substantially during the year F.Y. 2016-17 and also the cash deposit during the demonetization period was also not as per the trend/matrix tabulated by the AO for comparison with last year and next year for the same duration. The financial statements of appellant firm about exhibition sale and discount offering to increase the sales is not supported by any documentary evidences. Therefore, the genuineness of these transactions remained unexplained.
6.2Further, the AO is correct with its conclusion that appellant firm cannot stay away from its legitimate liabilities which were required to be paid involving liability towards the Vijaya Bank and also the cash deposited in the account of other bank during the demonetization period must had been done earlier to run the business smoothly. Therefore, the abnormal and unexplained cash deposit amounting to Rs. 5,26,07,671/-is treated as deemed income after giving credit for monthly average sales as per trend matrix. I have examined all the submission on record and do not find any procedural infirmity in the addition made by the AO.
6.3Hence, in view of the above discussion I am inclined to agree with the addition made by AO. Accordingly, these grounds of appeal are dismissed.” (emphasis supplied by us)
Aggrieved with the said order, the assessee is in appeal before us on the following ground of appeal:
“ 1. That the order passed by the assessing officer is bad in law and against the facts of the case.
2.The ld. AO erred in law and on facts of the case in making the addition of Rs 5,26,07,671 being cash deposited in bank account during demonetization period as unexplained source of income under section 68 despite being explaining the source of income from own business activity
3.The ld. AO erred in law and on facts of the case by levying interest under section 234B and 234C.”
Ground no. 1 of the appeal was not pressed by the assessee. Hence, this ground of appeal was dismissed as not pressed.
Regarding ground no. 2 of the appeal, the assessee filed a written submission and relied upon the same. The relevant extract of the written submission of the assessee is reproduced a under:
“In brief the argument of the assessee was as under: o Addition u/s.68 can be made only if the assessee was unable to explain the source of the same. o The assessee has duly explained the source that the same was deposited out of the cash sales. During the Assessment Proceedings the assessee had duly explained the source with the documents such as vat return, books of accounts, cash books sales registered, reconciliation of stock, purchase and sales bills etc.
The Learned Assessing Officer has not pointed out any defects in the documents.
The Learned Assessing Officer has accepted the opening stock, purchases
made the during the year, sales and the income offered on the same.
Books of accounts for the A.Y. 2016-17 & 2017-18 are audited.
No rejection of the books of accounts.
Reasons for not depositing the cash regularly in Vijaya bank and increase of sales during the year was duly explained with the documents.”
The assessee also relied upon various case laws in its written submission but due to facts as discussed later in this order are distinguishable and hence not applicable in the case of the assessee.
The Ld. Sr. AR relied upon the orders of the authorities below.
We have heard both the parties and perused the material available on record. The assessee has submitted the details of cash sales on page no. 40 to 51 of the paper books and similarly, the purchase details on page no. 52 of the paper book along with details of cash purchases on page no. 53 to 54 of the paper book. The details of cash deposited between 10.11.2016 to 28.12.2016 are mentioned on page no. 58 of the paper book and also the month wise break-up of the purchases before the said deposits are mentioned on page 59 of the paper book. The said details on page no. 58 and 59 are reproduced as under:
| Date | A/c No. and name of the Bank | Total Cash Deposited | Out of total cash deposited , amount of old currency notes (SCN) | Out of total cash deposited, cash amount of new currency notes if any |
|---|---|---|---|---|
| 10.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 9,000,000.00 | 9,000,000.00 | |
| 10.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 6,091,000.00 | 6,091,000.00 | |
| 11.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 800,000.00 | 800,000.00 | |
| 11.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 5,682,000.00 | 5,682,000.00 | |
| 13.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 677,500.00 | 677,500.00 | |
| 15.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 6,000,000.00 | 6,000,000.00 | |
| 15.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 6,681,000.00 | 6,681,000.00 | |
| 18.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 4,273,000.00 | 4,273,000.00 | |
| 19.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 2,000,000.00 | 2,000,000.00 | |
