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Kishore Jeram Bhai Khaniya, Prop. M/s Poonam Enterprises, MP-83, Pitampura, Delhi-88 Vs Income Tax Officer, Ward-25(1) New Delhi
May, 17th 2014
                 DELHI BENCH `D', NEW DELHI
       Before Sh. R. S. Syal, AM And Sh. I. C. Sudhir, JM
             ITA No. 1220/Del/2011 : Asstt. Year : 2006-07
             C. O. No. 89/Del/2011 : Asstt. Year : 2006-07
Kishore Jeram Bhai Khaniya, Prop.    Vs    Income Tax Officer,
M/s Poonam Enterprises, MP-83,             Ward-25(1)
Pitampura, Delhi-88                        New Delhi
(APPELLANT)                                (RESPONDENT)

           ITA No. 980/Del/2011 : Asstt. Year : 2006-07
Income Tax Officer,           Vs    Kishore Jeram Bhai Khaniya, Prop. M/s
Ward-25(1)                          Poonam Enterprises, MP-83, Pitampura,
New Delhi                           Delhi-88
(APPELLANT)                         (RESPONDENT)
                   Assessee by : Shri K. P. Garg, CA
                   Revenue by : Shri S. N. Bhatia, DR

Date of Hearing : 12.5.2014         Date of Pronouncement : 13.5.2014

Per R. S. Syal, AM:

     These two cross appeals-one by the assessee and other by the Revenue
along with Cross Objection by the assessee arise out of the order passed by
the CIT(A) on 20.12.2010 in relation to the assessment year 2006-07.

2.   The assessee's appeal is a recalled matter inasmuch as the earlier ex-
parte order passed by the tribunal was subsequently recalled vide its order
dated 2.12.2011.
                                       2   ITA No. 980, 1220 /Del/2011 & CO No. 89/Del/2011
                                                                  Kishore Jeram Bhai Khaniya

3.   The only issue raised in the assessee's appeal is against the confirmation
of addition of Rs. 22,06,672/-. Briefly stated the facts of the case are that the
assessee is engaged in the business of trading in metal, scrap etc. under the
name and style of M/s Poonam Enterprises. Some information was received
from the Directorate of Revenue Intelligence, Ahmadabad that during the
course of investigation into the affairs of Gurukrupa Metal Recycling (in
which the assessee is a partner) , Jam Nagar and others, a sum of Rs. 54 lacs
was seized on 5.10.2005 from the premises of the assessee. On being called
upon to explain the source of such seizure of Rs. 54 lacs, the assessee gave
the details of seized cash as of i) Poonam Enterprises - Rs. 23.1 lacs ; ii)
Radha Bhanushali (sister-in-law of the assessee) - Rs. 3.62 lacs ; and iii)
Premji Bhanushali (brother of the assessee) - Rs. 27 lacs.                 In order to
substantiate his claim about the cash of Rs. 23.1 lacs relating to his
proprietorship concern, the assessee produced books of accounts along with
sales/purchase voucher. The Assessing Officer observed that the assessee
registered a total turnover of Rs. 10.29 crore. On the examination of the sales
register, it was noticed that four cash memos were issued by the assessee on
28.9.2005 and 29.9.2005 detailed as under:-

     Sl.    Bill No. & Date    Name & Address of the party          Amount
     1.     No. 085, 28/9/05   Afroj Allam, Muradabad               5,52,448
     2.     No. 86, 28/9/05    Yusuf Khan, Muradabad                5,24,784
     3.     No. 87, 29/9/05    Salim Khan, Aligarh                  5,20,832
     4.     No. 88, 29/9/05    Mohmad Raffik, Aligarh               6,08,608
                                       3   ITA No. 980, 1220 /Del/2011 & CO No. 89/Del/2011
                                                                  Kishore Jeram Bhai Khaniya

4.    The Assessing Officer observed on the perusal of the details that
except for these four cash memos depicting cash sales totaling Rs.
22,06,672/-, there were no other instances of cash sales. These cash memos
did not carry address of the purchaser whereas the other bills did carry proper
addresses. It was further observed that these cash memos were in the
handwriting of a person different from other invoices. The A.O further
noticed that these cash memos did not carry any detail of transporter who
carried heavy items like metal. Since, these cash memos were issued a few
days before the search was conducted by the DRI on 5.10.2005, the A.O
called upon the assessee to clarify such abnormalities. The assessee tendered
his reply. Not convinced with the same, the Assessing Officer made addition
of Rs. 22,06,672/- u/s 68 of the Act. No relief was allowed in the first appeal.

