INCOME TAX OFFICER, WARD-1.2.1, AHMEDABAD, AHMEDABAD vs. BHARATKUMAR RATILAL SONI, AHMEDABAD

“Whether on the facts and in the circumstances of the case and in law. the Ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 1,50,00,000/- made u/s 68 of the Act, by ignoring the direct and cogent evidence gathered during the investigation which established a clear money trail from the assessee, through the middleman (Shri Sanjay Manubhai Soni) and the entry operator (Shri Afzal Savjani), into the benami account of M/s Raj Enterprise, and back to the assessee's bank account?”

The brief facts of the case, as culled out from the records, are that the assessee, an individual, engaged in the business of manufacturing of jewellery and wholesale and retail trade of jewellery and bullion, filed his return of income for the year under consideration on 25.10.2017 declaring a total income of Rs.19,83,290/-. The case of the assessee was reopened u/s 148 vide notice dated 31.03.2021 based on information received from the Investigation Wing that the assessee received Rs.1,50,00,000/- from alleged dummy entities during demonetization.

1 In response to notice issued u/s 148, the assessee filed return of income declaring the same income as originally returned. During the course of reassessment proceedings, the Assessing Officer called for various details including bank statements, stock records, VAT returns and details of transactions with M/s Raj Enterprise from whom the assessee had received Rs.1.50 crore. The assessee explained that the said amount represented sale consideration received against sale of gold bullion of 5 kilograms and furnished documentary evidences including sale invoice, ledger account, bank statements, stock register, VAT returns and KYC details of the purchaser. The Assessing Officer, relying primarily on the investigation report relating to alleged accommodation entry operators, concluded that the entity M/s Raj Enterprise was a benami concern and that the ITO Vs. Bharatkumar Ratilal Soni - 3– assessee had routed its own unaccounted money through such entity. Accordingly, the entire amount of Rs.1,50,00,000/- was treated as unexplained cash credit u/s 68 and added to the total income vide assessment order passed u/s 147 r.w.s. 144B dated 31.03.2022. 4. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A), who quashed the reassessment proceedings holding the same as invalid and also deleted the addition on merits.

Aggrieved by the order of the Ld. CIT(A), the Revenue is now in appeal before us.

On merits, the Ld. AR submitted that the amount in question represents sale proceeds of gold bullion which are duly recorded in the books of account and form part of the total turnover. It was submitted that the assessee has maintained proper books of account which have not been rejected by the Assessing Officer. The Ld. AR also submitted that the sales are supported by documentary evidences such as sale invoice, ledger account, bank statement, VAT returns and stock register. It was further submitted that the profit element embedded in such sales has already been offered to tax and therefore any addition of the entire sale amount u/s 68 of the Act would result in double taxation. The Ld. AR also submitted that the Assessing Officer has not brought any material on record to prove that the sales are bogus or that the assessee has introduced its own unaccounted money.

The Ld. DR, on the other hand, relied upon the findings of the Assessing Officer and submitted that the investigation report clearly establishes that the ITO Vs. Bharatkumar Ratilal Soni - 4– entity from whom the amount was received was a dummy concern used for providing accommodation entries and therefore the addition has been rightly made.

We have considered the rival submissions and examined the material on record. We have examined the rationale given by the Ld. CIT(A) while deleting the addition. For the sake of ready reference, the same is reproduced hereunder:-

3 The AO failed to rebut these documents or conduct any verification of Raj Enterprise. No material has been placed on record to show that the appellant routed unaccounted funds or that any prior cash was deposited in any benami accounts. The statements relied upon by the AO (Afzal Savjani, Aftab Kazi, etc.) do not mention the appellant, nor has any opportunity for cross- examination been given.

4 The stock register clearly shows the availability of 12.847160 kgs gold before the sale to Raj Enterprise. The appellant also submitted that the RTGS receipt matches the sale value and is recorded in the books and profit & loss account for AY 2017-18. 5.4.1 The AO has not brought on record any direct evidence linking the appellant to the so-called cash handlers or alleged benami transactions. Furthermore, the AO did not conduct any enquiry under section 131 or 133(6), nor obtained any confirmation or affidavit from the alleged parties.

5 In view of these facts and judicial precedents, the addition of Rs.1.5 crore under Section 68 is unjustified and is deleted. xxxx xxxxx - 6–

8 The appellant has taken a contention that the transaction for sale of gold with Raj Enterprise was undertaken on 16.11.2016 for 5 Kgs of gold bullion for an amount of Rs. 1,50,00,000/- and at the time of sale of goods to Raj Enterprise, the appellant was in possession of stock of 12.847160 Kgs of gold bullion and on 15.11.2016, the appellant had purchased 17 kgs of gold 999 from Zaveri & Co. Pvt. Ltd and on the day of sale of gold 999 to Raj Enterprise was undertaken on 16.11.2017 for 5 Kgs of Gold bullion for an amount of Rs. 1,50,00,000/- and at the time of sale of goods to Raj Enterprise, the appellant was in possession of stock of 12.847160 kgs of gold bullion and on 15.11.2016, appellant had purchased 17 kgs of fold 999 from Zaveri & Co. Pvt.Ltd., and on the day of sale of gold 999 to Raj Enterprise, the appellant had stock of 12.847160 Kgs of Gold which can be verified from the stock register submitted by the appellant vide reply dated 17.03.2022 (Page No. 483 to 485 of Paper Book). The appellant had submitted the Extract of Stock Register of Gold Bullion 999 submitted by the appellant is as under:- Date Particulars Receipt Issue Balance Qty (In Kgs.) 15/11/2016 Opening Balance 0.99013 17.00 15/11/2016 Purchase from Zaveri & - 17.99013 Co. Pvt. Ltd. 15/11/2016 Retail Sales to Bhoomi - 2.00 15.99013 Krupa Construction 15/11/2016 Retail Sales to Bhoomi - 2.00 13.99013 Soham Corporation 15/11/2016 Sales to Soni - 0.44297 13.54716 Virendrakumar Ramanlal 15/11/2016 Sales to Shree K B - 0.60000 12.94716 Jewellers 15/11/2016 Retail Sales to Bhoomi - 0.10000 12.84716 Stavan Anupkumar Shah

It is an undisputed fact that the amount of Rs.1,50,00,000/- is recorded as sales in the books of account of the assessee. The corresponding entries are duly reflected in the sales ledger, bank statements and VAT returns. The assessee has also furnished stock records demonstrating availability of sufficient stock for making the said sales. The Assessing Officer has not rejected the books of account nor has he disturbed the sales or purchases recorded therein. The addition has been made primarily made on the basis of the investigation report alleging that the purchaser is a dummy entity; however, no direct evidence has been brought on record to establish that the transaction of sale is not genuine or that the goods - 8– were not actually delivered. The Assessing Officer has also not conducted any independent inquiry to verify the transaction. The conclusion drawn is based on general findings of the investigation report without establishing specific linkage with the assessee’s transaction. In the present case, the profit arising from the sales has already been offered to tax and accepted. Therefore, the addition of the entire sale consideration u/s 68 is not justified. Accordingly, on merits, we do not find any infirmity in the order of the Ld. CIT(A) in deleting the addition, and the same is hereby affirmed.

Since the appeal has been heard on merits, the technical grounds raised by the assessee are not being adjudicated being academic in nature.

In the result, the appeal of the Revenue is dismissed.