| 19.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 3,666,500.00 | 3,666,500.00 |
| 21.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 3,795,000.00 | 3,795,000.00 | |
| 22.11.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 4,100,000.00 | 4,100,000.00 | |
| 27.12.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 45,000.00 | - | 45000.00 |
| 28.12.2016 | A/c No. '911020065131683, Axis Bank ,NFC New Delhi | 24,000.00 | - | 24000.00 |
| TOTAL | 52,835,000.00 | 52,766,000.00 | 69,000.00 | |
Similarly, the details of month wise sales are mentioned on page no. 60 of the paper book, which are reproduced as under:
The above chart shows that that total cash deposited in the bank account of the assessee was Rs. 5,28,35,000/- out of which an amount of Rs. 5,27,66,000/- was of old currency notes (SCN) deposited between 10.11.2016 to 28.12.2016 i.e. during the period of demonetization whereas the sales of the assessee company showed a huge spike from the month of July 16 to November 16 in the above chart. As noted above, the assessee had explained that the main source of cash in hand was on account of sale of opening stock in hand which was sold during exhibition cum sale. It was further explained that the main reason for offering discounts on sale was that the five-year lease period for the rented business premises at M-5, Basement, Greater Kailash, Part-1, New Delhi-110048 was going to expire on 20.12.2016 and so the assessee had to clear its old stock and the large sales were made in cash during the exhibition period. However, the Ld. CIT(A) in this regard noted that financial statements of assessee firm about exhibition sale and discount offering to increase the sales is not supported by any documentary evidences. No supporting evidence regarding the above claim by the assessee has also been filed before us. Further, the submission of the assessee about the lease of the above premises getting expired on 20.12.2016 also needs verification because in the assessment order for AY 2018-19 in the case of the assessee it is stated that a survey operation u/s 133A of the I.T. Act 1961 was conducted in the case of M/s Aum Jewels (PAN: AABFU1372L) on 18.08.2017 at the following premise “M-5, Basement, Greater Kailash, Part-1, New Delhi-110048, which shows that the said premises was still in the possession of the assessee. The address of the assessee at the aforesaid address is also supported by the address of the assessee mentioned in letter of the assessee dated 02.11.2016 addressed Vijay Bank (placed at pg no. 4-5 of the paper book) and screenshot of the same is reproduced as under:
Therefore, the claim of the assessee that the assessee cleared the old stock at discount and sold the jewellery in cash due to the lease of premises expiring on 20.12.2016 needs verification as no supporting facts are on record regarding the claim of the assessee.
Further, the claim of huge increase in the sales for the period August 2016 to November 2016 also requires verification before accepting the claim of the assessee that the source of cash deposits in its bank account was on account of sales of the jewellery.
Therefore, in order to give one more opportunity to the assessee and in the interest of justice, we set aside the order of the Ld. CIT (A) and restore the matter to the file of the AO for fresh adjudication keeping in view our above observations and after giving reasonable opportunity of being heard to the assessee and in accordance with law. The grounds of appeal filed by the assessee are allowed for statistical purposes.
Further, the assessee will also be at liberty to submit any evidence/details in support of its claim.
In the result, the appeal of the assessee is allowed for statistical purposes.
ITA No.- 908/Del/2025 for A.Y. 2018-19
Brief facts of the case: A survey operation u/s 133A of the I.T. Act 1961 was conducted in the case of M/s Aum Jewels (PAN: AABFU1372L) on 18.08.2017 at the following premises:
“M-5, Basement, Greater Kailash, Part-1, New Delhi-110048”
The AO noted that on the perusal of record and statement recorded under oath of partners of the firm, it was established that books of accounts of the assessee was not maintained and there was no sale proceeds for AY. 2017-18 as stock was nil on 31.03.2017.
Further, the AO noted that during the survey operation u/s 153A at M-5, Basement, Greater Kailash, Part-1, New Delhi an order book was found in which order had been booked and sale shown in cash during the F.Y. 2017-18 totaling Rs. 9,05,200/-. The details of the said cash sales are mentioned on page no. 2-4 of the assessment order.
The assessee was asked to furnish the complete details of source of cash and sale with supporting necessary documentary evidences. The assessee was also show caused as to why in absence of any satisfactory explanation why this cash receipts of Rs. 9,05,200/- may not be treated as unexplained.
