NEW KALKA NATIONAL JEWELLERS,DELHI vs. INCOME TAX OFFICER, WARD-30(5), DELHI, DELHI

1 ITA No. 5934/Del/2025 New Kalka National Jewellers vs. ITO

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘G’ NEW DELHI) BEFORE YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER ITA No. 5934/DEL/2025 (A.Y. 2017-18)

New Kalka National Jewellers V Income Tax Officer, B-95/A, Kalkaji, s Ward 30(5) New Delhi Civic Centre, Minto Road, PAN: AADFN3613P New Delhi Appellant Respondent Assessee by Ms. Meenal Goyal, CA and Ms. Mehak Gupta, Adv Revenue by Sh. Manish Gupta, Sr. DR Date of Hearing 02/02/2026 Date of Pronouncement 24 /04/2026

ORDER PER YOGESH KUMAR, U.S. JM: The present appeal is filed by the Assessee against the order of Ld.

Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre

(‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 08/09/2025 for the

Assessment Year 2017-18.

carrying on its business of gold, silver and diamond jewellery on retail

basis and also undertakes job work on behalf of customers. The

Assessee filed return of income declaring income of Rs. 12,18,930/-. The

case of the Assessee was selected under CASS. The Assessee had

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deposited cash of Rs. 1,43,97,000/- in the bank account during the

demonization period. The Assessee was asked to giving source of cash

deposit during the assessment proceedings. The assessment order came

to be passed on 30/12/2019 by making addition of Rs. 1,43,97,000/-

under Section 69A of the Act as the Assessee failed to give source of the

said cash deposit made during the demonization period and also made

addition of Rs. 1,16,195/- on account of conversion charges.

preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order

dated 08/09/2025, dismissed the Appeal of the Assessee.

4.The Ld. Assessee's Representative vehemently submitted that the entire

cash deposited during the demonetization was out of the sale proceeds

which have been duly recorded in the cash book and books of accounts

of the Assessee. Further contended that the Assessee had deposited

cash of Rs. 1,14,35,000/- during Assessment Year 2016-17,during A.Y

2017-18 deposited Rs. 2,42,21,000/- and in Assessment Year 2018-19

deposited Rs. 67,17,000/- thus contended that there is no major

increase in the cash deposit in the year under consideration. The Ld.

Counsel further submitted that the Assessee has produced all the

documentary evidence before the A.O. such as,month wise sales register,

3 ITA No. 5934/Del/2025 New Kalka National Jewellers vs. ITO

purchase registers, VAT returns, GST details, comparative trading and P

& L account to substantiate that the cash deposits are out of recorded

sale proceeds which was duly reflected in the books of accounts, profit

from which was offered to tax in the ITR. The Ld. Counsel has also relied

on the order of the Co-ordinate Bench of the Tribunal dated 25/09/2024

in the case of S. Balaji Mach tech Private Limited Vs. ITO ITA No.

556/Del/2024 and other decisions. The ld. Counsel further submitted

that the Books of Account of the Assessee has been duly accepted and no

specific defect in cash books, sales register or purchase register was

pointed out by the A.O., therefore, submitted that the authorities below

have committed grave error in making addition/confirming the same,

thus sought for allowing the Appeal.

Assessee was not maintaining stock register which casts serious doubts

on the linkage of sales with the deposits. Further contended that in trade

involvingarticle such as gold and diamond of business of stock records

undermines reliability of sales figures. Further submitted that both the

A.O. and the CIT(A) have rightly appreciated the facts and passed the

respective orders, therefore, relying on the orders of the Lower

Authorities sought for dismissal of the Appeal.

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on record. During the assessment proceedings, the Assessee vide letter

dated 03/12/2019, submitted that the Assessee was not maintaining the

stock register as it is very difficult to maintain. As per the A.O. the said

explanation of the Assessee cannot be trusted in view of the fact that the

gold is very expensive metal and keeping eye on the stock is must in the

trade in order to avoid any leakage by the ornament makers, therefore,

the said explanation of the Assessee was treated as untrustworthy and

not accepted the same and held that the Assessee had failed to give the

explanation to the source of Rs. 1,43,97,000/- deposited during the

demonization period. The Ld. CIT(A) in the First Appeal, confirmed the

observation of the A.O. and upheld the addition made by the A.O. u/s

69A of the Act.

the cash deposits, Assessee produced ITR, computationof income,

audited financial statements, tax audit report, bank account statements,

VAT returns, GST Registration for Assessment Year 2016-17 and also for

Assessment Year 2017-18, comparative Chart for trading and profit and

loss account, sales/purchase register, cash book and month wise details

for cash deposit for Assessment Year 2016-17 to 2018-19 . As could be

5 ITA No. 5934/Del/2025 New Kalka National Jewellers vs. ITO

seen from the record, there was no abnormal increase/decrease in the

figures of sales and net profit in Assessment Year 2016-17 to 2018-19.

produced documents such as sales register, purchase registers, VAT

Returns, GSTdetails and comparative trading and P & L account. The

Assessee has also produced cash book. It is matter of record that the

department has not rejected the books of accounts of the Assessee.

