ITO WARD-23(3), NEW DELHI vs. SINGLA JEWELLERS PVT. LTD., NEW DELHI
Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRIS.RIFAUR RAHMANITO, Ward 23 (3), vs.
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The Revenue has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 08.02.2023 for the Assessment Year 2017-18. 2. Brief facts of the case are, assessee filed return of income declaring an income of Rs.16,86,100/- for AY 2017-18 on 14.10.2017. The case was 2 selected for limited scrutiny through CASS for the reasons that large value cash deposit during demonetization period reported and large share application money pending for allotment of more than a year. Notices u/s 143(2) of the Income-tax Act, 1961 (for short ‘the Act’) was issued through ITBA portal. Subsequently notice u/s 142(1) was issued to the assessee and the assessee filed response. Further the case of the assessee company was transferred to Ward 23 (2), Delhi from Ward 23(4), ND by virtue of Pr.CIT/Delhi-9, ND order dated 29.11.2019 and these facts were brought to the notice of assessee vide notice dated 30.11.2019. During demonetization period, the assessee deposited amount of Rs.3,22,00,000/- in its bank account and in order to justify its claim, the assessee submitted that the cash is deposited out of cash sales. The assessee showing turnover during the year under consideration of Rs.18,46,28,936/- and cash deposit made in this year is shown in the table at page 2 and 3 of the assessment order. Further assessee also submitted the cash deposited during the previous assessment year i.e. 2016-17 and also submitted comparative chart of cash deposited during AYs 2017-18 & 2016-17, which are placed at pages 3 to 5 of the assessment order. 3. After considering the contention of the assessee and the chart submitted by the assessee, Assessing Officer rejected the same by observing as under :-
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“The contention of the assessee that cash deposited during demonetization period is out of cash sale considered carefully and found not acceptable due to the reason summarized as under.-
(i)
The turnover of the assessee decreased from last year by Rs.7,38,68,649/-. The total other expense claimed by the assessee of Rs.39,58,000/- and salary expense of Rs. 33,97,400/-. If it is presumed that these all expenses are in toto paid by assessee in cash then also per month expenses are coming to Rs. 6,12,950/-. Then why assessee retained huge cash in hand every month. The same is done to take advantage during demonetization period, specifically in the month of October cash is retained to Rs.93,70,144/- (last year Rs. 39,48,673/-) and in September Rs.51,80,645/-
(last year Rs.2,83,894/-).
(ii)
From 1st November, 2016 to 8th November, 2016 the assessee made cash sale amounting to Rs. 2,39,25,489/- as against last year figure of Rs.8,23,862/- during this period. This means approx the assessee booked sale of Rs. 30 lacs per day which is beyond imagination and does not match with the trend of assessee of making cash sale earlier year or succeeding year.
(iii)
The assessee made cash sale of Rs. 2,41,65,268/- from 01.11.2016 to 08.11.2016 and not deposited even single amount in bank account during this period which means all the cash retained by assessee (Opening Cash
Rs.93,70,144/- + Rs.2,41,65,268/-) Rs. 3,33,25,819/-. This is not matched with the trend of earlier year or succeeding year.
(iv)
Even the assessee after demonetization not bother to deposit the cash in hand of Rs.3,33,25,819/- in bank account during full month of November rather deposited in December, 2016 which means assessee was doing sale in old currency notes.
(v)
All the cash bills provided by the assessee below 2 Lacs and without having address on a single voucher. This is done intentionally to avid cross verification at the department's end even some of the vouchers are repeated for example voucher no.402 & voucher no. 422 are repeated in just after 3 days making cash sale of Rs. 1,89,799/- & Rs.1,80,295/- respectively.
(vi)
In previous year the assessee booked credit sale from 01.11.2015 to 08.11.2015 of Rs.45,59,916/- however in demonetization period 01.11.2016 to 08.11.2016, this figure is Rs.11,23,711/- to avail extra benefit of cash.”
Accordingly, Assessing Officer proceeded to make the addition under section 68 of the Act of Rs.1,80,96,119/-. 5. Aggrieved assessee preferred an appeal before the ld. CIT (A) and filed grounds of appeal and detailed submissions which is reproduced in para 5
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at pages 3 to 12 of the appellate order. After considering the detailed submissions of the assessee, ld. CIT (A) allowed the grounds raised by the assessee and deleted the addition by observing as under :-
“7.1
I have gone through the findings of Assessing Officer and also verified the submissions by the appellant. The Assessing Officer has disallowed
Rs.1,80,96,119/- on account of unexplained credit u/s 68 r. w .s. 115BBE of Income Tax Act, 1961
2 While adjudicating the case, learned Assessing Officer made assumption as to what should have been the cash in hand (on account of cash sale) in a particular month by comparing the same with the last year figures. However, while doing so, the Learned Assessing Officer estimated excessive cash in hands of appellant and treated such excessive sale as unexplained cash credit. To substantiate his order, the Learned Assessing Officer has put forward on the following justification:
The learned Assessing Officer has made comparison to the sale of previous financial year and pointed out the increase in cash sales even when there was a decline in total sales.
The learned Assessing Officer has made comparison of sales during the demonetization period to the same period in previous financial year.
The learned Assessing Officer has made comparison in frequency of current year's cash deposit to the previous financial year.
The learned Assessing Officer also granted benefit of 10% increase in sales due to demonetization period.
3 The above basis indicates that the learned Assessing Officer was in principle in agreement that there could be excessive sale and he has allowed the same as well. However, the Learned Assessing Officer adopted inconsistent view of rest of amount deposited.
4 The appellant had submitted the sales with the bills which were duly accounted for in the books of accounts and there were no abnormal profits. The appellant also filed stock details and the Learned Assessing Officer did not find any defects thereto. Therefore, I do not find any reason to suspect that cash deposited was not explainable by the appellant.
5 Further, the provision of section 68 is reproduced here under:
“Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no 5
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 ...”
6 In order to invoke section 68, the most essential aspect is that the tax payer does not offer any explanation towards source and nature of such cash credit. In the underline case the appellant has very well explain the source i.e. Sales proceed from the business and the same has been also accepted by learned Assessing Officer by considering such amount as part of turnover.
7 In this regard, reliance can be placed on following judicial pronouncements: [ITA No.253Nizl2020] - Vishakhapatnam
" .. In the instant case the assessee has established the sales with the bills and representing outgo of stocks. The sales were duly accounted for in the books of accounts and there were no abnormal profits. In spite of conducting the survey the Assessing Officer did not find any defects in sales and the stock. Therefore we do not find any reason to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in the span of 4
hours, non availability of KYC documents for sales, non writing of tag of the jewellery to the sale bills, non-availability of CCTV footage for huge rush of public etc ... "
Further in case of In the case of Lakshmi Rice Mills v. CIT [1974] 97 ITR 258
(Pat.) Hon'ble Patna High court held as under:
"It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law."
In case of CIT VS KAILASH JEWELLERY HOUSE, Hon'ble Delhi
HC [ITA 613/2010 ] upheld finding of CIT(A) and ITAT that once the amount was credited in the sale account and had been-duly included in the profit disclosed by the assessee in its return, the same could not be treated as undisclosed income and no addition could be made once against in respect of the same .
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7.8
Having regards to judicial pronouncements of honourable courts and facts of the appellant case, I am of the considerate view that the cash deposited once treated as turnover, the same shall not be considered unexplained cash credit within meaning of section 68. It would lead to unjustified addition to the appellant's case. Therefore, the addition proposed by learned Assessing
Officer for sum of Rs.1,80,96,119/- (i.e. unexplained cash credit) is deleted.”
Aggrieved Revenue is in appeal before us raising following ground of appeal :- “Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting addition of Rs.1,80,96,119/- u/s 68 of the Income Tax Act, on account of unexplained credits.”
At the time of hearing, ld. DR of the Revenue brought to our notice the above facts of the case and submitted that there is substantial increase in the sales declared by the assessee during demonetization period and relied on the findings of the Assessing Officer. 8. On the other hand, ld. AR of the assessee relied on the detailed findings of the ld. CIT (A) and detailed submissions made before him. 9. Considered the rival submissions and material placed on record. We observe that the Assessing Officer made assumption as to what should have been the cash in hand (on account of cash sale) in a particular month by comparing the same with the last year figures. However, while doing so, the Assessing Officer estimated excessive cash in hands of assessee and treated such excessive sale as unexplained cash credit. We further observed that to substantiate his order, the Assessing Officer has made comparison to the sale of previous financial year and pointed out the 7 increase in cash sales even when there was a decline in total sales; AO made comparison of sales during the demonetization period to the same period in previous financial year; further AO made comparison in frequency of current year's cash deposit to the previous financial year; and also granted benefit of 10% increase in sales due to demonetization period. We observe that the above basis indicates that the Assessing Officer was in principle in agreement that there could be excessive sale and he has allowed the same as well, however, the Assessing Officer adopted inconsistent view of rest of amount deposited. Further we observe that the assessee had submitted the sales with the bills which were duly accounted for in the books of accounts and there were no abnormal profits. We also observe that the assessee also filed stock details and the Assessing Officer did not find any defects thereto. Therefore, we do not find any reason to suspect that cash deposited was not explainable by the assessee and the ld. CIT (A) has also rightly held the same. We further observe that in order to invoke section 68, the most essential aspect is that the tax payer does not offer any explanation towards source and nature of such cash credit; and in the present case, the assessee has very well explained the source i.e. sales proceed from the business and the same has been also accepted by Assessing Officer by considering such amount as part of turnover. We further observe that ld.
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CIT (A) relied on various judgments and rightly held that the cash deposited once treated as turnover, the same shall not be considered unexplained cash credit within meaning of section 68 and it would lead to unjustified addition to the assessee’s case. Accordingly, we are inclined to uphold the order of the ld. CIT (A) who has passed a speaking order.
Hence, the Revenue’s ground is hereby deleted.
10. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 8th day of July, 2025
after the conclusion of the hearing. (SATBEER SINGH GODARA)
ACCOUNTANT MEMBER
Dated: 06.09.2025
TS