P.P. JEWELLERS PVT LTD,DELHI vs. ACIT,CENTRAL CIRCLE-25, DELHI

PER SATBEER SINGH GODARA, JM These assessee’s twin appeals ITA Nos. 3590 & 3591/Del/2025 for assessment years 2013-14 and 2017-18, arise against the Commissioner of Income Tax (Appeals)-29 [in short, the “CIT(A)”], New Delhi’s orders dated 25.03.2025 & 24.03.2025 passed in case nos. CIT(A), Delhi-29 10118/2018-19 and

ITA Nos.3590 & 3591/Del/2025

10260/2019-20, involving proceedings under section 147/143(3) & 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively. Heard both the parties. Case file perused. 2. We proceed assessment year-wise for the sake of convenience and brevity.

ITA No. 3590/Del/2025 AY :2013-14 3. It emerges at the outset that the assessee/appellant herein canvasses its first and foremost legal ground challenging validity of the impugned reopening itself. Learned counsel has invited our attention to the Assessing Officer’s corresponding reopening reasons recorded in its case on 27.09.2017, reading as under:

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all he has done in other words is to initiate the impugned reopening both for disallowing proportionate interest expenditure on interest paid to the shareholders/directors and section 80G deduction disallowance on the ground that it had failed to submit any supporting evidence. We further notice that the Assessing Officer very fairly observes in his reopening reasons that he had inquired into the latter issue vide section 142(1) notice during scrutiny assessment on 18.02.2014. We are of the considered view in this factual backdrop that such a reopening representing mere change of opinion is not sustainable in law going by CIT Vs. Kelvinator of India Ltd. [2010] 187 Taxman 312 (SC). The Revenue’s vehement contentions supporting the same fail in very terms. The impugned reopening is hereby quashed therefore. This assessee’s former appeal ITA No.3590/Del/2025 succeeds on the instant first and foremost legal issue. All remaining pleadings between the parties stand rendered academic. 5. This assessee’s appeal is allowed in above terms.

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ITA No.3591/Del/2025 AY: 2017-18 6. Coming to the assessee’s latter appeal ITA No. 3591/Del/2025, we advert to the first and foremost common issue of section 68 unexplained cash credit addition of Rs.40/- crores made by the Assessing Officer; in his assessment order dated 31.12.2019 and confirmed in the CIT(A)’s lower appellate discussion, reading as under: “6. Ground Nos. 2 to 5: The brief facts of the case are that the appellant e-filed its return for the year under reference on 31.10.2017 declaring loss of Rs. 6,05,51,846/. The case of the appellant was selected for complete scrutiny under CASS. The assessment in the case was completed u/s 143(3) of the Act on 31.12.2019 at assessed income of Rs. 40,00,00,000/-. The present appeal emanates against this assessment order. 6.1 During the assessment proceedings, it was noted by the AO that the appellant company was deriving its income from manufacturing and sale of gold, diamond and silver jewellery items. The appellant had deposited cash in aggregating to Rs. 45,31,00,000/- in its various bank accounts in specified bank notes (SBN) during the demonetization period i.e. 09.11.2016 to 30.11.2016. The appellant was specifically asked to furnish the details in the prescribed format to explain the source of these cash deposits. Since the appellant did not respond to initial notice(s) u/s 142(1) of the Act and show cause notice issued thus the penalty for non-compliance was also initiated by the AO. The appellant later on e-filed its submission along with copy of cash book for relevant year. The AO summarized the total sales, cash sales and cash deposit made during the year and compared it to the figures of last year, which is reproduced as below: Comparison of Cash Sales to Total Sales (In Crore) F.Y. Total sales Cash Sales Ratio of Cash sales 2015-16 1198.63 248.83 20.75% 2016-17 623.90 190.20 30.48% 6 | P a g e

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Ratio 52.05% 76.43% 6.2 Further, it was inferred by the AO that while the total sales were found to be just above 52% as compared to last year but ratio of cash sales was more than 76% of the cash sales made in last year, which reflected exaggeration of cash sales by the appellant. Similarly, on doing detailed analysis of the cash sales and cash deposit figures to month and year wise with the last year, it was established by the AO that appellant had shifted sales of post demonetization period to pre- demonetization period which exaggerated figure of cash in hand as on the day of demonetization i.e. 08.11.2016. After this in-depth analysis the books of the appellant was rejected by the AO invoking provisions u/s 145(3) of the Act. Hence, out of the 37.71 Crore cash sales shown by the appellant in its books for the month of November- 2016, 20.75% cash sales were allowed as was the case in the last year and the remaining cash sales were found to be fictitious and accordingly, the related cash deposit of Rs. 40 Crore out of the total cash deposit Rs. 50.38 Crore made during this month was considered as unexplained cash u/s 68 of the Act and added back to the income of appellant company by the AO. 6.3 During the appellate proceedings, appellant filed part submissions on 27.09.2021 and 06.10.2021. I have perused the submission thoroughly and found appellant submitted copy of bank statement(s), purchase bill(s), Cash memo(s) and margin account ledger. The appellant contended that AO did not identify any error in the books but, it is found that during the assessment proceedings AO has performed in depth analysis of trend of cash deposit and cash sales in accordance to CBDT instruction no. 3/2017 for verification of cash deposits and the irregularities were clearly mentioned in the assessment order at the time of rejecting the books u/s 145(3) of the Act. 6.4 It was submitted by appellant during the present proceedings that a reason for depositing large cash balance in comparison to relevant period of last year was that creditors were insisting for prompt payment due to decline in the turnover of company and change in business model of the company. However, no evidences to substantiate the same were produced by the appellant company in this regard. In the absence of any justification about the exaggerated sales figure in cash book identified by the AO and non-furnishing explanation about the source of cash deposit under reference, I do not find any reasons to interfere with the assessment order passed by the AO. Accordingly, these grounds of appeal are dismissed. This is what leaves the assessee aggrieved.

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period as noticed both in the assessment order as well as in the lower appellate discussion. The fact also remains that both the learned lower authorities have not pinpointed any specific defects in the assessee’s books of account as well whilst treating the impugned cash deposits as part of cash sales/regular business turnover in diamond, gold and silver trading etc. as unexplained. We are of the considered view in this factual backdrop that a further lumpsum addition of Rs.50 lakhs in the assessee’s case regarding the impugned entire cash deposits of Rs.40 cores would be just and proper in these peculiar facts with a rider that the same shall not be treated as a precedent. The assessee’s book entries to this effect stand rejected in very terms. Necessary computation shall follow as per law. 9. So far as assessee’s assessment under section 115BBE is concerned, we quote S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. The assessee is accordingly directed to be assessed under the normal provision as per law.

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