5.    We have heard the rival submissions and perused the relevant material
on record. There is no dispute on the fact that the search carried out on
5.10.2005 resulted into seizure of cash amounting to Rs. 54 lacs, whose
source was explained as, inter alia a sum of Rs. 23.1 lacs coming from
Poonam Enterprises, namely, the assessee's proprietorship concern. The
assessee produced his books of accounts to show that this much cash was
available in his books on the date of search. Apart from other invoices, the
assessee issued four cash memos totaling Rs. 22.06 lacs, as tabulated above,
which amount was included in the books of account. The assessee replied to
the A.O's objections by stating that usually sales were made through demand
draft/cheque and only in a case of certain new unknown party, the assessee
was making sales either after collection of cheque or on receipt of cash. The
                                       4   ITA No. 980, 1220 /Del/2011 & CO No. 89/Del/2011
                                                                  Kishore Jeram Bhai Khaniya

reason for the above four cash memos amounting to Rs. 22.06 lacs was stated
to be for as these parties approaching the assessee and coming directly to
godown for collecting their goods and directly transporting them to their
respective destinations. The assessee further submitted that all the goods were
sold after charging due VAT, which amount was duly deposited in the
government account within the specified time. The reason for such cash
memos in the handwriting of a different person, was stated to be their
issuance by the assessee's brother who was there at the time of delivery of
goods at stockyard. Relevant extract of the assessee's cash book from
7.6.2005 to 4.10.2005 is available on pages 34 and 35 of the paper book,
from which it is clear that the cash in hand of the assessee stood at Rs. 23.10
lacs at the close of 4.10.2005. It is further relevant to note that the assessee
was maintaining stock register in respect of the items dealt with by him. A
copy of the relevant parts of the stock register is available on pages 44 to 49
of the paper book. This stock tally was admittedly before the Assessing
Officer, who has not pointed out any deficiency in them. There is no law
which prohibits a trader or a manufacturer in making cash sales.                      The
Hon'ble Bombay High Court in R.B.Jessaram Fatehchand (Sugar Deptt) VS.
CIT (1970) 75 ITR 33 (Bom) has held that sales can be in cash and it is
hardly necessary for the seller to bother about the name and address of the
purchaser. We find that so long as the availability of stock is there and there
is nothing adverse against the cash memos issued by the assessee, such cash
sales cannot be doubted. Here it is pertinent to note that the volume of such
cash sales at Rs. 22.06 is to be seen in the light of the assessee's total
turnover of Rs. 10.29 crore. It is but natural that if a customer makes cash
                                       5   ITA No. 980, 1220 /Del/2011 & CO No. 89/Del/2011
                                                                  Kishore Jeram Bhai Khaniya

purchase and lifts the goods, there is no duty cast upon the seller to insist for
the address of the purchaser. In the light of the fact that the stock record was
available with the assessee, which evidenced the making of sale, we fail to
appreciate as to how any addition can be made by treating cash sales as

6.    There is another dimension to this issue. The Assessing Officer made
addition of Rs. 22.06 lacs u/s 68 of the Act, which contemplates the making
of addition where any sum found credited in the books of the assessee is not
proved to the satisfaction of the A.O. It is only when such a sum is not
proved that the Assessing Officer proceeds to make addition u/s 68 of the
Act. We are dealing with a situation in which the assessee has himself offered
the amount of cash sales as his income by duly including it in his total sales.
Once a particular amount is already offered for taxation, the same cannot be
again considered u/s 68 of the Act. In fact, such addition has resulted into
double addition.

7.    In view of the foregoing discussion, we are of the considered opinion
that the ld. CIT(A) was not justified in sustaining this addition. The
impugned order is overturned on this issue and the addition is directed to be
deleted. This ground is allowed.

8.    First ground of the Revenue's appeal is against the deletion of addition
on account of cash seized amounting to Rs. 30.26 lacs. The assessee
explained the source cash seized amounting to              Rs. 54 lacs inter alia
including a sum of Rs. 3.62 lacs received from Radha Bhanushali and Rs. 27
                                      6   ITA No. 980, 1220 /Del/2011 & CO No. 89/Del/2011
                                                                 Kishore Jeram Bhai Khaniya

lacs received from Premji Bhanushali. The Assessing Officer made addition
of Rs. 30.62 lacs (Rs. 3.26 lacs + Rs. 27 lacs) by recording that no
confirmation was furnished from them. The ld. CIT(A) deleted this addition
by holding that both these persons, namely, Premji Bhanushali and Radha
Bhanushali duly confirmed the cash belonging to them. The ld. CIT(A)
directed to delete this addition and gave liberty to the A.O to examine the
source of cash in the hands of Shri Premji Bhanushali and Radha Bhanushali,
who had confirmed the possession and ownership in cash in question. The
Revenue is aggrieved against such addition.

