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Facts
The assessee made substantial purchases from suppliers who were non-filers or had low turnovers. Despite repeated notices, the assessee failed to provide purchase details, supporting bills, vouchers, or payment confirmations. Additionally, cash deposits made during the demonetization period were questioned.
Held
The Tribunal held that the assessee's failure to provide substantiating evidence for purchases, identify and prove the creditworthiness of suppliers, and justify cash deposits warranted the additions made by the Assessing Officer. The appellate authority confirmed these findings.
Key Issues
Whether the additions made on account of unverified purchases and demonetization deposits are justified due to the assessee's failure to provide supporting evidence and justify the source of funds.
Sections Cited
143(3), 145(3), 133(6), 69A, 69, 69B, 142(1)
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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: Ms. MADHUMITA ROY & SHRI NAVEEN CHANDRA
O R D E R
PER Ms. MADHUMITA ROY, JM:
The instant appeals, filed by the assessee, are directed against the separate orders dated 03.04.2025 & 25.04.2025 passed by the Ld. CIT(A), arising out of the assessment orders dated 19.09.2019 & 23.12.2022 for AYs 2017-18 & 2021-22 respectively.
2. Since both the matters relate to the same assessee, these are heard analogously and are being disposed of by a common order.
AY 2021-22: 3. The assessee has raised the following grounds of appeal: - That the assessment order dated 23.12,2022 passed under Section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (‘the Act’), by the Assessing Officer (‘AO’) and the additions made therein are illegal, bad In law, without jurisdiction, barred by limitation, and not in accordance with the provisions of the Act.
2. That the Commissioner of lncome Tax (Appeals) [‘CIT(A)’] vide order dated 24.04.2025 has erred in upholding the additions made by the AO.
3. That the AO erred in law and on facts in issuing notice under Section 143(2) without disclosing the basis or category of CASS selection, in violation of CBDT Instruction No. F. No. 225/157/2017/ITA-II dated 23.06,2017, rendering the assessment void and without jurisdiction.
4. That on the facts and in the circumstances of the case and in law, the CJT(A) has failed to appreciate the fact that the AO has erred in not passing the draft order as per the mandate of Section 144B(i)(xvi) of the Act.
5. That on the facts and in the circumstances of the case and in law, the AO has erred in rejecting the books of accounts without duly appreciating that the Appellant was prevented by a just and reasonable cause from producing the same during the assessment proceedings and the CIT(A) has erred in upholding the same.
6. That on the facts and in the circumstances of the case and in law, the AO has erred in assessing the total income of the Appellant at Rs. 1,99,23,142/- as against the returned income of Rs.23,54,280/-.
7. That on the facts and in the circumstances of the case and in law, the AO has erred in making an addition of Rs. 1,75,68,862/- allegedly on account of bogus purchases without pointing a single defect in the audited financial statements of the Appellant and the CIT(A) has erred in upholding the same.
8. That on the facts and in the circumstances of the case and in law, the AO has erred in applying an average gross profit rate of 9.96% (based on the preceding two years), instead of the actual gross profit rate of 3.13% for the relevant year. The CIT(A) has further erred in upholding this approach.
9. That on the facts and in the circumstances of the case and in law, the AO has erred in making the said impugned addition without disputing and without doubting the Sales made by the Appellant, and the CIT(A) has erred in upholding the same.
That the no reasonable opportunity of being heard was provided to the Appellant by the lower authorities, i.e., AO/CIT(A). Hence, the orders passed by the lower authorities are in gross violation of principles of nature justice.
That the documents and explanation filed by the Appellant and the material available on record have not been properly considered and judicially interpreted, and have been wrongly ignored.”
The assessee case was selected for scrutiny through CASS on the following count: - The assessee has made substantial purchases from suppliers who are either non filers or have filed non business ITR or reflected a substantially lower turnover in ITR. The assessee is engaged in the business of purchasing and selling of Scrap through proprietorship concern namely Nishi Paper & Print Pack and Baba Industries. The assessment was finalized upon making addition in the following manner: - S.No. Description Amount (In INR) 1. Income as per Return of Income filed: 23,54,280 2. Income as computed u/s 143(1)(a): 23,54,280 3. Variation in respect of issue as discussed 1,75,68,862 n Para 3 4. Total Income determined 1,99,23,142 5. The same was further confirmed by the first appellate authority hence the instant appeal before us.
The assessment made by the Ld. AR is under the following facts and circumstances of the matter: - “(I). The assessee was asked vide notice u/s 142(1) dated: 026/10/2022, 14/11/2022 & 02/12/2022 to submit the details of the parties from whom he had made purchase during the year under consideration along with supporting bill/vouchers. But the assessee did not submit any details regarding the purchase made. He was also asked to submit the confirmation of purchase from the parties but he failed to submit any confirmation from this parties till date.
