PAYAL KEDIA,JAIPUR vs. ACIT, CIRCLE-4, JAIPUR, JAIPUR

The assessee in this appeal has taken following grounds of appeal:- 1. Necessary cost be awarded to the assessee.

Out of the above, the cash deposit attributed to cash sales made by the assessee of Rs. 21,35,700/-, was not treated as duly explained, and therefore, the addition made by the AO to this extent was confirmed. 5. Orders of the Authorities below reveal that in support of the claimthat the cash deposit was out of cash sales made by the assessee, the assessee had submitted the entire list of parties from whom cash was received during this period on account of sales made to them comprising of 22 parties, and all bills raised by the said parties was also furnished to the AO. Complete books of accounts were furnished by the assessee to the AO, and similarly, the entire cash book was also furnished, explaining the source of cash deposited in the bank account of the assessee, during the demonetization period from the different sources as accounted for in its books. The assessee also furnished the TIN number of all the parties to which the cash deposits were attributed, which it could collect from the said parties. With respect to the remaining parties the assessee contended that since they were operating at a very small scale they were all unregistered dealers. The

The primary and sole reason, by the Revenue, for rejecting the assessee's explanation as above, is the fact that the AO investigated the genuineness of the assessee's claim by conducting verification of the same through an Inspector with respect to 3 parties out of the listed 22 parties submitted by the assessee, and as per the Inspectors’ report the three parties were not found on the given address, and local enquiries revealed that no such Firm existed. The said three parties have been noted to be

As per the Revenue, this exercise carried out by the AO on test check basis applied to all the parties from whom cash was collected by the assessee, and the entire explanation of the assessee, accordingly, rejected.

I do not find any merit in the addition made and confirmed by the Revenue Authorities below. The reason for the same is, the assessee

In the case of M/s Madhav Footwear, while the total cash sales made to the said party was Rs.17,39,208/-, as per the copy of ledger account of the said party furnished to the Lower Authorities and placed before me, at paper book page No.44, the AO has rejected as non-genuine, the cash collected from sales to the extent of Rs.6,76,210/- only.

Similarly, in the case of M/s Shailender Footwear, the total cash sales made to the said party by the assessee amounted to Rs.10,09,703/- as per the copy of ledger account of the said party placed before me at

The premise with the Revenue Authorities being that the said parties did not exist at all, if the said parties did not exist then the entire sales made to these parties needed to be rejected, and not only the sales to which the cash collected during demonetization period, and deposited in the bank account of the assessee needed to be doubted. This act alone of the AO of accepting part of the sale transaction, and rejecting the balance, while finding the said party to be non-existent itself demolishes the case of the Revenue.

Further, a mere test check of three parties alone does not entitle the AO to extend his findings with regard to the said parties to the other 19 parties to whom cash collection on account of sales was attributed by the assessee. The cash collected from these three parties comes to around Rs.11,52,910/-(6,76,210+3,22,800+,1,53,900), while the cash deposited in the bank account by the assessee, was way more amounting to Rs.21,35,700/-. It is highly unfair and unjustified to hold, the remaining 19 parties as also in-genuine, merely on the basis of findings, in relation to, three parties. In most of the cases, it is only the cash stated by the assessee to have been collected and deposited during the demonetization period from these 22 parties, which has been treated

Moreover, I find that the assessee furnished the TIN number of majority of the parties, and also corroborated its claim by stating the fact that all sales were disclosed in its VAT returns.

It is clear, therefore, that assessee had discharged its onus of proving genuineness of the source of cash deposited in the bank account during demonetization period, attributing it to cash collected from sales made to various parties, while the Revenue's case rests on an ad hoc exercise of investigation carried out by it revealing three parties to not exist at the stated address and extending its finding in relation to the three parties to the rest of 19 parties from which the assessee had claimed to have collected cash. Further while the AO has accepted sales made to these very parties in the remaining year , he has treated the parties as ingenuine only with respect to the sales transactions carried out during demonetization period.

There is no substance at all, therefore, I hold, nor any basis with the AO to hold that the explanation of the assessee of the cash deposited in the bank account was not bona fide or genuine, I, accordingly, direct the addition made to the income of the assessee of

In effect, appeal of the assessee stands allowed. Order pronounced in the open court on 25.06.2026