Tax on Unaccounted sales only profit can be taxed as income
IN THE INCOME TAX APPELLATE TRIBUNAL
The Relevant Tax of the Order as follows :
35. It is evident from entries found in cash book of Ram Kumar Soni and from statement recorded from assessee in course of survey that assessee purchased gold in period of demonetization which was obviously for sale to persons on receiving cash from them as the same is normal practice of gold trade. The gold purchased in period of demonetization was towards agreed sale to persons on receiving amount therefor from those persons. Thus the source of payment to Ram Kumar Soni for purchase of gold is out of amount received from its sales and so it is to be treated as properly explained. It is only profit on sale of said purchased gold which is income of assessee which was undisclosed income of assessee and the same could only be subjected to tax. It is settled law that in case of unaccounted sales only profit therefrom could only be taxed as income of assessee. The assessee relies on the judgement of ITAT, Ahmedabad Bench in case of DCIT Vs. Brijvasi Developers P. Ltd. ITA No. 290/Ahd/2013 order dated 17-5-2017. The payment for purchase gold is not made by assessee from his own but the same is either settled by direct payment to seller by buyer and/or payment made from advance from customer or credit from sales as per normal trade practice. The assessee admitted such profit at Rs. 45,00,000/- and disclosed that income in PMGKY, 2016 and paid due tax thereon. The assessee has not noted name(s) of person(s) whom gold was sold by him. In unrecorded transactions neither the purchaser informs his name neither assessee require it as the dealing ins cash based and even if name and address is given the person will not be found there or will deny it. Thus when the entries clearly reveals that transactions are of unrecorded purchase and sale of gold which A.O. also admits in assessment order than simply that name & address of purchasers are not provided the entire amount of sale cannot in law be treated as undisclosed income, only profit earned from said transactions which has been admitted by assessee at Rs. 45,00,000/- can only be assessed to tax. We also observe that assessee had disclosed in PMGKY the said undisclosed income of Rs. 45,00,000/- and paid tax in accordance with scheme and received certificate therefor from Pr. Commissioner of Income Tax, hence the same disclosed income cannot be included as income in assessment as per Section 199-I of PMGKY. However, the A.O. has allowed credit of amount of disclosed income in PMGKY from total income and so there being no consequence to assessee so the same was not objected to.
36. The Ld CIT(A) in para 23 of appeal gave his findings. For ready reference the said findings are reproduced herein below:-
23. I have perused the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. A/R. I have also gone through the relevant pages in the paper book filed by the Ld. A/R. It is seen that in course of search at the premises of Ram Kumar Soni, Sikar a cash book was found which was seized and marked Ann. AS. Ex-12 in which certain transaction for payment of purchase of gold from Ram Kumar Soni were noted in the name of Babu Lal Lawat (appellant) in between the dates of demonization of currency totalling to 2,47,95,000/- and these transactions were unaccounted transactions for purchase and sale of gold in period post demonetization. These transactions were for purchase/sale of 7 Kg gold. However appellant in his statement dated 24-12-2016 u/s 131 admitted sale/purchase of 9 kg gold for Rs. 3,02,20,000/- and stated that gold was purchased by him from Ram Kumar Soni and directly sold to people of nearest place(s) who themselves made direct payment to Ram Kumar Soni and he only earned profit on such transaction of sale of 9 kg gold which he admitted to be @ Rs. 5,00,000/- per kg total Rs. 45 Lakhs. This income was later on disclosed under the provisions of PMGKY Scheme, 2016. The Ld. AO in assessment order on the basis of statement of appellant that he purchased 9 kg gold for Rs. 3,02,00,000/- from Ram Kumar Soni which was sold by him took into consideration the amount of Rs. 3,02,00,000/-. The AO held that these transactions were through old demonetization currency which was barred transaction under demonetization scheme. The AO therefore required appellant to furnish details related to parties to whom gold was so sold and on failure of appellant to provide such details the AO made addition of Rs. 3,02,00,000/- in income of appellant u/s 68 r.w.s. 115BBE of the Act.
23.2 It is evident from entries found in cash book of Ram Kumar Soni and from statement recorded from appellant in course survey that appellant purchased gold in period of demonetization which was for sale to persons on receiving cash from them as the same is normal practice of gold trade.
23.3 I find that the Ld. AO also in assessment order has not held that the transaction of sale are not from purchases by appellant or it was out of unaccounted stock of appellant but on the inability to give the identity of purchasers of gold he made addition of total sale price of Rs. 3,02,00,000/- in the income of appellant.
Further the payments to Ram Kumar Soni also appear in Hazir software seized in course of survey which contain the unaccounted purchase/sale of appellant. Thus the source of payment to Ram Kumar Soni for purchase of gold is to be taken out of amount received from its sales and so it is to be treated as explained.
23.4 It is settled law that not only from the illegal business but also the unaccounted transaction of purchase and sale only profit/ income on sales could be assessed as undisclosed income and could be subjected to tax. Case laws to the point are as under:
1. Dr. T.A. Quereshi (157 taxmann.com 514) (Supreme Court)
2. Piara Singh (124 ITR 40) (Supreme Court)
3. S.C. Kothari (82 ITR 794 (Supreme Court)
23.5 The appellant admitted such profit at Rs. 45,00,000/- and disclosed that on said transactions income in PMGKY, 2016 and paid due tax thereon. The copy of certificate issued by PCIT is placed on record. Thus when that transactions are of unrecorded purchase and sale of gold, which Ld. AO also admits in assessment order, then simply that name & address of purchasers are not provided the entire amount of sale cannot in law be treated as undisclosed income, only profit earned from said transactions which has been admitted by appellant at Rs. 45,00,000/- can only be assessed to tax more so when the appellant has disclosed in PMGKY the said undisclosed income of Rs. 45,00,000/- and paid tax in accorandce with scheme and received certificate there for from Pr. Commissioner of Income Tax, hence the same disclosed income cannot be included as income is assessment as per Section 199-I of PMKGY. However Ld. A.O. has allowed credit of amount of disclosed income in PMKGY from total income as so the addition on this account is restricted to Rs. 45,00,000/- and balance is deleted. The appellant thus gets relief of Rs. 3,02,00,000-45,00,000 = Rs. 2,57,00,000/-.”
In view of the above facts and submissions made herein above the Ld. CIT(A) is correct in deleting the addition of Rs.2,57,00,000/- made by the AO on account of alleged undisclosed investment in purchase of Gold.
37. In the result, all the appeals of the revenue are dismissed whereas all the appeals of the assessee are allowed.
Order pronounced in the open court on 15/09/2020.