ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 4(1), KOLKATA, KOLKATA vs. SENCO GOLD LIMITED, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM

ITA No.1601 & 1602/KOL/2025 (Assessment Year:2017-2018) SENCO GOLD LIMITED ACIT, Central Circle-4(1), Unit No.1001, 10th Kolkata Floor¸Diamond Prestige¸41A, Vs. AJC Bose Road, Kolkata (Appellant) (Respondent) PAN No. AADCS6985J

Assessee by : Shri Miraj D. Shah, AR Revenue by : Smt. Pampa Roy, Sr. DR Date of hearing: 12.06.2026 Date of pronouncement: 00..16.06.2026

O R D E R Per Rajesh Kumar, AM: These two appeals preferred by the revenue against the separate orders of the Commissioner of Income Tax Appeal, Kolkata-27, (hereinafter referred to as the “Ld. CIT(A)”] dated 28.04.2025 for the AY 2017-18.

ITA No.1601/Kol/2025 (A.Y. : 2017-18)

“I have gone through the assessment order and submissions of the assessee. On perusal of the same, it is observed that after the ‘Demonetization period’ during which large volume of OHD (Old High Denomination) (Specific Bank Notes) to the tune of Rs. 42,31,23,500/- were deposited in the several bank accounts of the assessee, scrutiny assessment was initiated u/s 143(3) of the Act. The AO passed the assessment order u/s 143(3) of the Act on 31.12.2018 at assessed income of Rs. 67,29,89,620/- wherein additions of Rs. 7,86,15,507/- was made u/s 68 of the Act as unexplained cash credit and of Rs. 2,35,532/- was made by disallowing the making charges. In the assessment order, the AO found discrepancies of Rs. 7,86,15,507/- between the sale figures shown by the assessee and actual sales accepted by the customers during the period of AY 2017-18. The AO opined that in the form of

6.2.2. The assessee is a reputed and well-established jewellery manufacturing and trading company, incorporated in the year 1990. Over the years, it has significantly expanded its operations and currently owns 44 showrooms and operates 37 franchisees outlets across the country. For the relevant A.Y, the assessee reported a turnover of Rs. 1,834.92 crore, a profit after tax of Rs.52.54 crore, and also filed its return of income declaring Rs. 59,41,38,580/-. The financial statements of the assessee are duly audited under the Companies Act, 2013 and also subject to tax audit under the Income Tax Act, 1961.

6.2.3. During the assessment proceedings, the assessee was requested to explain and substantiate the issue of huge cash deposits in the bank accounts of the assessee vide show cause notice dated 19.12.2018. In response to a show cause notice dated 19.12.2018, the assessee furnished complete details of the transactions, including invoice numbers, customer names, addresses, GST charged, and supporting documentation. In reply to the show cause notice, the assessee also provided substantial documentary evidence in support of the said transactions, including:

• Detailed sales ledger entries;

• Sales invoices with GST details;

• Monthly GST returns;

• Stock and inventory registers;

• Sales register and cash book;

• Audited books of accounts.

However, upon issuing verification notices to several parties, the AO summarily rejected the explanation provided and mechanically invoked Section 68 without rejecting the books of accounts or disproving the actual occurrence of sales and the AO concluded that an amountof Rs. 7,86,15,507/- remained unconfirmed and proceeded to treat the same as unexplained cash credit under Section 68 of the Act.

6.2.4. On careful consideration of the entire fact I find that the addition made under Section 68 is wholly unjustified and contrary to settled legal principles. The following points merit specific attention in favor of the assessee:

(a) The amount of Rs. 7,86,15,507/- which has been treated by the AO as unexplained cash credit under Section 68 of the Act, was in fact fully recorded in the regular books of account maintained by the assessee in the ordinary course of its business. These books are maintained in accordance with the prescribed accounting standards and statutory requirements and have been duly audited under both the Companies Act and under the Income Tax Act. Each transaction corresponding to the said amount is supported by proper sales invoices, entry in the sales ledger, and corresponding entries in the cash book and stock register. These sales were made against cash advances received from customers, and the delivery of goods was reflected through stock movement recorded in the inventory register. The entire value of these transactions has been appropriately credited to the sales account and included in the turnover for the relevant financial year. Consequently, the amount in question is not an unaccounted receipt or unexplained cash entry but a part of the declared and disclosed business income. The profit arising from these

