INCOME TAX OFFICER, WARD-6(2), JAIPUR, NCR BUILDING, STATUE CIRCLE JAIPUR vs. VASUDEV HEMRAJANI, ARJUN NAGAR, JAIPUR

Vide show cause notice dated 19.03.2022 asking the assessee to file his objections to the variation proposed in the returned income. In response thereto, the assessee furnished his reply on 23.03.2022.

On perusal of the reply of the assessee, the ld. AO noted that the assessee is just trying to refute any finding that leads to conclusion that the assessee was actually trading the goods on his own behalf. In the absence of bill in the case of Ram Das Seth Nimbu Wale, the assessee refuted by claiming that it was a bility and not a bill; in case when a bill/bility is brought into light during the assessment proceedings as in the case of Sh. Keshav Gambhire Prop. M/s Ankheri Devi Lemon & Trading Company, the assessee has just chosen another claim that it is also not a bill but a challan issued to farmer, without producing any documentary evidence in support of his claim.

Vide notice u/s 142(1) of the Income Tax Act, 1961, the assessee was specifically required to provide the detailed ledger account of all the balances, transactions during the year and closing balance at the year end.

From the reply, it was noticed that the assessee has just furnished a ledger account of M/s Vasudev Commission agency wherein the opening credit balance was shown at Rs. 18,13,845/- and the credit balance at the end of year was at Rs. 21,32,614/-. However, in his reply furnished on 10-08- 2022, the assessee has furnished ledger account of debtors / creditors.

From that ledger account total of sundry debtors and creditors in all the proprietary Concerns of the assessee works out at Rs. 30,64,293/- and Rs. 40,66,713/- respectively whereas in the Balance Sheet, the amount of Sundry Debtors & Creditors were shown at Rs. 31,10,746/- and Rs.

56,83,348/-. The ld. AO also noted that as per Balance Sheet shown in the ITR of the assessee for the year consideration, the amount of Balance outstanding at the year end Rs. 7,82,662/-. In the reply filed by the assessee on 12.01.2022, the assessee furnished detail of 10 bank accounts maintained by him in individual/business capacity and the total balance of these bank accounts totaling at Rs. 5,33,235/-. However, in the Balance Sheet, the amount of bank balances was shown at Rs. 7,82,662/-. query, the assessee was requested to provide clarification regarding the transaction that has been carried out are trading activities in the nature. In response the assessee submitted that he is engaged in the business of aadatiya. The reply submitted was not found satisfactory by the ld. AO.

Keeping in view of the facts the correctness and completeness of the books of accounts maintained by the assessee was not found satisfactory and therefore, in view of provision of section 145(3) of the Income Tax Act, 1961 and hence rejected by the ld. AO.

As the assessee failed to submit the exact sources of cash deposited in the bank account maintained by the assessee remained unexplained and the provisions of section 68 of the Income Tax Act, 1961 were rightfully applicable in the case of the assessee which mandates that "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing) Officer. satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. provisions of section 68 of the Income Tax Act, 1961 for unexplained cash deposits in bank accounts.

The ld. AO also noted that keeping in view the defects, pointed out above in para 5 given supra, and on the facts and in the circumstances of the case, it is clear that the claim of expenses under various heads have been claimed to reduce the incidence of tax. In such circumstances, disallowances of 25% of expenses incurred in cash, which works out to Rs.

12,63,307/-, are proposed as additions being made to the returned income.

4. Feeling aggrieved from the order of the assessment the assessee preferred an appeal before the ld. CIT(A). Apropos to the various grounds so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated herein below:

“Decision:

I have gone through the above submissions of the appellant and have considered the facts and evidence on record. In the present case, the appellant e-filed his return of income for A.Y.2020-21 on 29/12/2020 declaring net taxable income at Rs.15,53,040/-. Later the AO completed the assessment by assessing the total income at Rs. 8,88,20,150/- by adding an amount of Rs. 8,60,03,806/- u/s 68 of the Income Tax Act, 1961 and an amount of Rs. 12,63,307/- being expenses incurred in cash to the income of the appellant. Penalty proceedings u/s 271AAC and u/s 270A(9) of the Income Tax Act, 1961 were initiated separately. Being aggrieved by the same the appellant has preferred instant appeal.

ITO vs. Vasudev Hemrajani The AO stated that the case was selected for Complete Scrutiny under CASS due to 'Low income compared to large commission receipts' and 'Large cash deposits in bank account(s)'. The appellant derived income under the head 'Income from business / profession' being Adatia (i.e. selling the perishable goods and charging commission thereon). The appellant being sole proprietor runs three commission agency viz. M/s Kanhiya Lal Nenu mal, M/s Prashant Kumar Lakhmi Chand and M/s Shri Radhey Radhey Commission Agency and earned a total commission amounting to Rs. 96,11,422/- and has declared income of Rs. 19,28,051/- under the head 'Income from business / profession'. Further, the appellant has also earned interest on deposits maintained with banks and declared income of Rs. 34,119/- under the head Income from other sources' and also declared Short term capital gain on Rs. 31,565/- earned on sale of mutual funds. The appellant has further claimed deduction under chapter VI-A of the Act to the extent of Rs. 2,40,698/- thereby declaring net taxable income at Rs. 15,53,040/-. The appellant was specifically required to furnish detailed bank account statement along with explanation regarding the source of cash deposit as well as copy of cash book for the year under consideration. In reply appellant submitted that he facilitates the farmers in selling their crops which generally consist of food grains such as green chilli, lemon, tomato, green ginger, lady finger, cauliflower etc. and for such facilitation, he charges commission and the amount so received is duly offered for tax in the return of income filed. The appellant while doing so, sales the crops / food grains on behalf of the farmers and make the payment to the respective farmers through banking and other modes as acceptable in the line of agriculture produce. The cash so deposited in the bank during the entire year reflects the proceeds so received on selling of such agriculture produce which is paid to the respective farmer / owner and can be verified from the bank statement. Appellant submitted the break-up of commission earned by in his proprietorship concerns. The AO stated that during the year under consideration a total of Rs. 8,60,03,806/- has been deposited in the bank account of the appellant and only a total of Rs. 10,00,000/- only has been withdrawn in cash. Further, from the ITR filed for the last year i.e. AY 2019-20, it was noticed that the cash in hand as on 31/03/2019 was at Rs. 39,479/-. The sources of such huge cash in the bank accounts of the appellant always remain questionable as appellant didn't furnish copy of cash book. X DEPARTME The appellant has claimed to have earned a total commission amounting to Rs. 95,11,422/- which includes total amount of commission at Rs. 69,70,634/- at a uniform rate @6% on Agriculture produce sold (Credit) on behalf of the farmers to different parties and @4% on cash sale made on behalf of farmers under the proprietorship concern M/s KANHIYA LAL NENU MAL and @5% on cash sale under the proprietorship concern M/s PRASHANT KUMAR LAKHMI CHAND. However, the appellant didn't furnish any explanation as to how he had discharged the payments which were required to be made to farmers. Further, from perusal of bank account statements, it was noticed that the appellant has ITO vs. Vasudev Hemrajani made payments involving significant amounts bearing the name of trading firms instead of farmers. Cash books of two of the appellant's concerns had been submitted but the Cash book of the third concern M/s Radhey Radhey Commission Agency and bills/vouchers of the expenses were not submitted. The AO noticed from the details of the proprietorship concern namely M/s Kanhiya Lal Nenumal, that the appellant had claimed to have sold goods (Gross) on behalf of farmers to the extent of Rs. 6,72,58,081/- on which it has earned commission of an amount of Rs. 36,77,572/-. The goods sold on behalf of agriculturist also included cash sale amounting to Rs. 1,78,95,635/- and the goods sold on behalf of the farmers (on credit basis) worked out to the tune of Rs. 4,93,62,446/- which as per version of the appellant was passed on to the proprietorship concern M/s Radhey Radhey Commission Agency for collection. From the perusal of cash book of M/s Kanhiya Lal Nenumal, it has been noticed that the appellant has been generating cash from his other proprietorship concern i.e. M/s Shri Radhey Radhey Commission Agency on almost each day and continuously paying Freight out of his cash book but has not claimed the Freight as expenses (the total of these expenses as debited in the cash book of M/s Kanhiya Lal Nenumal, worked out to Rs. 115.5 Lakhs) in the P&L A/c in order to just lend authentication to his statement that he is just earning commission on sale of goods on behalf of farmers besides keeping the cash in hand at the year- end in check. Moreover, the amount of freight payment exceeded Rs. 10,000/- (paid in cash) in most of the cases and also exceeded Rs. 35,000/- on daily basis in most of the cases. The other peculiar feature in the cash book of M/s Kanhiya Lal Nenumal that had been noticed is that, the cash from farmers sale runs from 01/04/2019 to 22/07/2019 which ended on 01/11/2019 and started again on 02/11/2019 and carried on till 05/02/2020 and ended till the year end i.e. 31/03/2020 and that this trend also applied in the case of freight payment. The AO further stated that the amount of freight entries were passed in the cash book and hence, were not claimed in the Profit & Loss A/C. The AO further stated that during the course of assessment proceedings, it was noticed that the appellant has debited various expenses under different heads for which the appellant had failed to bring any documentary/supporting evidence in respect of the genuineness of the claim of expenses incurred in cash and further that the expenses have been incurred wholly, exclusively and necessarily for business needs. The claim of expenses under various heads have been claimed to reduce the incidence of tax and consequently in such circumstances the book version disclosed by the appellant could not be accepted and the provisions of section 145(3) would come into play in the present case. Disallowances of 25% of expenses incurred in cash, which worked out to Rs. 12,63,307/-, were proposed as additions being made to the returned income of the appellant by the AO.