In response to the show cause notice, the assessee furnished a reply which was not found acceptable by the AO. The AO noted that the assessee had stated that the documents seized during the course of survey do not belong to the assessee Firm and belonged to Mrs. Rita Bagga who had started the business of tailor-made garments in her individual capacity. It was further submitted that the total sale shown in the personal return of income of Mrs. Rita Bagga was Rs 8,30,000 and the profit declared on these sales is Rs 2,24,000. The assessee has also submitted few handmade slips showing allegedly some tailoring orders. One of such slip was submitted by the assessee was reproduced below in the assessment order as below:
The AO noted that the reply furnished by the assessee does not have any substance and the documents furnished by the assessee had no evidentiary value and the submission made by the assessee are based are on afterthought and self-made documents as the slips furnished by the assessee claimed as related to individual business of Mrs. Rita Bagga do not have any name of the firm, its address, GSTIN, Contact details, name & address of the customers etc. The AO observed that the assessee had not furnished any satisfactory reply on the merits of the case and also noted that the assessee had no stock of good as on 31.03.2017 and no sale during the F.Y. 2017-18 as stated by Tarun Bagga, (Partner of the assessee Firm) in his statement on oath and observed that the statements recorded on oath have great evidentiary value. Accordingly, the AO held that, in any case the cash receipts of Rs. 9,05,200/- are not justified on account of sales and the entire amount received by the assessee Firm is nothing but its unaccounted cash receipts. Accordingly, the AO added a sum of Rs. 9,05,200/- u/s 69A of the Act. The relevant extract of the order of the AO is reproduced as under:
“10.Hence, considering the facts of the case, statement of the partners and improper reply of the assessee, it is clear that the assessee has received unaccounted cash of Rs 9,05,200/-during the relevant previous year. Thus, an amount of Rs. 9,05,200/-is hereby added to the total income of the assessee for the relevant period as per the provisions of the Section 69A of the I.T. Act, 1961 being unexplained money. ….”
Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee and the relevant extract of the order of the Ld. CIT(A) is reproduced as under:
“7.Ground Nos. 2 to 5: During the course of survey operation the appellant firm had no business activity and there was no physical stock on the premises. The same was confirmed in the statement of Sh. Tarun Bagga recorded at the time of survey action. But an order book was found at the premises of appellant firm in which cash sales was shown amounting to Rs. 9,05,200/- Further, At the time of assessment appellant firm was show caused to provide explanation and complete details of source of cash sales with supporting documentary evidences. The appellant firm in response to the show cause notice submitted that this order book reflecting cash sales amount belongs to one of the partners of the firm Ms. Rita Bagga, who was doing business of tailor-made garments at the premises of the firm in her individual capacity and that she had already offered this amount to her income u/s 44AD of the Act at the time of filing ITR for the relevant year. But in the absence of documentary evidences to explain how the order book sales are related with the aforementioned business and due to incomplete nature of submission i.e. manual handmade slips on paper cutting without name & address of customers were furnished initially, and later the same invoices related to PADMA KRITI which were overwritten in a few places and having different total amount, were rejected by the AO as found not satisfactory and the amount was added back to the income of appellant firm treating as unaccounted cash receipts u/s 69A of the Act. It is further seen that the order book had a detailed entry of name of party and date with the narration cash, and therefore cannot be disregarded.
7.1The appellant firm's contention about the addition under incorrect section is not acceptable because the appellant was found to be the owner of money which was not included in the books and provisions of section 69A of the Act were invoked accordingly. The relevant part of the section reproduced as under:-
"Unexplained money, etc.
694.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."
