SHRI NAWAL KISHORE SONI,JAIPUR vs. ACIT, CENTRAL CIRCLE-3, JAIPUR

2. That on the facts and in the circumstances of the case, the ld. CIT(A) is wrong, unjust and has erred in law in upholding finding recorded by the AO that the assessee has allegedly made investment of capital for alleged unrecorded transactions of Rs. 91,53,55,592/- and in fu9rther sustaining addition to the extent of Rs. 15,74,496/- on this count which was worked out on the basis of proportion of actual capital of Rs. 34,96,965/- for declared turnover of Rs. 203,30,09,914/-. – A.Y. 2016-17- Assessee ‘’1. That on the facts and in the circumstances of the case, the ld. CIT(A) is wrong, unjust and has erred in law in upholding rejection of books of account of the assessee by the AO by invoking the provisions of Section 145(3) of the I.T. Act, 1961 and in further sustaining addition of Rs. 10.00 lacs in the hands of the assessee on this count.

Whether on the facts and in the circumstances of the case & in law the ld. CIT(A) was right in deleting the addition of Rs. 10.00 lacs made by the AO on account of undisclosed profit from unaccounted transactions with detected during the search.

Whether on the facts and in the circumstances of the case & in law the ld. CIT(A) was right in deleting the addition of Rs. 2,57,00,000/- made by the AO on account of unexplained investment in purchase of gold.’’ 2. The hearing of the appeals was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.

In all these cross appeals of the assessee and the revenue, common issues are involved, therefore, for the sake of convenience and brevity, a common order is being passed.

For the A.Y. 2015-16, the A.O. issued notice u/s 153C of the Acton 24-09-2018 (on the basis of documents seized from Shri Ram Kumar Soni) to assessee and in compliance thereto assessee filed return of income declaring income of Rs. 18,92,170/- as was declared in original return of income. The A.O. issued notice u/s 143 (2) and 142 (1) of the Act which assessee also complied. The A.O. completed assessment u/s 153C r.w.s. 143 (3) at an income of Rs. 6,47,89,430/- making:

The Ld CIT(A) partly allowed the appeal of assessee and deleted the following addition. (i) Addition of Rs.2,20,37,862/- on account of alleged unrecorded transactions in Hazir software (ii) Addition of Rs.43,42,901/- on account of alleged investment of capital The department is in appeal against the above said additions deleted by CIT (A) and assessee filed appeal against the additions sustained by CIT(A). After considering the written submission of assessee the Ld. CIT(A) restricted the addition to Rs.10,00,000/- by invoking the provisions of section 145(3) of the Act and addition of Rs.15,74,496/- by further upholding the finding recorded by the assessing officer that the assessee has made investment of capital for alleged unrecorded transactions. The present appeal is against the order of Ld. CIT(A) filed by department as well as by the assessee.

In the assessment order, the A.O. has also made a lump sum addition of Rs. 10,00,000/- to the income of the assessee on account of 8 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT asset profit on unaccounted transactions at MCX. By the impugned order, the ld. CIT(A) has deleted the addition.