ITO vs. Vasudev Hemrajani The correctness and completeness of the books of accounts maintained by the appellant was not found satisfactory in view of provision of section 145(3) of the Income Tax Act, 1961 and were hence rejected by AO. During the course of appellate proceedings, the appellant stated that he is aged at nearly 64 years and was assessed to tax for last more than 40 years and since inception he was engaged in the business of Adatia of agriculture products mainly the Lemons, Green Chilies and other perishable vegetables and is having income from commission from such activity being carried out from his establishment in the Shop area allotted and situated in the Mandi premises which mandi has been developed and controlled by the KRISHI UPAJ MANDI SAMITTEE, an organization created as well as functioning under the control and management by the Government of Rajasthan with the primary objects to fulfill its commitment for a fair price in such open mandi where the products are auctioned by the Commission Agents in the presence of the cultivators or its representatives. The income of commission as earned is offered for taxation after claiming normal business expenses related to the earning of such income which entire of it is vouched and is in full consonance with several previous years in appellant's own case and the expenditure incurred in such manner and based on such vouchers have been fully allowed in the past. The appellant stated that the entire process starting from the entering the produce into the mandi premises till its disposal in the shape of sale is closely supervised and controlled by the officials the Krishi Upaj Mandi Samiti, a State Government Undertaking who not only records all these transactions in their records but also periodically verifies such records from the respective shop owners. The State Government has levied Mandi Tax @1.5% on the amount of produce sold from such transaction (which was abolished by the State Government from 06/08/2019 and later the same was introduced in the name of Krishi Kalyan Cess) which is collected from the successful bidder alongwith the brokerage payable on such transaction. To determine the liability of Mandi Tax, books of accounts maintained by him are subjected to periodical checking and cross verification on day to day basis by the Authorities of Krishi Upaj Mandi. Thus the business model as undertaken by him is in compliance of the Mandi norms and had never been doubted either by the Krishi Upaj Mandi Samiti or by the Income Tax Department at any stage in any manner in the past. During the year under consideration, appellant was running three entities in proprietorship with the trade names, i) M/s Prashant Kumar Lakhmichand - operating as Adatia (Mandi License at APB 1276), ii) M/s Kanhaiya Lal Nenumal - operating as Adatia (Mandi License at APB 1277), iii) M/s Radhey Radhey Commission Agency - operating as factor (doing payment collection work). The appellant submitted Cash books of all the three proprietorship concerns owned by the appellant, all the bank statements owned by the appellant, Ledger account of all the expenses claimed by the appellant in all the three proprietorship concerns, Ledger account of farmers with supporting evidences, Details of ITO vs. Vasudev Hemrajani agriculture produce sold by the appellant on behalf of the farmers from all the concerns, Receipts issued to farmers in confirmation of agriculture produce sold on their behalf, Available Bank details of Farmers. Regarding cash deposit u/s 68 of the Income Tax Act, 1961 it is pertinent to mention here that the AO had rejected the entire books of accounts u/s 145(3) of the Income Tax Act, 1961 and then went on to make further additions u/s 68 of the Income Tax Act, 1961 which is not correct. As regards disallowance of an amount of Rs. 12,63,307/-, being 25% of expenses on ad hoc basis, the AO after rejecting books of accounts has relied upon the same set of books for making disallowance out of the expenses claimed, which is not correct as per the judgment of the Hon'ble Punjab- Haryana High Court in the case of The Commissioner Of Income Tax vs Dulla Ram on 22 October, 2013 in which the Hon'ble High Court held: 22 October, 201 MEN "The revenue has filed an appeal, under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as, the Act) to challenge order dated 28.4.1999 passed by the Income Tax Appellate Tribunal (for short, the Tribunal), Amritsar Bench, Amritsar, whereby order dated 14.3.1990 passed by the Commissioner of Income Tax (Appeals), Bhatinda setting aside the assessment order, has been affirmed. The revenue has framed the following questions of law: '(i) Whether on the facts and in the circumstances of the case, the ITAT was right in law in sustaining the order of the CIT(A) vide which the CIT(A) deleted the addition of Rs. 1,98,295/- so made by the Assessing Officer under Section 68? (ii) Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that where flat rate for assessment is adopted after rejecting books of accounts, ITO cannot make addition on account of unexplained credit entry in books of the assessee as undisclosed income from other sources?' A perusal of the questions of law would reveal that in essence the only substantial question of law that arises is, "Whether after rejection of books of accounts, an Assessing Officer can make any further addition on account of unexplained entries treating them as undisclosed income from other sources by invoking Section 68 of the Act?" The assessee is a labour contractor. The Assessing Officer completed assessment at a total income of Rs. 2,70,992/- after rejecting the account books and applying a flat rate of 10%. The Assessing Officer also added Rs. 1,98,298/- to the income of the assessee by relying upon alleged unexplained entries reflected in the books of accounts. Aggrieved by this order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), Bathinda, who partly allowed the appeal by holding that as account books have been rejected, entries therein cannot be relied for addition to income. However, after holding as above, the Commissioner of Income Tax (Appeals) enhanced the flat rate from 10% to 12.5%.

The revenue filed an appeal whereas the respondent filed cross-objections before the Tribunal. Vide the impugned order, the Tribunal has dismissed the appeal filed by the revenue and accepted the cross-objections filed by the assessee by holding as follows: "9. As far as ground taken by the assessee in his cross objection regarding the application of rate of 12.5% by the CIT(A) against the rate of 10% applied by the A.O. concerned, in our opinion, looking into the facts that the assessee is a Labour Contractor, the CIT(A) was not fair and reasonable to apply the G.P. rate of 12.5% against the rate of 10% applied by the A.O., which was also agreed by the assessee. The D.R. has also conceded that it would be very fair and reasonable to apply the net profit rate of 10% in the case of the assessee.

10. In view of the above discussion, the ground of the assessee taken in the C.O. as well as the C.O. of the assessee succeeds and hence it is concluded that it is fair and reasonable to apply a net rate of 10% in the case of the assessee while calculating the profits. XXX 13. After going through the order of the CIT(A), we are of the considered opinion that the order of the CIT(A) does not suffer from any illegality or infirmity regarding his conclusion that the deposits as well as withdrawals of contract receipts have not been properly reflected in the books of accounts and as such no reliance can be placed on this bank account.

taken by the Revenue is hereby rejected.

15. In the result, the appeal of the Revenue, i.e. fails and the same is dismissed. However, Cross-Objection of the assessee i.e. C.O. No.83 (ASR)/1990 succeeds and the same is allowed." A perusal of the above extract reveals that the Tribunal has affirmed the order passed by the Commissioner of Income, Tax (Appeals) by holding that as account books were rejected in their entirety, entries in account books could not be relied for making additions to income. The Tribunal, however, restored the gross profit rate of 10% applied by the Assessing Officer. Counsel for the revenue submits by reference to Section 68 of the Act, that even if account books are rejected, an Assessing Officer may, where any unexplained entry appears in the account books, add the amount reflected in the entry to the income of an assessee. The mere fact that account books have been rejected in their entirety or in part cannot be construed to limit the operation of Section 68 of the Act. It is further submitted that Section 68 of the Act is a general provision applicable in all situations whether account books have or have not been rejected. The impugned orders having been passed by ignoring Section 68 of the Act, are illegal and may, therefore, be set aside.

ITO vs. Vasudev Hemrajani Counsel for the assessee, per contra, submits that Section 68 of the Act applies to situations where account books have not been rejected and no credible explanation is offered by the assessee for suspicious entries. The Assessing Officer having rejected account books and calculated income on an estimated rate of profit, no additions could be made on account of unexplained entries in the account books. In support of his contentions, counsel for the assessee relies upon Commissioner of Income Tax Versus G.K.Contractor (2009) 19 DTR (Raj) 305. We have heard counsel for the parties, perused the impugned orders and are of the firm opinion that there is no illegality or infirmity in the findings recorded by the Tribunal. An Assessing Officer may, while considering a return of income, inspect the account books and, if satisfied, that account books do not reflect the true income of an assessee, reject the same. Account books once rejected, are ruled out of consideration and cannot be pressed into service whether by the assessee or the revenue. Thus, when account books are rejected, it would follow, as a necessary corrolary, that entries in the account books whether suspicious or not cannot be relied by the revenue or the assessee. To hold otherwise, would, in essence, render account books valid for certain purposes and invalid for others, a course impermissible in law. The Assessing Officer rejected the account books in their entirety and thereafter proceeded to assess income by applying a flat rate of profit of 10%. After applying a flat rate of profit of 10%, the Assessing Officer added Rs.1,98,298/- to the income of the assessee on the basis of certain 'entries' deemed to be suspicious. The Commissioner of Income Tax (Appeals) as well as the Tribunal have rightly held that as books of accounts were rejected in their entirety, the Assessing Officer could not rely upon any entry in the books of accounts for making an addition of Rs.1,98,298/-. A bare reading of Section 68 of the Act would reveal that it would not apply to a situation where account books have not been rejected. We find no reason to differ from the opinion recorded by the Tribunal and, therefore, answer the questions of law against the revenue and in favour of the assessee. The appeal is, consequently, dismissed." In view of the factual matrix of the case, the discussion above and the above referred judgment, after rejection of books of accounts, the AO cannot make any further addition on account of unexplained entries treating them as undisclosed income from other sources by invoking Section 68 of the Income Tax Act, 1961. In view of the above, these grounds of appeal are, accordingly, allowed and the addition made by AO on this account is, hereby, deleted.

6. In the result, the appeal is allowed. In the result, the appeal is decided as above.

5. As the revenue was not satisfied with the finding so recorded by the ld. CIT(A) while deciding the appeal of the assessee, revenue has preferred the present appeal challenging the finding of the ld. CIT(A) on the technical reasons and on merits of the case. In support of the grounds so raised the ld. DR relied upon the detailed factual aspect noted in the scrutiny report and the same reads as under :

In this case, the assessee filed ITR for the AY 2020-21 on 29.12.2020 amounting to Rs. 15,53,040/-. The assessee derived income from business/profession being Adatia (je selling the perishable goods and charging commission thereon). The assessee being sold proprietor runs three commission agency viz M/s Kanhiya Lal Nenu Mal, M/s Prashant Kumar Lakhmi Chand and M/s Shri Radhey Radhey Commission Agency and earned a total commission amounting to Rs. 96,11,422/- and declared income of Rs. 19,28,051/-. During the assessment proceeding it is seen that assessee has deposited cash amounting to Rs. 8,60,03,806/- in his firm's bank account but failed to furnish details of such cash pertain. He simply stated the "he sold the crops/food grains on behalf of the framers and makes the payment to the respective framers through banking and other modes but he failed to prove the same. Further he failed to furnish cash book during the assessment proceeding. Therefore, AO add the total amount Rs 8,60,03,806/- as the income of the assessee u/s 68 of the I.T. Act. Further during the assessment proceeding it seen that assessee has claimed total expenses amounting to Rs. 77,62,673/- out of which cash expense incurred by him is Rs. 50,53,229/-. The AO issued notice to persons to whom the assessee has paid salary but no response received from the respective persons. Therefore, AO disallowed the 25% of cash expense incurred by him amounting to Rs. 12,63,307/-. Thus, AO completed assessment u/s 143(3) r.w.s. 144B of the Act on 27.09.2022 by making addition of Rs. 8,60,03,806/- u/s 68 of the Act and addition of Rs. 12,63,307/-

Aggrieved by the above order passed by the AO, the assessee filed appeal before the Ld. CIT(A). Decision of CIT(A): The CIT(A) vide order dated 11.03.2024 allowed the appeal of the assessee by holding that the assessee submitted Cash book of all the three proprietorship concerns, all the bank statements owned by the assessee, ledger account of all the expenses claimed by the assessee, Ledger account of farmers with supporting evidences, details of agriculture produce sold by the assessee on behalf of the farmers from all the concerns, receipts issued to farmers in confirmation of agriculture produce sold on their behalf, available bank details of farmers. After rejection of books of accounts, the AO cannot make any further addition on account of unexplained entries treating them as undisclosed income from other sources by invoking section 68 of the Act. With respect to disallowance of an amount of Rs. 12,63,307/-, being 25% of expenses on ad hoc basis, the CIT(A) held that the AO after rejecting books of accounts relied upon the same set of books for making disallowance out of the expenses claimed which is not correct. The decision of Id. CIT(A) is not acceptable for the following reason: The decision of Ld. CIT(A) is not acceptable on merit, as Ld. CIT(A) granted relief to the assessee on the cash book and ledger account provided to him. The Ld. CIT (A) did not call remand report from AO. Further he rejected the finding of the AO made in the assessment order. In light of the above discussion, the decision of Id. CIT(A) is not acceptable and also the tax effect in this case is above the prescribed limit as per Board's circular No.5/2024 dated 15.03.2024 for filing appeal before the Hon'ble ITAT.

Ld. DR heaving relied upon the above arguments and the fact that the ld. CIT(A) has granted the relief to the assessee without calling for the remand report from the ld. AO while deciding the appeal of the assessee.

