S R AGRO TECH,BEHROR vs. ITO, WARD, BEHROR

. This has not been done. Onus cannot be cast on this S.R. AGRO TECH VS ITO, WARD-BEHROR office to be an adjudicator and also a lawyer for the assessee when assessee it itself lax and uninterested in pursuing of his own appeal.

7. As a result, the appeal is held to be without merit and the same is hence dismissed.

2.3 During the course of hearing, the ld . AR of the assessee has filed following detailed written submission in connection with both the additions i.e. Rs.5,00,000/- and Rs.31,39,000/- and submitted that the assessee had produced all the relevant details/ records before the AO but he has passed the assessment order on the basis of presumption and assumption without considering the facts of the case and thus the additions so made by the AO needs to be quashed; ‘’OBSERVATIONS OF THE LD. AO AND SUBMISSIONS OF APPELLANT:

Submission of the Applicant Within the framework of law the A.O may proceed under Section 145(3) under any of the following circumstances: a) Where assessing officer is not satisfied about the correctness or completeness of the accounts, or b) Where method of accounting cash or mercantile has not been regularly followed by the assessee, or c) Accounting Standards as notified by the Central Government have not been regularly followed by the assessee S.R. AGRO TECH VS ITO, WARD-BEHROR Though the broad parameters have been laid down in the Section itself under which the provisions are required to be invoked for rejection of books of account in a particular case, vet, a definite ground work is sine-quanon on part of the Assessing Officer before resorting to the provisions of section 145(3) of the income Tax Act 1961. This is well deliberated by The Honorable bench of ITAT, third Member Bench in the matter of Raja & Co Vs Assessing officer ward Baramulla. The Honorable bench has held rejection of books of accounts not justified as the reasons recorded for rejection of such books of accounts are not meeting the criteria as laid down in section 145(3) of the Income Tax Act 1961. The assessing officers usually after Rejection of Books of Account under Section 145(3) conduct Assessment in the manner under Section 144 of the Income Tax Act 1961. In a case where the provisions of Section 145(3) are attracted, although the assessment is made in the manner provided under Section 144, nevertheless the assessment is made under Section 143(3) of the Act. A clear cut distinction between Best Judgement Assessment and in the manner provided under Section 144 is required to be understood while resorting to the provision of Section 145(3). Under Section 145(3) the assessment is required to be made in the manner under Section 144 of the Act only. However, it is well known fact that in the case of Best Judgement where resort is taken to Section 144, the Assessing Officer exercising his jurisdiction cannot act arbitrarily or capriciously. The assessing officer must proceed on judicial considerations in the light of relevant material that may be brought on record The Hon'ble Allahabad High Court in the case of CIT V/s. Surjeet Singh Mahesh Kumar (1994) 210 ITR 83 has held that in every case of Best Judgement, the element of guess work cannot be eliminated so long as best judgement has a nexus with material on record and discretion in that behalf has not been exercised arbitrarily or capriciously. Shri Harish Patel, Bhopal vs The Deit 1(1), Bhopal on 2 January, 2019 Appeals) erred in confirming for invoking the provisions of Section 145 (3) of the Income Tax Act by making Hypothetical and arbitrary estimation Appeals) erred in confirming for invoking the provisions of Section 145 (3) of the Income Tax Act by making Hypothetical and arbitrary estimation In the Instance case Ld AO made trading addition at hypothetical and arbitrary estimation so addition liable to be deleted.

Applicant submission as under:

S.R. AGRO TECH VS ITO, WARD-BEHROR 1.The Ld.AO grossly erred in making the addition of Rs.31,39,000/- u/s 69A being the cash deposited in bank account during the demonetization period, as the same is beyond the scope of provision itself, whereby amount is duly recorded in books of accounts and source of such amount is fully explained, hence addition is against the specific provision of Act.