We have considered the rival contentions and carefully gone through the orders of the authorities below and found from the record that in the assessment order the A.O. estimated profits @ 1% on sales from 24-11-2014 to 31-3-2015 on transaction recorded in regular books of accounts as well as not recorded in regular books of accounts and for MCX portal transactions making a lump sum addition of Rs. 10,00,000/- without any basis while actual profit earned from those transactions was correctly worked out by assessee from record found in survey and submitted before A.O. The application of profit rate @ 1% on sales has been applied by the A.O. not because of any defect or deficiency in the 9 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT accounts but by wrongly putting stress on that the assessee in course of survey proceedings in statement accepted 1% profit rate on deemed sales for stock found short in survey. The said admission by assessee was on different facts and in different context and because of no details were found for hypothetical estimated sale of stock which was found short in course of survey with the spirit to close survey proceedings to buy peace and to cooperate with department but same could not be applied for all sales for which complete details including quantitative details are available. In respect to transaction of purchase and sale recorded in regular books of accounts the return of income computing total income from accounts audited u/s 44AB was filed declaring an income of Rs. 18,42,170/-. The return was processed u/s 143 (1) and no notice u/s 143 (2) was received within allowed time. The present assessment has been completed u/s 143 (3) r.w.s. 153C. The A.O. found no defect or deficiency in books of accounts maintained and declared op. stock, purchases, sales & closing stock including quantitative details thereof have been accepted as such by the A.O. and, therefore declared gross profit was completely verifiable and the AO should have accepted as per law. The A.O. however accepted all the transaction of sales, purchases and stock for the period 24-11-2014 to 31-3-2015 as declared 10 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT by the assessee and applied 1% G.P. rate on sale of said period while accepted the declared profit for remaining period of the year which is grossly incorrect in law. The accounts of the year have to be accepted as such for the whole year and, in law there cannot be that declared results for the part of year accepted as correct and part of the year has not been accepted as correct. Otherwise also the assessment u/s 153C has to be completed in accordance with provisions of section 153A. It is now settled law that no addition in assessment u/s 153A/153C can be made unless there is some incriminating material therefor. In view of this clear provisions of law also application of G.P. rate of 1% on sales transaction accounted in regular books of accounts for the period 24-11-2014 to 31- 3-2015 is not in accordance with law and declared results are to be accepted as the purchase, sale and quantitative details have been accepted by the Assessing Officer. In respect to transaction of purchase and sales not recorded in regular books of accounts but found in ‘Hajir’ Software, we observe that the record found in Hajir software is correct and complete. The complete details of all transactions alongwith quantitative details are available in said record and trading A/c with the said record was prepared by assessee showing gross profit/gross loss resulted from those transaction not recorded in books of accounts. The 11 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT A.O. found no mistake, defect or deficiency therein and accepted the purchase/sales as shown in said trading account but instead of accepting the declared profit arbitrarily putting stress that assessee accepted 1% G.P. rate which is wrong as explained above, otherwise also in accordance with section 292C of the Act the contents of documents found in course of survey are to be accepted as true and no subtraction/ addition/interpolation can be made in law without any corroborative and supportive material therefor and, therefore trading results i.e. gross profit arrived from the said documents found in course of survey which is correctly worked out deserves to be accepted. The Ld. CIT(A) gave his finding in para no.8 and 9 of appeal order, which is reproduced as under: 8. In this ground the Ld. A/R has contested the application of GP rate of 1% on the entire sales (accounted and unaccounted in ‘Hazir’ software) of gold and silver on the basis of admission by the appellant in statement recorded u/s 131 of the I.T. Act where in appellant admitted an application of GP rate of 1% on short stock of Rs. 8347544 The text of statement can be seen on page 9 of the Ld. AO order. 8.2 I have closely perused the Ld. AO order and the submissions made. I am of the view learned AO is not correct in apply in uniform GP rate of 1% to accounted and unaccounted sale. The portion of statement relied upon by the Ld. AO in is on page 9 same is reproduced below:-

In ground No. 2 of the appeal, the revenue has alleged deletion of addition of Rs. 10.00 lacs made by the A.O. being undisclosed profit from undisclosed transaction with MCX. In this regard, we observe that the AO in the assessment order made lump sum addition of Rs. 1000000/- to the income of the assessee on account of alleged profit on unaccounted transactions at MCX. That the profit from transaction with MCX is computable from record found in ‘Hazir’ software and assessee submitted before A.O. the resultant profit from MCX transaction being to Rs. 41,36,010/- which A.O. verified the same and found it correct and accepted it and added the same in income of assessee assessed by A.O. Besides that, the A.O. further made an lump sum addition of Rs. 10,00,000/- without any reason or basis or finding any shortcoming in 17 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT resulted profit computed from transaction on MCX. Thus this lump sum addition is arbitrary being without any basis or reason cannot be sustained in law and deserves to be deleted. The Ld. CIT(A) in para no.17 of his order held that: I have persued the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. AR. I find this addition is based on pure assumption and not based any incriminating seized material. That being so the addition of Rs.10 Lakh is directed to be deleted. In view of the above the lump sum addition of Rs.10,00,000/- is purely based on surmises and conjectures and accordingly the Ld. CIT(A) is correctly deleted the same.

