VINOD GUPTA,JHUNJHUNU vs. INCOME TAX OFFICER, JHUNJHUNU

Record reveals that the Assessing Officer issued to the assessee notice dated 9.1.2023 under section 143(2) of the Act, but the assessee failed to furnish any reply thereto. That is how, show cause notice dated 28.4.2023 was issued to the assessee-appellant under first proviso to section 144 of the Act, but he failed to furnish any response. Proviso to section 251(1) of the Act stipulates that where the appeal before the Commissioner (Appeal) is against an order of assessment made under section 144, he may set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment.

In this situation, Learned DR has rightly submitted that the assessee- appellant failed to furnish reply to show cause notice dated 28.4.2023 issued for 4.5.2023, and as such CIT(A) was empowered to exercise powers under section 251(1) of the Act in case of assessment order passed under section 144 of the Act.

As is available from the assessment order dated 25.05.2023 as per specific information available on Insight portal under High Risk CRIU/VRU information, uploaded by the office of DDIT (Inv.), Unit-6(2), New Delhi, a survey u/s 133A of the Act was carried out on 30.11.2018 at premises - Room No. 210 & 212, 4107, Naya Bazar, Delhi i.e. of Shri Ashok Kumar Gupta, Shri Sandeep Gupta & Shri Anuj Gupta.

Said survey revealed that the abovesaid persons were engaged in providing accommodation entries of non-genuine purchases as well as non-genuine sales to various parties, details of which were collected during survey.

Admittedly, notice u/s 148 of the Act was issued to the assessee on 26.07.2022. Thereupon, the assessee furnished his return of income. Thereafter, notice u/s 143(2) of the Act was issued to the assessee on 09.01.2023, but the assessee did not submit any response thereto. However, when notice u/s 142(1) of the Act was issued to the assessee on 30.01.2023, the assessee furnished his response that he had actually made transactions through said entities and that payments were made through banking channels. The assessee also submitted balance sheet of M/s Uma Traders, Proprietorship of Shri Vinod Kumar Gupta-the assessee, bank statement Sh. Vinod Gupta, Jhunjhunu of account maintained by HDFC Bank, for the period from 01.04.2016 to 31.03.2016, audit report, acknowledgment of return of income with computation of income details of purchase and sales during financial year 2016-17, and statement of his own account with State Bank of India.

The Assessing Officer observed in the assessment order that during survey proceedings, above named person-Shri Ashok Kumar Gupta, when examined u/s 131(1)(A) of the Act, stated on oath that he had provided accommodation entries regarding purchase and sales to many entities, through his various entities.

As is available from the assessment order, when Shri Ashok Kumar Gupta was subsequently examined on oath on 28.01.2020, 03.03.2020 and 19.02.2021, as regards the entities controlled by him during the period i.e. financial year 2012-13 to financial year 2018-19, he confirmed to have provided accommodation entries to various individuals and entities as regards purchases and sales. In the assessment order, it was further observed that during survey proceedings, certain digital devices were impounded and relevant data was extracted from there, which coupled with the statement of said Shri Ashok Kumar Gupta revealed that the assessee appellant was one of the beneficiaries, who had obtained accommodation entries regarding bogus Sh. Vinod Gupta, Jhunjhunu transactions through above named, three entities controlled by him, Shri Ashok Kumar Gupta. Additional Evidence before Learned CIT(A) 15. Record reveals that Learned CIT(A) observed in the impugned order that for the first time the assessee appellant submitted in the appellate proceedings before him Learned CIT(A), following documents :- Description of documents Remarks 1. Written submission explaining the contention of the appellant The 2. Copy of ITR & computation filed on 03.11.2017 along with the documents/eviden audit report. ces have prima 3. Copy of purchase ledger of Umesh Kumar Vivek Kumar along facie potential with the purchases bills and Bank statement reflecting the payment material having to the seller. bearing on the 4. Copy of ledger of Mahaveer Prasad Suresh Kumar along with outcome of the the sale bills and banks statement reflecting the payment received assessment of from purchaser. true income.

Copy of purchase ledger of S.A. Agro International along with the purchase bills and banks statement reflecting the payment to the seller.