The ld. AO has in depth analyzed the records and on each of the aspect he has given his reasoned finding and therefore, his report in the proceeding before the ld. CIT(A) is not called and therefore, the order of the ld. CIT(A) violates the principles of natural justice. The ld. CIT(A) has deleted the verify the large deposit of cash and the low income shown by the assessee.

The assessee claimed that he is acting as aadatiya but in fact based on the detailed finding recorded in the order of the ld. AO, the assessee is trader not aadatiya. Even the assessee inspite of the repeated request to supply the cash book the same was not provided as recorded at para 4.2 of the assessment order. The assessee is not making the payment to farmers but the trading firms and therefore, the claim of the assessee is incorrect on facts [ page 8 of AO ]. The assessee is paying the freight payment but the same is not debited in the profit and loss account. Moreover the payment is in violation of section 40A(3) of the Act. The bank balance reported in the ITR does not match with the bank statement placed on record. The slips issued by the assessee do not contain the name of the person on whose name the amount got debited in the bank account of the assessee. The slips furnished by the assessee do not bear the name of any of the proprietorship concern name and therefore, that slips are not reliable. As regards the contention that vehicle entered in the mandi is issued the gate pass. The said gate pass contains the vehicle no., sender’s name. In that gate pass when the sender is firm how can it be believed that it is from a farmer. The farmer cannot come from far away of 800-1000 kms. So, for upon the order of the ld. AO and prayed to sustain the addition made by the ld. AO.

This aspect of mandi tax is already referred by the ld. AO in show cause notice page 29 para 7.8. Thus, the ld. AO on the hand trying to reconcile the Mandi tax with sales made and on the other hand did not believe the sale made by the assessee and added a total cash deposited into the bank account. The assessee produced all the related books and records before the ld. AO including the cash book. Thus, the assessee has filed all most everything available on earth in his possession. To support the ld. AR of the assessee submitted that even this appeal of the revenue the assessee has filed the following documents to support the finding of the ld. CIT(A):

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(i) Cash Book of Radhey Radhey Commission Agency 1171-1273 Certificates issued from Mandi dated 23.03.2022 in the name of (ii) 1274-1275 Kanhaiyalal Nenumal and Prashant Kumar Lakhmi Chand Licenses issued by Mandi in the name of Kanhaiyalal Nenumal and (iii) 1276-1277 Prashant Kumar Lakhmi Chand (iv) Details of Proceeds from Farmers Sale 1278-1287 (v) Bank Statements duly highlighting entries of Cash deposit 1288-1408 (vi) Bank Statements duly highlighting payments to farmers 1409-1443 (vii) Ledgers of farmers alongwith details of Agriculture produce 1444-1538 Ledger of Vasudev Commission Agency in the books of Prashant Kumar (viii) 1539-1551 Lakhmichand (ix) Copyof ledger of farmers 1552-1575 11. Copy of Reply dated 10.08.2022 filed before ld.AO alongwith: 1576-1578 Party ledgers in the books of Kanhaiyalal Nenumal and Prashant Kumar (i) 1579-1620 Lakhmi Chand (ii) Mandi Tax Receipts 1621-1626 12. Copy of Reply dated 06.09.2022 filed before ld.AO alongwith: 1627 Details of Collection made by Radhey Radhey Commission Agency from (i) 1628-1941 customers (ii) Cash Sale Ledger of Kanhaiyalal Nenumal 1942-1946 (iii) Cash Sale ledger of Prashant Kumar Lakhmi Chand 1947-1951 (iv) other supporting documents 1952-1964 13. Copy of Reply dated 19.09.2022 filed before ld.AO alongwith: 1965-1979 (i) Balance Sheets of all the three proprietary concerns of assessee 1980-1992 Bank Details of Farmers and cheque images showing payments made to (ii) 1993-2046 farmers Confirmations issued by two farmers (Keshav gambhire and Ramdas (iii) 2047-2048 Seth) confirming that they have not sold produce to but through assessee (iv) Copies of farmers ledger in the books of assessee 2049-2204 (v) Mandi Tax Receipts 2205-2209

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(vi) Proceeds of farmers sale with transporters bilty 2210-2220 14. Copy of Acknowledgement dated 18.10.2022 2221-2230 15. Copy of written submission dated 18.10.2022 filed before ld. CIT(A) 2231-2258

Brief facts of the case are that the assessee is aged nearly 64 years and is assessed to tax for last more than 40 years and since inception is engaged in the business of Adatia (vkM+fr;k) of agriculture products mainly the Lemons, Green Chilies and other perishable vegetables and is having income from commission from such activity being carried out from his establishment in the Shop area allotted and situated in the Mandi premises which mandi has been developed and controlled by the KRISHI UPAJ MANDI SAMITTEE, an organization created as well as functioning under the control and management by the Government of Rajasthan with the primary objects to fulfill its commitment for a fair price in such open mandi where the products are auctioned by the Commission Agents (vkM+fr;k) in the presence of the cultivators or its representatives. The income of commission as earned is offered for taxation after claiming normal business expenses related to the earning of such income which entire of it is vouched and is in full consonance with several previous years in assessee’s own case and the expenditure incurred in such manner and based on such vouchers have been fully allowed in the past. During the year under consideration, assessee was running three entities in proprietorship with the trade name:- i) M/s Prashant Kumar Lakhmichand – operating as Adatia (Mandi License at APB 1276) ii) M/s Kanhaiya Lal Nenumal – operating as Adatia (Mandi License at APB 1277) iii) M/s Radhey Radhey Commission Agency – operating as factor (doing payment collection work) Return of Income for the year under appeal was filed on 29.12.2020 declaring total income at Rs. 15,53,040 (APB 3-7). Case of assessee was selected for scrutiny. Information and documents as sought by ld.AO were furnished by assessee from time to time and verbal submissions were also made through video conferencing. Ld. AO completed the assessment vide order dated ITO vs. Vasudev Hemrajani 27.09.2022 passed u/s 143(3) r.w.s.144B of the Income Tax Act, 1961 whereby books of accounts were rejected by invoking provisions of section 145(3) and following additions / disallowances were made: (i) Addition u/s 68 on account of Cash deposit in bank Rs.8,60,03,806/- (ii) Adhoc disallowance out of expenses Rs.12,63,307/- Further the provisions of section 115BBE were invoked on the additions made u/s 68 towards the bank deposits by treating the same as unexplained. Aggrieved of the order so passed, assessee preferred appeal, which was decided vide order dated 11.3.2024 passed in appeal No. NFAC/2019- 20/10174194, whereby appeal of assessee was allowed. Present appeal has been filed by the department against the order so passed by ld.CIT(A). With this background, detailed submission is made as under: Departmental Grounds of Appeal

No. 1 & 2: Grounds of appeal No. 1 & 2 have been raised by the department on the premise that ld. CIT(A) has erred in accepting additional evidences u/r 46A without affording adequate opportunity to the ld.AO and that since assessee could not furnish such documents during assessment proceedings, the same remained uncorroborated. In this regard, it is submitted that assessee has not furnished any single document as additional evidence and all the documents furnished before ld.CIT(A) were already furnished before ld.AO during assessment proceedings. In fact, it has not been specified in ground of appeal no. 1 & 2 as to which documents were furnished as additional evidence. However, in ground of appeal no. 3, it has been stated that ld.CIT(A) has erred in deleting the addition of Rs.8,60,03,806/- made by ld.AO u/s 68 on account of cash deposits, ignoring the fact that the assessee couldn’t furnish cash book and other relevant documentary evidences during assessment proceedings. Thus, it appears that the ground of appeal no.1 & 2 have been raised on the presumption that cash book was not submitted by assessee during assessment proceedings. Therefore, kind attention of your honours is invited to the various replies as furnished before ld.AO, whereby cash book of all the three concerns was furnished before ld.AO: Name of Concern Reply via Relevant page of which Cash Assessment order giving book was filed cognizance to such submission M/s Prashant Kumar Lakhmi Chand 5.3.2022 Page 10 para 4.6 M/s Kanhaiya Lal Nenumal 15.3.2022 Page 12 para 4.7 M/s Radhey Radhey Commission 23.3.2022 Page 21 para

7. (not

Agency specified receipt of cash book)**

** Though, ld.AO has not specifically acknowledged in the assessment order the fact of receipt of Cash book of M/s Radhey Radhey Commission Agency, however after considering reply dated 23.3.2022 as was filed by assessee in response to show cause notice, ld.AO at page 21 of assessment order has observed as under: “W.r.t., invoking of provisions of section 69A of the Income Tax Act, 1961 by relying on various case laws, it is pertinent to mention here that these were initiated on the basis of intentional delay in production of Cash Book maintained for all of his proprietorship concerns, within stipulated period, absence of which the sources of cash deposits in the bank remain unexplained. Hence, the case laws referred by the assessee in his reply w.r.t. invoking the 69A of the Income Tax Act, 1961 dealt accordingly.” Thereafter, while concluding assessment proceedings, ld.AO eventually considered all the documentary evidences furnished and made addition by invoking the provisions of section 68 as against 69A as was originally proposed. In support of the above submission, copies of acknowledgements of submission made before ld.AO, whereby cash books of all the three proprietary concerns were submitted is enclosed. It is therefore submitted that no additional evidences were furnished by assessee during appellate proceedings before ld.CIT(A). It is therefore submitted that grounds of appeal no.1 & 2 raised by the department are contrary the facts and thus deserve to be rejected. Ground of Appeal No.3 In this ground of appeal, department has challenged the action of ld.CIT(A) in deleting the addition of Rs.8,60,03,806/- made by ld.AO u/68 of the Income Tax Act on account of Cash deposited by assessee in bank account and invocation of provisions of section 115BBE of the Income Tax Act. In this regard, at the outset, brief note on the mode and manner of earning of income and conducting the business by the assessee in the form of Adatia (Commission Agent) dealing in agriculture produce is explained herein below for the sake of properly appreciating the actual operations. Basically, the activity in which assessee is engaged, is totally similar to a normal consignment agent where commission is earned on the sales made on behalf of the principal. In our case, the principal is the agriculturists who produces and brings their agriculture products for sale in the State Government owned selling hub known as Krishi Upaj Mandi (owned and established by the Rajasthan State Government) to provide a platform to the agriculturist for getting fair price of their ITO vs. Vasudev Hemrajani produce. The assessee is one of the license holder of the mandi samiti (owned and controlled by the State Government) as per which he became entitled to get one shop area in the above stated type of mandi premises from where he carried out his Adat (vkM+r) activity as per the rules and regulations formed by the State Government and implemented through the Government Officers in the relevant Mandi Samiti by observing the prescribed practice that as and when a vehicle carrying the agriculture produce enters into the premises of the mandi samiti, the same is got weighed and a prescribed gate pass is issued by the mandi samiti which contains the details of the produce brought into alongwith the details of the sender / person who brings the produce and the details of Adatia to whom such produce is being assigned for sale by auction. With this, the produce is brought to the shop of such adatia (vkM+fr;k) where such produce is unloaded from the vehicle and after making entry of such goods into the register authenticated by the Mandi Samiti, the same is sold through open auction process, where the prospective bidders bid for the produce are gathered and the successful bidder after making the payment as per the conditions between the broker (Adatia like the assessee) and the customer, take delivery of the goods (produce). It is also relevant to state that in no case any advance payment is ever made to the producer i.e. the principal of the goods and only after the successful bid and after receiving consideration from the successful bidder, payment is made to the farmer / agriculturists after deducting charges on account of freight and unloading etc. which is paid by the assessee in advance on their behalf. The mode and manner of the payment is fully dependent upon the instructions given by the principals i.e. the farmer / agriculturist. It is also a matter of fact and is to be noted that the entire process starting from the entering the produce into the mandi premises till its disposal in the shape of sale is closely supervised and controlled by the officials the Krishi Upaj Mandi Samiti, a State Government Undertaking who not only records all these transactions in their records but also periodically verifies such records from the respective shop owners. The State Government has levied Mandi Tax @1.5% on the amount of produce sold from such transaction (which was abolished by the State Government from 06.08.2019 and later the same was introduced in the name of Krishi Kalyan Cess) which is collected from the successful bidder alongwith the brokerage payable on such transaction. As submitted above, to determine the liability of Mandi Tax, books of accounts maintained by the assessee are subjected to periodical checking and cross verification on day to day basis by the Authorities of Krishi Upaj Mandi. Thus, the business model as undertaken by the assessee is in compliance of the Mandi norms and had never been doubted either by the Krishi Upaj Mandi Samiti or by the Income Tax Department at any stage in any manner in the past. As such, the assessee has an established past history where the mode and manner of carrying out his business as ADATIA is admitted and accepted by the department in the assessments completed u/s 143(3) also. During the year under appeal also, assessee had continued to undertake his business operations in similar manner and style as was carried out in the past. Thus, the profit ratio and bank deposits shown during the year were very much comparable with the past history of the case.