Ground No. 3 of the departmental appeal and ground No. 2 of the assessee’s appeal are interlinked. In this regard, we observe that the assessing officer in the assessment order wrongly held that assessee has made investment of capital for alleged unrecorded transactions and in further working out such investment on the basis of actual investment for recorded turnover of the business. The assessing officer is thus wrong and has erred in law in working out total investment for business at Rs. 9414362/- on the basis of alleged total turnover of Rs. 5,47,31,72,177/- which is worked out by him in proportion to actual capital of Rs. 3496965/- for declared turnover of Rs. 2,03,30,09,914/-. The addition of Rs. 59,17,397/- made to the income of the assessee by the assessing 18 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT officer as alleged unexplained expenditure/capital investment on this count is unwarranted and is without any material on record. The ld. CIT(A) has dealt with this issue in para 22 of his appeal order, which is as under: 22. I have perused the written submissions submitted by the Ld. AR and order of AO. I have also gone through various judgments cited by the Ld.AR and those contained in the order of AO: 22.2 The Ld. AO has discussed this addition in para 6 on page 10 to 12 of the order. There is a print out extracted from Hazir software copy of which hasscanned on page 11 of the order. The Ld AO gave a finding that column of capital is left blank which is not possible in this case. The Ld. AO drawn support from the available figure and worked out capital at Rs.59,17,397/-. 22.3 I am in agreement with the stand taken by the Ld. AO however the turnover of Rs.2,76,63,19,000/- was erroneously taken and correct figure taken is Rs. 3,39,42,36,100/-. The Ld. AO also has taken this figure in passing the order u/s 154 of the Act. The Ld AR himself calculated the unexplained investment as 15,74,496/- which is factually correct. That being so the Ld AO is directed to sustain the addition of Rs.15,74,496/- out of Rs.59,17,397/-. The appellant get consequential relief. “ 14. We also observe that the A.O. without any basis or material held that assessee would have made investment of capital for alleged unrecorded transactions of sales/purchases found recorded in ‘Hazir’ software and worked out total investment for business at Rs. 9414362/- on the basis of alleged total turnover of Rs. 5,47,31,72,177/- which is worked out by him in proportion to actual capital of Rs. 3496965/- for declared turnover of Rs. 2,03,30,09,914/- and made addition of Rs.

In the result, appeal of the revenue is dismissed whereas the appeal of the assessee is allowed.

Now we take appeals for the A.Y. 2016-17 (Assessee & Revenue).

By the impugned order, the Ld CIT(A) partly allowed the appeal of assessee and deleted the following addition.

Ground No.1 of the departmental appeal as well as the assessee’s appeal are interlinked, in this regard we observe that in the assessment order the A.O. arbitrarily estimated profits @ 1% on sales during the year on transaction recorded in regular books of accounts as well as not recorded in regular books of accounts and for MCX portal transactions making a lump sum addition of Rs. 10,00,000/- arbitrarily without any basis while actual profit earned from those transactions was correctly worked out by assessee from record found in survey and submitted before A.O. The application of profit rate @ 1% on sales has been applied by A.O. not because of any defect or deficiency in the accounts but by wrongly putting stress on that the assessee in course of survey proceedings in statement accepted 1% profit rate on deemed sales for stock found short in survey. The said admission by assessee was on different facts and in different context and because of no details were 22 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT found for hypothetical estimated sale of stock which was found short in course of survey with the spirit to close survey proceedings to buy peace and to cooperate with department but same could not be applied for all sales for which complete details including quantitative details are available. In respect to transaction of purchase and sale recorded in regular books of accounts the return of income computing total income from accounts audited u/s 44AB was filed declaring an income of Rs. 17,82,540/-. The return was processed u/s 143 (1) and no notice u/s 143 (2) was received within allowed time. The present assessment has been completed u/s 143 (3) r.w.s. 153C. The A.O. found no defect or deficiency in books of accounts maintained and declared op. stock, purchases, sales & closing stock including quantitative details thereof have been accepted as such by A.O. and, therefore declared gross profit was completely verifiable and the AO should have accepted as per law. The A.O. however taken the transaction of sales for the year and applied 1% G.P. rate on sale of the year. We observe that the assessment u/s 153C has to be completed in accordance with provisions of section 153A. It is now settled law that no addition in assessment u/s 153A/153C can be made unless there is some incriminating material therefor. In view of this also application of G.P. rate of 1% on sales transaction accounted in 23 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT regular books of accounts for the year is not in accordance with law and declared results are to be accepted. In respect to transaction of purchase and sales not recorded in regular books of accounts but found in ‘Hajir’ Software, we observe that the record found in Hajir software is correct and complete. The complete details of all transactions alongwith quantitative details are available in said record and trading A/c with the said record was prepared by assessee showing gross profit/gross loss resulted from those transaction not recorded in books of accounts. The A.O. found no mistake, defect or deficiency therein and accepted the purchase/sales as shown in said trading account but instead of accepting the declared profit arbitrarily putting stress that assessee accepted 1% G.P. rate which is wrong as explained above, otherwise also in accordance with section 292C of the Act the contents of documents found in course of survey are to be accepted as true and no subtraction/ addition/interpolation can be made in law without any corroborative and supportive material therefor and, therefore trading results i.e. gross profit arrived from the said documents found in course of survey which is correctly worked out deserves to be accepted. The ld. CIT(A) has dealt with the issue in para 8 of his appellate order, which is reproduced as under:

In view of the above facts and submissions made herein above the G.P. rate of 1% applied by the A.O. on the sales found recorded in ‘Hajir’ software is thus unwarranted and uncalled for. Further the ld. CIT(A) has sustained a lump sum addition of Rs.10,00,000/- in the hands of assessee as against the addition of 2,30,37,862/- made by the Assessing officer.

In ground No. 2 of the appeal, the revenue has alleged ld. CIT(A)’s action in deleting addition of Rs. 10.00 lacs, which was made by the A.O. on account of profit from undisclosed transactions from MCX. In this regard, we observe that the AO in the assessment order made lump sum addition of Rs. 1000000/- to the income of the assessee on account of alleged profit on unaccounted transactions at MCX. That the profit from transaction with MCX is computable from record found in ‘Hazir’ software and assessee submitted before A.O. the resultant profit from MCX transaction being to (-) Rs. 9,52,665/- which A.O. verified the same and 29 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT found it correct and accepted it and added the same in income of assessee assessed by A.O. Besides that, the A.O. further made a lump sum addition of Rs.10,00,000/- without any reason or basis or finding any shortcoming in resulted profit computed from transaction on MCX. Thus, this lump sum addition is without any basis or reason cannot be sustained in law and deserves to be deleted. The Ld. CIT(A) in para no.17 of his order held that: I have perused the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. AR. I find this addition is based on pure assumption and not based any incriminating seized material. That being so the addition of Rs.10 Lakh is directed to be deleted.

Ground No.2 of the assessee’s appeal relate to the ld. CIT(A)’s holding that loss of Rs.17,45,527/- suffered by the assessee in respect of alleged unrecorded transactions is not eligible for set off against declared profit by wrongly invoking sec. 115BBE of the Act.

We observe that this amendment takes effect from 1st of April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assessment years. Accordingly, we hold that the assessee current loss is allowable to set off against the current year income. The Hon'ble Jaipur Bench of ITAT, Jaipur Bench, Jaipur in case of ACIT, CC-2, Jaipur vs. Girdhar Associates vide order dated 04- 08-2017 and ACIT, CC-2, Jaipur vs. M/s Pitamber Commodity Futures P Ltd. ITA No. 863/JP/2017 by confirming the appeal order of CIT (A) – 4, Jaipur held that amended provisions are applicable from 01-04-2017 only and cannot be applied retrospectively. The issue in this case is thus being exactly the same and is covered by the said judgement of ITAT, Jaipur Bench, Jaipur. The CIT (A) thus is wrong and has erred in law in not allowing the set off of net unaccounted loss from the accounted income of assessee.

Now we take appeals for the A.Y. 2017-18 (Assessee & Revenue)

Ground No.1 of departmental appeal as well as assessee’s appeal are interlinked. In this regard, we observe that similar issue was involved in the appeals for the A.Y. 2015-16 and 2016-17 and the reasoning given by the A.O. for upholding addition and the reasoning given by the ld. CIT(A) for partly allowing are same, therefore, following the reasoning given hereinabove for the appeals of A.Y.2015-16 and 2016-17, we uphold the finding of the ld. CIT(A) in deleting the addition made by estimating 1% profit on sales. Similarly estimated addition upheld by the 35 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT ld. CIT(A) is also deleted on the basis of very same reasoning given in the orders for the A.Y. 2015-16 and 2016-17.

At para no.8-page no. 7, the ld CIT(A) have observe that:

In this ground the Ld. A/R has contested the application of GP rate of 1% on the entire sales (accounted and unaccounted in ‘Hazir’ software) of gold and silver on the basis of admission by the appellant in statement recorded u/s 131 of the I.T. Act where in appellant admitted an application of GP rate of 1% on short stock of Rs. 8347544 The text of statement can be seen on page 9 of the Ld. AO order. 8.2 I have closely perused the Ld. AO order and the submissions made. I am of the view learned AO is not correct in apply in uniform GP rate of 1% to accounted and unaccounted sale. The portion of statement relied upon by the Ld. AO in is on page 9 same is reproduced below:- iz- 63 vkids bl O;kofld ifjlj esa de ik;s x;s 83]47]544@& :i, ds de LBkWd dk dkj.k Li"V djus esa vki vleFkZ jgs gS] rks fQj D;ksa ugha ;g ekuk tkos fd bl 83]47]544@& :i, LVkWd dks vkius out of books csp fn;k gS] rnuqlkj Dk;sa ughs bl 36 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT unaccounted sale ij 1% dk Gross Profit ekftZu yxk dj dqy 83]475@&:i, dks vkidh v?kksf"kr vk; eku fy;k tkos ? th gka] eSa esjs 83]47]544@& ds de LVkWd dks viuh out of m- books unaccounted sale eku dj bl ij 1% ds Gross Profit ekftZu ds fglkc ls dqy 83]475@& :i, dks esjs 'qk) v?kksf"kr equkQk ekurs gq, bls LosPNk ls pkyw fofRr; o"kZ 2016&17 esa djkjksi.k ds fy, lefiZr djrk gwWa rFkk bl ij ns; vk;dj vnk djus dk opu nsrk gwWa A 8.3 It can clearly be seen that Ld. AO asked ‘leading’ question that why not a GP rate of 1% be not applied on the unaccounted stock of Rs. 8347544 The question posed by the investigating officer reads as under:- “……….rnuqlkj D;ksa ughs bl unaccounted sale ij 1% dk Gross Profit ekftZu yxk dj dqy 33]475@&:i, dks vkidh v?kksf"kr vk; eku fy;k tkos ?........” The appellant agreed that on this short stock a GP rate of 1% can be applied.

The Ld. AO is directed to accept the books result of regular books of accounts which are duly audited and a returned income of Rs. 1892170 is filed. For the unaccounted transaction in silver and gold (‘Hazir’ software) the Ld. AR has filed a detailed P & L account. The same is reproduced by the Ld. AO onwards of the order. The Ld. A/R has taken a plea that the content of ‘Hazir’ software are to be taken as true and correct unless proven otherwise.

For silver trading (period 24-11-2014 to 31-03-2015) Rs.562647 2. For gold trading (period 24-11-2014 to 31-3-2015) Rs.1617752 The aforesaid two additions shall be made by the Ld. AO 9.4 Since the books of accounts are rejected I am of the view a nominal addition of Rs. 10 lacs is made in the income the appellant as a fair estimation of income as envisaged in the section 145 of the Act. “ Accordingly, the Ld. CIT(A) deleted the addition of Rs.1,58,31,290/- and sustained the addition to Rs.10,00,000/-.

Ground No. 2 and 3 of the departmental appeal relate to deleting addition of Rs. 10.00 lacs in respect of undisclosed profit from undisclosed transactions with MCX. In this regard, we observe that similar issue has also been arisen in the A.Y. 2015-16 and 2016-17 and following the same reasoning, we uphold the order of the ld. CIT(A) in deleting addition of Rs. 10.00 lacs.