(b) A crucial aspect that undermines the addition made by the Assessing Officer is the fact that he has not invoked the provisions of Section 145(3) of the Income Tax Act, 1961 to reject the assessee’s books of account. The books have been maintained in the regular course of business, duly audited under both the Companies Act and the Income Tax Act, and no specific defect has been pointed out with respect to the method of accounting, completeness, or correctness of entries. Section 145(3) of the Act empowers the Assessing Officer to reject the books only when he is not satisfied with the correctness or completeness of the accounts, or where the method of accounting or income computation standards have not been regularly followed. In the present case, the Assessing Officer has neither alleged any such deficiency nor invoked this provision. The absence of any such finding implies that the books of account are presumed to be reliable and maintain evidentiary value. Furthermore, the Assessing Officer has not disputed the overall sales declared by the assessee in its profit and loss account. The total turnover of Rs.1,834.92 crores and

(c) A key aspect supporting the assessee’s claim that the sales were genuine lies in the reconciliation of stock records. The sales transactions in question were duly recorded in the sales register and resulted in a corresponding reduction in closing stock. If the Assessing Officer's contention—that such sales did not actually take place—is to be accepted, then logically, the physical stock at the time of search should have reflected a surplus, equivalent to the unsold goods. However, during the course of the search proceedings conducted under Section 132 of the Act, no such excess stock was found. The gold jewellery and articles corresponding to the alleged unconfirmed sales were not available in the physical inventory. This strongly supports the assessee’s position that the goods were in fact sold to customers and were no longer in the possession of the assessee at the time of search. To quantify this, the value of the disputed sales

(d) Most of the concerned parties confirmed the transactions, and in many cases, disclosures were made in response to the departmental querries.

(e) It is pertinent to note that the Assessing Officer, in paragraph 7B of the assessment order, has himself recorded that certain customer names were altered, and in many instances, individual bills were split to reflect amounts below Rs.2 lakhs. The Assessing Officer suggests that these changes were made post-facto, possibly to avoid additional compliance requirements under applicable laws. However, this observation, rather than casting doubt on the genuineness of the transactions, actually supports the assessee’s explanation that the sales did occur. The practice of issuing multiple bills or modifying the customer names, while possibly irregular in procedural terms, does not in itself invalidate thesubstance of the transactions — namely, that goods were sold and cash was received against them. It is a common occurrence in the jewellery business, especially during periods of high footfall (such as on the night of demonetization), for

(f) It is a well-settled principle of law that cash advances received by an assessee, which are subsequently adjusted against actual sales of goods, and where such sales are duly recorded in the regular books of account, cannot be brought to tax as unexplained cash credits under Section 68 of the Income Tax Act, 1961.The judiciary has consistently held that once a transaction is substantiated through proper documentation—such as sales invoices, stock and inventory records, entries in books of account, and statutory tax returns—it is not open to the Revenue to disregard such evidence merely on the basis of partial or insufficient third-party confirmations. The absence of

6.2.5. The law is well settled that cash advances against which goods are supplied and recorded as sales cannot be added u/s 68 of the IT Act 1961. This proposition has been held in several Judicial decisions including:

(a) The Hon’ble Calcutta High Court, in the case of Crystal Networks Pvt. Ltd. Vs. CIT. reported in 353 ITR 171 (CAL) had held that where trade advances given by the creditors/customers were found to be adjusted against the sale of products made by the assessee subsequently to the concerned creditors/customers, the advances so received by the assessee could not be treated as unexplained cash credit.