2. The Ld. AO further erred in not appreciating that the sale/purchases etc. are supported with invoices, bank account, Financials etc. mass documents on record proving the genuinity of transactions and cash deposit, whereby such cash deposit is also inline of subsequent years, beside addition is made without any iota of evidence/material against the assessee and in support of flimsy allegations made, therefore addition is against all the cannons of law

In the case of Rakesh Kumar Goel, Ghaziabad vs ITO Ward-2(2) (2) ITAT Delhi explicitly held as under:

It is clear that Sec. 69A of the Act is applied when the assessee is found to be owner of any money which is not recorded in the books of account. However, in the case of the assessee, it has maintained hooks of accounts duly audited in accordance with section 44AB of the Income Tax Act which was also furnished with the return of income filed by the assessee. The assessee has demonstrated from the purchase books, sale books cash book supported with relevant invoices that source of cash deposited was out of the cash sales made during the A.Y relevant to the assessment year under consideration. The Id. Counsel has also placed reliance on a number of judicial pronouncements on the proposition that addition u/s 69A of the Act cannot be made Le. Lalchand Bhagat Ambica Ram Vs CTI (1959) 37 ITR 288 (SC); Lakshmi Rice Mills Vs. CIT (1974) 97 ITR 258 (PAT): DCIT Vs. M/s Karthik Construction Co. ITA No. 2292/Mum/2016. After considering the facts as discussed above, we find the AO has failed to justify in applying section 69A to the case of the assessee when the assessee itself declared the cash sales in its return of income duly recorded in the audited books of accounts maintained by the assesse. Therefore, the CIT(A) has correctly held that provision of Sec. 69A of the Act cannot be applied in respect of cash deposited which have been duly recorded in the books of account and had already been declared income in the return of income filed by the assessee. Therefore, the grounds of appeal of the revenue are dismissed."

S.R. AGRO TECH VS ITO, WARD-BEHROR Similarly, in the case of Sobha Devi Dilipkumar Vs. ITO (supra) the Vishakhapatnam Bench of the Tribunal held as under: ‘’4. At the outset, the Ld. Authorized Representative submitted that the assessee being involved in money lending business, on the monies lent, the assessee has received an amount of Rs.3,63,609/- as interest income and the principal amount was given as loan during the previous year relevant to the assessment year 2017-18 to various persons and the same fact was recorded in the books of account which has been furnished before the Ld. Revenue Authorities. However, the assessee made cash deposits during the demonetization period and therefore the Ld AO treated the amount of cash deposits as unexplained money u/s 69A of the Act. The Ed. AR further submitted that the assessee has disclosed the investments in the books of accounts and the computation of income which was offered for taxation and therefore the question of invoking the provisions of section 69A does not arise. The Ld. AR relied on the decision of this Bench of the Tribunal in the case of ITO v. Sri Tatiparti Satyanarayana in [IT Appeal No. 76 (Viz.) of 2021, dated 16-3-2022] to state that when the investments are disclosed by the assessee in the books of accounts, there is no application of the provisions of section 69A of the Act. The Ld. AR further submitted that the L.d. CIT(A)- NFAC, on similar set of facts, considered the assessee's son's case (Ankit Dilip Jain) but the Ld. CIT(A)-NFAC has not considered the assessee's case. Therefore, the Ld. AR pleaded that the addition made by the Ld. AO and confirmed by the Ld. CIT(A)- NFAC may be deleted.

Allahabad High Court in the case of Smt. Sadhana Jain Vs. CIT(supra) held as under: - "The provisions of section 69A are explicit and come into play when in a particular assessment year the assessee is found to be the owner of any money. bullion, jewellery or other valuable article and such money bullion, jewellery and other article is not recorded in the books of account and the assessee is unable to give any explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuation articles."

The Chennai Bench of the Tribunal in the case of PCIT Vs. M.C. Hospital (supra) held that it is a settled principle of law that entries recorded in the books of account cannot be brought to tax u/s 69A of the Act. Assessee version on merits, that:

S.R. AGRO TECH VS ITO, WARD-BEHROR a) Additions u/s 69A cannot be made of an amount recorded in book of accounts for any source of income. b) After accepting the sales by accepting declared income on same, same cannot be added again as no source. c)Raising doubt on sales after accepting the same is against the basic tenets of law and not permissible. d) Neither there is any material against the assessee or in support of addition, more so when none of the evidences and sources placed found false with some material.