Ground No. 4 of the departmental appeal relates to deleting the addition of Rs.2,57,00,000/- made by the AO on account of on account of unexplained investment purchase of Gold. In this regard, we observe that in course of search at the premises of Ram Kumar Soni, Sikar a cash book was found which was seized and marked Ann. AS. Ex-12 in which certain transaction for payment of purchase of gold in between the dates of demonetization of currency were found. Thereafter in course of survey at the premises of assessee statement was recorded from the assessee in which he stated as under: - iz- 69 vc tcfd vkius Lo;a us ;g Lohdkj dj fy;k gS fd Jh jkedqekj lksuh] lhdj dks uxn Hkqxrku djus ds ckjs esa vkius >wBs c;ku fn;s Fks] rks d`i;k vc vki Lo;a gh ;g crkus dk d"V djsa fd fnukad 8-11-16 dks uksVcanh ds ckn vkius Jh jkedqekj lksuh (Prop. M/s M.B. Sons Jewellers) dks dqy fdrus :i, dk Hkqxrku fd;k vkSj D;ksa fd;k A d`i;k bldh iwjh ekWMl vksijsaMh Hkh le>k,sa A 39 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT m- eSa fcYdqy Bhd&Bhd lksp lx>dj vkSj ;kn djds vkidks crk jgk gwWa fd uksVcanh ds ckn fofHkUu rkjh[kaksa esa eSaus Jh jkedqekj lksuh ls dqy 9 kg lksuk [kjhnk Fkk ftlds fy, eSaus mUgsa dqy 3]02]20]000@& ¼ v{kjs rhu djksM nks yk[k chl gtkj½ :i, dk uxn Hkqxrku fd;k Fkk A okLro esa bl bl 9 kg lksus esa ls 3 fdyks lksuk rks eSaus muls [kjhndj t;iqj eaxok;k rFkk ;gka ij vU; ikfVZ;ksa dks equkQs ds lkFk csp fn;k A ckdh 6 Kg lksuk eSaus 'ks[kokVh csYV ¼lhdj] >q>quw o pw: ftys½ dh ikfVZ;ksa dks ogha ls direct gh fcdok fn;k vFkkZr~ fMysojh lh/ks lhdj ls gh djok nhA blds fy, mu ikfVZ;ksa us direct gh jkedqekj lksuh th dks Hkqxrku dj fn;k rFkk esjk equkQk eq>s ns fn;k A blds fy, eSaus ,ojst 5 yk[k :i, izfr fdyks ds fglkc ls dqy djhc 45 yk[k :i, dk v?kksf"kr equkQk dek;k A iz- 70 vkius ftu ikfVZ;ksa dks Jh jkedqekj lksuh] lhdj ls vkxs lksuk fcdokuk crk;k gS mudk uke] irk] fooj.k miyC/k djokus dk d"V djsa ojuk D;ksa ugha ;g ekuk tk, fd vkius laiw.kZ lksuk [kjhnus ds fy, dqy 3]02]20]000@& :i, dk v?kksf"kr L=kksrksa ls vftZr vk; ls fuos'k fd;k gS \ m- ftu yksxksa dks eSaus lksuk vkxs cspuk ¼fcdokuk½ crk;k gS] mu yksxksa dk uke] irk] fooj.k miyC/k djokus esa eSa vleFkZ gwWa A vkids bl loky dk esjs ikl dksbZ mRrj ugha gS A iz- 71 vkius Jh jkedqekj lksuh ls ;g 9 kg lksuk u;s uksVksa esa [kjhnk ;k iqjkus uksVksa esa [kjhnk \ m- eSaus Jh jkedqekj lksuh ls ;g 9 kg lksuk leLr iqjkus uksVksa esa gha [kjhnk A iz- 72 vkius ;g lksuk vkxs fdlh dks cspk ;k fcdok;k] bl laca/k esa dksbZ lcwr nsus esa vki vlQy jgs gSa A vr% ;g fu"d"kZ fudkyk tk jgk gS fd vkius viuh ?kksf"kr vk; ls Jh jkedqekj lksuh ls 9 kg lksuk 3]02]20]000@& :i, esa [kjhnk Fkk A bl laca/k esa vkidk D;k dguk gS \ m- eSus lksuk [kjhnus ds fy, dksbZ iSlk ugha fn;k A cfYd gdhdr ;g gS fd eSaus ftu ikfVZ;ksa dks vkxs lksuk fcdok;k Fkk] mUgksus direct gh jkedqekj lksuh dks Hkqxrku esjs behalf ij djds eq>s esjk equkQk fHktok fn;k Fkk A iz- 73 vkids crkbZ ckr ij vxj fo'okl fd;k tkos rks vkius ml lksus dk cspus ij dek;s equkQs dk fQj D;k fd;k \ m- eSaus esjs v?kksf"kr equkQs dks esjs ekyoh; vjcu dks vksijsfVo cSad] tkSgjh cktkj ea yksu vdkmaV esa yksu ds against tek djok fn;k A iz- 75 Jh jkedqekj lksuh ls dqy 3]02]20]000@& :i, esa iqjkus uksVksa esa 9 kg lksuk [kjhnus dk L=kksr Li"V djus esa vki vlQy jgs gSa] vr% d`i;k crk;sa fd bl dqy 3]02]20]000@& :i, dks D;ksa ughs Lkksus esa v?kksf"kr fuos'k ds :Ik esa vkidh v?kksf"kr vk; eku yh tkos \ 40 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT m- ;g lksuk eSaus [kjhnk ugha cfYd direct jkedqekj lksuh ls fcdok;k gS A iSlk direct jkedqekj lksuh dks gh feyk gS A eq>s uxn esa esjk equkQk feyk gS] tks ,ojst 5 yk[k :i, izfr fdyks ds fglkc ls djhc 45 yk[k :i, curk gS ftls eSa esjs v?kksf"kr equkQs ds :i esa pkyw for o"kZ esa djkjksi.k ds fy, lefiZr djrk gwWa A ;g esjk 'kq} v?kksf"kr equkQk gS ftl ij eSa vk;dj vnk djus dk cpu nsrk gwWa A The assessee accordingly surrendered Rs. 45,00,000/- as his profit in purchase & sale of 9 kg gold from Ram Kumar Soni and the said undisclosed income was declared by assessee in accordance with section 199C of Taxation Laws (Second Amendment) Act 2016 in PMGKY (Pradhan Mantri Garib Kalyan Yojna) in which assessee declared income of Rs. 1,05,50,000/-as per details thereof given in affidavit filed which includes said undisclosed income of Rs. 45,00,000/- also. The Pr. Commissioner of Income Tax also issued prescribed certificate in respect to declaration under PMGKY (copies of all documents submitted). In annexure AS, Exhibit – 12 i.e. cash book found and seized from Ram Kumar Soni, Sikar following transaction of receipt of amount in the name of Babu Lal Lawat i.e. assessee were found Date (Amount in Rs.) Narration Page No. of Ex-12 19.11.16 5500000 Sh. Babu Lal ji Lawat 221 22.11.16 12500000 Sh. Babu Lal ji Lawat 224 02.12.16 2000000 Sh. Babu Lal ji Lawat 236 03.12.16 1550000 Sh. Babu Lal ji Lawat 237 08.12.16 800000 Sh. Babu Lal ji Lawat 243 08.12.16 1400000 Sh. Babu Lal ji Lawat 243 11.12.16 800000 Sh. Babu Lal ji Lawat 247 (7450/- ysuk jgk)