7.21 have perused the submission of the appellant filed during the appellate proceedings and found that on the top of the copies of a few invoices related to the firm named PADMA KRITI on the same dates as tabulated in the order book found at the time of survey. But nowhere on these invoices the name of Ms. Rita Bagga, appears and it is hard to believe that these invoices related to the tailoring and garment business of Ms. Rita Bagga. The appellant firm has also not furnished any explanation for this. Also, total amount of these invoices is different. Therefore, these invoices failed to substantiate the reply of the appellant firm and its claim of the order book found during the survey proceedings is of cash sales related to individual tailoring business of Ms. Rita Bagga. Also, other copies of manual handmade slips submitted by the appellant firm do not contain any specific information about the buyer or seller, any contact details, address, etc. pertaining to the order. Hence, these submissions were rejected by the AO at the time of assessment proceedings. The submission of the appellant that Mrs. Rita Bagga offered certain income for taxation u/s 44AD of the Act may be true but the appellant firm failed to explain that this income and the cash sales mentioned in the order book found during survey at premises are related. Also, as per statement of Sh. Tarun Bagga the stock of appellant firm was Nil on 31.03.2017 which means the sale could not be made by the firm during the F.Y. 2017-18.
7.3Therefore, in view of the above discussion, I am inclined to agree with the addition made by AO treating the order book amount as unaccounted cash receipts and accordingly these grounds of appeal are dismissed.” (emphasis supplied by us)
Aggrieved with the said order, the assessee filed an appeal before us on the following grounds of appeal:
“ 1. The learned assessing officer has eared in passing the order u/s 143(3) passed by Central Circle 28, Delhi without jurisdiction and has to be quashed.
2.The order u/s 143(3) dated 30th Sept. 2021 for the A.Y. 2018-19 determining income of Rs.9,05,200/- u/s 69A of the Income Tax Act under Income. from Other sources is wrong and bad in law. The addition made is wrong and bad in law and has to be deleted.
3.The appellant contends that during the survey operation u/s 133A at M-5, Basement, Greater Kailash-I, New Delhi done at the partnership firm and statement recorded of partner Shri Tarun Bagga has in his statement on oath stated that there is no stock of goods as on 31st March 2017 and no sale was made during the F.Y. 2017-18. Therefore, there is no iota of evidence against the assessee firm for taxing any income.
4.The AO has erred in rejecting the explanation of the assessee that the so-called order book referred in the assessment order belongs to Mrs. Rita Bagga, partner who is into the business of tailormade garments in her individual capacity which should have been accepted. No income should be taxed in the hands of the assessee. The income determined is wrong and bad in law. The tax determined as a consequence wrong and bad in law. The levy of interest is wrong and bad in law. All have to be cancelled
5.The appellant contends that the provisions of section 69A can only be invoked if the assessee is found to be owner of money, jewellery etc. and the same is not recorded in the books of accounts. No such money alleged has been found in the premises of the assessee surveyed u/s 133A of the Income Tax Act. Thus, no addition can be made u/s 69A.”
During the course of hearing before us, the Ld. Sr. AR relied upon the written submission filed before the Ld. CIT(A). The relevant extract of the same, is reproduced as under:
“This appeal is directed against the assessment order u/s 143(3) Id. ACIT Central circle 28, Delhi dated 30.09.2021 in which the addition of Rs 9,05,200 on account of unaccounted cash under section 69A of the Income Tax Act, 1961.
Brief Facts of the case are as under:
1.The Assessee is a partnership Firm engaged in the business of trading & Manufacturing of gold, diamond jewellery & garments. The firm which is having three partners, the Tarun Bagga (40 percentage), Ridhi Bagga (30) and Ms. Rita Bagga. (30). All 3 partners are family members. Rita Bagga (aged 70) being mother of Tarun Bagga and Ridhi Bagga. The partnership firm was dissolved on 30.09.2017 by WILL. (Paper Book page no 1-3)
2.A survey operation u/s 133A of the I.T. Act 1961 was conducted in the case of M/s Aum Jewels, the appellant (PAN: AABFU1372L) on 18.08.2017 at the following premises:
M-5, Basement, Greater Kailash, Part-1, New Delhi-110048. It was found that the firm has no business activity and no physical stock.
3.The findings of Ld AO that appellant has not maintained any books of accounts of previous assessment years is not correct. The Hon'ble ITAT 'A' Bench has already given its order remanding the order of penalty u/s 271A to Ld AO on the basis that the appellant has been audited under section 44AB in previous assessment years. The copy of Hon'ble ITAT 'A Bench' Delhi vide ITA No: 5465 to 5470/Del/2018 dated 21.09.2021 in its own case is attached herewith at paper book page no 189-193.