In order to get a visualization of the complete process being followed at Mandi right from goods brought by farmers for sale till auction and completion of sale, the same is photographed as reproduced herein below for sake of convenience:

Copy of the first page of register issued by the Mandi Samiti containing details of number of pages in the said register and each and every page is got seal and page numbering by the Mandi Samiti.

As submitted above, these mandi samitis are established by the State Government in all the cities and towns in the state of Rajasthan which are managed and controlled by the Agriculture department of the state government and having their own charter and byelaws which are available on the portal of the State Government at www.agriculture.rajasthan.gov.in and are applicable to all the organizations working in the mandi.

ITO vs. Vasudev Hemrajani As submitted above, the sales made on behalf of the farmers are subject to mandi tax which is collected from the customer alongwith the commission and from the agriculturist, an amount is charged on account of labour for unloading of agriculture produce from the truck and loading it to the vehicle of customer who is purchasing agriculture produce is borne by the customer only. Besides this the freight of the vehicle through which the produce is brought to the mandi is though paid by the adatia like the assessee, however the same is borne by the agriculturists therefore, the same is never claimed by the assessee as expenses and an entry of the payment is made in the cash book where the payment made to truck driver is recorded and debited to the account of such agriculturist who brought the produce to the shop of the assessee. In lieu of commission charged, the license holders i.e. the shop keepers like the assessee are responsible for soliciting the sale of produce and after making recovery of the produce so sold to the customers either in cash or on credit basis as per terms and conditions decided between them, made the payment to the agriculturist of the value of their produce after deducting the freight and unloading charges wherever applicable. In the case of the assessee, both in cash as well as through banking channels the payments are being made to the agriculturists. However, in most of the cases of credit consignment sales, the payments have been received in cash for which the assessee has formed a separate firm for better control and accounting. Also, the collection of consignment sales made on behalf of the farmers on credit basis have a different phenomenon of collection (which in this trade is popularly known as “Ugai”) and the firms selling the agriculture produce on behalf of farmers deputed other concerns for collection of their credit sales dues from different customers who bought the produce of the farmers. Such concerns in turn collect the dues on behalf of their principal and hand over the collections so made either in cash or through the banking mode. This process of Ugai is very familiar in this line of trade i.e. Adat business (consignment selling) of agriculture commodities and is being regularly adopted by the Brokers like the assessee working in the mandi samiti for smooth functioning of their business and for early payment to the farmers. In the case of assessee, the payment collection of credit consignment sales of M/s Prashant Kumar Lakhmichand is being done by M/s Vasudev Commission Agency (PAN: AHCPH5684G) and collection of credit consignment sales of M/s Kanhaiya Lal Nenumal is being done by M/s Radhey Radhey Commission Agency [owned by the assessee himself]. Further M/s Radhey Radhey Commission Agency is also collecting payment for other party namely M/s Gordhan Das Radha Kishan. During the course of assessment proceedings, summons were also issued u/s 133(6) to these parties, in response to which they have confirmed the facts as stated above.

However, the ld.AO failed to appreciate the entire process of working of the assessee as consignment agent engaged in the business of selling the ITO vs. Vasudev Hemrajani agriculture produce on behalf of the farmers/ agriculturists and treated the assessee as the trader solely for the reason that in some of the cases produce was sent by the farmer under a title of firm name which is a common feature where a particular farmer collects the entire produce of the village and send it for the sale in mandi, thus there is nothing abnormal or whisper of any trade activity in such kind of transactions. Further for invoking the provisions of section 145(3), ld.AO has not specifically mentioned the reason, however it appears that books have been rejected by alleging that (i) assessee is engaged in sale and purchase (trading) of agriculture produce also and (ii) there were certain discrepancies in figures of Balance Sheet as per ITR and copy of Balance Sheet furnished during the course of assessment proceedings. On this basis ld. AO has alleged that assessee might have engaged in the trading business which as not disclosed and the cash deposit in the bank account of his commission agency firm belonged to such undisclosed trading activity and accordingly treated the said cash deposit as unexplained cash credit and made the addition of entire cash deposited into bank at Rs.8,60,03,806/- u/s 68 of the Income Tax Act. While alleging so the ld. AO has failed to appreciate the fact that the bank accounts under which the said cash was deposited belonged to and pertaining the transactions carried out by the proprietorship firms of the assessee namely M/s Kanhaiya Lal Nenu Mal and M/s Prashant Kumar Lakhmi Chand where the consignment sale of more than 17.00 crores were carried out and part of the same was received in cash and duly recorded in the books of accounts maintained. Had there been any other trading business which is not disclosed that there must exits other undisclosed bank account where the cash from undisclosed business was deposited but as submitted above, the entire cash was deposited in the banks accounts regularly maintained by the assessee therefore under no circumstances such deposit could be held as unexplained. With regard to the rejection of books of accounts, basically, ld.AO has pointed out following discrepancies: 1. Assessee is engaged in sale and purchase of agriculture produce i.e. doing trading activity which in fact is not permissible; 2. Assessee, though has paid freight, the same is not claimed in profit & loss account; 3. AO has picked up one document, i.e. “Bilty” regarding receiving Nimbu from Ram Dass Seth Nimbu Wale from Akola and assumed the same as invoice normally made in the trading activity ; 4. Initially proposed to invoke provisions of section 69A in respect of Cash deposits and then dropped the same and eventually added entire cash deposits u/s 68; 5. Pointed out certain discrepancies in Balance Sheet in debtors and creditors, Bank Balances and has worked out the difference of Rs.33,11,308/- in Balance Sheet at page 44 of Assessment order, which On the above allegations/ discrepancies as stated by the ld. AO, our explanation on each of the discrepancy is as under: 1. Assessee has been a registered license holder of Krishi Upaj Mandi at Jaipur and since beginning working as Adtaia for and on behalf of the agriculturists who bring / send their produce to the Mandi for sale at best price. In this entire process, assessee is getting its commission which is duly declared in the return of income filed on year to year basis. It is thus submitted that the observations of ld.AO are contrary to the facts as assessee is never trading in agriculture commodities and is only charging commission on sale of agriculture produce on behalf of the farmers. It was submitted before ld.AO that submission of assessee deserves to be accepted in view of peculiar nature of business in which is assessee is engaged and if ld.AO had any evidence to the contrary, he was requested that the same may be shared for the necessary cross examination by the assessee and rebuttal thereon. However, no such evidence was shared. It is submitted that that the entire sales have been made by the assessee solely on Adat basis and in no case any direct sales or purchases has been carried out. As submitted above, in some cases, it had happened that a person collected the produce from the group of agriculturists and bring or sent such produce to the Mandi for sale for which such person issued its goods transfer memo only and no sale bill is generated as he never made any sale of such produce and send them to the assessee for sale at best price. When such produce is received by the assessee, assessee also sold such produce on adat basis only and the sale proceeds are paid to the sender agriculturists after making deduction of expenses relating to such sale such as transportation, unloading etc. Also in support of his business activity of Adatia, assessee submitted following documents before ld.AO alongwith other details during the course of assessment proceedings: i) License of Adatia issued by mandi owned and controlled by Rajasthan State Government (APB 1276-1277) ii) Cash book of all the three proprietorship concerns owned by the assessee (APB 890-1021, 1023-1147, 1171-1273) iii) All the bank statements owned by the assessee (APB 8-222) iv) Ledger account of all the expenses claimed by the assessee in all the three proprietorship concerns (APB 225-226 & 238-320) v) Ledger account of farmers with supporting evidences (APB 1444-1538 & 1552-1575) vi) Receipts of mandi tax deposited with the mandi samiti (APB 1621-1626) vii) Details of agriculture produce sold by the assessee on behalf of the farmers from all the concerns (APB 285-307)

ITO vs. Vasudev Hemrajani viii) Receipts issued to farmers in confirmation of agriculture produce sold on their behalf (APB 327-874) ix) Available Bank details of Farmers (APB 1993-2046). x) Proceeds of farmer’s sale voucher duly reflecting the name of the farmer vehicle No., date of transaction, nature of agriculture produce, truck freight payable by the farmers etc.(APB 2210-2220)

All the above documents so enclosed prove beyond doubt that the agriculture produce from wherever location has come for sale on adat basis in Mandi ITO vs. Vasudev Hemrajani premises at Jaipur, has received a gate pass of Mandi controlled by State Government. Therefore, it cannot be presumed that such agriculture produce is sold to the assessee more particularly when there is no invoice available in the name of assessee and the pasted image clearly reflect the bilty of the transporter containing the name of consigner and consignee and the sales of such agriculture produce is being done to a customer on adat basis and the proceeds were given to the farmer as per norms. Further in said bilty nowhere the amount of goods is mentioned. Assessee in support during the course of assessment proceedings also filed the confirmations of the senders wherein they have categorically confirmed that they are farmers and not the traders (APB 2047- 2048) however, such confirmations was doubted by the ld. AO for the sole reasons that their land holdings were not provided. In this regard it is submitted that the assessee being the consignment agent working in the Mandi formed by the state government where the produce brought by the agriculturists are being sold thus there was no occasion for the assessee for obtaining the land holding of the farmer who send/ brought the produce ion the mandi. Moreover, looking to the competition between the agents in the mandi, it is also not advisable rather against the prudent business policy to ask for the holding from the farmer which fact is grossly ignored and not appreciated by the ld. AO. Ld.AO at page 25-26 has also reproduced “Bilties” issued by Sri Balaji Transporters, and has then concluded that farmers sending goods 800-1000 kms away, which takes 2-3 days to reach the goods to destination to get better price. “….All these facts transpire that there must be a specific order to send specific quantity of specific goods to reach at the destination for which the freight has also been paid by the assessee.” In this regard, it is submitted that such observations of ld.AO are absolutely arbitrary and are not supported by any documentary evidence. On the other hand, assessee has furnished every possible document in support of his claim that assessee has received goods for making sale on behalf of consignor (farmers). Also, names, addresses of such consignors was furnished and it was requested that direct enquiry could be made from them if required, however instead of that, ld.AO simply arrived at a conclusion that assessee is a trader. It was also submitted before ld.AO that if there was any material in his possession so as to prove the assessee as trader, the same may be shared, however no such document was provided. Further it is a matter of common knowledge that in the Krishi Upaj Mandi operated by the state government, the agriculture produce form PAN India comes for the sale no matter what is the distance and nobody can compel any agriculturist to sell their produce in a particular market. It all depends upon the sweet will of the farmer who always in the search of better price coupled with the genuine person who can sell their produce without cheating them. Therefore, such observations of the ld. AO deserves to be ignored and excluded. Further, ld. AO has emphasized on the category of license issued by Mandi Samiti by observing at page 45 of the assessment order as under:

ITO vs. Vasudev Hemrajani “On this claim of the assessee, from the perusal of the copy of licenses issued by the Mandi Samiti, it is observed that one concerns of the assessee namely Kanhiya Lal Nenu Mal holds the license of ^d* oxZ nyky i.e. a broker and the concern M/s. Prashant Kumar Lakhmi Chand holds the license of la;qDr O;kikjh ^d* oxZ nyky i.e. Combined license of broker and trader.” While observing so, the ld. AO considered the licenses of Mandi which are issued on printed format and only tick mark is done while issuing it. Therefore to avoid any confusion the assessee uploaded the license cum letter issued by Mandi Samiti dated 23.03.2022 (APB 1148-1170) which were uploaded on 23.03.2022 and read as under:-

In view of above submission is amply clear that assessee has been carrying out Adat business only and was not trader.