The A.O. as per discussion in assessment order mainly on the ground that assessee has not provided the names and address of those parties to whom he has sold gold rejected the explanation of assessee while accepting the explanation of assessee in respect to entry of Rs. 1,10,00,000/-. This left the entries of receipt of amount of Rs. 2,47,95,000/- by Ram Kumar Soni from Babu Lal Lawat i.e. assessee which was only for purchase of 7 kg gold. However, the A.O. on the basis of statement of assessee that he purchased 9 kg gold for Rs. 3,02,00,000/- from Ram Kumar Soni which was sold by him took into consideration the amount of Rs. 3,02,00,000/- and added the same to the income of assessee as undisclosed investment and also invoked provisions of section 68 and 115BBE of I.T. Act and subjected the same to tax @ 60%.

It is evident from entries found in cash book of Ram Kumar Soni and from statement recorded from assessee in course of survey that assessee purchased gold in period of demonetization which was obviously for sale to persons on receiving cash from them as the same is normal practice of gold trade. The gold purchased in period of demonetization was towards agreed sale to persons on receiving amount therefor from those persons. Thus the source of payment to Ram Kumar Soni for purchase of gold is out of amount received from its sales and so 45 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT it is to be treated as properly explained. It is only profit on sale of said purchased gold which is income of assessee which was undisclosed income of assessee and the same could only be subjected to tax. It is settled law that in case of unaccounted sales only profit therefrom could only be taxed as income of assessee. The assessee relies on the judgement of ITAT, Ahmedabad Bench in case of DCIT Vs. Brijvasi Developers P. Ltd. order dated 17-5-2017. The payment for purchase gold is not made by assessee from his own but the same is either settled by direct payment to seller by buyer and/or payment made from advance from customer or credit from sales as per normal trade practice. The assessee admitted such profit at Rs. 45,00,000/- and disclosed that income in PMGKY, 2016 and paid due tax thereon. The assessee has not noted name(s) of person(s) whom gold was sold by him. In unrecorded transactions neither the purchaser informs his name neither assessee require it as the dealing ins cash based and even if name and address is given the person will not be found there or will deny it. Thus when the entries clearly reveals that transactions are of unrecorded purchase and sale of gold which A.O. also admits in assessment order than simply that name & address of purchasers are not provided the entire amount of sale cannot in law be 46 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT treated as undisclosed income, only profit earned from said transactions which has been admitted by assessee at Rs. 45,00,000/- can only be assessed to tax. We also observe that assessee had disclosed in PMGKY the said undisclosed income of Rs. 45,00,000/- and paid tax in accordance with scheme and received certificate therefor from Pr. Commissioner of Income Tax, hence the same disclosed income cannot be included as income in assessment as per Section 199-I of PMGKY. However, the A.O. has allowed credit of amount of disclosed income in PMGKY from total income and so there being no consequence to assessee so the same was not objected to.