9.    Having heard the rival submissions and perused the relevant material
on record, it is observed that the assessee categorically stated before the
Assessing Officer that a sum of Rs. 30.62 lacs belonged to Premji Bhanushali
and Radha Bhanushali. This fact was confirmed by these two persons as
well. When the assessee's brother and his wife admitted the possession of
cash belonging to them, there can be no reason for making addition in the
hands of the assessee in respect of cash when the facts and circumstances
amply show that the cash did belong to them. It is for them to explain the
source of cash available with them in their respective hands. In our
considered opinion, the ld. CIT(A) rightly appreciated the facts in directing
to delete the addition by asking the A.O to verify the source of cash in the
hands of these two persons. This ground is not allowed.

10.   The last ground of the Revenue's appeal is against the deletion of
addition of Rs. 19,00,674/- being the amount credited to the assessee's capital
account. The facts apropos this issue are that the assessee introduced a sum of
                                      7   ITA No. 980, 1220 /Del/2011 & CO No. 89/Del/2011
                                                                 Kishore Jeram Bhai Khaniya

Rs. 19,00,674/- as fresh capital in M/s Poonam Enterprises. The assessee was
asked to furnish details    of such fresh capital vide questionnaire dated
24.3.2008. No reply was given. Again when the assessee was asked to
explain the source of such introduction of fresh capital vide order sheet entry
dated 22.12.2004, the assessee gave the following explanation which has
been reproduced in the assessment order:-
      "During the year capital account of proprietor in increased as he
      has received personal advances and inducted to the business which
      in the next year getting settled."

11.   The Assessing Officer held that this limited reply of the assessee did
not indicate any source of funds introduced as capital. He, therefore, made
addition for the said sum u/s 68 of the Act. The ld. CIT(A) got convinced
with the assessee's submissions and directed to delete the addition. The
Revenue is in appeal against such deletion.

12.   After considering the rival submissions and perusing the relevant
material on record, it is observed that the Assessing Officer specifically
requisitioned the assessee to explain the source of fresh capital amounting to
Rs. 19.00 lacs and odd introduced in his books of accounts. The assessee
gave only sketchy reply which has been reproduced above. In our considered
opinion, the ld. CIT(A) was not justified in deleting this addition by rather
strangely mentioning that this addition was made in a summary manner. It is
severely simply that when a certain sum is credited to the assessee's capital
account, the onus is on him to explain the source of such deposit to the
satisfaction of the A.O. The ld. AR has invited our attention towards the
capital account of the assessee in which there are certain debit and credit
                                        8   ITA No. 980, 1220 /Del/2011 & CO No. 89/Del/2011
                                                                   Kishore Jeram Bhai Khaniya

entries. The ld. CIT(A) was swayed by the assesssee's submissions without
recording any categorical finding on the explanation of the source of credit
entries, more so when the assessee did not adduce any proper explanation
before the AO. We, therefore, overturn the impugned order on this issue and
remit the matter to the file of A.O for deciding it afresh after allowing a
reasonable opportunity being heard to the assessee. Needless to say, the
assessee will be at liberty to lead any fresh evidence before the Assessing
Officer in support of the credit entries in his capital account.

13.   The Cross Objection filed by the assessee, which is only in support of
the CIT(A)'s order as become infructuous in view of our decision in the
Revenue's appeal.

14.   In the result, the assessee's appeal is allowed, the Revenue's appeal is
partly allowed for statistical purposes and the Cross Objection of the assessee
is dismissed.

Order pronounced in the open Court on 13/5/2014.

           Sd/-                                                       Sd/-
   (I. C. Sudhir)                                       (R. S. Syal)
JUDICIAL MEMBER                                    ACCOUNTANT MEMBER
Dated: 13/5 /2014
                                               9    ITA No. 980, 1220 /Del/2011 & CO No. 89/Del/2011
                                                                           Kishore Jeram Bhai Khaniya

Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
                                                                  ASSISTANT REGISTRAR

                                                        Date       Initial
1.     Draft dictated on                            12.5.2014                  PS
2.     Draft placed before author                   12.5.2014                  PS
3.     Draft proposed & placed before the                                      JM/AM
       second member
4.     Draft discussed/approved by Second                                      JM/AM
5.     Approved Draft comes to the Sr.PS/PS                                    PS/PS
6.     Kept for pronouncement on                                               PS
7.     File sent to the Bench Clerk                                            PS
8.     Date on which file goes to the AR
9.     Date on which file goes to the Head Clerk.
10.    Date of dispatch of Order.
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