(b) The Hon’ble Delhi High Court in the case of PCIT vs. Agson Global Pvt. Ltd. (441 ITR 550), held that the addition had no merit and hence is liable to be deleted. The High Court held:

“17.6 Having regard to the extensive material which has been examined by the Tribunal, in particular, the trend of cash sales and corresponding cash deposited by the assessee with earlier years, we are of the view that there was nothing placed on record—which could have persuaded the Tribunal to conclude that the assessee had, in fact, earned unaccounted income i.e., made cash deposits which were not represented by cash sales. Therefore, in our opinion, the Tribunal correctly found in favour of the assessee and deleted the addition made by CIT(A) of Rs.73.13 crores, under section 68 of the Act.”

(d) The Hon’ble Delhi High court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 (Delhi High Court) has held as under: “In the facts of above case cash of Rs. 24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. Theassessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs. 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department.”

(f) CIT v. Vishal Exports Overseas Ltd., Tax Appeal No. 2471 of 2009 was decided by the Hon’ble Gujarat High Court on 03.07.2012(Copy at Case Law PB Page No. 238) wherein it was held that “In the facts of above case the assessee was an exporter. The issue was regarding sale of Rs.70 lacs included in turn-over which was more than 500 crores. The assessee had claimed deduction u/s 80HHC of the Act. On the basis of information received by the Assessing Officer from investigation he considered the entry for export of 70 lacs as bogus. He denied benefit u/s 80HHC of the Act. Further, he made addition of Rs. 70 lacs in the income u/s 68 of the Act. It was held that once the assessee has already included the amount of sale of Rs. 70 lacs in Profit and Loss Account and determined the income on that basis no further addition could be made u/s 68 of the Act as it would tantamount to double taxation of same. income. The Assessing Officer could only reject claim u/s 80HHC of the Act ”.

(g) The Bombay High Court in the case of R.B. Jessaram Fetehchand (Sugar Dept.) v. CIT (1969) 75 ITR 33 (Bom), dealing with the issue of cash sales of sugar. The Assessing Officer required address of the buyers. The Hon’ble High Court in regard to the matter held as under:- "In the case of a cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser. In our opinion, therefore, the rejection of the results of the assessee's cash book by the Incometax Officer was not at all justified and the Appellate Assistant Commissioner, therefore, was right in deleting the addition made by the Income-tax Officer. The Tribunal, it appears, has

(h) It has been held that once, the assessing officer accepts the books of accounts and the entries in the books of accounts are matched, there is no case for making the addition as unexplained. The Hon’ble Delhi High court considered the issue of taxing the opening stocks in the case of Principal Commissioner of Income Tax, 20, Delhi. v. Akshit Kumar, [2021] 124 taxmann.com 123 (Delhi), and upheld the order of the ITAT in deleting the addition related to sales. The Hon'ble High Court has extracted the relevant part of the order of the ITAT which reads as under:

“17. Thus, in our opinion the sale made by the assessee out of his opening stock cannot be treated as unexplained income to be taxed as 'income from other sources'; firstly, the stock was available with the asssessee in his books of account and trading in such stock including purchase, sale, opening and closing stock (quantity wise and value wise) has been accepted by the department year after year and in some years under scrutiny proceedings, therefore, non existence of stock or business cannot be upheld; secondly, the sale of stock in the earlier years and the sale of balance left out stock in subsequent years has been accepted or has not been disturbed, then to hold that no stock was sold in this year and remained with the assessee will be

(i) The Hon’ble ITAT Chennai in the case of Smt. Durga Devi Mundhra vs. ITO in ITA No.1228/Chny/2023, dated 25.04.2024 is applicable to the present case on hand, wherein the Hon’ble tribunal held as under:

“6. We are of the considered opinion that when the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation which is impermissible in law. The cash sales proceeds have been credited in the books of accounts and the same form part of assessee's cash book. On these facts, it could very well be said that the assessee's claim was backed up by sufficient documentary evidences. The allegation of Ld. AO is that such abnormal sales could not be achieved by the assessee immediately upon announcement of demonetization by the Government. However, such allegations are bereft of any concrete evidence on record. It is trite law that no addition could be made merely on the basis of suspicion, conjectures and surmises. In the present case, the assessee has duly discharged the burden of establishing the source of cash deposit and the onus was on Ld. AO to disprove the same. However, except for mere allegation and few statistics, there is nothing on record to support the conclusions drawn by Ld. AO that the cash deposited by the assessee was her unaccounted money. There is no finding by Ld. AO that any particular sales affected by the assessee exceeded threshold limit which cast an additional obligation on the assessee toobtain requisite particulars