The Ld CIT(A) in para 23 of appeal gave his findings. For ready reference the said findings are reproduced herein below:- 23. I have perused the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. A/R. I have also gone through the relevant pages in the paper book filed by the Ld. A/R. It is seen that in course of search at the premises of Ram Kumar Soni, Sikar a cash book was found which was seized and marked Ann. AS. Ex-12 in which certain transaction for payment of purchase of gold from Ram Kumar Soni were noted in the name of Babu Lal Lawat (appellant) in between the dates of demonization of currency totalling to 2,47,95,000/- and these transactions were unaccounted transactions for purchase and sale of gold in period post demonetization. These transactions were for purchase/sale of 7 Kg gold. However appellant in his statement dated 24-12-2016 u/s 131 admitted sale/purchase of 9 kg gold for Rs. 3,02,20,000/- and stated that gold was purchased by him from Ram Kumar Soni and directly sold to people of nearest place(s) who themselves made direct payment to Ram Kumar Soni and he only earned profit on such transaction of sale of 9 kg gold which he admitted to be 47 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT @ Rs. 5,00,000/- per kg total Rs. 45 Lakhs. This income was later on disclosed under the provisions of PMGKY Scheme, 2016. The Ld. AO in assessment order on the basis of statement of appellant that he purchased 9 kg gold for Rs. 3,02,00,000/- from Ram Kumar Soni which was sold by him took into consideration the amount of Rs. 3,02,00,000/-. The AO held that these transactions were through old demonetization currency which was barred transaction under demonetization scheme. The AO therefore required appellant to furnish details related to parties to whom gold was so sold and on failure of appellant to provide such details the AO made addition of Rs. 3,02,00,000/- in income of appellant u/s 68 r.w.s. 115BBE of the Act. 23.2 It is evident from entries found in cash book of Ram Kumar Soni and from statement recorded from appellant in course survey that appellant purchased gold in period of demonetization which was for sale to persons on receiving cash from them as the same is normal practice of gold trade. 23.3 I find that the Ld. AO also in assessment order has not held that the transaction of sale are not from purchases by appellant or it was out of unaccounted stock of appellant but on the inability to give the identity of purchasers of gold he made addition of total sale price of Rs. 3,02,00,000/- in the income of appellant. Further the payments to Ram Kumar Soni also appear in Hazir software seized in course of survey which contain the unaccounted purchase/sale of appellant. Thus the source of payment to Ram Kumar Soni for purchase of gold is to be taken out of amount received from its sales and so it is to be treated as explained. 23.4 It is settled law that not only from the illegal business but also the unaccounted transaction of purchase and sale only profit/ income on sales could be assessed as undisclosed income and could be subjected to tax. Case laws to the point are as under: 1. Dr. T.A. Quereshi (157 taxmann.com 514) (Supreme Court) 2. Piara Singh (124 ITR 40) (Supreme Court) 3. S.C. Kothari (82 ITR 794 (Supreme Court) 23.5 The appellant admitted such profit at Rs. 45,00,000/- and disclosed that on said transactions income in PMGKY, 2016 and paid due tax thereon. The 48 ITA 1256/JP/2019 & 5 Ors appeals_ Nawal Kishore Soni Vs ACIT copy of certificate issued by PCIT is placed on record. Thus when that transactions are of unrecorded purchase and sale of gold, which Ld. AO also admits in assessment order, then simply that name & address of purchasers are not provided the entire amount of sale cannot in law be treated as undisclosed income, only profit earned from said transactions which has been admitted by appellant at Rs. 45,00,000/- can only be assessed to tax more so when the appellant has disclosed in PMGKY the said undisclosed income of Rs. 45,00,000/- and paid tax in accorandce with scheme and received certificate there for from Pr. Commissioner of Income Tax, hence the same disclosed income cannot be included as income is assessment as per Section 199-I of PMKGY. However Ld. A.O. has allowed credit of amount of disclosed income in PMKGY from total income as so the addition on this account is restricted to Rs. 45,00,000/- and balance is deleted. The appellant thus gets relief of Rs. 3,02,00,000-45,00,000 = Rs. 2,57,00,000/-.” In view of the above facts and submissions made herein above the Ld. CIT(A) is correct in deleting the addition of Rs.2,57,00,000/- made by the AO on account of alleged undisclosed investment in purchase of Gold.

In the result, all the appeals of the revenue are dismissed whereas all the appeals of the assessee are allowed. Order pronounced in the open court on 15/09/2020.