DY CIT CC-1(1), MUMBAI vs. MANGAL BULLION P. LTD., MUMBAI

These are the cross appeals filed by M/s Mangal Bullion Pvt. Ltd. (“The assessee/appellant”) and the Deputy

In Ld. AO has raised the following grounds of appeal;

In the Assessee has raised the following grounds of appeal;

The Brief fact of the case shows that assessee is a company engaged in the business of trading in Diamonds, Gold and Jewellery, it filed its return of income of

The Ld. AO categorically noted that assessee has shown to have business in trading of diamond and gold at 3 places in the country Mumbai, Surat and Jaipur. The assessee’s Jaipur Branch has not shown any substantial turnover. However, Surat branch has shown huge cash in respect of trading in diamond. The assessee company’s Mumbai Branch has also disclosed an abnormally high sale of gold and gold jewellery in cash.

The details filed by the assessee also show cash sales are only from 01.11.2016 and there is no such history of cash sales prior to November 2016. Further, after 08.11.2016 again assessee has not made any sales in cash. Therefore the specific 142(1) notice was issued to the assessee. The assessee’s response to that notice , assessee reiterated the submission early made. The Ld. AO rejected the same. The Ld. AO held that assessee has disclosed sudden increase in cash sales starting from 01.11.2016 ending before 09.11.2016. After 09.11.2016 there is no cash sale. Therefore, the cash sales shown by 8 days of November 2016 are highly suspicious. Further, the sale bills also shows that the customers who have purchased in cash have never come to assessee to purchase prior to the November 2016. The cash books of the assessee also do not show any prior huge cash in hand but in this period only. Further, according to the AO it is very difficult to agree as why assessee would pay interest on borrowed

Assessee aggrieved and preferred an appeal before the Ld. CIT(A). The Ld. CIT(A) passed an order on 25.01.2021 and gave finding as per Para no. 5.5. With respect to the sales by the assessee at Surat and Mumbai branch in case of 7 persons to the addition to the extent ₹33,29,886/- was held to be unexplained and addition to that extent was sustained. With respect to the balance sales the ld. CIT(A) relying heavily on the decision of Visakhapatanam Bench in case of Heerapanna Jewelers for assessment year 2017-18 and several other judicial precedents deleted to the addition to the extent of ₹1,76,35,114/-. The main reason for deleting this addition was that the assessee has established the sales with the bills and outgo of stocks. The sale was duly accounted for in the books of account and no abnormal profit was shown. He further held that Ld. AO did not find any defects in books of account with respect to the sales and stock details. Therefore, he did not find any reason to suspect that the sales are bogus. Accordingly, out of the total addition of ₹02,09,65,000/- addition to the extent of ₹33,29,886/- is confirmed and to the extent of ₹01,76,35,114/- is deleted.

The Ld. Departmental Representative contesting the appeal of the AO submitted that the Ld. CIT (A) has not given any finding that why there is no cash sale subsequent to demonetization period and prior to the demonetization period. Those customers have neither purchased gold nor purchased Jewellery from the assessee prior or subsequent to these purchases. The assessee has never sold the jewellery and gold to the extent of ₹ 2,00,000/-. Further, The SBN notes were kept in hand for almost 20 days. There is no explanation about transfer of cash from Surat to Mumbai and how it was transported. Despite sale being transported on the day has not been deposited into bank account immediately but after 20 days. All these questions have not been answered by the Ld. CIT(A).

Coming to the appeal of the assessee the Ld. Departmental Representative vehemently submitted that the parties have purchased Gold and Jewellery in cash at Surat as well as Mumbai. Three cash purchases have been made on same date at both the places. He submitted that preponderance of probability , with respect to gold purchased by the customer at Surat branch and at Mumbai Branch in cash on the same date shows that it is bogus.

We have carefully considered the contentions and perused the orders of lower authorities. We have also carefully considered the reply dated 19.12.19 placed at page no. 45-336 pages paper book at the page 329 to 333. The assessee has given copies of cash books wherein sales of Jewellery are recorded. We find that cash sales from 1.11.2016 to 08.11.2016 are all in excess of ₹2 lakhs for which assessee had provide the copies of bills wherein the complete address of the customers are mentioned. The bills are supported by the permanent account no of those parties. The copy of permanent account no. cards is also produced before the Ld. AO, before the Ld. CIT(A) as well as before us. This fact has not been denied by any of the lower authorities. The sales of the assessee at Mumbai branch has also been recorded in the stock register on the day on which sales have been recorded. Therefore, the sales register of the assessee and stock register of the assessee coupled with the cash books are completely matching. With respect to the Surat sales cash book is placed before us at page no 334 of the paper book. None

Ground no 3 of appeal of assessee was not pressed hence, dismissed.

Accordingly, the appeal of the AO is dismissed and the appeal of the assessee is partly allowed.