DY. COMMISSIONER OF INCOME TAX, MUMBAI vs. RAMESH PANNALAL RANAWAT, MUMBAI

Since the assessment year involved is the same and issues involved are same, the Income Tax Appeal of Revenue and cross objection filed by appellant are clubbed and a single order is passed.

In this case, the appellant is a manufacturer and dealer in gold ornaments and they also undertake job work. A survey under section 133A of the Income Tax Act was conducted by Income Tax Department at Cuttack Branch of appellant on 10.4.2014. The Ld. AO in assessment order states that during the course of survey, huge discrepancies were found between actual sales and sales reported for tax purposes. The Ld. AO is of the view that the total sales of Cuttack Branch is Rs. 149.52 crore as against Rs. 13.82 crore admitted by appellant and accordingly, a show-cause notice was issued to appellant accordingly to explain the discrepancy. The Ld. AR of the appellant has filed detailed explanation with respect to the estimated sales computed by Ld. AO and argued that the CCTV footage of period from 31.3.20214 to 10.4.2014 at Cuttack Branch could not be extrapolated for the entire year. The estimated of unaccounted sales made by the Ld. AO does not have any scientific basis nor there is any corroborative evidence. The Ld. AR says that he has asked the Department to give a copy of CCTV footage on the basis of which extrapolation of unaccounted sales was made, but the same was not given. The Ld. AR argues that if 103 persons came on a particular days, it cannot be presumed that 103 sale transactions took place because many people come to see the designs, to find out rates and many people does not buy the gold jewellery who enter the shop. Many times, 4 to 5 people come to buy a single piece of jewellery also. If there are unaccounted cash sales, as presumed by Ld. AO, there should be corroborative evidence with respect to cash bills/slips/estimate etc. and nothing of such documentary evidence was found by Department during survey action at Cuttack. The amount received by cash sales was deposited in the Bank account only and the same may be verified. The Ld. AR has Ramesh Pannalal Ranawat Rahul Ramesh Ranawat (legal heir of late Ramesh Pannalal Ranawat) flawed the method of computing of the unaccounted cash sales by saying that average sales per invoice is 38.498, there is an average number of sales of 50 per day and the average rate was taken at 2476 with 310 working days per annum and then arrived at the unaccounted cash sales of Rs. 149.52 crore which was not backed by any evidences. The Ld. AR also relied on the order of ITAT in his own case in earlier year vide ITA No. 5688/Mum/2024, where it was held that such extrapolation is invalid in the absence of any corroborative evidences. The Ld. AR of appellant at the time of hearing before ITAT had strongly relied on the order of ITAT in appellant’s own case in earlier year where extrapolation was neither scientific nor has any documentary evidence was found to come to the conclusion of such huge unaccounted cash sales. It was argued by Ld. AR that the matter stands covered in their favour by earlier year ITAT order as the facts and circumstances are similar. The Ld. AR of appellant has filed summary of ITAT order in his own case for this A.Y. 2014-15 in the written submissions.

The Ld. DR relied on the assessment order where it was mentioned that CCTV footage shows that many persons are coming and going from shop whereas corresponding sales were not admitted. Hence, the estimate made by Ld. AO should be upheld.

Heard both sides. There is considerable force in the arguments of Ld. AR of the appellant. The Bench is of the view that the addition made with respect to unaccounted sales is devoid of merits and evidence and should be deleted for the following reasons :- a) The Bench has specifically asked for a copy of CCTV footage of 10 days on the basis of which unaccounted sales were extrapolated. The Ld. AR of the appellant has also asked for a copy of the same earlier and the same was not given to anyone including to ITAT.

In view of the above, the appeal of Revenue is dismissed.

The Cross Objection does not survive as there is no material to corroborate the grounds mentioned by appellant. Hence, the cross objection is also dismissed.

The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.