4.In the survey operation "order book" in the name of Padmakriti was impound, (Paper Book page no 56-80) wherein aggregating amount for the year 2017-18, Rs. 9,05,200 is mentioned which is a pre discount sales. The post discount sales amounts to 8,30,000 in the "Order book" itself which is visible apparently, on the face of the order book evident from the naked eyes. This "Order Book" was impounded on the next day of survey i.e. 19/08/2017 in presence of Mr. Tarun Bagga and not in the presence of Rita Bagga (Partner). Further, this Order book, being documents were impounded without reasons recorded by the authorities. (paper book page no 18). Thus Ld. AO has not complied the proviso (a) of section 133A(3)(ia) of the Income Tax Act.
5.During survey, statement u/s 131(1A) of Ridhi Bagga (paper book page no 4-6) and Mr. Tarun Bagga (paper book page no 7-17) was taken and no statement of Rita Bagga was taken.
6.Partner Rita Bagga (Aged 70), has in her individual capacity started a business of tailor made garments for her clients and has filed ITR -3 in her personal name (Paper book page no 19-23). The turnover declared in return amounts to Rs. 8,30,000 and profits declared in the return is Rs. 2,24,000. During the assessment proceeding, Rita Bagga, (Partner) has stated that "Order Book" impound during the survey was sales made by her in her individual capacity and all the "Order Book" was in her own handwriting. There is a direct nexus between the amount of post discount in the order book and turnover mentioned in her individual return, both were amounting to Rs. 8,30,000.
7.Notice u/s 143(2) was issued by ITO of ward 28(1) without questionaries based on issue "Survey u/s 133A". Further, notice u/s 142(1) with questionaries was issued by Ld. ACIT of the central circle 28, followed by SCN.
8.The Ld. ACIT was relying on the statement of Mr Tarun Bagga drawn during the survey as mentioned in the SCN and made an addition of 9,05,200 u/s 69A in the name of the Partnership firm based on pre discount order book as unaccounted cash not giving any reason for not accepting appellant plea.”
In the assessment order on para 9, Ld. AO has rejected the submissions of assessee without providing any cogent reasons or explanations. It is a trite law that Burden of proof the income is on the department.
Assessment Order Para Assessment Order Appellant Remarks Para 9 (First Line) The reply furnished by the assessee do not have any substance and the documents furnished by the assessee has no evidentiary value The Ld. AO has drafted the order on pre conceived notion that assessee reply has no evidentiary value.
The Assessing Officer has been shown the ITR of Rita Bagga showing taxable income of 13,57,058 wherein, the balance sheet figures clearly shows the proprietor capital, fixed assets and Other current assets.
The Profit & Loss clearly shows the revenue from operation amounting to 8,30,000 on which net profit comes to 2,24,000. The Ld. AO has completely outlooked the submission of sales and purchase register filed before him.
Para 9 (Second line) The submission made by the assesse based on the after thoughts and self-made documents as the slips furnished by the to assessee claimed as related to individual business of Mrs. Rita Bagga do not have any name of the firm, its address, GSTIN, Contact details, name & address of the customers etc. 1. The ITR of partner Rita bagga was filed dated 31 October 2018. Much before the notice of first Notice of 142(1) dated 22 April 2021 of assessment proceedings of firm was issued. Therefore, it is clear that it is not an afterthought. Moreover, survey proceedings were happened during the year 2017-18. If the intention is to hide the sales, then there would be no financial logic to show the sales in the name of partner because of following reasons.