4. The ld. AO in the show cause notice issued in March, 2022 has show caused as to why the addition of the bank deposits be not made u/s 69A and thereafter it was consciously dropped and the additions has been made u/s 68 of Income Tax Act, 1961. In this regard, at the outset, kind attention of your goodself is invited to para 4.8 page 12 of assessment order, where ld. AO has observed as under: “4.8 Accordingly, in view of the above, as per detail given above in table mentioned at para No. 4.1, net cash amounting to Rs.8,59,03,806/- had been deposited in the bank accounts of the assessee for which he could neither provide satisfactory explanation nor could substantiate with documentary evidence. Therefore, additions of Rs.8,59,03,806/- were proposed under the provisions of section 69A of the Income Tax Act, 1961, besides initiation of penalty proceedings u/s 271AAC of the Income Tax Act, 1961, vide Show Cause notice dated 19.03.2022.”

Thereafter, at para 7 page 20, ld.AO has observed that:

“7. Besides the observations given supra under para 6.1 & 6.2, all the other discrepancies noticed during the course of assessment proceedings and all the points raised by the assessee have been considered carefully and the details furnished by the assessee on 23.03.2022, i.e. after the issuance of SCN, have also been perused carefully and discussed herein as under:

W.r.t. invoking of provisions of section 69A of the Income Tax Act, 1961 by relying on various case laws, it is pertinent to mention here that these were initiated on the basis of intentional delay in production of Cash Bok maintained for all of his proprietorship concerns, within stipulated period, absence of which the sources of cash deposits in the bank remain unexplained. Hence, the case laws referred by the assessee in his reply, w.r.t. invoking the 69A of the Income Tax Act, 1961, dealt accordingly.”

Observations of ld.AO reproduced above, prove it beyond doubt that ld.AO after considering the various details and submissions furnished by assessee has agreed with the explanation of the assessee so far as applicability of provisions of section 69A of the Income Tax Act is concerned. Subsequently, ld.AO at para 8.1 page 34 of the Assessment order concluded that:

“8.1 In view of the facts stated above, the exact sources of cash deposited in the bank account maintained by the assessee remained unexplained and the provisions of section 68 of the Income tax Act, 1961 were rightfully applicable in the case of the assessee which mandates that-“where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation thereof or the explanation offered by him is not, in the opinion of the [Assessing] officer, satisfactory the sum so credited may be charges to income tax as the income of the assessee of that previous year.

Therefore, addition of rs.8,60,03,806/- were proposed under the provisions of section 68 of the Income Tax Act, 1961 for unexplained cash deposits in bank accounts, besides initiation of penalty proceedings u/s 271AAC of the Income tax Act, 1961, vide show cause notice dated 14.09.2022.” It is thus clear that conduct of ld.AO has been very casual and arbitrary. It is submitted that in the case under consideration, the elements as required to invoke deeming provision of section 68, are missing as the nature and sources of the bank deposits are verifiable from the Regular Cash Books (which has not been disputed) maintained by the assessee in his course of business and the ultimate beneficiary of these deposits are farmers of the agricultural produce only whose produce was sold by the assessee on consignment basis. As the entire bank deposits are duly recorded in the regular cash books and deposited out of cash balances available in such cash books, so these cash deposits cannot be questioned until and unless any contrary material is brought on record to disprove correctness of the Cash Book and the payments made from the bank account after deposit of cash. In fact, it is the recovery of consignment sale against which assessee has already declared the commission income which is assessed beyond doubts. In the case under consideration, ld. AO has not brought on record any evidence from the enquiries, if any made independently, which could have been done from the bankers of the assessee as well as the bankers of the beneficiary in whose account the fund has been transferred more ITO vs. Vasudev Hemrajani particularly when the details of beneficiary bankers as available with the assessee was also submitted during the course of assessment proceedings. Nor any enquires were made from the Madi Samittee or from the farmers whose details were also available with the ld. AO. From the perusal of the above, it is clear that inspite of all the material available on record the Ld. AO has brushed aside everything and has reached to a conclusion that the cash deposited is not explained and hence added the same to the total income declared without any basis.

It is submitted that table furnished above is self explanatory and from perusal of above, it is evident that the Balance Sheet figures are fully reconciled, therefore conclusion drawn by ld.AO without properly appreciating and understanding the accounting entries, deserves to be ignored and set aside. With the above, it is humbly submitted that books of accounts maintained by assessee are in accordance with accounting principles and policies and trading results declared by assessee are in consonance with industry norms and deserves to be accepted as such. With regards to addition of cash deposits of Rs.8,60,03,806/- made u/s 68 by treating the same as unexplained, at the outset it is submitted that provisions of section 68 are not applicable to the facts of the case. Ld. AO, while making the addition u/s 68 of the Income Tax Act has made various observations which all are not in parity with the actual facts and the submissions on the same is as under:- 1. At page 2 of the assessment order the ld. AO has observed that various opportunities were given to the assessee for submitting the precise details and at every occasion, the incomplete response was submitted, however, the assessee has attended the proceedings on all the dates which came to his knowledge and furthermore various documents and submissions has been uploaded on each date and the approximate number of total pages uploaded during the course of assessment proceedings on the online portal are more than 2000 and the main concern which appears from the assessment order is the understanding of the trade in which the assessee is engaged was not clear and hence the AO was inclined for submitting the already submitted details time and again inspite of going through the detailed submissions available on record. It is also an admitted fact that assessee finally submitted the copies of cash book of all the three proprietary concerns in the Month of March,22 and thereafter only passing of almost 5 months in the month of August, ld. AO has resumed the proceedings and in the meantime has failed to appreciate the cash books available with him nor any independent enquires were made though the entire details of the farmers and the other parties were submitted to him. All this clearly establish the fact that the ld.AO was bent upon to make the addition come what may.

2. That the ld. AO at page 4 and 6 of the assessment order has reproduced the details of amount received by the assessee in cash and through recovery of credits (as furnished by assessee) which is as under:-

S. Name of Proprietorship concern Sales made on Gross No. behalf of the Commission farmers earned thereon 1. M/s Kanhaiya Lal Nenumal Sales made on behalf of the farmers in Cash 1,78,95,635.74 7,15,825.43 Sales made on behalf of the farmers on Credit 4,93,62,445.75 29,61,746.79 Total 6,72,58,081.49 36,77,572.22 2. M/s Prashant Kumar Lakhmichand Sales made on behalf of the farmers in Cash 3,64,99,267.49 18,24,963.37 Sales made on behalf of the farmers on Credit 6,68,14,768.08 40,08,887.09 Total 10,33,14,035.57 58,33,850.46

From the perusal of above table, it is clear that the total sales made on behalf of the farmers in Cash which was available for deposit in Bank is 5,43,94,903.23 [1,78,95,635/- + 3,64,99,267/-] besides the receipt of cash through Ugai of credit sales through M/s Radhe Radhe Commission Agency and M/s Vasudev Commission Agency, however this vital fact has been completely ignored by ld.AO more particularly when he has not given any adverse comments on such cash receipts. However, the ld. AO has held the cash deposit of Rs. 8.60 crores as unexplained.

ITO vs. Vasudev Hemrajani 3. During the course of assessment proceedings, the ld. AO has asked to furnish the details of payments made to farmers in cash and through bank. In response the assessee vide reply dated 02.03.2022 (APB 321-323) has uploaded the entire bank accounts, which were filed earlier, duly highlighting the entries of cash deposit and the payments made to farmers from the bank accounts of the assessee and AO himself has observed at page 28 to 30 that various payments has been made to farmers and their names are also mentioned in the assessment order. However, on his own whims and fancies has held the deposits as made out of some other trading business though he himself has accepted that such deposits were utilized for making payments to the farmers.

(a) The Commission earned is accepted as such, meaning thereby the cash deposited in the bank account, is accepted to be out of sale made by assessee in the capacity of “Adatiya”; (b) The cash deposit has been added under the head “Income from Other Sources” on the same deposits, on which commission has been declared.

With this background, addition of Rs.8,60,03,806/- made by ld.AO was challenged before ld.CIT(A) on following grounds:

Ld.AO firstly proposed addition of cash deposits made u/s 69A of the Income Tax Act and after considering the submission of the assessee was satisfied with the explanation that deposits in bank were not taxable u/s 69A of the Act and vide next show cause notice proposed addition u/s 68 of the Income tax Act and eventually made addition u/s 68. In this regard, at the outset provisions of section 68 are reproduced for ready reference: “68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year : Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by ITO vs. Vasudev Hemrajani whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless— (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB)of section 10.”

From the perusal of the provisions of law, it is evident that Act has laid down two fundamental criteria for considering an income as cash credits u/s 68 : a. There has to be a credit entry in the books of accounts of the assessee, b. The credit entry remains unexplained on the part of the assessee or the explanation offered by the assessee is not up to the satisfaction of the AO.

In the appellant’s case the addition of Rs.8,60,03,806/- is made by alleging cash deposits in bank as “Income from other sources”. At this juncture, as submitted above, it is reiterated that the sale made on behalf of farmers is either (i) Cash or (ii) on Credit. In case of cash sales, net consideration after reducing freight and unloading charges is given to seller, whereas in case of credit sales, assessee charges commission @ 6% for providing credit facility to the buyer. Basically, it is not possible for farmers coming from outside places to revisit/make regular follow ups for recovery of sale consideration (in case of credit sales). On the other hand, assessee is a local person and has specifically engaged agencies for recovery (ugai) in case of credit sales. Also, not only assessee, but all the adatias operating in Mandi follow this practice. Accordingly, cash deposits made in bank account represent the amount recovered from buyers on behalf of farmers whose produce has been sold on credit, by assessee in Mandi.

Under the circumstances, the addition made by the ld. AO u/s 68, fails the very first criteria of there being a credit entry in the books of accounts laid down under the Act.