3. Sir, the Ld. AO has passed the assessment order on the basis of presumption/assumption without considering the facts of the case. The Appellant has made extensive submissions and presented all documentary evidences in support of its claim whereas the Ld. AO has simply made allegations without any evidence / or bringing anything adverse on record. PRAYER 4. Sir, based on the above submissions we would like your honor to allow the appeal and grant us full relief.’’ 2.4 On the other hand, the ld. DR supported the orders of authorities below and submitted that the assessee has partly filed the details before the ld. AO and before ld. CIT(A) did not file any records and thereby he supported the of the ld. CIT(A).

2.5 We have heard both the parties and perused the materials available on record. It is noticed from the records that the assessee is a Partnership Firm dealing in Agro Equipment products and having Income from business and filed its return of income for AY 2017-18 on 31.10.2017 declaring a total loss of Rs. 18,68,187/-.It is further noted that the case of the assessee S.R. AGRO TECH VS ITO, WARD-BEHROR was selected for scrutiny under CASS with remarks i) Cash deposit during the Demonetisation period and ii) lower amount disallowed u/s 40(a) (ia)". From the available records, it is noted that during the year the assessee deposited Rs. 31,39,000/- cash of Rs. 500/-and Rs. 2000/- Note in Banks during the demonetization period i.e. 09.11.2016 to 31.12.2016. The above-mentioned cash had been deposited by the assessee out of the cash in hand available with assessee. It is pertinent to mention that the available cash in hand was in the books of accounts of the assessee. The notice described the cash deposited during the period of monetization is unexplained Money and the AO invoked Section 145(3) by making trading addition of Rs.5.00 lacs in the hands of the assessee.In first appeal, the ld.CIT(A) has confirmed the action of the AO for the reason that the assessee had not furnished any reply in spite of various notices. The Bench also noted that during the assessment proceedings assesse had very well explained that cash deposited during the period of demonetization was out of the cash in hand reflected in the books of account and expenses debited in P&L account were of all business expenditure and books of accounts are audited by qualified independent Chartered Accountant. The Bench also noted that the sale/ purchase etc. were supported with invoices, bank account, financial etc. and documents on record were placed before S.R. AGRO TECH VS ITO, WARD-BEHROR the AO to prove the genuineness of the transactions. It is also notable that addition u/s 69A cannot be made of an amount recorded in books of accounts for any source of income and after accepting the sales by accepting declared income on same, the same cannot be added again as no source. The Bench also noted that there is no material placed on record by the AO as to the addition made by AO that money deposit is not of the business income and in addition to what is reflected in the books. Hence, we do not concur with the findings of the lower authorities as to the addition of Rs.31,39,000/- in the hands of the assessee . As regards the addition of Rs.5.00 lacs made by the AO by holding that the bills of expenses are self- made and he invoked the provisions of Section 145(3)of the Act. It is noted that the AO made lumpsum addition of Rs.5.00 lacs to the income of the assessee taking into account all possible leakage on trading front. It is noted that the books of accounts of the assessee were audited and books are maintained as per mercantile system of accounting. Hence, it is not justified on the part of the AO to make trading addition on hypothetical basis and the addition should be made on concrete basis based on the record and evidence to be placed on record no lump addition can be made without finding any specific default in the audited books of accounts. Hence, in view of this matter, we do not concur with the findings of the S.R. AGRO TECH VS ITO, WARD-BEHROR lower authorities and the trading addition made of Rs.5.00 lacs is directed to be deleted. Thus, the appeal of the assessee is allowed. 3.0 In the result, the appeal of the assessee is allowed Order pronounced in the Open Court on 25-07-2025. Sd/- Sd/-