(a) Both Firm and Rita Bagga would have taxed at 30%. Rita Bagga has paid tax on 2.24 @ 30% lacs on
income above 10 Lacs. The total tax paid by her in the return was Rs. 2,36,185. Self-assessment tax was Rs. 1,24, 260. (b) Rita Bagga return has not claimed any special deduction or exemption which the firm could not have claimed. No brought forward loss or other deduction is available them. (c) The firm could have opted for section 44AD, could have paid tax on income @ 8% i.e. (8,30,000*8%) Rs. 66,400. Therefore, the tax liability could be 31.2% i.e., 20,716. But the partner has paid tax on Income from business of Rs. 2,24,000 @31.2% i.e., 69,900. Since the total income of partner was above 10 lacs. The partner has paid tax amounting to 49,184 more than what could have been. Hence, there is no financial planning or tax planning in it. The True and fair picture is already shown by showing the income in the name of partner. (d) Since, the survey conducted during the previous year i.e. 18.08.2017, had it been the income of assessee, it would have been more conscious of showing in the return of income as already income tax department has surveyed them, but in order to present the true picture, the firm has not done that. (d) The handwriting of Rita Bagga on bills, taking of the order, providing the customized designs, communicating to tailors, explaining them the specification, and collecting of money, all were duly performed by Rita Bagga in her personal capacity. Hence, there was no way to show the income in the name of firm. The customers directly know them as well and well versed with her. From the above, it is clear that Firm (Family Business) and partner has not done any tax evasion, in fact, partner individually has paid much more than, they would have paid in firm (Which was a family business firm). 2. The order book contain the serial no. name of the customer, mode of payment, date of order. The business was not registered under GST. As the turnover was very well below the statutory limits. The partner being lady and senior citizen was not versed with the taxation provisions (Being in tailoring business only). The purchase order are given to illiterate tailors who works for daily earnings and does not have any proper printed bills. They use to make handmade bills showing the basic details of customer requirements like order no, item tailored, size no, name of customer and amount charged. The business done by the assessee is on good faith and is bonafide. To treat the same sales in the firm, same would amount to double taxation which dehors under section 4 of the income tax act.
On the other hand, the Ld. Sr. DR supported the orders of the authorities below.
We have heard both the parties and perused the material available on record. In this case the AO added the sum on the ground that the during the course of survey and order book was found in which orders were booked and sale was shown in cash amounted to Rs. 9,05,200/- and according to the AO this cash sales represented the unaccounted cash of the assessee firm. On the other hand, the assessee submitted that documents seized during the course of survey do not belong to the assessee Firm and belonged to Mrs. Rita Bagga who had started the business of tailor-made garments in her individual capacity. It was further submitted that the total sales shown in the personal return of income of Mrs. Rita Bagga was Rs 8,30,000/- after factoring in the discount of Rs. 75,200/- to some of the customers and the profit was declared on these sales at Rs 2,24,000/- in her return of income which was filed by the assessee on 31.10.2018 much before the first notice u/s 142(1) of the Act dated 22.04.2021 was issued by the AO. Further, it has been submitted at serial no. (c & d) that the partner M/s Rita Bagga had paid an amount @ 31.2%, whereas the firm would have been liable to pay the taxes @ 8% only. Further, the assessee submitted that the handwriting of Rita Bagga on bills, taking of the order, providing the customized designs, communicating to tailors, explaining them the specification, and collecting of money, all were duly performed by Rita Bagga in her personal capacity, which showed that in no way it showed the income in the name of firm and the customers directly know her as well and well versed with her. The above submissions of the assessee have not been controverted either by the AO or the Ld. CIT (A) while confirming the above addition in the hands of the assessee. On perusal of the table on page 2-4 of the assessment order, it shows sales of Rs. 9,05,200/- to the 31 customers with their respective names and the amount of each purchase. The details of sales amount as per bill received and the discount given to some of the customers has also been submitted by the assessee at page no. 18 of the paperbook which was also submitted before the CIT (A) as well as the AO. However, no enquiry was made by the AO from any of the said customers to negate the above claim of the assessee. Therefore, in the given facts of the case that the sales of Rs. 9,05,200/- recorded in the impounded book does not belong to the assessee and it relates to the personal business of M/s Rita Bagga cannot be rejected. As noted above M/s Rita Bagga has delared income of Rs. 2,24,000/- and filed her return of income on 31.10.2018 and due taxes have been paid on the said income. Therefore, in the given facts of the case the addition of Rs. 9,05,200/- made in the hands of the assessee is not sustainable and the same is deleted. The grounds of the appeal filed by the assessee are allowed.
In the result, the appeal of the assessee is allowed.
To sum up, the appeal of the assessee in ITA no. 909/Del/2025 is allowed for statistical purposes and the appeal of the assessee in ITA no. 908/Del/2025 is allowed.