However, addition has been made u/s 69A of the act. The provision of

Section 69A of the Act applies where the Assessee is found to be the

owner of money which is not recorded in the books of account and the

Assessee either offers no explanation or the explanation offered is not

satisfactory. Thus, the money found must be unrecorded/ undisclosed in

books of the Assessee in order to invoke provisions of Section 69A of the

Act.

Tech Private Ltd (supra) held that, recorded and accepted cash sales

cannot be taxed again u/s 68 or 69A of the Act merely due to higher

demonetization deposits. Once the cash is duly entered in the books and

explained, it cannot be treated as unexplained money. Relevant extract is

reproduced below:

6 ITA No. 5934/Del/2025 New Kalka National Jewellers vs. ITO

"...20. Whether the recording of cash sales which is already declared in the books of account will attract the deeming provisions of sec. 68 or 69A of Act. We observed that the assessee has declared all the cash transactions in its books of account and merely because the cash deposits are more during the demonetization period, whether the CIT(A) can invoke the provisions of section 69A of the Act. As per provisions of the section, it is necessary that the assessee be found with the money, the same is not recorded in the books accounts maintained by it for any source and not offers any explanation or such explanations are not found to be satisfactory to the AO. In this case, the assessee has already declared the cash sales in its books of account and offers the explanation as cash sales, which the lower authorities has accepted it as regular business transactions because they have not rejected the book results and brought to tax the total sales declared by the assessee in its books. Since the cash were already recorded and explanation is already part of the book results, there is no avenue for the CIT(A) to reject such explanations. This expression "explanation is found not satisfactory to the AO" is purely relates to the money found with the assessee which are not recorded in the books of account. In this case, the above expression has no relevance since the assessee had already declared the cash sales in its books..." (Emphasis Supplied)

act that the Assessee did not maintain any stock register linking

purchases with sales. As observed earlier, the books of account of the

Assessee were never rejected u/s 145(3) of the Act and no specific defect

in the cash book, sales register or purchase register was pointed out.

The Co-ordinate Bench of the Tribunal in the case of Yogesh Gupta v.

ACIT [2024] 159 taxmann.com 1396, held that when the books of

7 ITA No. 5934/Del/2025 New Kalka National Jewellers vs. ITO

accounts remain unrejected and the transactions stand accepted under

VAT laws, then the addition founded only on suspicion, without

substantive evidence or proper inquiry, cannot be sustained in law.

Relevant extract of the case is reproduced below:

"...7..It is observed that the assessee was maintaining cash books and also regular books of accounts, at no point of time, the AO doubted the regular books of account of the assessee and without finding any fault in the books of account of the assessee, the Ld. AO proceeded to make addition u/s 69A of the Act. When the assessee maintained and produced the books of account and the cash books before the Ld. AO by offering the explanation and by submitting the copies of VAT returns to justify the sales and corresponding receipts of cashbooks deposited in bank, the Ld. AO without even disputing the books of account, committed an error in making addition u/s 69A of the Act, therefore, the addition made by the AO is not sustainable, hence, the addition made by the AO u/s 69A of the Act which was confirmed by the CIT(A) is hereby deleted... (Emphasis Supplied) Re: Mere absence of stock register without rejecting books, not a valid ground to invoke Section 694/68 of the Act

automatically render the books of account defective, particularly in

the case of a retail jewellery, business dealing in numerous small and

various items. The Hon'ble High Court of Delhi in the case of CIT v.

Smt. Poonam Rani [2010] 326 ITR 223 (Delhi) held as under: -

8 ITA No. 5934/Del/2025 New Kalka National Jewellers vs. ITO

"...10.. In any case, no statutory provision under the Income-tax regime requiring the assessee to maintain the Daily Stock Register has been brought to our notice. Hence, even if no such register was being maintained by the assessee as is contended by the learned counsel for the appellant, that by itself does not lead to inference that it was not possible to deduce the true income of the assessee from the accounts maintained by her, nor the accounts can be said to be defective or incomplete for this reason alone. If stock register is not maintained by the assessee that may put the Assessing Officer on guard against the falsity of the return made by the assessee and persuade him to carefully scrutinize the account books of the assessee. But the absence of one register alone does not amount to such a material as would lead to the conclusion that the account books were incomplete or inaccurate. Similarly, if the rate of gross profit declared by the assessee in a particular period is lower as compared to the gross profit declared by him in the preceding year, that may alert the Assessing Officer and serve as a warning to him, to look into the accounts more carefully and to look for some material which could lead to the conclusion that the accounts maintained by the assessee were not correct. But, a low rate of gross profit, in the absence of any material pointing towards falsehood of the account books, cannot by itself be a ground to reject the account books under section 145(3) of the Act..." (Emphasis Supplied) 12. In view of the above discussion, by relying on the above-mentioned

judicial precedents, we find merits in the Grounds of appeal of the

Assessee. Accordingly, the addition made by the A.O. which has been

confirmed by the CIT(A) is hereby deleted. the Grounds of Appeal of the

Assessee are hereby allowed.

Order pronounced in the open court on 24th April, 2026

Sd/- Sd/-

(KRINWANT SAHAY) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 24.04.2026 Reshma Naheed, Sr.P.S

9 ITA No. 5934/Del/2025 New Kalka National Jewellers vs. ITO