DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 22(2) , NEW DELHI, NEW DELHI vs. SPR JEWELS PVT LTD, DELHI
Income Tax Appellate Tribunal, DELHI BENCH ‘G’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRIS.RIFAUR RAHMANDCIT, Circle 22 (2), 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 12.03.2024 for the Assessment Year 2017-18. 2. Brief facts of the case are, assessee filed return of income declaring an income of Rs.78,93,920/- for AY 2017-18 on 29.10.2017. The case was selected in CASS with reason description a large value of cash deposits
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during demonetization period as compared to returned income. Further the case was selected for complete scrutiny and notices u/s 143(2) was issued. In response, assessee filed reply and submitted copies of audited financial statements, tax audit report along with income tax return for assessment year under consideration. Assessing Officer observed that assessee had deposited cash of Rs.2,55,91,000/- during demonetization period. When details were called for, assessee submitted as under :-
"The assessee has been asked to explain the reason for the large value cash deposit during demonetization period and abnormal increase in cash deposit during demonetization period as compared to pre-demonetization period. In this connection it is submitted that the assessee has been engaged in the trading of Gold Jewellery & Gold Ornaments and has made the turnover for the last three years as given herein below:-
Asst. Year
Turnover (Rs.)
Gross Profit (Rs.)
Net Profit (Rs)
2016-17
3,91,68,947.00
8,06,538.00
4,68,482.00
2015-16
14,92,69,763.00
2,68,035.00
(56,229.00)
2014-15
2,06,20,868.00
14,59,449.00
10,06,156. 00
During the year, the assessee has made sale to the customers in the normal course of the business and has deposited cash of Rs. 2,55,91,000/- in the bank during the period 09.11.2016 to 30.12.2016. The cash was deposited partly out of the opening cash in hand of Rs.7,44,341/- and partly out of the sale made on or before 08.11.2016. The cash books showing the cash balance is enclosed for your perusal and ready reference. The assessee is maintaining the Bills &
Vouchers in the regular course of the business and the same will be produced as desired by your goodself. It's perusal would show that the assessee has been making sale regularly in cash in the course of business and further substantial sale has also been made on 08.11.2016 and all such cash sales has been made before the 12:00 AM midnight of 08.11.2016 after the announcement of demonetization as the buyers rushed for buying the jewellery/gold in cash. The bills for the same will be produced as desired by your goodself. Thus the assessee has recorded all the sales & purchases in the Books of Accounts, therefore, it is requested that no adverse inference may kindly be drawn on the sale made by the assessee during the period 08.11.2016 to 30.12.2016. 3
The copy of the bank statements and cash book for the Financial Year 2016-17
is enclosed for your reference. 3. The desired details of the stock as required in the notice is under preparation and would be filed in the next hearing. 4. The details of the cash deposit in bank for the following periods as mentioned in the notice is given herein below:
(i)
Total Cash Deposit in bank in FY 2015-16: Rs.2,64,37,O00/-
(ii)
Total Cash Deposit in bank during 09/11/2015 to 31/12/2015:
Rs.51,00,000/-
(iii)
Total Cash Deposit in bank in FY 2016-17: Rs.3,25,91,000/-
(iv)
Total Cash Deposit in bank during 09/11/2016 to 31/12/2016:
Rs.2,55,91, 000-
(v)
Total Cash Deposit in bank during 01/04/2016 to 08/11/2016:
Rs.70,00,000/-
The details of the cash sale for the following periods as mentioned in the notice is given herein below:
(i)
Total Cash sale in FY 2015-16: Rs.2,80,38,014/-
(ii)
Total Cash sale during 01/04/2015 to 08/11/2015: Rs.1,33,73,852/-
(iii)
Total Cash sale in FY 2016-17: Rs.3,43,31,375/-
(iv)
Total Cash sale during 01/04/2016 to 08/11/2016: Rs.3,27,04,666/-”
With regard to abnormal increase in the sale of third quarter, a notice was served on the assessee. In response assessee submitted as under :- “In connection with the abnormal increase in the sale in the third quarter t is submitted that the sale in third quarter is generally high due to the Hindu festive and marriage season and apart from this after the announcement of demonetization at 8 PM, the buyers having SBN rushed to the market for buying the jewellary/gold. The assessee firm has made the sale in the regular course of its business and accepted the SBN in specified limit after the announcement of demonetization as per the copies of the bills. The same can be produced for verification. It is submitted that the assessee has made sale in this quarter out of the stock in hand kept by the assessee company. The assessee company has not purchased any additional goods/stock to match the sale made in this quarter. The same is verifiable from the stock register filed in the earlier submission. The stock in hand was also declared in the income tax return for the AY 2017-18.”
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4. After considering the same, Assessing Officer rejected the same by observing as under :-
“1. The first contention of the assessee is that the cash sale is made by it during the last year also is not tenable vis-à-vis related to facts of the current year during demonization period. There is abnormal increase in cash deposit during demonetization period as compared to proceeding period.
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The Contention of the assessee related to increase in cash sale during the period is due to festival seasons is not tenable again as the festival season was also available during last year so there is no change in facts considering the festive seasons.”
Accordingly, Assessing Officer proceeded to make the addition under section 68 of the Act of Rs.2,55,81,000/-. 6. Aggrieved assessee preferred an appeal before the ld. CIT (A) and filed grounds of appeal and detailed submissions which is reproduced in para 3 at pages 4 to 36 of the appellate order. After considering the detailed submissions of the assessee, ld. CIT (A) allowed the grounds raised by the assessee by observing as under :- “4(a) I have gone through the assessee's submissions and I have also considered the facts and circumstances of the case. From the facts, it is understood that the assessee has been engaged in the business of trading in gold ornaments and other precious metals. During the course of scrutiny proceedings, the AO asked for various details at various points of time. The assessee had filed detailed replies and necessary documents in response to AO's notices on 26.10.2018, 15.04.2019, 08.11.2019 and 02.12.2019. In the above responses, the assessee filed detailed analysis of cash sales made in AY 2016-17, 2017-18 and also in AY 2018-19. The assessee filed necessary stock details as called for by the AO. The assessee also filed VAT returns as submitted to the VAT authorities. The AO even though acknowledged furnishing of above details but did not unearth any inconsistencies or discrepancies in the details submitted by the assessee. Without giving proper reasoning or showing any inconsistencies, the AO simply denied the assessee's submissions and proceeded to make the addition. This kind of indifferent attitude towards taxpayers grievances is not warranted on the part of the AO
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4(b)
During the course appellate proceedings, the assessee filed same details which were already filed before the AO. From the details it is seen that, the Assessee furnished a detailed chart of monthly cash sales and cash deposits in bank a/c which was reconciled with reference to cash book. From this chart it is noticed that the assessee was having opening cash balance of rs.3,18,899/- as on 01.10.2016 on which cash sales were made during the month which amounts to Rs.96,60,2471- thus, out of the cash received on above cash sales, the assessee deposited Rs.30,00,000/- in bank a/c during the month after which closing cash balance as on 31.10.2016 comes to Rs.68,88,836/-. During the month of November, 2016, due to demonetization huge cash sales happened at last hour on 08.11.2016 which resulted into cash sales of Rs.1,88,98,205/-.
The assessee filed necessary invoices to substantiate the above cash sales.
After considering the above sales, the assessee's cash balance as on 09.11.2016 comes to Rs.2,58,54,993/- which was shown as cash in hand as on 09.11.2016. The above facts clearly substantiates that the assessee was having sufficient cash balance of Rs.2,58,54,993/- as on 09.11.2016 to deposit the same in bank accounts. The assessee also substantiated the above cash sales with reference to available stock in the premises which was shown in the books of accounts. The assessee fled details of stock available during the course of prior and after demonetization. The assessee further filed following details to substantiate the nature and source of the cash deposits made.
i.
purchase registers for FY 2016-17, ii.
DVAT returns for all the four quarters for FY 2016-17
iii.
Day wise cash book for FY 2016-17 along with running balance.
iv.
Day wise stock register for FY 2016-17
v.
Details of sales as per VAT returns.