6.2.6. In light of the detailed discussion above, and upon careful consideration of the facts and circumstances of the case, I am of the considered view that the assessee has satisfactorily discharged the onus cast upon it under the law. The assessee has demonstrated with cogent evidence that the amount of Rs. 7,86,15,507/- represented genuine cash sales made in the normal course of business operations. The relevant sales transactions were duly recorded in the regular books of account, and the amounts were appropriately credited to the sales account and reflected in the profit and loss account for the relevant assessment year. These accounts were subjected to statutory audit, both under the Companies Act and the Income Tax Act, and no qualification or adverse remark was made in the audit report in respect of these entries. It is further significant to note that the Assessing Officer has not invoked the provisions of Section 145(3) of the Income Tax Act, 1961 to reject the assessee's books of account. As such, the books of account stand accepted, and the regularity and authenticity of the entries made therein remain unchallenged. Additionally, the stock register maintained by the assessee clearly corroborates the reduction in stock corresponding to the recorded sales. During the course of the search proceedings under Section 132 of the Act, the physical inventory was verified by the department, and no excess or unaccounted stock was found. This fact alone strongly supports the genuineness of the sales transactions and conclusively rebuts the allegation that the corresponding cash receipts were unexplained. Therefore, in view of the above documentary evidence,

6.2.7. In view of the above discussion and judicial pronouncements, I find that the assessee rightly explained the issue of discrepancies as noticed by the AO in the course of assessment proceedings. Therefore, the addition of Rs. 7,86,15,507/- made u/s 68 of the Act in the assessment order dated 31.12.2018, is deleted. Hence, these grounds of appeal raised by the assessee are allowed.”

ITA No.1602/Kol/2025(A.Y.: 2017-18)

6.2. Discussion & decision:-

6.2.1. I have gone through the assessment order and submissions of the assessee. On perusal of the same, it is observed that after the 'Demonetization period during which large volume of OHD (Old High

6.2.2. The assessee is a reputed and well-established jewellery manufacturing and trading company, Incorporated in the year 1990. Over the years, it has significantly expanded its operations and currently owns 44 showrooms and operates 37 franchisees outlets across the country. For the relevant A.Y, the assessee reported a turnover of Rs. 1,834.92 crore, a profit after tax of Rs.52.54 crore, and also filed its return of income declaring Rs. 59,41,38,580/-The financial statements of the assessee are duly audited under the Companies Act, 2013 and also subject to tax audit under the Income Tax Act, 1961.

6.2.3. During the assessment proceedings, the assessee was requested to explain and substantiate the issue of huge cash deposits in the bank accounts of the assessee vide various statutory notices on various dates. In response to a show cause notice dated 14.02.2022, the assessee furnished complete details of the transactions, including invoice numbers, customer names, addresses, GST charged, and supporting documentation.

 Detailed sales ledger entries:

 Sales invoices with GST details:

 Monthly GST returns;

 Stock and inventory registers;

 cash book: Sales register and cash

 Audited books of accounts

 Forensic Audit Report by Deloitte

However, upon issuing verification notices to several parties, the AOsummarily rejected the explanation provided and mechanically invoked Section 68 without rejecting the books of accounts or disproving the actual occurrence of sales and the AO concluded that an amount of Rs.1,40,84,831/- remained unconfirmed and proceeded to treat the same as unexplained cash credit under Section 68 of the Act.