Notice u/s 133(6) was issued to the following parties to confirm the genuineness of purchase:- S. No. Name of the party PAN 1. SUNNY GUPTA AWOPG1107G 2. CHHOTU CFOPC1301R 3. SHYAMU MOUPS3777N 4. SIVA SASHIDANADAM BJTPT5046A THIRUNAVUKKARASU 5. ARVIND ROY DTTPR8641P 6. VIKAS BABU DJHPB1591Q 7. SHEETAL MKTPS1894P 8. SAKURANSARI CZAPA0979F 9. ARUN KUMAR TYAGI AHZPT3946J But no compliance has been made by them. Most of the parties from whom purchase were made by the assessee are non-filer and seems to be bogus and not bonafide. (III). In spite of repeated request, the assessee did not furnish any details or address or e-mail ID of these parties till date. (IV). The assessee was asked to submit the details of payment made to the parties along with supporting documents and it reflection in bank statement. In response to it, the assessee has not provided an explanation or document on the basis of which it could be established that the payment was actually made to the parties against the purchase and the purchases are genuine. In absence of details of payment the genuineness of the purchases could not be verified. Modus operandi of the assessee is to claim bogus expenses by way of inflated purchase and reduce his profit/taxable income. From the above, it is concluded that the purchase shown by the assessee in his books of account is not reliable in absence of supportive documents. From the above, it is concluded that the purchases recorded in the books of account are not correct and complete. B). Following major discrepancy is found, on comparing the balance sheet filed by the assessee in Part A-BS of the Income tax return (ITR) and Audited Balance sheet filed with Audited Report in 3CD for the A.Y. 2021-22.
As per ITR, part-BS As per Audited BS Proprietor Capital 0 87,97,128 Fixed Asset 23,74,61,397 21,26,589 Sundry Creditors 26,90,53,227 15,44,82,855 Loan and Advances 1,89,62,098 0 The assessee was asked vide notice u/s 142(1) of the I.T. Act, 1961 dated: 26/10/2022 &11/11/2022 to give the explanation for the above differences. In - s submission dated: 30/11/2022 the assessee has stated that it is a typing error. C) The G.P as per Audit Report is Rs.80,60,038/- but as per Profit and loss account of ITR his G.P. for the year is Rs. 1,39,77,468/-. D) Non maintenance of stock register: The assessee was asked vide notice u/s 142(1) of the I.T. Act, 1961 to furnish Quantity and Value-wise details of closing stock/inventory. But the assessee failed to submit any document regarding the inventory or closing stock. It is important to note here that the tax auditor in his tax audit report, vide Para 5 has categorically mentioned that:- S. No. Qualification Type Observations/Qualifications 1. Proper stock records are not On the Basis of Management maintained by the assessee. Certificate t is confirmed by MRL that it is maintain as per nature of business and of principal items.
2. Valuation of closing stock is not Made on basis on MRL as possible. given to us of 31/03/2021. From the above, it is concluded that:- (a) The assessee has not maintained and kept any quantitative details/stock register for the goods traded in. (b) There is no evidence on record or document to verify the basis of the valuation of the closing stock shown by the assessee. The assessee is not able to prepare such details even with the help of books of accounts maintained, purchase bills & Sale Invoices.
E) It is also important to note here that the tax auditor in his tax audit report, vide Para 5, also mentioned that:- S. No. Qualification Type Observations/Qualifications 1. Records produced for verification of No cheques duplicate copy payments through account payee was with assessee to check it cheque were not sufficient. but assurance by MRL that no cash payment more than 10000/- for revenue expenses paid per day to single party plus of unsecured loan as per section 269SS/TT/ST for the year, plus 269SS/ST/TT limit due to same reason. But as per the information available with department, the assessee had made total Cash withdrawals (including through bearers cheque) amounting to Rs.5,01,93,500/ - from his current accounts. The assessee was asked to explain the reason for such huge cash withdrawal, but he did not give any emanation or document regarding the cash withdrawal. Considering the volume of cash withdrawal of Rs.5,01,93,500/-. There is a strong possibility that the assessee as made payments to suppliers in excess of Rs.10,000/-. But it has been neglected by auditor in the audit report. Hence the correctness and completeness of the account is doubtful. F) The Gross profit ration for last three years is as under: - A.Y. Turnover Gross Profit G.P. Ratio 2019-20 22,46,503 2,03,90,773 11.01% 2020-21 52,73,893 5,91,55,381 8.91% 2021-22 80,60,039 25,73,18,291 3.13% On the analysis of G.P. ratio, it is observed that the Gross profit ratio is decreasing sharply without any valid reasons. As discussed above, the assessee has inflated the purchases to lower the Gross profit. Gross profit earned by other comparable business of the same nature as of the assessee is around 15-20%. Further, in absence of any submission or documentary evidences as asked for vide statutory notices from the assessee with regard to the deductions, expenses, stock etc. claimed in the financial statements including the Profit and Loss Account and Balance Sheet, the correctness and completeness of the accounts is beyond the scope of verification and satisfaction of the Assessing Officer. It is the duty of the assessee to explain or substantiate his claim of deductions, expenses, stock etc when the Income-tax Return (ITR) is selected for scrutiny by producing supporting evidence and books of accounts as and when asked for by the assessing officer in the course of scrutiny proceedings." But the assessee has failed in the present proceedings in doing so even though he has been allowed reasonable opportunities as mentioned supra in pursuance to the principle of natural justice. Under the circumstances the net profit as declared by the assessee in the Profit and Loss Account as submitted in the ITR cannot be accepted as the true and correct net profit of the business and also the financial statements including the Profit and Loss Account and the Balance Sheet submitted by the assessee in the ITR has failed to reflect the correct and true state of affairs of the business. Hence, for the reasons stated above the assessing officer is not satisfied about the correctness or completeness of the accounts on the basis of which the financial statements (Profit and Loss Account and the Balance Sheet) has been drawn and therefore, the accounts including the Profit and Loss Account and the Balance Sheet as submitted in the ITR is hereby rejected by invoking section 145(3) of the Income-tax Act, 1961 and subsequently the present assessment proceedings is going to be completed in the manner provided in section 144 of the said Act.”
The assumption of Gross Profit of the assessee’s business for the year under consideration proposed @9.96% which is average of the gross profit rate disclosed in the last two years and show-cause, therefore, dated 09.12.2022 was issued to explain the same where upon the assessee submitted as follows: - “At the very outset we would like to extreme tender our apologies for the delay in submissions of the documents. It may be submitted that the tally software of the assessee has become corrupt due to which it has become impossible for the assessee to extract the data from the computerized books of accounts. As such the details cannot be furnished in entirety. There is no doubt to the fact that the books of accounts have been maintained and the same have also been audited u/s 44AB of the Income Tax Act 1961. We would like to furnish the available details as under- Regarding Purchase parties- It may be submitted that Your Honour has observed that the purchase parties of the assessee have not filed correct returns of income or have filed lower turnovers in their respective returns of income. In this regard it is explained that these parties are not in the control of the assessee. The assessee has made purchases which have duly been reflected in the GSTR returns of the assessee. The complete set of GSTR returns of the assessee in Form GSTR1 and GSTR3B are being furnished before your Honour. It is clear from the sheet annexed in the show cause notice that these parties are assessed to tax and their permanent account numbers are known to the department. Once they are known to the department the assessee cannot be held liable for default of these parties. The necessary information in this regard may be passed to the respective jurisdictional assessing officers for necessary action in their hands. Refer Annexure 1 and 2. The assessee is not in a position to furnish the purchase ledgers of these parties in view of the corrupt tally software.
Regarding non compliance of 133(6) notices by parties – Your Honour has observed that certain parties have not responded to notices u/s 133(6) of the Act. In this regard it is submitted that these parties are not n the control of the assessee and hence the assessee is not in a position to make their compliance.
Regarding Purchase parties- It is not in doubt that the assessee is engaged in the business of scrap. It is an unorganized sector. The assessee purchases and sells scrap in the shape of plastic, iron, other metals and corrugated boxes. The assessee is prevented by a reasonable cause in furnishing these details as the books of accounts cannot be extracted. However the purchases and sales are supported by GSR returns which have been furnished by the assessee in the above referred annexure. The same are also supported by the audited financial results.
4. Regarding E Way Bills - The copies of E way Bills are also being furnished wherever available are being furnished before your Honour. Refer Annexure 3.
Regarding Mistake in ITR and audited balance sheet- It may be submitted that the figures appearing in the audited balance are certified and authentic. The staff of the CA while furnishing the return of income has committed certain errors due to which the balance sheet of the ITR appears cryptic. There can be no way that the Proprietors capital be Nil as is appearing in the ITR which clearly shows that error has been committed.
6. Regarding Ledgers of Banks- The ledgers of the banks are being annexed herewith as Annexure 4.
7. Regarding Estimation of Gross profit- Your Honour has proposed that average of gross profit of the preceding year and relevant year be estimated in this case. In this regard it is submitted that the assessee plays on small margins to the tune of even in Paisa per kg. The assessee is a small trader who increases the turnover on small margins. It may be appreciated that this is the COVID year which had struck the entire world economy and the business were hampered. The assessee is normal parlance is a mere KABADI and hence it would be highly unjustified to estimate such a huge gross profit in the hands of the assessee. Your Honour will appreciate that the Gross profit rate and Turnovers for the years ending 31.03.2019 and 31.03.2020 are not at all comparable with that of the relevant year. Your Honour will appreciate that the assessee’s business has multiplied as much as five times over the last years business. This establishes the contention of the assessee that the assessee is playing on least margins to increase his turnover. The details of the Gross profit and Turnover of the last two years is as under- FY Gross Profit Turnover GP Rate 2018-19 22,46,503 2,03,90,773 11.02% 2019-20 52,73,893 5,91,55,381 8.92% 2020-21 80,60,039 25,73,18,291 3.13% Thus Tom the above it can be seen that the assessee has almost negligible business in the last two years. The assessee's business has multiplied manifolds during the relevant year. Alt purchases and sales are duty verifiable from the GST returns and also from the audited financial statements which also need to be given respect and sanctity. The assessee may not be made to suffer because of unforeseen circumstances which are beyond human control. In view of the same your Honour will appreciate that disallowing almost 7% in the hands of the assessee in gross profit will be very unfair, and against the facts of the case. In view of the same it is prayed that the declared results be accepted in the justice. Your Honour will appreciate that on comparing results of FY 18-19 and 19-20 which have been accepted in the past , there has been an accepted DIP in Gross profit ratio for every 4 crore increase, GP has fallen by 2%. Thus looking to this method, at the same pace at 25 Crores of turnover, the GP fallen should have reached at approx. (-) 1%. However the assessee has achieved a gross profit target of 3.13% which is highly appreciable and thus may kindly be accepted in the interest of justice. The assessee places heavy reliance on the judgment of jurisdictional High court in the case of Additional Commissioner of Income Tax Vs Jay Engineering works reported in 113 ITR 389 where the Hon’ble Delhi High court has emphasized and discussed about the importance of audited financial statements in absence of books of accounts. The court held- The question arises, therefore, whether the reports of the auditors could be said to be "material" on which reliance could be placed by the income-tax authorities. Unlike the proof required of such reports as also of the account books under the Indian Evidence Act, it is quite competent for the income- tax authorities not only to accept the auditors' report, but also to draw the proper inference from the same. The income-tax authorities could, therefore, come to the conclusion that since the auditors were required by the statute to find out if the deductions claimed by the assessee in their balance-sheets and profit and loss accounts were supported by the relevant entries in their account books, the auditors must have done so and must have found that the account books supported the claims for deductions, when the deductions were disallowed, by the Income-tax Officer on the ground that detailed information regarding them was not available, justice was not done to the assessee. It was not possible for the assessee to produce the original account books, which were destroyed in fire. There was, however, other material mainly consisting of the auditors' reports from which it could be inferred that the deductions were properly supported by the relevant entries in the account books. In a sense it may be a question of law as to what the meaning of "material" is and whether the auditors' reports were material. But the question of law is well settled and is not capable of being disputed and does not, therefore, call for reference. In view of the above facts it is prayed that no adverse inference be drawn in the instant case for which we shall forever be grateful.”
The Ld. AO concluded as follows: - “Considering the fact of the case and verifying the materials on record, invoking section 145(3) of the Income-tax Act, 1961, the books of account of the assessee is rejected and the gross profit is estimated as the average of the Gross profit rate disclosed in last two years 9.96% [(8.91 + 11.01)/2] on the total turnover of the Assessment Year 2021-22, which comes to Rs.2,56,28,901/- (i.e. Rs.25,73,18,291/- X 9.96%). Hence Rs.1,75,68,862/- (i.e. Rs.2,56,28,901/- less Rs.80,60,039/-) is added to the income of the assessee under the head “income from profits and gain of business or profession”. [Additions of Rs.1,75,68,862/-]”
Before the Ld. CIT(A) confirm the addition with the following observation:
DECISION OF THE APPELATE AUTHORITY W.R.T. GROUNDS NO.-1 TO 9: The contentions of both the Assessing officer and the appellant assessee resp. have been carefully considered and this Appellate authority has noted the following points: i. The assessee filed his return of income in ITR-3 for the relevant assessment Year through e- filing on 16/02/2022 declaring total income as Rs.23,54,280/-. The return has been processed u/s 143(1) of the Act on 01/06/2022 on total income of Rs.23,54,280/-. The case was selected for scrutiny through CASS and a notice u/s. 143(2) of the Act issued accordingly. ii. Reasons for selection: ‘The assessee has made substantial purchases from suppliers who are either Non-Filer(s) or have filed non-business ITR (ITR 1 or 2) or reflected a substantially, lower turnover in ITR’. iii. The assessee is engaged in the business of purchase and sale of Scrap. The assessee is running his business through two proprietorship concern namely: Nishi Paper & Print Pack and (ii) Baba Industries. iv. The assessee was asked vide notice u/s 142(1) dated: 26/10/2022, 14/11/2022 & 02/12/2022 to submit the details of the parties from whom he had made purchase during the year under consideration along with supporting bill/vouchers. But the assessee did not submit any details regarding the purchase made. He was also asked to submit the confirmation of purchase from the parties but he failed to submit any confirmation from this parties till date of assessment order. v. The AO gives a finding in the assessment order that, “Notice u/s 133(6) was issued to the following parties to confirm the genuineness of purchase: S. No. Name of the Party PAN 1. SUNNY GUPTA AWOPG1107G 2. CHHOTU CFOPC1301R 3. SHYAMU MOUPS3777N 4. SIVA SASHIDANADAM THIRUNAVUKKARASU BJTPT5046A 5. ARVIND ROY DTTPR8641P 6. VIKAS BABU DJHPB1591Q SHEETAL MKTPS1894P 8. SAKURANSARI CZAPA0979F 9. ARUN KUMAR TYAGI AHZPT3946J But no compliance has been made by them. Most of the parties from whom purchase were made by the assessee are non-filer and seems to be bogus and not bona-fide....
. vi. The AO further states in the order that, “....The assessee was asked to submit the details of payment made to the parties along with supporting documents and it reflection in bank statement. In response to it, the assessee has not provided any explanation or document on the basis of which it could be established that the payment was actually made to the parties against the purchase and the purchases are genuine. In absence of details of payment the genuineness of the purchases could not be verified...”. vii. The AO also states in the order that, “.. .Following major discrepancy is found, on comparing the balance sheet filed by the assessee in Part A-BS of the Income tax return (ITR) and Audited Balance sheet filed with Audited Report in 3CD for the A.Y. 2021-22: As per ITR, Part-BS As per Audited BS Proprietor Capital 0 87,97,128 Fixed Asset 23,74,61,397 21,26,589 Sundry Creditors 26,90,53,227 15,44,82,855 Loan and Advances 1,89,62,098 0 The assessee was asked vide notice u/s 142(1) of the I.T. Act, 1961 dated: 26/10/2022 & 11/11/2022 to give the explanation for the above differences in his submission dated: 30/11/2022, the assessee has stated that it is a typing error. The assessee was asked vide notice u/s 142(1) of the I.T. Act, 1961 to furnish Quantity and Value-wise details of closing stock/inventory. But the assessee failed to submit any document regarding the inventory or closing stock. (a) The assessee has not maintained and kept any quantitative details/stock register for the goods traded in. (b) There is no evidence on record or document to verify the basis of the valuation of the closing stock shown by the assessee. The assessee is not able to prepare such details even with the help of books of accounts maintained, purchase bills & Sale Invoices The assessee was asked to explain the reason for such huge cash withdrawal, but he did not give any explanation or document regarding the cash withdrawal.
Considering the volume of cash withdrawal of Rs.5,01,93,500/-. There is a strong possibility that the assessee has made payments to suppliers in excess of Rs. 10,000/-, but it has been neglected by auditor in the audit report. Hence the correctness and completeness of the account is doubtful. Further, in absence of any submission or documentary, evidences as asked for vide statutory notices from the assessee with regard to the deductions, expenses, stock etc. claimed in the financial statements including the Profit and Loss Account and Balance Sheet, the correctness and completeness of the accounts is beyond the scope of verification and satisfaction of the Assessing Officer. It is the duty of the assessee to explain or substantiate his claim or' deductions, expenses, stock etc. when the Income-tax Return (ITR) is selected for scrutiny by producing supporting evidence and books of accounts as and when asked for b. the assessing officer in the course of scrutiny proceedings. But the assessee has 'else in the present proceedings in doing so even though he has been allowed reasonable opportunities as mentioned supra in pursuance to the principle of natural justice……….” viii. The AO also mentions in the order that, “....(vii) The contention of the assessee that the G.P. has been correctly shown and there has been anaccepted DIP in Gross profit ratio for every 4 crore increase, GP has fallen by 2%. Thus looking to this method, at the same pace at 25 Crores of turnover, the GP fallen should have reached at approx, (-) 1% not at all accepted as the gross profit not solely depend on turnover. The gross profit also depends upon the nature of business, competition among the peers, demand and supply of the goods traded etc. In Scrap business the gross profit is very high. Gross profit earned by other comparable business of the same nature as of the assessee is around 15-20% of the turnover....”. ix. The Assessing officer during the course of assessment proceedings had sent various notices to the appellant assessee, but the appellant assessee did not file his submissions during the whole assessment proceedings and or to submit such evidence so as to prove the facts of the purchase transactions or identity of the said purchase parties. Thus, the same were considered as not bona-fide by the AO. x. After seeing the negligent behaviour of the appellant assessee, the Assessing officer went ahead and made the addition amounting to Rs 1,75,68,862/- on account of Gross profit under the head Income from profit and gain from business or profession. The AO while making the addition states in the order that, “ Considering the fact of the case and verifying the materials on record, invoking section 145(3) of the Income-tax Act, 1961, the books of account of the assessee is rejected and the gross profit is estimated as the average of the Gross profit rate disclosed in last two years on the total turnover of the Assessment Year 2021-22, which comes to Rs.2,56.28,901/- (i.e.Rs.25,73,18,2911- X 9.96%). Hence Rs.1,75,68,862/- (i.e. Rs.2,56,28,901/- less Rs.80,60,039/-) is added to the income of the assessee under the head “Income from profits and gain of business or profession”. Thus, in view of the above discussions and finding of the AO at point no.-(i) to (ix), is seen that, the grounds no.-1 to 8 are either incorrect or untenable as the AO -as provided adequate opportunity to be heard to the appellant and then gone ahead with a reasoned order. The appellant failed to furnish such necessary documents, evidence and satisfactory submissions before the AO during the assessment proceedings, the AO had to therefore reject the books of accounts u/s. 145(3) of the Act as they are faulty, incomplete, incorrect (as also referred above) and un-reliable and even the Auditor’s report is clearly found to be faulty and un-reliable by the AO. The AO mentions in the order that, “….the correctness and completeness of the accounts is beyond the scope of verification and satisfaction of the Assessing Officer……”. The AO has not outrightly added all of the purchases from questionable purchase parties. Further, the appellant’s grounds no.-4 & 5 cannot absolve him of the onus cast upon (through statute), to submit such necessary supporting details I evidences/ confirmations etc. of purchase parties. Thus, merely calling them uncontrolled third parties or mere PAN no. without such other facts to complement/supplement and to prove the purchases, is not enough. It is a settled law that, mere furnishing of particulars/PAN is not enough. Thus, the grounds no.1 to 8 are untenable and hence not being allowed. xi. Fresh hearing Notice us/ 250 of the Income Tax Act, 1961 were issued to the assessee as per the chart mentioned below: Notice to the assessee Date of Hearing Remarks 01.03.2023 No Reply 09.04.2024 16.04.2024 No Reply 14.10.2024 21.10.2024 No Reply 06.03.2025 13.03.2025 No Reply xii. During the course of appellate proceedings vide notices dated as per the above chart appellant was requested to file such reply. However, no submissions were made during the entire appellate proceeding and also no adjournment was asked for by the appellant assessee. xiii. It can be seen that, th eassessee has not submitted any satisfactory reply nor taken any initiative to respond to any of the notices despite being provided with a number of opportunities. Thus, it is held that, the appellant had nothing more to submit except for raising the ground. Further, the appellant has not cared to even file an affidavit (notarised) to show any reason as to what may have prevented him from filing the relevant details / evidences before the AO dim-g me statutory assessment proceedings or making such submissions thereof in response to the statutory notices issued to him. xiv. Hence, in view of the above facts, it is noted that, the Hon’ble lTAT in 1027/Chandi/2005 for the A.Y. 2002-03 in the case of M/s Chhabra Land and Housing Ltd. after following the decision of Hon’ble Supreme Court in the case of B. N. Bhattachargee, 118 ITR 461 (SC) held that, the appeal does not mean merely filing of the appeal but effectively pursuing it. Keeping in view of the aforesaid factual position, the appeal filed by the appellant is, therefore, being decided on merits. Further, in a decision in the case of CIT v. Gold Leaf Capital Corporation Ltd. on 02.09.2011 (ITA No. 798 of 2009). the Hon’ble High Court of Delhi had held that, a negligent assessee should not be giver, too many opportunities just because that quantum of amount involved is high. The necessary course of action is to draw adverse inference; otherwise it would amount to giving premium to the assessee for his negligence. When the assessee is non-cooperative, it can naturally be safely concluded that the assessee did not want to adduce evidence as it would expose falsity and lack of genuineness. xv. The appellant assessee has not provided any submissions on merits, no bills/vouchers have been provided, no bank statement have been provided by the appellant assessee to this Appellate authority and the same behaviour of the appellant assessee was seen during the entire assessment proceedings. Thus, the appellant has not been able to prove the said parties identity, creditworthiness and genuineness of the transaction. The Appellant being in the business of purchase and sale of Scrap has also not submitted any relevant TCS details. Further, it is believed that, the books o* accounts have been correctly rejected by the AO u/s. 145(3) of the Act and the gross profit correct estimated @ the average of the Gross profit rate disclosed in last two years 9.96% [(8.91 +11.011/2) on the total turnover of the Assessment Year 2021-22, which comes to Rs.2,56,28,901/- (i.e.Rs.25,73,18,291/- X 9.96%). Hence, Rs.1,75,68,862/- (i.e. Rs.2,56,28,901/- less Rs.80,60,039/-) is rightly added to the income of the assessee under the head “Income from profits and gain of business or profession”. xvi. Also the onus is on the appellant assessee to prove the transactions and the facts of its case. But in the present case the appellant assessee has failed to do so. Thus, this Appellate authority places its reliance on the following judgments of the Hon’ble Supreme Court and High court: a. The Hon’ble Supreme Court in the case of ChuharmaI Vs CIT (1988) 172 ITR 250 while affirming the view of the Madhya Pradesh High Court has held that ‘the expression ‘INCOME’ as used in Section 69A of the Act, 1961 had a wide meaning which meant anything which came in or resulted in gain and on this basis, concluded that the assessee had income which he had invested in purchasing article and he could be held to be owner and the value could be deemed to be his income by virtue of Section 69A of the Act. b. The Hon’ble Supreme Court in the case of Smt. Srilekha Banerjee and others Vs CIT, Bihar & Orissa, reported in 1964 AIR 697, dated 27/03/1963, held that the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income assessee from some undisclosed source. The Hon’ble Supreme Court further held that "The correct position is as follows. If there is an entry which shows the receipt of a sum or conversion of the notes by the assessee by himself, it is necessary for the assessee to establish, if asked, what the source of that money was and to prove that it did not bear the nature of income. The department is not at this stage required to prove anything. The fact that there was receipt of or money or conversion of notes is itself prima facie evidence against the assessee on which the Department can proceed in absence of good explanation.’ c. In Manindranath Das v. Commissioner of Income Tax, Bihar & Orissa, the tax-payer had encashed Notes of the value of Rs. 28,600, which he contended were his accumulated savings. His explanation was accepted in respect of Rs.15,000, because 15 notes could be traced to a bank, but was rejected in respect of the balance. The Patna High Court pointed out that if an assessee received an amount in the year of account, it was for him to show that the amount so received did not bear the character of income, and the tax payer n the case had failed to prove this fact in respect of the remaining notes. The Hon’ble Supreme Court has held that ‘The cases involving the encashment of high denomination notes are quite numerous. In some of them the explanation tendered by the tax payer has been accepted and in some it has been rejected. Where the assessee was unable to prove that in his normal business or otherwise, he was possessed of so much cash, it was held that the assessee started under a cloud and must dispel that cloud to the reasonable satisfaction of the assessing authorities, and that if he did not, then, the Department was free to reject his explanation and to hold that the amount represented income from some undisclosed source.’ d. And it was also held that, the onus of proving the source of an amount received lies squarely on the assessee. Reliance is placed on the decision of Hon'ble Calcutta High Court in Unit Construction Co Ltd Vs. JCIT (260 ITR 189) wherein it was held that (extracts reproduced): as much as, section 68 of the Income-tax Act, essentially contains a deeming provision, which applies when the assessee's explanation is rejected. Section 68 does not imply that the books of account are to be rejected in order to hold otherwise than the entries made. On the other hand, it implies addition only when the discrepancies are not explained by the assessee to the satisfaction of the Assessing Officer. The same principle will apply in cases under sections 69 and 69B. The onus of proving me source of a sum of money is on the assessee. If he disputes the liability for tax, it is for him to show that the receipt was not income or that it was exempted from taxation under the law. In the absence of any proof, the Assessing Officer is entitled to charge it as taxable income, Kale Khan Mohammad Hanifv. CIT (1963) 50 ITR 1, 4(SC). If an assessee fails to prove satisfactorily the source and nature of certain amount received during the accounting year, the Assessing Officer is entitled to draw the inference that the receipts are of an assessable nature. A GovindarajuluMudaliar v. CIT (1958)34 ITR 807 810(SC). The presumption arising under section 132(4A) of the I.T. Act does not override or exclude section 68 of the Income Tax Act. It does not obviate the necessity to establish by independent evidence, the genuineness of cash credit u/s 68. The presumption is relevant andlimited only to summary adjudication contemplated u/s 132(5). Neither more nor less. The assessee has a legal obligation to explain the nature and source of such entries, Sreelekha Banerjee vs. CIT (1963) 49 ITR 112 (SC), 117. Thus, it appears that it is not necessary that the books of account have to be rejected expressly or that it is to be, in express terms, recorded that the books of account are not reliable or the explanation is not satisfactory. It has to be gathered from the order itself whether in effect the Assessing Officer was satisfied with the explanation or had found that the books of account were not reliable. It is not the technical terms, which must appear in the order. It is the substance of the order that the Assessing Officer was not satisfied with the explanation which is relevant. This is apparent from section 69 and 69B. Where accounts are not reflected in the account books, it can be explained by the assessee, who under section 69 is entitled to an opportunity to explain. If in the opinion of the Assessing Officer the explanation is not satisfactory, the income can be added. The phraseology of section 69 creates a legal fiction." xvii. In this instant case, the appellant has failed to make any submissions or file evidences in support of grounds of appeal, this gives rise to an undisputable conclusion that the assessee has got nothing more to say in this regard. This Appellate authority have gone through the record and based on the record, findings of the AO this Appellate authority have decided to adjudicate the issue on the merits of the case.
In the light of above discussed facts at point no.-(i) to (xvii), grossly negligent behaviour of the appellant assessee before the AO and this Appellate authority, non- submission of relevant facts/ evidences and non- compliance during these appellate proceedings and the referring to the Judgments of Hon’ble Apex/ High Courts, this Appellate authority is in the view that, the addition amounting to Rs. 1,75,68,862/- made by the AO to the income of the assessee under the head “Income from profits and gain of business or profession”, after rejecting his books of accounts u/s. 145(3) of the Act and rejecting the Auditor’s report due to it being faulty & un- reliable and then going on to estimate the Gross profit (GP) for this AY which is the average of the Gross profit rate disclosed by the appellant in the last two years and which is found to be very fair, it is thus UPHELD. The grounds of appeal no.-1 to 8 are not allowed. Lastly, the ground no.-9 is general and is hence not adjudicated upon further. • In the result, the appeal is NOT ALLOWED.”
10. The assessee’s case is that in spite of all documents placed before the authorities below, the Ld. Assessing Officer by rejecting the books of accounts of the assessee made addition on estimated basis on the gross profit disclosed in the last two years at 9.96% to the tune of Rs.1,75,68,862/- in the hands of the assessee which was further confirmed by the Ld. CIT(A) is not sustainable in law.
11. The Ld. AR reiterated the submissions made by the assessee before the authorities below and vehemently opposed the orders passed by the Ld. Assessing Officer and further confirmed by the Ld. CIT(A) as incorrect. The Ld. DR, on the other hand, relied upon the orders passed by the authorities below.
We have heard the rival submissions made by the respective parties. We have also perused the relevant material available on record. It is on record that in regard to the purchase and selling of scrap through proprietorship concern, namely, Nishi Paper & Print Pack and Baba Industries, though documents in support of the same was directed to be produced no compliance was made. The supporting bill/vouchers nor the confirmation of the purchase from the parties were filed before the Ld. Assessing Officer. Inquiry under Section 133(6) reveals that most of the parties from whom purchase were made by the assessee are non-filer, seems to be bogus and not bona fide. The GP as per audit report is Rs.80,60,039/-, but, as per Profit & Loss Account it is Rs.1,39,77,468/-. Major discrepancy was further found on comparing the balance sheet filed by the assessee. The assessee was found not maintaining any stock register and, thus, quantitative details could not be verified for the goods traded. Any valuation of closing stock shown by the assessee was not supported by any evidence; no details with the help of books of account maintained; purchase bills, sale invoices not produced. Furthermore, tax auditor opined that records produced for verification of payment through account payee cheques were not sufficient. The assessee failed to give explanation for such huge cash withdrawal of Rs.5,01,93,500/- as made to the supplier which is found in excess of Rs.10,000/-. Considering the entire aspect of the matter, the proposed addition on gross profit at 9.96% was made known to the assessee asking for show cause reply which though filed by the assessee was not supported by any documents and ultimately addition at 9.96% on the gross profit disclosed in last two years was made in the hands of the assessee. The Ld.CIT(A) further confirmed this fact that even before the appellate authority no submission was filed. Despite notices being served on a number of occasions, no compliance was made and, therefore, the matter was decided on merits. In the absence of any bills/vouchers provided by the assessee or the bank statement in support of the purchase and selling of scrap qua the parties the identity and credit worthiness of the parties was not found proved by the Ld. CIT(A). Neither the genuineness of the transaction having been proved by the appellant before the First appellate authority as it is evident from the order passed by the Ld. CIT(A). No relevant TCS details filed before him. It is a fact that the assessee to prove the transactions but in the present case it has failed to do so and in this regard, the Ld.CIT(A) relied upon the order passed by different judicial forum including the Hon’ble Apex Court in the case of Chuharmal vs. CIT reported in (1988) 172 ITR 250 wherein addition under Section 69 of the Act was challenged and the expression ‘income’ had given a wider connotation which resulted in gain like the assessee before us and such addition was confirmed. The source of amount received needs to be proved by the assessee as of the observation made by the Ld.CIT(A) following the judgement passed by the Hon’ble High Court at Calcutta in the case of Unit Construction Co. Ltd. vs. JCIT reported in 260 ITR 189 is also found to be applicable in the case in hand having regard to the facts of the case. When the assessee were given number of opportunities to explain and when the explanation was not satisfactory neither supported by relevant document, the income was added in the hands of the assessee under Section 69 and 69B was found to be correct. Thus, having regard to the entire aspect of the matter particularly when the assessee failed to prove the identity and credit worthiness of the parties and also the genuineness of the transaction, the addition made by the Ld. Assessing Officer in this particular facts and circumstances of the matter further confirmed by the First Appellate Authority in our considered opinion is just and proper so as not to warrant interference. The appeal preferred by the assessee is, thus, dismissed.
(AY: 2017-18) 13. The cash deposit to the tune of Rs.14,20,500/- during demonetization period from 09.11.2016 to 31.012.2016 in the bank account number 9811814776 in Kotak Mahindra Bank is the subject matter before us. The details including account opening form, the bank statement of this and 9913143118 provided by the Kotak Mahindra Bank on inquiry under Section 133(6) of the Act reveals that no transaction were there in the said account No.9913143118 and the deposit of cash as above in account No.9811814776 during demonetization period was found correct. As per the required details in terms of the notice under Section 142(1) of the Act as appearing at page 2 of the assessment order, no compliance was made by the assessee. Not even reply to the notice duly served at Flat No.93, New Ashok Nagar, Delhi – 110096 was made and addition of Rs.14,20,500/-, therefore, under Section 69A of the Act was made which was further confirmed by the First Appellate Authority on merit in the absence of no compliance made by the assessee against several opportunities/notices having been served upon him.
Having regard to the entire aspect of the matter as narrated hereinabove, in our considered opinion the addition made under Section 69A to the tune of Rs.14,20,500/- being cash deposit during demonetization period that from 09.11.2016 to 31.12.2016 in the absence of any supporting documents so as to justify the source of such cash is found to be just and proper, so as not to warrant interference.
In the result, both the appeals are dismissed.