4(c)
Thus, the assessee filed above details to substantiate the sources of cash deposits during the demonetization period. The above details were already filed before the AO during the course of scrutiny proceedings but the AO did not establish any deviations in the above details. The AO simply turned a blind eye towards the assessee's submissions. The A0 did not unearth any inconsistencies or discrepancies in details given by the assessee but simply proceeded to reject the details summarily without any reasoned order.
Thus, the AO failed to bring out the basis for the addition made by him.
However, after verification of all details furnished by the assessee, l am fully convinced that the assessee was having sufficient stock which is available for cash sales prior to demonetization period. Thus, after considering the cash sales as on 08.11.2016 the assessee was having sufficient cash balances and the same was deposited in the bank accounts. Therefore, the addition made by the AO on account of unexplained cash credits is totally baseless and not substantiated, therefore, the addition of Rs.2,55,91,000/- in hereby deleted.
Hence, the assessee's grounds are hereby allowed.”
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7. Aggrieved Revenue is in appeal before us raising following grounds of appeal :-
“1. Whether in facts and circumstances of the case, the Ld. CIT (A) was right in allowing appeal of the assessee.
Whether in facts and circumstances of the case, the Ld. CIT (A) has erred in deleting addition of Rs.2,55,91,000/- u/s 68 of the Income Tax Act, 1961 with the fact that the assessee has deposited this amount to its bank account in cash.”
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. 9. 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. 10. Considered the rival submissions and material placed on record. We observe that the assessee was engaged in the business of trading in gold ornaments and other precious metals. During the course of scrutiny proceedings, the AO asked for various details at various points of time and the assessee had filed detailed replies and necessary documents in response to AO's notices on 26.10.2018, 15.04.2019, 08.11.2019 and 02.12.2019 wherein the assessee filed detailed analysis of cash sales made in AYs 2016-17, 2017-18 and also in AY 2018-19 and also filed necessary stock details as called for by the AO. We observe that the assessee also filed VAT returns as submitted to the VAT authorities. We
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observe that the AO even though acknowledged furnishing of above details but did not unearth any inconsistencies or discrepancies in the details submitted by the assessee. We further observe that without giving proper reasoning or showing any inconsistencies, the AO simply denied the assessee's submissions and proceeded to make the addition. We further observe that the Assessee furnished a detailed chart of monthly cash sales and cash deposits in bank a/c which was reconciled with reference to cash book and from this chart it is noticed that the assessee was having opening cash balance of Rs.3,18,899/- as on 01.10.2016 on which cash sales were made during the month which amounts to Rs.96,60,2471- thus, out of the cash received on above cash sales, the assessee deposited Rs.30,00,000/- in bank a/c during the month after which closing cash balance as on 31.10.2016 comes to Rs.68,88,836/-.
We further observe that during the month of November, 2016, due to demonetization huge cash sales happened at last hour on 08.11.2016
which resulted into cash sales of Rs.1,88,98,205/-. We observe that the assessee filed necessary invoices to substantiate the above cash sales and after considering the above sales, the assessee's cash balance as on 09.11.2016 comes to Rs.2,58,54,993/- which was shown as cash in hand as on 09.11.2016, hence the above facts clearly substantiates that the assessee was having sufficient cash balance of Rs.2,58,54,993/- as on 8
09.11.2016 to deposit the same in bank accounts. The assessee also substantiated the above cash sales with reference to available stock in the premises which was shown in the books of accounts. We observe that the assessee filed details to substantiate the sources of cash deposits during the demonetization period during assessment proceedings but the AO did not establish any deviations in the above details but the AO simply turned a blind eye towards the assessee's submissions and the AO did not unearth any inconsistencies or discrepancies in details given by the assessee but simply proceeded to reject the details summarily without any reasoned order. Accordingly, we observe that the AO failed to bring out the basis for the addition made by him. Therefore, we hold that the ld.
CIT (A) rightly deleted the addition made by the AO on account of unexplained cash credits which is totally baseless and not substantiated.
Accordingly, we are inclined to uphold the order of the ld. CIT (A) who has passed a speaking order. Hence, the Revenue’s grounds are hereby deleted.
11. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 7th day of July, 2025
after the conclusion of the hearing. (SATBEER SINGH GODARA)
ACCOUNTANT MEMBER
Dated: 30.09.2025/TS
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ITA No.2723/DEL/2024