It was also submitted before ld.CIT(A) that ld.AO on one hand, accepted the commission income of Rs. 95,11,422/- declared by assessee (on Farmer’s Sale) as such which was received on the gross consignment sales of Rs. 17,05,72,116/- i.e. without any variation and on the other hand made addition of Rs.8,60,03,806/- being cash received out of such sales (i.e. Sales on which commission was earned). In other words, assessee himself has declared gross Commission income of Rs.95,11,422/- from the consignment Sale of agriculture produce worth of Rs.17,05,72,116/- on behalf of farmers, which has been accepted as such. Then, ld.AO simply presumed that assessee was engaged in the trading of agriculture produce which was not disclosed and the cash deposit in the bank accounts is ITO vs. Vasudev Hemrajani out of such undisclosed trading business. To substantiate this, ld.AO pointed out “Bilty” issued by transporter for consignment of agriculture produce, which was in the name of assessee (though there was no invoice issued in the name of assessee) as reproduced on page 7 and 8 of assessment order and a details submission on the same has already been made herein above. Firstly, “Bilty” is always issued in the name of recipient and assessee, being registered Adatiya in Mandi Samiti was authorized to receive goods for sale. Ld.AO could have verified this fact from the record of Mandi Samiti, which has not been done It is thus submitted that addition made by ld.AO amounts to double addition which is against the principle of taxation. It is further submitted that ld. AO grossly erred in not appreciating the fact that only “Real Income” can be taxed and moreover in the case of assesse, ld. AO miserably failed to understand the facts that in the business of Adatia (vkM+fr;k) only commission income can be taxed. Ld.AO has neither rebutted the submission of the assessee that cash deposits represent sale consideration received by assessee on behalf of farmers nor brought any material on record by making any independent enquiry that assessee has indulged into the trading activity which was not disclosed and the cash deposited in the bank account is over and above the cash receipts from his regular ADAT business. Your honours would appreciate that ld.AO by accepting commission income, has accepted that assessee has made sale on behalf of farmers, and has thus received money their behalf. In fact, ld.AO is vested with power to make direct enquiries and if he had any doubts, notices could have been issued Mandi Samiti to cross verify the Sales or to bankers to confirm that payments were made to farmers and subsequent deposits were on account of their sale consideration. In this regard the reliance is placed on the decision of hon’ble Supreme court in the case of Orissa Corporation reported in 155 ITR at 159 wherein it has been held that AO has power to issue summons to make enquires if he has any doubts about the credits in the books of accounts which in the present case has filed to do. Section 5 of the Income Tax Act, 1961 provides for scope of income chargeable to tax and to the extent relevant to the issue it reads: "accrues or arises or is deemed to accrue or arise to him . . . .". What is chargeable to tax is income, which has accrued or arisen to a person. The concept of accrual was considered in E. D. Sassoon & Co. v. CIT, (1954) 26 ITR 27 (SC) and it was held: "What is sought to be taxed must be income and it cannot be taxed unless it has arrived at a stage when it can be called income". In the present case assessee has earned commission income in respect of Sales made on behalf of farmers, which has already been taxed. In this regard reliance is placed on the following: The Hon’ble Supreme Court in case of CIT V/s. Shoorji Vallabhdas and Co.[1962] 046 ITR 0144 has held as under:. “Income-tax is a levy on income. Though the Income-tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt, yet the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income", which does not materialise. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account.” The Hon’ble Karnataka High Court in case of CIT (Asst.) V/s. Industrial Credit and Development Syndicate Ltd.[2006] 285 ITR 0310 has held that only real income alone is taxable. The relevant observations of the Hon’ble court are as under: Income-tax—General principles--Income--Definition--Inclusive--But to be construed by natural connotation--Real income alone taxable. The inclusive definition of the word “income” in section 2(24) of the Income-tax Act, 1961 adds several artificial categories to the concept of income, but on that account, the expression does not lose its natural connotation. It has to be construed as comprehending only such things which are income according to the natural import of the term. It is the income which has really accrued or arisen to the assessee that is taxable. Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. When in reality there is neither accrual nor receipt of income by the assessee, even though an entry to that effect might in certain circumstances have been made in the books of account, it would not constitute income for the purpose of levy of tax. A rebate obtained by the purchaser or remission of debt by a creditor would not result in the creation of income in the hands of the purchaser or debtor. 225 ITR 746 Godhara Electricity Co. Vs. CIT (SC) Income tax is a levy on income. No doubt, the Income Tax Act takes into account two points of time at which the liability to tax is attracted, viz., the accrual of the income or its receipt; but the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made about a hypothetical income, which does not materialize. In view of above, it is submitted that in the present case, ld.AO has taxed entire cash deposits in bank by ignoring the fact that actual income earned by virtue of such cash deposits is “Commission” which has already suffered tax. Such an act of the ld. AO is taxation of an income twice. It is a settled proposition of law that an income cannot be taxed twice unless otherwise expressly provided. Hon’ble Supreme court in the case of Laxmipat Singhania v. CIT (72 ITR 291) held that “Taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over the payment of tax on the taxpayer unless the language of the statute is so compellingly certain that the court has no other alternative than to accept it.”

Hon’ble Apex court in case of Jain Brothers and Others vs. Union of India and Others (1970) 77 ITR 107 (SC), has held as under:- “ It is not disputed that there can be double taxation if the legislature has distinctly enacted it. It is only when there are general words of taxation and they have to be interpreted, they cannot be so interpreted as to tax the subject twice over to the same tax….. If any double taxation is involved, the Legislature itself has, in express words, sanctioned it. It is not open to any one thereafter to invoke the general principles that the subject cannot be taxed twice over." The above referred cases make it clear that there is no prohibition as such on double taxation provided that the legislature contains a special provision in this regard. Now, the only question remains to be decided is whether in fact there is a specific provision for including the income earned from the Sikkim lottery ticket prior to 01.04.1990 and after 1975, in the income-tax return or not. We have gone through the relevant provisions but there seems to be no such provision in the IT Act wherein a specific provision has been made by the legislature for including such an income by an assessee from lottery ticket. In the absence of any such provision, the assessee in the present case cannot be subjected to double taxation. Furthermore, a taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. So, it is clear enough that the income in the present case is taxable only under one law. By virtue of clause (k) to Article 371F of the Constitution which starts with a non-obstante clause, it would be clear that only the Sikkim Regulations on Income-tax would be applicable in the present case. Therefore, the income cannot be brought to tax any further by applying the rates of the IT Act. In view of the above, it is submitted that the exorbitant addition of Rs.8,60,03,806/- made u/s 68 of the Act is legally defective and thus bad in law and after considering the submission made by assessee and evidences adduced, appeal of assessee stood allowed by ld.CIT(A).

It is submitted before your honours also that such illogical and mechanical addition of cash deposits made by the ld. AO is bad in law and contrary to the settled legal position by the courts that addition u/s 68 can only be made when there is a credit entry in the books of accounts and the assessee fails to explain that credit entry and thus any addition of the amount not being a credit entry in the books of accounts has been rightly deleted by ld.CIT(A) more particularly when such deposits is on account of sales made, commission on which is not disputed.

In the circumstances, it is humbly prayed that the addition of Rs. 8,60,03,806/- made by ld.AO u/s 68 by holding the cash deposit in bank as unexplained and also the invocation of provisions of section 115BBE are not applicable to the facts of the case and has been rightly deleted by ld.CIT(A) and order so passed deserves to be upheld.

Departmental Ground of Appeal No.4:

ITO vs. Vasudev Hemrajani In this ground of appeal

, department has challenged the action of ld.CIT(A) in deleting the disallowance of Rs.12,63,307/- made by ld.AO being 25% of expenses on ad hoc basis. In this regard, at the outset it is submitted that ld.AO after rejecting books of accounts has relied upon the same set of books for making disallowance out of the expenses claimed, which is not permissible. With regard to the disallowance made, it is submitted that the assessee has claimed following expenditures in the Profit & Loss Account of respective firms: S. Name of firm Expenses No. claimed 1. M/s Prashant Kumar Lakhmi Chand 45,96,083.00 2. M/s Kanhaiya Lal Nenumal 30,19,210.00 3. M/s Radhey Radhey Commission Agency 1,47,380.00 77,62,673.00

The assessee as mentioned above, is being Adatias and major expense is being claimed on account of salary paid to his employees for which assessee has submitted the precise details of the recipients such as their name, Aadhar No., amount paid and their designation alongwith their individual ledger account containing the precise details of payment made. It is submitted that during the course of assessment proceedings, ld.AO had issued notices u/s 133(6) to the persons to whom salary has been paid but they remained un-complied and only one of them has reverted that he was in employment somewhere else however, has not submitted anything else like Salary Certificate etc. and has further informed that he was in employment with the assessee prior to this year and after this year also which rather proves that he was under employment with the assessee in the year under consideration. Also, the persons to whom salary is being paid are not techno friendly and is not having legal counsels to look after their respective income tax login alongwith their mails and rather they are simple accountant, salesmen, loaders etc. which are earning their livelihood from the employment. Further the fact that they have provided services was neither doubted nor can be denied looking to the volume of business carried out by the assessee where the total consignment sale of more than 17.00 crores was taken place in the entire year which could not be possible without the help of manpower. Further except the salary expenses, no doubts were raised on the other expenses claimed by the assessee thus disallowance has been made without pointing out any specific defect in the same.

In the circumstances it is humbly submitted that the expenditure so claimed in the Profit & Loss Account are most reasonable and genuine and have been rightly deleted by ld.CIT(A), which order deserves to be upheld. In the last, to sum up the entire arguments taken for all the grounds of appeal are tabulated as under: Issue ALLEGATION of AO Our submission Application of Assessee is a trader Assessee is working as Adatia (vkM+fr;k) section 145(3) under the license granted by Krishi Upaj Mandi created and controlled by State Government and make sale by auction of the agriculture produce belonging to the cultivators. The products are like lemon, green chillis brought by farmers on consignment sale basis and having commission income from the transaction. Goods sent by It is common practice that a farmer collect the farmer under firm produce of few cultivators and send it to the name and through mandi for sale by bidding on consignment invoice for sale of basis. Many a times and for the sake of clear goods identification such collecting farmers utilize a title name that does not change either the identity of the cultivator or the collecting farmer bringing consolidated agriculture produce for bidding. The Bilty send alongwith the produce is considered as the invoice which is a total wrongful appreciation of the facts on record and the documents in hand. Since the assessee acts as Adatia (vkM+fr;k), the Freight charges paid has not been freight charges are always to be borne by the claimed as principals and the same is deducted by the expenditure though assessee from the total amount payable to the recorded in the principals thus there arises no occasion to books of accounts claim such expenditure though the same are recorded in the books of accounts and thereafter it is squared up by deducting the same from the total amount remaining payable to the principals. It needs to be appreciated that no such expenditure has been claimed by the assessee in its Profit & Loss Account.