6.2.4. On careful consideration of the entire fact I find that the additionmade under Section 68 is wholly unjustified and contrary to settled legal principles. The following points merit specific attention in favor of the assessee:

(a) The amount of Rs. 1,40,84,831/- which has been treated by the AO as unexplained cash credit under Section 68 of the Act, was in fact fully recorded in the regular books of account maintained by the assessee in the ordinary course of its business. These books are maintained in accordance with the prescribed accounting standards and statutoryrequirements and have been duly audited under both the Companies Act and under the

(b) A crucial aspect that undermines the addition made by the Assessing Officer is the fact that he has not invoked the provisions of Section 145(3) of the Income Tax Act, 1961 to reject the assessee's books of account. The books have been maintained in the regular course of business, duly audited under both the Companies Act and the Income Tax Act, and no specific defect has been pointed out with respect to the method of accounting, completeness, or correctness of entries. Section 145(3) of the Act empowers the Assessing Officer to reject the books only when he is not satisfied with the correctness or completeness of the accounts, or where

(c)A key aspect supporting the assessee’s claim that the sales were genuine lies in the reconciliation of stock records. The sales transactions in question were duly recorded in A key aspect supporting the assessee's claim that the sales were genuine Ses the sales register and resulted in a corresponding reduction in closing stock. If the Assessing Officer's contention that such sales did not actually take place is to be accepted, then logically, the physical stock at the time of search should have reflected a surplus, equivalent to the unsold goods. However, during the

(d) disclosures were made in response to the departmental queries. Most of the concerned parties confirmed the transactions, and in many cases,

(e) It is pertinent to note that the Assessing Officer, in the assessment order, has himself recorded that in many instances, Individual bills were split to reflect amounts below Rs.2 lakhs. The Assessing Officer suggests that these changes were made post-facto, possibly to avoid additional compliance requirements under applicable laws. However, this observation, rather than casting doubt on the genuineness of the transactions, actually supports the assessee's explanation that the sales did occur. The practice of issuing multiple bills or modifying the customer names, while possibly irregular in procedural terms, does not in itself invalidate the substance of the transactions cash was received against them.It is a common

(f) It is a well-settled principle of law that cash advances received by which are subsequently adjusted against actual sales of goods, and where such sales are duly recorded in the regular books of account, cannot be brought to tax as unexplained cash Credits under Section 68 of the Income Tax Act, 1961. The judiciary has consistently held that transaction is substantiated through proper documentation such as sales invoices, stock and inventory records, entries in books of account, and statutory tax returns-it is not open to the Revenue to disregard such evidence merely on the basis of partial or insufficient third-party confirmations. The absence of confirmations from some customers, especially in high-volume retail

6.2.5.The law is well settled that cash advances against which goods are supplied and recorded as sales cannot be added u/s 68 of the IT Act 1961. This proposition has been held in several Judicial decisions including:

……………….

…………………..

………..

6.2.6. In light of the detailed discussion above, and upon careful consideration of the facts and circumstances of the case, I am of the considered view that the assessee has satisfactorily discharged the onus cast upon it under the law. The assessee has demonstrated with cogent evidence that the amount of Rs. 1,40,84,831/- represented genuine cash sales made in the normal course of business operations. The relevant sales transactions were duly recorded in the regular books of account, and the amounts were approximately credited to the sales account and reflected in the profit and loss account for the assessment year. These accounts were subjected to statutory audit both under the Companies Act and the Income Tax Act, and no qualification of adverse remark was made in wow has not invoked the provisions of Section 145(3) of the Income Tax Act. 1961 to reject the assessee’s books of account. As such, the books of account stand accepted, and the regularity and authenticity of the entries made therein remain unchallenged Additionally, the stock register maintained by the assessee clearly corroborates the reduction in stock corresponding to the recorded sales. During the course of the search proceedings under Section 132 of the Act, the physical inventory was verified by the department, and no excess or unaccounted stock was found. This fact alone strongly supports the genuineness of the sales transactions and

6.2.7. In view of the above discussion and judicial pronouncements, I find that the assessee nightly explained the issues as noticed by the AO in the course of assessment proceedings. Therefore, the addition of Rs. 1,40.84.831/- made u/s 68 of the Act in the assessment order dated 22.03.2022, is deleted. Hence, these grounds of appeal raised by the assessee are allowed.”

Order pronounced in the open court on 16.06.2026.

Sd/- Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:16.06.2026. SM, Sr. PS

Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata