SH. VIKRAM JAIN,AMRITSAR. vs. THE DY. COMMISSIONER OF INCOME TAX, AMRITSAR.

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. No. 336/Asr/2016 Assessment Year: 2010-11

Vikram Jain s/o Vinod Jain, vs. Dy. CIT, Circle 1, Prop. Aar Vee Textiles, Amritsar 528, White Avenue, Amritsar [PAN: AALPJ 4238Q] (Appellant) (Respondent)

Appellant by : Sh. R. K. Magow (C.A.) Respondent by: Sh. Charan Dass (D.R.) Date of Hearing: 29.11.2018 Date of Pronouncement: 02.01.2019 ORDER Per Sanjay Arora, AM: This is an Appeal by the Assessee agitating the Order by the Commissioner of Income Tax (Appeals)-1, Amritsar (‘CIT(A)’ for short) dated 30.03.2016, partly allowing the assessee’s appeal contesting his assessment under section 143(3) of the Income Tax Act, 1961 (‘the Act’ hereinafter) dated 25.03.2013 for Assessment Year (A.Y.) 2010-11.

2.1 Opening the arguments for and on behalf of the assessee, it was submitted by the ld. counsel, Sh. Magow, that the appeal for the immediately preceding year, i.e., AY 2009-10, stands decided by the Tribunal by setting aside the order of the first appellate authority, and restoring the matter back to the file of the Assessing Officer (AO) for adjudication afresh in accordance with law. Copy of the said order (in ITA No. 355/Asr/2016, dated 17/8/2018) was adduced by him. The

2 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT assessee being in the same ‘business’, i.e., sale of woolen fabrics, carpets, yarns, etc., with the Revenue having similarly estimated his income, rejecting the books of account, and applying the rate of 2.75% on the stated turnover, treating it as commission, i.e., as for the current year, it was posed by the Bench as to why, then, should not the same course be adopted for the current year, which may also result in consistency in the approach of/by the Revenue. Sh. Magow would submit that the position for the year under reference is different in-as-much as the books of account had not been ‘rejected’ by the AO, who has framed the assessment u/s. 143(3), as against u/s. 144, i.e., as the best judgment assessment, for AY 2009-10. The tribunal upheld the assessment u/s. 144, even as it did not, in view of the incomplete state of verification of the assessee’s return, issue any conclusive finding with regard to the applicability of section 145(3) for that year. For the current year, the assessee has furnished all the necessary details and replies, with in fact the AO considering the same, though has yet preferred to estimate the assessee’s income (at the rate of 2.75% of the turnover of Rs.3836.87 lacs), without as much as rejecting the assessee’s books of account, which has been confirmed by the ld. CIT(A) even as he allowed the assessee’s claim for expenditure aggregating to Rs. 27.31 lacs, as against, at Rs.5 lacs by the AO, and which stands impugned by the assessee before the tribunal thus:

‘3. That the learned CIT(A) has erred in not disposing the Grounds of Appeal taken before him which are reproduced below:- (a) ...... (b) That the learned A.O. was not justified in estimating the income by applying adhoc rate of 2.75% on total turnover and that too without rejecting the books of accounts. (5) That the learned CIT(A) has wrongly held that the A.O. has rightly rejected the books of accounts and as such rightly proceeded with the provisions of section 144, whereas the A.O. has passed the order u/s. 143(3).’

3 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT He would then take us, in detail, to both the assessment and the appellate order. The cash deposit of Rs. 225 lacs in Vijaya Bank, Amritsar is, as explained, out of cash sales. The same amounts to a fraction of the total turnover of Rs. 38.37 cr., so that there was no reason to doubt the same. In fact, had the assessee been an entry provider, as alleged by the Revenue, the assessee would not ‘loose’ income by way of booking cash sales as, to that extent, no credit ‘sale bills’ could be raised by the assessee. On being asked as to how it could be said by the assessee that the AO had found the assessee’s books correct and complete when the assessment order is replete with, and the entire exercise during assessment toward, examining the genuineness of the purchases and sales by the assessee, found as not so by the AO, he would state that it was nevertheless necessary for the assessing authority to clearly state of having ‘rejected’ the assessee’s accounts, i.e., in case he intends to disregard the disclosed results and estimate an assessee’s income, as done in the present case.

2.2 The ld. Departmental Representative (DR) would submit that in view of the definite findings of fact by the Revenue authorities, not rebutted by the assessee, it cannot be said that the assessee has any case, or that the Revenue has no basis for concluding that the assessee’s purchases and sales are not genuine, and proceeding to assess his income by applying a rate of 2.75% on the stated turnover. On being asked as to the basis of the said rate, he could not, however, furnish any satisfactory answer.

4 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT 144(1)(b), while for the current year the assessment is under section 143(3). Section 145(3) enables the AO to, where the condition/s of the said section, reproduceds as under, are satisfied, make the assessment in the manner provided under section 144, i.e., as a best judgment assessment:

‘Method of accounting. 145 (1)……………………

(2)…………………………

(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144.’

That does not, however, mean that an assessment, where section 145(3) is invoked or becomes applicable, is an assessment u/s. 144. As such, nothing of consequence turns on the assessee stating (through his counsel) that no estimate of income could be made for the current year in-as-much as the instant assessment is u/s. 143(3). As regards the plea that section 145(3) could not be validly applied in-as-much as the AO has nowhere in his order explicitly stated of rejecting the assessee’s accounts, the same only needs to be stated to be rejected. The entire assessment order is devoted to an enquiry into and examination of the genuineness of the assessee’s purchases and sales, with the AO concluding, for the reasons stated in his order, as under: ‘After going through all the submissions made by assessee and after going through the information supplied to income tax department by the custom authorities, it is clear that sales and purchase of assessee are not genuine. He is merely providing entries to other parties. Such type of business is prevalent in the market. Commission is charged approximately around 3% for providing fake entries in the books of accounts. This matter is under investigation by custom authorities. Now since the assessee has failed to prove the genuineness of his transactions, I’m applying the commission @2.75% (approximately) of total turnover. During A.Y. 2010-11

5 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT assessee’s total turnover is Rs. 383687157/- and therefore his commission @2.75 comes to Rs. 10551396/-. Keeping in view the ideal of natural justice, Rs. 50,000/- expenditure is allowed against Rs. 2730508/- expenses claimed in the profit and loss account. Therefore addition of Rs. 10051396/- is made to the income of assessee.’ [emphasis, ours]

It is these findings that stand confirmed by the ld. CIT(A). In fact, Ground 6 before us, reads as under:

‘That learned CIT(A) has erred in not giving any basis for estimating additions @2.75% on turnover after rejecting the audited books of accounts and Vat returns, etc.’ , so that the assessee himself admits of the books of account having been rejected; the same, couched properly, would need to be read as under:

‘That learned CIT(A) has erred in not giving any basis for confirming the estimated addition @2.75% on turnover after rejecting the audited accounts, including Vat returns, etc.

We may though add, even as clarified during hearing, that that by itself does not imply approval of the AO’s finding as to the assessee’s purchases and sales being not genuine and, thus, his books of account not correct and complete. That is, the same is a question on the merits of the applicability of section 145(3), which we shall, therefore, examine next.

3.2 Toward this, we, on the conspectus of the case, do not find the assessee to have established the genuineness of his purchase and sale transactions during the year. Our reasons for the same are as under: a). the assessee before the custom authorities submitted that his books of account were stolen, toward which a FIR was lodged. The same were, however, produced in the assessment proceedings. The assessee’s explanation that the same were recovered by the police authorities is without any basis/material and, therefore, strongly doubted by the Revenue, which has not been repelled in any manner (page 5 of the assessment order). The assessee’s books, which thus ‘appear’ and ‘disappear’ at his fancy, itself raises considerable doubts as to their authenticity.

6 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT b). eight trade parties were issued summons u/s. 131 by the AO, of which only one, Malwa Industries Ltd., responded, confirming the transaction/s. The rest did not, nor did the assessee, at any stage, produce them, or otherwise confirmations from them. Even in the case of Malwa Industries Ltd. (MIM), the entire purchase of over Rs.4 cr. during the year remains outstanding as at the year-end, which was recovered on the basis of sales by the assessee thereto in the following year. Continuing to supply goods without receiving any money, i.e., assuming such disproportionate risk, more so by a concern whose products are well received in the market and in demand, isn’t consistent with the business reality and prudence and, even otherwise, unexplained, at any stage, with the AO, raising questions on the conduct (pgs. 4-5 of the assessment order).

c) the assessee, despite being asked to produce the stock register for the relevant year, failed to do so (refer pages 3, 12 of the assessment order).

d). the assessee, despite being repeatedly asked for the same, has failed to provide details of the transportation of the goods sold, even as he has admittedly sold goods worth Rs.38.37 cr. during the year. It is nowhere claimed that the goods sold are ex factory, which, where so, would again need to be satisfactorily proved in view of the doubts raised. Rather, the assessee claims to have sent goods through tempos and rehris (manual carts). This is bizarre. Goods worth lakhs of rupees cannot be sent thus, which is in fact undocumented, i.e., through strangers, who rather could not be trusted for the goods for even thousands, while the consignments are admittedly (by the ld. counsel before us) for lacs, which would only be through regular business associates. Further, not a single transporter was produced despite being specifically asked to do so per the show cause notice, i.e., even as the assessee mentions one transporter in his reply filed on 25.03.2013 (which is the date of the assessment order), the AO clearly stating of the assessee failing to provide him the name and addresses of the transporters. No freight cost, similarly, stands shown as incurred by either the assessee or the suppliers, i.e., in respect of the goods purchased by him during the year (at Rs. 33.03 cr.). The copy of the freight account, as supplied, has only two entries, totaling Rs.8550/-. Refer pages 2, 10, 11, 12 & 13 of the assessment order. The ld. counsel, Sh. Magow, was specifically queried on different aspects of the matter during hearing, and could not furnish any satisfactory answer. Rather, given the capacity constraints of a rehri, in which the bulk of the goods are stated before us to have been delivered, it would require hundreds, if not thousands, of freight vouchers, while there are none.

e.) the assessee was found to have an account with Vijaya Bank, Bhilwara, in which cash amounting to Rs.683 lacs was deposited during the relevant year. The

7 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT same being not accounted for in the assessee’s books of account, he was questioned in its respect. Though the assessee denied the account, the AO has, at page 13 of the assessment order, refuted this, stating the fifeteen digit account number as well as that the account statement is on record. Despite this, the assessee has not taken inspection of the assessment record, ascertaining and clarifying the facts, either before the first appellate authority or before us. Denial by him is, under the circumstances, only a bald assertion. Even as the AO has not increased the assessee’s turnover, the same, without doubt, remains unexplained and leads to the inference of the assessee’s accounts being not correct and complete. Again, it may be noted that the assessee’s explanation of the cash deposited in his other (Amritsar Branch) account as being the sale proceeds has not found favour with the AO, who questions the same in the absence of any basis thereof, viz., the persons purchasing the goods ranging from Rs. 1.5 lakhs to Rs. 3 lacs (refer, pgs. 5, 13 of the assessment order). The surrounding trade circumstances and incidences, impelling or causing these transactions, inasmuch as the same would, in that case, surely exist, have nowhere been explained. There are, behind cash sales, which are only sales sans credit, as prominent and valid trade factors and reasons as are behind the other sales. That is, merely because the same stand booked in accounts as receipt on revenue account, it does not follow that the same is genuine or that the genuineness of the same is proved. The goods being sold by the assessee, it needs to be appreciated, are not a standard commodity/s or even standard product/s with a brand name, which could be bought and sold off the shelf from any counter/trade concern dealing therein. In fact, even in such a case the sale bill normally carries some identification of the goods which, on any claim or dispute arising in relation to the transaction subsequently, could be pressed into service. The assessee’s products have various specifications, only upon satisfaction of which, including as to quality, would the trade transaction, which are for lakhs of rupees, materialize. Payment in cash is in fact discouraged by law by proscribing deduction (of the corresponding purchase cost) where it exceeds Rs. 20,000/- per day (s. 40A(3)), a fiscal disincentive no genuine trader would want or intend to invite. Yes, of course, the assessee cannot stop any person to pay in cash, but if only the assessee, who rather fails to disclose the identity of these persons, who cannot be ghost traders, the Revenue could cross check with them, establishing the truth of the assessee’s statement/accounts. Again, the ingredients of storage, weighment, delivery, transportation, are as integral to these sales as to any other, and which are missing. The point we are trying to make is two-fold. Cash sales, which is the stated explanation for the cash deposit of Rs. 225 lacs in Vijaya Bank, Amritsar, is unproved. Two, the cash deposit of Rs. 683 lacs in Vijaya Bank, Bhilwara is unaccounted. In fact, equally unevidenced, are the incidences of storage and

8 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT delivery of goods, which would again be accompanied by weighment slips. The goods can only be taken or given delivery of upon weighment, which in fact is to be in presence of both the parties (or their employees/agents). There are no godown receipts, while the godown-keeper, despite being required to be produced by the AO, was not, stating of the security being provided by the landlord (pg. 11 of the assessment order). The question is of establishing storage and delivery (of which in fact weighment is a part), which the assessee has completely failed to. In fact, even the security personnel, not produced, could throw considerable light in the matter, and that he is not in the employment of the assessee is irrelevant.

f). during search by the custom authorities at the assessee’s residence (528, White Avenue, Amritsar) on 02/12/2010, letterheads and rubber stamp of one, Ess Kay International, were found. The assessee, whose books reflect a sale of Rs.10.34 cr. to the said party during the relevant year, could not satisfactorily explain the existence of the same before the Revenue authorities nor before us. The transportation of goods thereto also could not be shown, even as the two transport bills, i.e., for Rs.4200/- and Rs.4350/-, appear to be for the sale to the said party. The same would therefore cover, as it appears, two consignments, so that the balance remain unexplained (refer page 3, 12 of the assessment order). The assessee before us submitted that the assessment of Vishakha Arora, proprietor, Ess Kay International, for AY 2009-10, stands since completed on 27/12/2017, with the Revenue accepting her returned income, save an addition of Rs.2 lacs, adducing a copy of the said order (copy on record). The said order has been carefully perused. The assessment in that case was reopened on two counts: i) export (outside India) being made at inflated prices; ii). the purchases having been made from bogus firms floated in the name of the employees/associates of the assessee. The exports were, on the basis of the verification of live consignments, on the directions of the Hon’ble Court, found as correctly valued. The statements admitting of inflation of consignments, made earlier, had been already retracted. No charge as to inflated duty drawback claims, thus, survived. The sales, thus, being confirmed, only implied purchase of goods, which were from registered parties, bearing VAT. The same, accordingly, could not be regarded as bogus. Implicitly, therefore, the said assessee had exhibited a correspondence between her purchases and sales. It was under these circumstances that the purchases, apprehended – which could not but be on the basis of some inputs, for being from bogus firms, were not probed or examined further, and the claim for purchase expenditure allowed. That is, on the premise, citing decisions by the tribunal (as an

9 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT Arora Alloys & J. R. Solvent Industries Private Ltd.), that when the sales are authentic, the purchases cannot be treated as bogus. The same cannot be regarded as per se a validation of the purchases from the assessee, which, as afore-stated, are unsupported by evidence as to transportation. There is in fact no finding of incurring of the transportation cost by the assessee or it being incurred by the purchaser, in which case, where so, all that was needed was to exhibit that the goods had been delivered ex factory/works by the assessee, i.e., at the risk and cost of the buyer. On the contrary, the assessee claims to have transported the goods through tempos/rehris, which claim, though, remains unsubstantiated – the accounts reflecting transportation cost at a mere Rs.8550/- against a total sale of Rs.3837 lacs, including Rs.1034 lacs to Ess Kay International. There is clearly no valuation of the consignments which were being considered by the custom authorities as inflated, with a view to defraud the Revenue through inflated claims of duty draw back. The letter heads and the rubber stamp with the assessee also remain equally unexplained. In fact, the assessee, admittedly a trader, has been in the cenvat declarations by the said firm, an exporter, shown as a supporting manufacturer (refer pg. 3 of its assessment order dated 27/12/2017). Clearly, there is much more that meets the eye. The assessment order in the case of Vishaka Arora, thus, would not be of much assistance to the assessee. Why, the AO in that case has not issued any finding with regard to the non-recovery of exports, as stated at page 1 of his order, which formed the basis of the enquiry by the Revenue, i.e., to the extent of Rs. 350 cr. out of a total export sale of Rs. 418 cr.

g). similarly, letterheads of one, Rasim Enterprises, with whom the assessee had purchase (at Rs.81.48 lacs) and sale (at Rs.107.94 lacs) transactions during the year, were found from the assessee’s premises at 528, White Avenue, Amritsar during search by the custom authorities. The existence of the said letterheads has not been explained, which throws a direct doubt on the genuineness of the said transactions. The assessee also could not, despite requisition, exhibit the transportation details qua the said transactions. The two bills, computer-generated, from Rasim Enterprises, produced in the assessment proceedings, were not signed by or on behalf of the said firm, for which no explanation was furnished, and neither Sh. Rakesh Arora, it’s proprietor, produced on being called upon to, in the verification of these transactions despite numerous opportunities, with he being also not found at the address given by the assessee (refer pages 2, 11-12 of the assessment order). The finding of the letterheads as well as unsigned bills of the said party are corroborative evidences directly impugning the genuineness of the transactions. The assessee would before us submit that Sh. Rakesh Arora is also assessed with the same AO, so that the AO could have called him on his own.

10 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT That, however, does not absolve the assessee to satisfactorily explain the various aberrations found, or the inference/s arising therefrom.

3.3 The assessee has not made any improvement in his case before the ld. CIT(A), who has upheld the findings by the AO in principle. Even as his stating that the assessee produced an incomplete cashbook before the AO only on 28/12/2011 (at page 8 of his order) was challenged before us as not correct, that does not detract from, in view of the detailed reasons given by the AO in his order, from the substance of the appellate order. Why, we have found the cash sales as not proved and, besides, cash deposits for Rs. 683 lacs in his Bhilwara Bank account (with Vijaya Bank) by the assessee as unexplained. Further, none of the several aspects having a direct bearing on the genuineness of the purchases and sales, delineated in this order, could not be satisfactorily explained by Sh. Magow during hearing, even as would be apparent there-from. The assessee may have deposited VAT, which is only on the value added, disclosed at 0.81% for the year, or of the payments being made or received through the banking channel, would not by itself prove the truthfulness of his accounts. In fact, where (and to the extent) the sales are to exporters, which is apparent from the reference to the proceedings by the custom authorities, the entire VAT paid would stand to be refunded back inasmuch as the exports attract no domestic levy. We have, in view of the foregoing, no doubt that the assessee’s accounts are not correct and complete, and that the assessee has not been able to establish the genuineness of its’ trading operations. The AO’s action in disregarding the assessee’s trading results, and estimating his (gross) income, confirmed by the ld. CIT(A), thus, has our approval.

3.4 The next question before us is with regard to quantum. We, even as observed for AY 2009-10, find no basis for the adopted rate of 2.75% by the AO, since confirmed by the ld. CIT(A), on the disclosed turnover of Rs.3836.87 lacs, on

11 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT which the latter has allowed expenditure of Rs. 27.31 lacs, i.e., as against Rs.500,000 (and not Rs. 50,000/-, as stated by the ld. CIT(A)) by the AO, who though has omitted in not excluding the assessee’s returned income while substituting it with the estimated income. The order of the ld. CIT(A) cannot also, however, be upheld in toto. The rate of 2.75% applied by the Revenue, stated to be on the basis of discreet inquiries made by it, may well approximate the actual rate obtaining for the said business. This process is not unknown or, at least not un- understandable, considering the fact of that the business is itself undisclosed, i.e., under wraps. Could the same, under the circumstances, nevertheless, be an unknown and undefined source, is the question, even as the assessee, who is in the denial mode, has not helped matters by not divulging the details, which he is in law obliged to, which in fact envisages disclosing correct income, including its’ details, stipulating penalty for concealing, or furnishing inaccurate, particulars thereof. Further, the expenditure on brokerage, salary, rent, etc., stands allowed by the ld. CIT(A) without examining its’ genuineness and business purpose. Two, its’ allowance, as also of bank charges and bank interest along with, implies the same to be genuine business expenditure, contradicting his finding of the assessee being not engaged in any genuine trade but only providing accommodation entries on commission basis, rate of which (at 2.75% of the turnover) he confirms. We are conscious that the Revenue is not in appeal before us. That, however, would not operate as a detriment as the allowance of expenditure against (or from) gross income, to whatever extent, is again a part of the estimation of income, i.e., the issue on quantum. It was, for instance, equally open for the ld. CIT(A), as it is for us, to allow lumpsum expenditure, as by the AO, or, alternatively, estimate income by adopting a net rate of profit, i.e., net of estimated expenditure. That is, the issue of quantification of income is not closed, but fully open, admitting to adjudication in more than one manner.

12 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT We have already observed no disclosed basis for the rate of 2.75%, i.e., apart from the AO stating of 3% being the commission rate for providing such entries. In fact, Sh. Magow would during hearing state that even considering that the assessee provides accommodation entries by way of sales, he would in that case also be procuring ‘purchase’ bills on commission basis, allowance for which therefore ought to be made as business expenditure. The argument is plausible, but, then, the rate for procuring a ‘bill’, which is only market driven, being the same, there would be no fiscal incentive for this business! Further, how does then the assessee justify the expenditure afore-referred, claimed through its profit and loss account? The matter as to estimation of income is undetermined and, accordingly, would warrant being restored back to the file of the ld. CIT(A), particularly considering the inherent contradiction in his findings qua quantum. He shall, after hearing the parties, issue definite findings in respect of the expenditure claimed, including on bank interest/charges. It could be that the assessee, along with the entry ‘business’, is also engaged, to whatever extent, in some genuine (actual) trade. As where, and which is not uncommon, the goods are sold in cash in the grey market, which cash is paid underhand to the ostensible buyers in lieu of the sale bills raised on them, receiving payment from them through the banking channel. Only one turnover, i.e., in respect of bills issued, can be booked in accounts, even as surely the assessee in such a case gains on both the transactions – the cash sales and the ‘entry’ business, both of which though would be subject to different margins. Does the assessee, in such a case, also recover VAT, in full or in part, i.e., on cash sales, trading thus on VAT, which itself may be a fiscal incentive, or at least a part thereof, for engaging therein. Two, the purchases in such a case being genuine, would not attract any commission, as stated by Sh. Magow. That is, there is a distinct possibility of the genuine purchases – to that extent, co-existing with un-genuine sales. Further, is the cash deposited in his undisclosed bank account by the assessee that generated

13 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT thus, or a part of this trade? Though the said undisclosed cash is indicative of this trade, it is, we may add, not necessary that cash is deposited in bank, or even has to be first generated where the goods are, as stated, sold in cash to one and the billed to another. Where the assessee has cash reserves, the two transactions can proceed in parallel, i.e., independent of each other, or almost. The credit in the bank account, on receipt of payment from the ostensible buyer, gets adjusted against the payment to the supplier, discharging his dues. The cash generated on the actual sales in the grey market is paid to this buyer. This may though not necessarily correspond to the payment to the suppliers, and which also explains the huge outstandings in the buyer’s accounts. In fact, no cash gets involved where the purchase and sale transactions are with the same party, as in the case of Malwa Industries Ltd.; Rasim Enterprises – the two that have come to our notice, which is otherwise a very rare trade phenomenon, i.e., the principal products required by the two matching with what they respectively deal in. This becomes even more surprising in the case as the present where the assessee is a trader, so that he only sells what he buys. Where and to the extent such trade, or otherwise genuine trade, exists, it’s extent and volume; its’ result/s – disclosed or, as the case may be, undisclosed; whether the same could be accepted as such or would require being estimated; the expenditure that can be considered to have been incurred there-against, etc. are all questions of fact/s that would need to be answered. The allowance of expenditure on a lumpsum basis by the AO, as apparent, is toward the assessee’s ‘entry’ business, and not any genuine trade. The argument advanced by Sh. Magow in this regard, i.e., allowance of commission on ‘purchase’ bills, though, cannot be disregarded, and would therefore need to be considered and concluded. What, then, is the difference in the commission rates on the purchase and sale bills, which only could be regarded as the gross income of the assessee, whose entry business could

14 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT also be apart from that explained above, which is based on genuine purchases, so that the answer – to the argument advanced by the ld. counsel, would lie in the genuineness of the purchases. Again, is it that a part of the unaccounted cash is utilized for this purpose, i.e., payment of purchase commission, allowance of which may though be precluded by proviso to s. 69C. It may well be that the additional income being estimated explains the financing of the additional expenditure. The ld. CIT(A) shall dwell on the different aspects of quantification, which we find as completely indeterminate, not necessarily confining himself to that raised here, which though need to be addressed, and adjudicate in the matter issuing definite findings of fact after hearing the parties before him. He may, at his option, also call upon the AO to examine some issues/aspects, particularly that which may be raised by the assessee or stand raised before us for the first time. The assessee, who only is the intimate know of his facts, we may though clarify, cannot be content with raising issues, and is obliged by law and in the interest of a correct assessment of his income, to come clean on several aspects of his dealings. Why, the cash generation of Rs. 683 lacs, and its’ utilization, i.e., to the extent withdrawn from the bank, is an integral part of the estimation process, if also of the nature of the assessee’s operations, which has not been explained. In other words, the issue of quantification is fully open for being decided by the ld. CIT(A), following of course the due process of law, including admission of additional evidence, if any. Needless to add, non-cooperation on the part of the assessee would entitle the Revenue to, taking note of the said non-cooperation, proceed in the matter on the basis of the material on record, drawing inferences as may be permissible under law. We may, in parting, state of having been guided in directing the set aside thus by the settled law in the matter, for which reference, among others, may be made to the decision in Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC), explaining the nature of the duty cast on an appellate authority. We may though not be

15 ITA No. 336/Asr/2016 (AY 2010-11) Vikram Jain v. Dy. CIT construed as having issued any finding in the matter, including as to the applicability or otherwise of sec. 69C, but only as raising pertinent issues/aspects that need to be examined and determined in deciding the quantum in this case.

3.5 We decide accordingly.

By Order