Difference in the This is an unfounded observation as the entire figure mentioned in reconciliation was filed during the assessment the Balance Sheet proceedings. Since there was no difference, filled in ITR and as nothing could be alleged on this count. submitted during the course of assessment The debit balance of creditor account is shown proceedings as minus figure in the list of creditor likewise the credit balance of the debtor is also shown as negative in the list of debtors which is alleged by AO as contrary to accounting principles. For making The assessee is The assessee has auctioned the agriculture addition of having undisclosed produce belonging to the principals for over Rs. Rs. business of trading 17.00 crores and such proceeds have been 860,03,806/- in agriculture remitted to the principals under proper and day u/s 68 for produce and the to day basis recording in the regular books of bank deposits bank deposits are accounts. In the event of the credit allowed to unexplained receipts the bidders the bidder might opt to pay in cash of such undisclosed or through cheque in the name of assessee business Adatia which is an accepted trade practice PAN India and anybody understanding the principal – agent relationship would understand the age old concept prevalent in the country thus there is no room to doubt the credits in the bank account duly supported by regular books of accounts. The AO has totally brushed aside the matching principal of accounting and has miserably failed to point out a single transaction emanating into undisclosed sales, least that the commission earned on such realization on behalf of the principal have been brought to tax meaning thereby that the entire collection on behalf of the principal stands accepted by the AO. The entire exercise is nothing but a flight of imagination and further based on no evidence on record thus the same deserves to be held illegal and untenable. Adhoc 25% of the According to the AO, out of the total expenses disallowance expenses incurred in claimed at Rs. 77,62,673/- expenses of Rs. out of cash were 50,53,229/- were incurred in cash. Total expense disallowed mainly for expenses towards salary was of Rs. the reason that 38,46,000/- out of which Rs. 12,30,775/- was summons issued u/s through banking channels. The expenses 133(6) to the incurred are in consonance with the past employees were history and the volume of business undertaken remained un- by the assessee. With regard to salary complied with. expenses, most of the employees are having income below taxable limits and not filing return, therefore, were not aware of any summons issued to them. One of them made reply and accepted the employment with the assessee in past as presently he is not working with assessee. Except this no other instance is pointed out before making adhoc disallowance.

In view of above, it is submitted that ld. CIT(A) has decided the appeal after considering all the documentary evidences furnished by assessee and evidences adduced, which order may please be upheld.”

The ld. AR vehemently opposed the action of the ld. AO making the addition of the whole of the sum deposited into the bank account stating that on the one hand ld. AO ask the assessee to reconcile the sale with mandi tax and pin point the difference in sale and on the other hand make the addition of the whole cash deposited into the bank account as and has not appreciated the correct facts placed on record. The assessee has nothing to do with the payment of the freight as the same is to be born by the seller of the goods. Even the ld. AO has dropped the proposal of making that disallowance as per provision of section 40A(3) of the Act as proposed in the draft assessment order. Based on these arguments the ld.

AR of the assessee supported the order of the ld. CIT(A).

As contended by the assessee he is aged 64 years and is assessed to tax for last more than 40 years. Since inception he is engaged in the business of Aadatia (vkM+fr;k) of agriculture products mainly the Lemons, Green Chilies and other perishable vegetables and is having income from commission from such activity being carried out from his establishment in the Shop area allotted and situated in the Mandi premises which mandi has an organization created as well as functioning under the control and management by the Government of Rajasthan with the primary objects to fulfill its commitment for a fair price in such open mandi where the products are auctioned by the Commission Agents (vkM+fr;k) in the presence of the cultivators or its representatives. The income of commission as earned is offered for taxation after claiming normal business expenses related to the earning of such income which entire of it is vouched and is in full consonance with several previous years in assessee’s own case and the expenditure incurred in such manner and based on such vouchers have been fully allowed in the past. During the year under consideration, assessee was running three entities in proprietorship with the trade name:-

I. M/s Prashant Kumar Lakhmichand – operating as Adatia (Mandi License at APB 1276) II. M/s Kanhaiya Lal Nenumal – operating as Adatia (Mandi License at APB 1277) III. M/s Radhey Radhey Commission Agency – operating as factor (doing payment collection work)

Against the various notices so issued by the National E Assessment Unit [ NeAC / ld. AO ] information and documents as sought were furnished by through video conferencing as provided by the NeAC.

Ld. AO completed the assessment vide order dated 27.09.2022 passed u/s 143(3) r.w.s.144B of the Income Tax Act, 1961 whereby books of accounts were rejected by invoking provisions of section 145(3) and following additions / disallowances were made:

I. Addition u/s 68 on account of Cash deposit in bank Rs.8,60,03,806/- II. Adhoc disallowance out of expenses Rs. 12,63,307/-

Aggrieved from the order so passed, assessee preferred appeal, which was decided vide order dated 11.3.2024 passed in appeal No.

NFAC/2019-20/10174194, whereby appeal of assessee was allowed.

Present appeal has been filed by the revenue challenging the finding of the ld. CIT(A). While doing so the revenue has effectively taken 3 grounds of the appeal.

The paper book has been filed by the assessee well in advance on 28.06.2024 and the matter was heard on 30.07.2024. In the meantime, the ld. AO did not challenge the certification made by the assessee that all the records produced, were before the ld. AO. Why we write these dates because the assessee has specifically made certification on the detailed paper book. Even the ld. CIT(A) vide para 4 of this order specifically mentioned that “During the course of appellate proceedings, no Additional Evidence was filed by the appellant.” Since that is the dispute the ld. AO through the ld. DR did not pinpoint which are the records which were discussed and relied on by the ld. CIT(A) were not before him.

The bench noted from the written submission in the form of Scrutiny report filed that no wherein that it is stated which part of the ld. CIT(A) deals with that the additional evidence produced by the assessee. The bench also noted that the ld. AO after considering the cash book so produced and other records pinpointed allegation as discussed in the body of the order.

Not only that after considering the books of account supported by the provision of section 145(3) of the Act. As regards the contention of the fact that the assessee has not produced any single document as additional evidence, and all the documents furnished before ld. CIT(A) were already furnished before ld.AO. In fact, it has not been specified in grounds of appeal no. 1 & 2 as to which documents were furnished as additional evidence. But as is evident from the ground no. 3, raised by the revenue wherein it has been contended that ld. CIT(A) has erred in deleting the addition of Rs.8,60,03,806/- made by ld.AO u/s 68 on account of cash deposits, ignoring the fact that the assessee couldn’t furnish cash book and other relevant documentary evidence during assessment proceedings.

Thus, the ground of appeal no.1 & 2 have been raised on the presumption that cash book was not submitted by assessee during assessment proceedings but in fact the same has been submitted. The bench noted that cash book of all three concerns were furnished before ld.AO as detailed and appears from the records:

Name of Concern Reply via which Relevant page of Cash book was Assessment order filed giving cognizance to such submission M/s Prashant Kumar Lakhmi Chand 5.3.2022 Page 10 para 4.6 As regards the contention of the revenue that the assessee has not submitted the cash book of M/s. Radehy Radhey Commission Agency the ld. AR invited our attention that though, ld.AO has not specifically acknowledged that aspect of the matter in the assessment order but in fact Cash book of M/s Radhey Radhey Commission Agency were submitted on 23.3.2022 and after considering reply dated 23.3.2022 as was filed by assessee in response to show cause notice, ld.AO at page 21 of assessment order ld. AO observed that;

“W.r.t., invoking of provisions of section 69A of the Income Tax Act, 1961 by relying on various case laws, it is pertinent to mention here that these were initiated on the basis of intentional delay in production of Cash Book maintained for all of his proprietorship concerns, within stipulated period, absence of which the sources of cash deposits in the bank remain unexplained. Hence, the case laws referred by the assessee in his reply w.r.t. invoking the 69A of the Income Tax Act, 1961 dealt accordingly.”

Thereafter, while concluding assessment proceedings, ld.AO eventually considered all the documentary evidence furnished and made addition by invoking the provisions of section 68 as against 69A as was originally proposed. In support of the above submission, copies of books of all the three proprietary concerns were submitted is placed on record. The ld. AO though the ld. DR did not controvert this aspect of the matter and therefore, based on the material placed on record it is very much clear that no additional evidence was furnished by assessee during appellate proceedings before ld. CIT(A). Based on these observations ground no. 1 & 2 raised by the revenue has no leg to stand and thereby the same are dismissed.

Aggrieved from that finding of the ld. CIT(A) the assessee the revenue has challenged that finding contending that ld. CIT(A) has errned in directing to delete the addition of Rs. 8,60,03,806/- ignoring the fact that the assessee could not furnish the copy of the cash book and other relevant documentary evidence. On this aspect of the matter the bench has already based on the evidence placed on record while dealing with the ground no. 1 & 2 of the revenue in para 10 held that the assessee has submitted the cash book of all three proprietary concern and therefore, the contention raised by the revenue has no merits. So far as the finding of the ld. AO with that of the ld. CIT(A) the bench noted that on the hand ld. AO trying to match the mandi tax with the sales recorded by the assessee and on the other hand considered the whole cash deposited into the bank account as unexplained credit. The fact that the assessee has produced cash book of all three concerns is evident from the finding so record at para 10 above and the other issue that has been raised by the ld. AO we note that the assessee is earning income as Adatia (Commission Agent) dealing similar to a normal consignment agent where commission is earned on the sales made on behalf of the principal. Whereas in the case of hand the principal is the agriculturists who produces and brings their agriculture products for sale in the State Government owned selling hub known as Krishi Upaj Mandi (owned and established by the Rajasthan State Government) to provide a platform to the agriculturist for getting fair price of their produce.

The assessee is one of the license holder of the mandi samiti (owned and controlled by the State Government) as per which he became entitled to get one shop area in the above stated type of mandi premises from where he carried out his Adat activity as per the rules and regulations formed by the State Government and implemented through the Government Officers in the relevant Mandi Samiti by observing the prescribed practice that as and when a vehicle carrying the agriculture produce enters into the premises of the mandi samiti, the same measured in terms of weight and nature of goods and thereafter prescribed gate pass is issued by the mandi samiti which contains the details of the produce brought into along with the details of the sender / person who brings the produce and the details of Adatia to whom such produce is being assigned adatia where such produce is unloaded from the vehicle and after making entry of such goods into the register authenticated by the Mandi Samiti, the same is sold through open auction process, where the prospective bidders bid for the produce are gathered and the successful bidder after making the payment as per the conditions between the broker (Adatia like the assessee) and the customer, take delivery of the goods (produce). It is also relevant to state that in no case any advance payment is ever made to the producer i.e. the principal of the goods and only after the successful bid and after receiving consideration from the successful bidder, payment is made to the farmer / agriculturists after deducting charges on account of freight and unloading etc. which is paid by the assessee in advance on their behalf. The mode and manner of the payment is fully dependent upon the instructions given by the principals i.e. the farmer / agriculturist. It is also a matter of fact and is to be noted that the entire process starting from the entering the produce into the mandi premises till its disposal in the shape of sale is closely supervised and controlled by the officials the Krishi Upaj Mandi Samiti, a State Government Undertaking who not only records all these transactions in their records but also periodically verifies such records from the respective licensed holder. The State Government also transaction (which was abolished by the State Government from 06.08.2019 and later the same was introduced in the name of Krishi Kalyan Cess) which is collected from the successful bidder along with the brokerage payable on such transaction. As submitted above, to determine the liability of Mandi Tax, books of accounts maintained by the assessee are subjected to periodical checking and cross verification on day to day basis by the Authorities of Krishi Upaj Mandi.

Thus, the business model as undertaken by the assessee is in compliance of the Mandi norms and had never been doubted either by the Krishi Upaj Mandi Samiti or by the Income Tax Department at any stage in any manner in the past.

As such, the assessee has an established past history where the mode and manner of carrying out his business as ADATIA is admitted and accepted by the department in the assessments completed u/s 143(3) also.

During the year under appeal also, assessee had continued to undertake his business operations in similar manner and style as was carried out in the past. Thus, the profit ratio and bank deposits shown during the year were very much comparable with the history of the case. The assessee to get a visualization of the complete process being followed at Mandi right the same was demonstrated by placing on record the relevant photographs.

The sales made on behalf of the farmers are subject to mandi tax which is collected from the customer along with the commission and from the agriculturist, an amount is charged on account of labour for unloading of agriculture produce from the truck and loading it to the vehicle of customer who is purchasing agriculture produce is borne by the customer only. Besides this the freight of the vehicle through which the produce is brought to the mandi is though paid by the adatia like the assessee, however the same is borne by the agriculturists therefore, the same is never claimed by the assessee as expenses and an entry of the payment is made in the cash book where the payment made to truck driver is recorded and debited to the account of such agriculturist who brought the produce to the shop of the assessee. In lieu of commission charged, the license holders i.e. the shop keepers like the assessee are responsible for soliciting the sale of produce and after making recovery of the produce so sold to the customers either in cash or on credit basis as per terms and conditions decided between them, payment to the agriculturist of the value of their produce after deducting the freight and unloading charges wherever banking channels the payments are being made to the agriculturists. In the case of assessee, the payment collection of credit consignment sales of M/s Prashant Kumar Lakhmichand is being done by M/s Vasudev Commission Agency (PAN: AHCPH5684G) and collection of credit consignment sales of M/s Kanhaiya Lal Nenumal is being done by M/s Radhey Radhey Commission Agency [owned by the assessee himself].

Further M/s Radhey Radhey Commission Agency is also collecting payment for other party namely M/s Gordhan Das Radha Kishan. During the course of assessment proceedings, summons were also issued u/s 133(6) to these parties, in response to which they have confirmed the facts.

However, the ld.AO failed to appreciate the entire process of working of the assessee as consignment agent engaged in the business of selling the agriculture produce on behalf of the farmers/ agriculturists and treated the assessee as the trader solely for the reason that in some of the cases produce was sent by the farmer under a title of firm name which is a common feature where a particular farmer collects the entire produce of the village and send it for the sale in mandi, thus there is nothing abnormal or whisper of any trade activity in such kind of transactions. Further for invoking the provisions of section 145(3), ld.AO has not specifically by alleging that (i) assessee is engaged in sale and purchase (trading) of agriculture produce also and (ii) there were certain discrepancies in figures of Balance Sheet as per ITR and copy of Balance Sheet furnished during the course of assessment proceedings. On this basis ld. AO has alleged that assessee might have engaged in the trading business which as not disclosed and the cash deposit in the bank account of his commission agency firm belonged to such undisclosed trading activity and accordingly treated the said cash deposit as unexplained cash credit and made the addition of entire cash deposited into bank at Rs.8,60,03,806/- u/s 68 of the Income Tax Act. While alleging so the ld. AO has failed to appreciate the fact that the bank accounts under which the said cash was deposited belonged to and pertaining the transactions carried out by the proprietorship firms of the assessee namely M/s Kanhaiya Lal Nenu Mal and M/s Prashant Kumar Lakhmi Chand where the consignment sale of more than 17.00 crores were carried out and part of the same was received in cash and duly recorded in the books of accounts maintained. The entire cash was deposited in the bank accounts regularly maintained by the assessee therefore under no circumstances such deposit could be held unexplained. made u/s 68 by treating the same as unexplained cannot be made as the assessee has submitted the cash book all the three concerns and the cash so deposited into the bank account is duly reflected in the books of account. The assessee has explained the source of this cash deposit. We also note that the ld. AO at page 4 and 6 of the assessment order has reproduced the details of amount received by the assessee in cash and through recovery of credits (as furnished by assessee) and same is reproduced here in below:-

S. Name of Proprietorship concern Sales made on Gross No. behalf of the Commission farmers earned thereon 1. M/s Kanhaiya Lal Nenumal Sales made on behalf of the farmers in Cash 1,78,95,635.74 7,15,825.43 Sales made on behalf of the farmers on Credit 4,93,62,445.75 29,61,746.79 Total 6,72,58,081.49 36,77,572.22 2. M/s Prashant Kumar Lakhmichand Sales made on behalf of the farmers in Cash 3,64,99,267.49 18,24,963.37 Sales made on behalf of the farmers on Credit 6,68,14,768.08 40,08,887.09 Total 10,33,14,035.57 58,33,850.46

Thus, even on these details it is very much clear that the total sales made on behalf of the farmers in Cash which was available for deposit in of cash through Ugai of credit sales through M/s Radhe Radhe Commission Agency and M/s Vasudev Commission Agency, however this fact has been ignored by ld.AO more particularly when he has not given any adverse comments on such cash receipts.

During assessment proceedings, the ld. AO has asked to furnish the details of payments made to farmers in cash and through bank. In response the assessee vide reply dated 02.03.2022 (APB 321-323) has uploaded the entire bank accounts, which were filed earlier, duly highlighting the entries of cash deposit and the payments made to farmers from the bank accounts of the assessee and AO himself has observed at page 28 to 30 that various payments has been made to farmers and their names are also mentioned in the assessment order. However, on his own whims and fancies has held the deposits as made out of some other trading business though he himself has accepted that such deposits were utilized for making payments to the farmers.

The bench also noted that the the Commission earned is accepted as such, meaning thereby the cash deposited in the bank account, is accepted to be out of sale made by assessee in the capacity of “Adatiya”. The cash the same deposits, on which commission has been declared.

The ld. CIT(A) considering the provision of section 68 of the Act which lay down two fundamental criteria for considering an income as cash credits u/s 68 : a) There has to be a credit entry in the books of accounts of the assessee, b) The credit entry remains unexplained on the part of the assessee or the explanation offered by the assessee is not up to the satisfaction of the AO.

In the appellant’s case the addition of Rs.8,60,03,806/- is made by alleging cash deposits in bank as “Income from other sources”. At this juncture, as submitted above, it is reiterated that the sale made on behalf of farmers is either (i) Cash or (ii) on Credit. In case of cash sales, net consideration after reducing freight and unloading charges is given to seller, whereas in case of credit sales, assessee charges commission @ 6% for providing credit facility to the buyer. Basically, it is not possible for recovery of sale consideration (in case of credit sales).

On the other hand, assessee is a local person and has specifically engaged agencies for recovery (ugai) in case of credit sales. Also, not only assessee, but all the adatias operating in Mandi follow this practice.

Accordingly, cash deposits made in bank account represent the amount recovered from buyers on behalf of farmers whose produce has been sold on credit, by assessee in Mandi. Under the circumstances, the addition made by the ld. AO u/s 68, fails the very first criteria of there being a credit entry in the books of accounts laid down under the Act.

It was also submitted before ld. CIT(A) that ld.AO on one hand, accepted the commission income of Rs. 95,11,422/- declared by assessee (on Farmer’s Sale) as such which was received on the gross consignment sales of Rs. 17,05,72,116/- i.e. without any variation and on the other hand made addition of Rs.8,60,03,806/- being cash received out of such sales (i.e. Sales on which commission was earned). In other words, assessee himself has declared gross Commission income of Rs.95,11,422/- from the consignment Sale of agriculture produce worth of Rs.17,05,72,116/- on behalf of farmers, which has been accepted as such. Then, ld.AO simply presumed that assessee was engaged in the trading of agriculture produce of such undisclosed trading business. To substantiate this, ld.AO pointed out “Bilty” issued by transporter for consignment of agriculture produce, which was in the name of assessee (though there was no invoice issued in the name of assessee) as reproduced on page 7 and 8 of assessment order and a details submission on the same has already been made.

Firstly, “Bilty” is always issued in the name of recipient and assessee, being registered Adatiya in Mandi Samiti was authorized to receive goods for sale. Ld.AO could have verified this fact from the record of Mandi Samiti, which has not been done It is thus submitted that addition made by ld.AO amounts to double addition which is against the principle of taxation. It is further submitted that ld. AO grossly erred in not appreciating the fact that only “Real Income” can be taxed and moreover in the case of assesse, ld. AO miserably failed to understand the facts that in the business of Adatia only commission income can be taxed. Ld.AO has neither rebutted the submission of the assessee that cash deposits represent sale consideration received by assessee on behalf of farmers nor brought any material on record by making any independent enquiry that assessee has indulged into the trading activity which was not disclosed and the cash deposited in the bank account is over and above the cash receipts from his of money their behalf is incidental. In fact, ld.AO is vested with power to make direct enquiries and if he had any doubts, notices could have been issued Mandi Samiti to cross verify the Sales or to bankers to confirm that payments were made to farmers and subsequent deposits were on account of their sale consideration.

Based on these discussion so recorded and ongoing through the detailed order of the ld. CIT(A) we see no infirmity in the finding of the ld.

CIT(A) while deleting the addition of Rs. 8,60,03,806/- in the hands of the assessee. In the light of these discussion ground no. 3 raised by the revenue stands dismissed.

Revenue, while challenging that action contended that the ld. CIT(A) failed to provide the justification with supporting evidence while directing to delete that addition. the expenses in three concerns as detailed here in below :

S. No. Name of firm Expenses claimed 1 M/s Prashant Kumar Lakhmi Chand 45,96,083.00 2 M/s Kanhaiya Lal Nenumal 30,19,210.00 3 M/s Radhey Radhey Commission Agency 1,47,380.00 77,62,673.00

The assessee as mentioned above, is being Adatias and major expense is being claimed on account of salary paid to his employees for which assessee has submitted the precise details of the recipients such as their name, Aadhar No., amount paid and their designation along with their individual ledger account containing the precise details of payment made [ paper book page 227 ]. We note that during the course of assessment proceedings, ld. AO had issued notices u/s 133(6) to the persons to whom salary has been paid but they remained un-complied and only one of them has reverted that he was in employment somewhere else however, has not submitted anything else like Salary Certificate etc. and has further informed that he was in employment with the assessee prior to this year and after this year also which rather proves that he was under employment with the salary is being paid are not techno friendly and is not having legal counsels to look after their respective income tax login along with their mails and rather they are simple accountant, salesmen, loaders etc. which are earning their livelihood from the employment.

Further the fact that they have provided services was neither doubted nor can be denied looking to the volume of business carried out by the assessee where the total consignment sale of more than 17.00 crores was taken place in the entire year which could not be possible without the help of manpower. Further except the salary expenses, no doubts were raised on the other expenses claimed by the assessee thus disallowance has been made without pointing out any specific defect in the records which were completely placed on record by the assessee vide letter dated 22.02.2022

In view of the above, we note that ld. CIT(A) has decided the appeal after considering all the documentary evidence furnished by the assessee and evidence adduced which are not disputed.

Even ld. CIT(A) also relied upon judicial precedence while doing so.

The ld. AO through ld. DR did not bring anything contrary to counter the finding of the ld. CIT(A) on facts. Even the bench noted that from the observed about the notice issued to employees and has not raised a single doubt about the claim of other expenses and as regards the salary expenses we note that the assessee has placed on record all the details which are necessary to prove the claim of salary expenses at page 227 of the paper book. This factual detail has not been controverted. Therefore, we see no infirmity on the facts of the case while ordering to delete the lumpsum addition of 25 % out of the expenses so claimed by the ld. CIT(A).

In the light of these facts, we see no force in the ground no. 4 raised by the revenue and the same is therefore stands dismissed.

In terms of these observations, the appeal of the revenue stands dismissed.

Order pronounced in the open court on 05/09/2024.

Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 05/09/2024 *Ganesh Kumar, Sr. PS ITO vs. Vasudev Hemrajani आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- ITO, Ward 6(2), Jaipur 2. izR;FkhZ@ The Respondent- Vasudev Hemrajani, Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 634/JP/2024) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत