VIVEK DIXIT,KANPUR vs. ACIT-CC-2, KANPUR

Page 3 of 10 A search and seizure operation u/s 132 of I T. Act, 1964(hereinafter referred to as “Act”) was carried out on 17-01-2019 in Dr. MC. Sharma, S.PM, Hospital & Trauma Centre Group of cases. Simultaneously, search was also carried out in the case of the assessee. The case was centralized to this office vide order u/s 127 of the Act dated 27-08-2019 passed by the Pr. Commissioner of Income Tax, Aligarh. The assessment for A.Y.2019-20 is to be completed compulsorily u/s 143(3) of the Act. Return of income for A.Y.2019-20 was filed on 23-10- 2019 at total income of Rs.15,29,020/-. Accordingly, notice u/s.143(2) of the Act dated 16-09-2020 was issued for making compliance on 25-09- 2020. Later on, a notice u/s 142(1) of the Act dated 04-11-2020 was issued alongwith questionnaire, for making compliance on 1911-2020. Later on a notice u/s 142(1) of the Act dated 02-03-2021 alongwith annexure was issued for making compliance 08-03-2021. In compliance to the above the notices, Shri Abhisak Pandey, CA and Shri Gagan Agarwal, Advocate duly authorized by the assessee attended from time to time and filed reply documents explanation. The case was discussed with them. The assessee is carrying on business in the name and style M/s Sagar Medical Store. The assessee declared’ income from house property, business & profession from M/s Sagar Medical Store besides income from other sources in the form of interest. On total turnover of Rs.2,27,99, 1281, gross profit of Rs.18,90,924/- has been disclosed, giving a GP rate of 8.29%. During the year under consideration, the assessee, raised unsecured loans of Rs.5,00,000/- each from Shri Raman Dixit, Shri Abhishek Dixit, Shri Harsh Dixit and Smt. Renu Dixit aggregating to*Rs. 20,00,000/- in his individual capacity which were credited in his bank account maintained with Canara Bank. Vide show cause notice dated 09-04-2021, the assessee was asked to furnish the copies of ITRs and complete bank statements of the lenders and it was made clear that failing to furnish - the same the so called unsecured loans will be treated as unexplained money and will be added to his income u/s 69A of the Act. The assessee vide reply dated 10-042021 has furnished the copies of complete bank statements of F.Y-2018-19 in respect of Shri Raman Dixit, Abhishek Dixit and Harsh Dixit. As regards complete bank statement of Smt. Renu Dixit, it has been stated that she is not well and is not in any position to provide her bank statements issued for making compliance on 25-09-2020. Later on, a notice u/s 142(1) of the Act dated 04-1-2020 was issued alongwith questionnaire, for making compliance on 1911-2020. Later on a notice u/s 142(1) of the Act dated 02-03-2021 alongwith annexure “was issued for making compliance 08-03-2021. In compliance to the above the notices, Shri Abhisak Pandey, CA and Shri Gagan Agarwal, Advocate duly authorized by the assessee attended from time to time and filed reply/documents explanation. The case was discussed with them. The assessee is carrying on business in the name and style M/s Sagar Medical Store. The assessee declared income from house property, business & profession from M/s Sagar Medical Store: besides income from other sources in the form of interest. On total turnover of Rs2,27,99,128/-, gross profit of Rs. 18,90,924/- has been disclosed giving a GP rate of 8.29%. During the year under consideration, the assessee raised unsecured loans of Rs,5,00,000/- each from Shri Raman ‘Dixit, Shri Abhishek Dixit, Shri Harsh Dixit and. Smt. Renu Dixit-aggregating to Rs. 20,00,000/- in ‘his individual capacity which were Credited in his bank account maintained.

Page 4 of 10 with Canara Bank. Vide show cause notice Gated 09-04-2021, the assessee was ‘asked to furnish’ ‘the copies of ITRs and complete bank statements of the lenders and it was made Clear that failing to furnish the same the so called unsecured loans will be treated.as unexplained money and will be added to his income u/s 69A of the Act. The assessee vide reply dated 10-04-2021 has furnished the copies of complete bank statements of F.Y-2018-19 in respect of Shri Raman Dixit, “Abhishek Dixit and Harsh Dixit. As regards complete bank statement of Smt. Renu Dixit, it has been stated that she is not well and is not in any position to provide her bank statements. From the reply filed by the assessee, it is apparent that the assessee has failed to prove-the creditworthiness of the lenders as copies of ITRs of Shri Raman Dixit, Shri Abhishek Dixit & Shri Harsh Dixit have not been furnished. Further, in the case of Smt. Renu Dixit’ even PAN has not been provided, what to say furnishing copy of her ITR. As the assessee has failed to prove the creditworthiness’ of the lenders, he has also failed to satisfactorily explain the source of amounts credited in his bank account amounting to Rs. 20,00,900/-. Thus, it is apparent that the assessee has routed his own cash in the garb of unsecured Joan and therefore the amount of Rs. 20,00,000/- credited in his bank account is treated as unexplained money u/s 69A of the Act. In the case of Sitaram Ramchanddas Patel Vs ITO Gujrat HC, it has been held that: “Where assessee failed to prove capacity of concerned persons who alleged ‘to have given unsecured loan and/or gift, impugned addition made under sec. 68 was to be confirmed”. Though the above cited decision has been pronounced with regard to addition made u/s 68 of the Act, the same is equally applicable for addition u/s 69A of the Act has also failed to satisfactorily explain the source of amounts credited in his bank account amounting to Rs. 20,00,900/-. Thus, it is apparent that the assessee has routed his own cash in the garb of unsecured Joan and therefore the amount of Rs. 20,00,000/credited in his bank account is treated as unexplained money u/s 69A of the Act. In the case of Sitaram Ramchanddas Patel Vs ITO Gujrat HC, it has been held that: “Where assessee failed to prove capacity of concerned persons who alleged to have given unsecured loan and/or gift, impugned addition made under sec. 68 was to be confirmed”. Though the above cited decision has been pronounced with regard to addition made u/s 68 of the Act, the same is equally applicable for addition u/s 69A of the Act immediate source of deposit in the bank accounts of the fenders was not cash but the receipt of money from Shiv Shakti Constructions to whom the lenders have provided loan in the month of June 2018. Therefore, the conclusion drawn and additions made by the learned AO u/s 69A was merely’ based on his conjecture and surmises and not based on any material brought out - records and hence deserved to be deleted.

2. The appellant further submits that Id. AO fails to appreciate that no addition u/s 69A can be made based on the allegation of not proving the creditworthiness of the lenders as the requirement to prove the creditworthiness is only under the provisions of 68 of the Act and not u/s 69A of the Act. In the present case it is an undisputed fact that the Page 5 of 10 lenders, the appellant submits following documents before your honour and requests to admit this as additional evidence: a) Capy of DTR of all lenders are being enclosed here with as Annexure -7 b) Affidavit from all the lenders are being attached as Annexure -2 B. Additions of Rs. 2,60,135/- on account of extra gross profits 1. During the search operation in the business premises of the appellant, physical verification of stock was done by the survey team and they valued the available physical stock at Rs. 14,84,000/-. At the same time, they had taken print out of balance sheet as on 17-01-2019 from the Tally software. On further verification it was noticed by them that in the print out of the balance sheet as at 17.01.2019, the value of closing stock was taken from PKS software, the value of stock was appearing at Rs. 24,02,105/-. During the post-search investigation, the appellant was asked to explain the differences between the value of stock in the aforesaid balance sheet and stock summary as well as the value of stock physically found by the survey team. Since the appellant was not aware of accounting, he submitted that the same could only be explained by his CA and accountant.

that the same should be set aside in the light of order of Hon'ble Apex Court in case of PCIT vs Abhisar Buildwell Pvt Ltd., Civil Appeal no. 6580 of 2021, order dt. 24.04.2023, is hereby dismissed. In the matter of addition of Rs. 20,00,000/made u/s 69A of IT Act, it is held that the appellant proved all the three limbs of a genuine cash credit, in which this amount of loan has been taken as Rs. 5,00,000/each from four family members through banking channel and copies of returns of all four creditors have been duly provided alongwith details of bank statements which prove identity, creditworthiness and genuineness of transaction. Hence this addition is deleted and relief is allowed to the appellant. In the matter of addition of Rs. 2,60,135/-, it is observed that the appellant failed to provide satisfactory reason for difference of stock as per balance sheet maintained in tally and as per physical stock taken by search team. Hence the conclusion of the AO that the stock worth Rs. 31,37,944/- (Rs.46,21,944 - Rs. 14,84,000) was sold out of books, is upheld. and extra gross profit @ 8:29% computed ‘on the stock worth of Rs.31,37,944/- ie. Rs.2,60,136/- is upheld to be added to the total income of the assessee.”

3. The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 23.02.2024 of the Page 7 of 10 Ld. CIT(A). At the time of hearings, the assessee was represented by none. Earlier, the hearing in this case were adjourned in Income Tax Appellate Tribunal on 20.11.2024, 02.01.2025, 04.02.2025 and 05.02.2025 on the request of the assessee’s side. Further, the hearing on 21.04.2025 was adjourned on the request of the Ld. Departmental Representative (DR) as the Ld. DR sought for time for obtaining the report of the Assessing Officer. Hearings fixed on 05.05.2025 and 17.06.2025 could not take place. As both sides have been provided reasonable opportunity, this appeal was heard in the absence of any representation from the appellant. Further, Ld. DR also submitted at the time of hearing that the report of the Assessing Officer for which adjournment was sought on 21.04.2025 was yet to be received. As reasonable time has already been provided to both sides the appeal was heard. During the assessment proceedings, the assessee had made submissions in respect of the aforesaid addition which were rejected by the Assessing Officer. The relevant portion of the assessment order is reproduced as under: - “During the course of search and seizure operation carried out on 17-01- 2019 at M/s Sagar Medical Store, Proprietorship firm of the assessee, stock as per balance sheet as on17-01-2019 was found at Rs.46,21,944/- whereas on physical verification, the stock was only of Rs.14,84,000/-. No satisfactory reason for difference was given either by the assessee during the search operation or in post such investigation by Ms. Jyoti accountant of the assessee. The assessee vide notice u/s 142(1) of the Act dated 04- 11-2020 was specifically asked to explain the reason as to why the difference in stock shown in the books of account and as per the physical verification be not added to total income of the assessee. The assessee vide reply dated 01-04-2021 has stated that the stock taken by search team of the department was on sample basis and complete stock was not taken. The assessee was not present at the time of search neither he was aware of the search being carried out at his medical store. Since, only selected items were taken for physical counting they will never tally with the books of account. The reply submitted by the assessee with regard to the difference of stock has been considered but not found acceptable. In his statement recorded during post search investigation the assessee could not explain the difference in stock found during the course of search and neither. gave any rebuttal to the statement of his accountant Ms. Jyoti. The relevant portion of his statement is scanned below:-

In view of the above discussion, it is apparent that the assessee has failed to explain the difference in stock. In absence of any credible explanation, it is clear that the stock worth Rs.31,37,944/- (Rs.46,21,944 - Rs.14,84,000) is sold out of books. Therefore, extra gross profit @ 8.29% on the stock sold out of books, which works out to Rs.2,60,135/- is added to the total income of the assessee. Penalty proceedings u/s 271AAB(1A)(b) of the Act are being initiated separately.”