Copy of Form 49-A dated 04.12.2016 i.e. certification of carrying goods out of state along with the Vehicle Challan.

It may also be mentioned here that even though initially in the course of arguments, Learned counsel for the appellant touched the two additional grounds raised

As regards purchases, on behalf of the assessee-appellant, it has been submitted that out of total purchases of Rs. 24,00,07,948/- made during the year under consideration, purchases to the tune of Rs. 3,55,70,762/-were made from Umesh Kumar Vivek Kumar and SA Agro International. As regards sales, case of the appellant is that during the year under consideration, its total sales were Rs.24,41,41,900/-whereas the sales made to Mahaveer Prasad Suresh Kumar were to the tune of Rs. 50,00,888/-.

The Ld D.R placed his reliance on the decision rendered by the Bangalore bench of ITAT in the case of Suresh Kumar T. Jain (supra), which was also confirmed by Hon'ble Karnataka High Court, vide its order dated 20-11-2018 Sh. Vinod Gupta, Jhunjhunu passed in of 2010. The Ld D.R contended that the outstanding trade creditors could be added u/s 68 of the Act. We have gone through the above said decision and notice that the facts prevailing in that case were different. In the above said case, most of the creditors confirmed the outstanding balances as per their books of accounts, which were much lesser than the outstanding balances disclosed by the assessee before the High Court. Copies of confirmation letters received from the creditors were also furnished to the assessee, but he did not offer any explanation. Hence, it was considered to be a case of either payment outside books or cessation of liability. Under these set of facts, it was held that the addition made u/s 41(1) and 68 of the Act was justified.

In the present case, the facts are totally different. First of all, the outstanding balances related to the purchases made during the year under consideration and not brought forward balances. The AO did not get reply from both the trade creditors and hence he proceeded to assess the outstanding balances, while accepting the purchases made during the year & payments made during the year. The AO has made the addition u/s 68 of the Act and did not invoke provisions of sec. 41(1) of the Act. On the contrary, the assessee has shown that the payments have been made in the succeeding year through banking channels. Accordingly, we are of the view that the revenue could not rely upon the decision rendered in the case of Sureshkumar T Jain. Under these set of facts, we are of the view that the AO could not have made addition of trade creditors u/s 68 of the Act." 4.13. That it is settled law that the provisions of section 68 of the Act are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P&L account. We rely upon:  Hon'ble ITAT Jaipur Bench in ACIT v. Chandra Surana [2022 (12) TMI 750] has held: As also observed from the assessment order that the AO had not rejected the books of account of the assessee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition made by the AO by applying the provisions of Section 68 it is noted that provisions of Section 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P&L account. There is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act. In view of the above deliberations and case laws relied upon by both the parties, we find that the AO was not justified in making an addition u/s 68 of the Act which has rightly been Sh. Vinod Gupta, Jhunjhunu deleted the Id. CIT(A) and we concur with his findings. Thus the appeal of the Revenue is dismissed.  Hon'ble ITAT Jaipur Bench in Mahesh Kumar Gupta v. ACIT [2023 (3) TMI 1148] has held: Addition u/s 68 - cash deposits in bank account -non rejection of books of accounts HELD THAT: opinion of the assessing officer is required to be formed objectively with reference to the material available on record. Hence, application of mind is sine qua non for forming the opinion. The only reason placed by the Id. AO in his order that the full name, address or/and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit has not been given. It is voluntary to the customer to provide their personal information to the assessee while goods being sold and even the law does not mandate to the assessee up to an amount of Rs. 2 lac. The action of the Id. AO making an addition u/s 68 as unexplained cash deposit without rejecting the books of account is unwarranted. Even the Id.AO has not find any defects in the details submitted by the assessee and audited books were considered and accepted while finalizing the assessment. As relying on SHRI CHANDRA SURANA [2022 (12) TMI 750-ITAT JAIPUR] case we vacate the addition made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO. Appeal of the assessee is allowed.  Hon'ble Gujarat High Court in CIT v. Vishal Exports Overseas Ltd. [2012 (7) TMI 1110] has observed as under: Revenue carried the matter in appeal before the Tribunal. The Tribunal did not address the question of correctness of the CIT (Appeal)'s conclusion that amount of Rs. 70 lakhs represented the genuine export sale of assessee. The Tribunal however, upheld the deletion of Rs. 70 lakhs under section 68 of the Act observing that when the assessee had already offered sales realisation and such income is accepted by the Assessing Officer to be the income of the assessee, addition of the same amount once again under section 68 of the Act would tantamount to double taxation of the same income. In view of the above situation, we do not find any reason to interfere with the Tribunal's order.  Hon'ble Rajasthan High Court in Harshil Chordia v. ITO [2008] 298 ITR 349 has observed as under: "23. So for as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee Sh. Vinod Gupta, Jhunjhunu would not attract Section 68 because the cash deposits becomes self- explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition would not arise".

As per written submissions on behalf of the appellant, before Learned CIT(A), in the Assessment Year under consideration its gross profit was 1.61%, whereas in the Assessment year 2015-16 it was 3.70%; and in the subsequent Assessment Year 2016-17, it was 3.28%. Learned counsel for the appellant has submitted that even if we accept the observations and calculations made by the Assessing Officer, same would lead to GP rate of 18.23%. The contention is that there is no possibility of such a high GP rate in agro-items industries. Learned counsel has also submitted that as regards sale transactions, recorded in the books of accounts maintained by the assessee, the amount of sales being part of the income and having been credited in Profit & Loss Account, provisions of section 68 of the Act cannot be attracted as regards said income from the sales.

However, in the end, Learned counsel submitted that in the given facts and circumstances, having regard to the sales by the assessee, which were not doubted by the department, addition to the tune of about Rs. Sh. Vinod Gupta, Jhunjhunu 12,50,000/-shall meet the ends of justice, as against addition of Rs. 4,05,71,650/-, Learned DR has also submitted that this is a case where purchases were made by the assessee out of books of accounts, and in this way, the assessee routed unaccounted income on the basis of accommodation entries regarding purchases and sales, and further that there is no merit in the contentions raised on behalf of the appellant.

It is correct that sales having been reflected by the assessee in the books of accounts maintained by the assesee, the amount of sales already disclosed, cannot be part of such an addition. In case, sales reflected in the books of accounts are also made part of the addition under section 68 of the Act, it would amount to double taxation, as rightly submitted on behalf of the appellant. However, it is significant to observe here that when, as per material available with the department, the goods are found to have not been received from the parties from whom same are shown to have been purchased, it can safely be said that such material was received by the assessee from a different source exclusively within the knowledge of the assessee and none else.

As noticed above, Learned counsel for the appellant submitted that in the given facts and circumstances, having regard to the sales by the assessee, which were not doubted by the department, addition to the tune of about Rs. 12,50,000/-shall meet the ends of justice, as against addition of Rs. 4,05,71,650/-, Ld. DR for the department took time to ponder over this submission made on behalf of the appellant, and ultimately submitted that in the given facts and circumstances, when, as per material available with the department, the goods are found to have not been received by the party to whom same are shown to have been sold, it can safely be said that such material was never delivered by the assessee or received by the person, shown as the seller, and rather, to a person a different from the said person, exclusively within the knowledge of the assessee, and none else. At the same time, Learned DR for the department did not raise any Sh. Vinod Gupta, Jhunjhunu objection to restricting the addition only to the tune of Rs. 12,50,000/- in total, as against addition of Rs. 4,05,71,650/-.

Having regard to the facts and circumstances and the incriminating material collected during survey proceeding, we deem it a fit case to confirm the addition only to the extent of Rs. 12,50,000/-as regards the accommodation entries relating to bogus purchases. Result 27. As a result, this appeal is disposed of and the impugned addition is restricted to Rs. 12,50,000/-. The Assessing Officer to make re- calculations. File be consigned to the record room after the needful is done by the office. Order pronounced in the open court on 15/07/2025. Sd/- Sd/- ¼xxu xks;y½ ¼ujsUnz dqekj½ (GAGAN GOYAL) (NARINDER KUMAR) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 15/07/2025 *Santosh आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- Sh. Vinod Gupta, Jhunjhunu. 1. 2. izR;FkhZ@ The Respondent- ITO, Jhunjhunu. 3. vk;djvk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत सहायक पंजीकार@Aेेजज. त्महपेजतंत