SUBHASH CHAND AGRAWAL,JAIPUR vs. INCOME TAX OFFICER, JAIPUR

P a g e | 1 ITA No.1072/JPR/2025 Subhash Chand Agrawal IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “SMC” BENCH, JAIPUR BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA No.1072/JPR/2025 (Assessment Year:2017-18) Subhash Chand Agrawal Vs. ITO Shop No. Ext. 6, 204 Ward 2(1) Agrasen Market, Johri Jaipur Bazar, Jaipur �थायीलेखासं./जीआइआरसं./PAN/GIR No:ABPPA 4919 G Appellant .. Respondent

Appellant by : Sh. Tarun Mittal, CA & Sh. Harshit Agrawal, CA Respondent by : Sh. Gaurav Awasthi, JCIT

Date of Hearing 01.06.2026 Date of Pronouncement 02.07.2026

O R D E R The present appeal has been filed by the assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961, (hereinafter referred to as “the Act”) dated 31.05.2025.

P a g e | 2 ITA No.1072/JPR/2025 Subhash Chand Agrawal 1. On facts and in the circumstances Ld. CIT(A) has grossly erred in confirming the action of ld. AO in invoking provisions of section 145(3) of the Income Tax Act, arbitrarily.

1.1. Ld. CIT(A) has further erred in confirming the rejection of books of accounts by ld.AO, without pointing out any specific defects and by solely drawing adverse inference due to increase in cash sales and deviation in pattern of cash deposits in bank account. Appellant prays that deviation in cash sales as well as deposits is attributable to de- monetization scheme announced by the Hon'ble Prime Minister, which itself is an exceptional situation, thus such deviation in cash sales and deposits, by itself do not call for rejection of books, more particularly when books of accounts of assessee were duly audited without any adverse remarks.

1.2. Ld. CIT(A) has further erred in confirming the rejection of books by brushing aside the submission of assessee that complete quantitative details of stock were maintained and sales was made by assessee out of the stock carried forward from previous year and thus the availability of goods sold is proved beyond doubt. Appellant therefore prays that the sales made by assessee and cash deposits made are absolutely genuine and therefore trading results declared by assessee deserve to be accepted.

2.1. That, the ld. CIT(A) has further erred in conforming the addition of Rs. 40,81,919/- made by ld.AO, by rejecting the sales declared by assessee and then estimating the Sales for the month of October & November on mere assumptions and presumptions.

2.2. That, ld. CIT(A) has erred in confirming the order passed by the ld. AO by brushing aside the fact that cash deposited by assessee was out of cash balance available as per books of accounts, which was accumulated as a result of cash sales [of preceding months and partly for current month (till 08.11.2016)], duly recorded in books of accounts. It is submitted that sales made by assessee is fully supported by respective bills. It is therefore prayed that the addition so made without bringing any evidence on record to disprove such recorded salesis not in accordance with law and deserves to be deleted.

2.3. That the ld. CIT(A) has further erred in confirming the observation of ld. AO with regard to heavy cash deposit during the demonetisation period, by ignoring the fact that assessee was necessarily required to deposit the SBN available with him, in view of the directions of Government related to Demonetisation Scheme. It is thus prayed that addition made without considering the peculiar facts of the case deserve to be deleted.

P a g e | 3 ITA No.1072/JPR/2025 Subhash Chand Agrawal 2.4. That the Id. CIT(A) has further erred in confirming the observation of ld. AO in rejecting the actual cash sales declared by the assessee arbitrarily, without considering the fact that the said sales were duly disclosed in the VAT return filed by the assessee, wherein the same has been accepted as such. Thus addition so made by doubting the sales declared by assessee deserve to be deleted; 2.5. That, the ld. CIT(A) further erred in confirming the action of ld. AO in estimating sales to Rs. 2,74,316/- as against Rs. 49,89,167/- already declared and accordingly upheld the addition as Unexplained Cash deposit. Appellant prays that such estimation has resulted into double taxation of income, as profit embedded in the sales recorded in the books of accounts of assessee has already suffered tax and again ld.AO has treated sales as Unexplained Cash Credit, which is against the principle of taxation, according to which same income cannot be taxed twice. 2.6. That the ld. CIT(A) has also erred in confirming the action of ld. AO in invocation of provisions of sec 115BBE of the Act, arbitrarily. 3. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal. 3. The solitary issue in the present appeal relates to addition made to the income of the assessee on account of cash found deposited in the Bank account of the assessee during demonetization period, the source of which remained unexplained. The assessee is engaged in the business of trading in Gold & Siver jewellery. While cash deposited in the Bank account of the assessee during demonetization period amounting to Rs.59.50 lakhs deposited on 13.11.2016,the AO, however, after giving benefit of the opening balance of cash as on 01.10.2016 amounting to Rs.11.63 lakhs, the amounts surrendered by the assessee in the Pradhan Mantri Garib Kalyan Yojana (PMGKY) scheme amounting to Rs.5.95 lakhs, and estimating the sale made by the assessee from 01.10.2016 to 08.11.2016 at Rs.2.74 lakhs on the basis of sales made in the same period in the preceding year, made

P a g e | 4 ITA No.1072/JPR/2025 Subhash Chand Agrawal ,addition of the balance amount of cash deposited of Rs.40,81,919/-, as being from unexplained source. The AO rejected the Books of accounts of the assessee invoking section 145(3) of the Act . The Ld.CIT(A) confirmed the same.

P a g e | 5 ITA No.1072/JPR/2025 Subhash Chand Agrawal 5. The business/ turnover of the assessee had substantially increased from the preceding year by 217.39%. The only anomaly noted by the Revenue in the above evidences furnished by the assessee is that, the sales bills were not verifiable and appeared to be made up, since they did not mention the complete address of the buyers, the nature of goods sold to them etc., and were all of amounts below Rs.2,00,000/-. These findings are with the respect to the sales claimed by the assessee to have been done in cash prior to the demonetization period to support its claim of all the cash deposited during demonetization period arising from the sales made in October and early November of the impugned year ,.Except for the above anomaly no other anomaly in any other document furnished by the assessee has been pointed out by the Revenue Authorities. 6. The basis with the Revenue for doubting the assessee’s explanation of the cash deposit emanating from cash sales made by the assessee prior to demonetization is a statistical analysis of cash deposited and cash sales made in the period prior to demonetization in the impugned year and in the preceding year. The AO found substantial increase in the same, as compared to the preceding year, and noting the sales bills to be unverifiable due to lack of details of buyers and goods sold therein, he applied the principle of preponderance of probability and held that, the cash sales claimed to have been made by the assessee were bogus, and that the cash deposited in the Bank account therefore was from unexplained sources ,liable to be added to the income of the

P a g e | 6 ITA No.1072/JPR/2025 Subhash Chand Agrawal assessee separately. He rejected the Books of accounts of the assessee also for the aforesaid reason. 7. I am not in agreement with the findings of the AO/Ld. CIT(A) as above. This is for the reason that thealleged anomaly noted in the sales made by the assessee prior to demonetization was , I find, not confined only to that period,but persisted in all the bills raised by the assessee during the entire year. The assessee submitted a detail of all sales made during the year, which is reproduced at page 28-31 of the Ld. CIT(A)s’ order. The buyers names and addresses are mentioned therein, and the anamoly noted by the Revenue that the addresses are incomplete in the Bills raised in October/ early November, I find, applies to almost all the bills raised by the assessee during the entire year. For example, a bill raised on 4th May 2016 vide Bill No.877 which is a bill raised during the initial month of the previous year, and not pertaining to the period identified by the AO, mentions the name of the buyer only as Sanjay Ji Agrawal Bhrampuri, Jaipur. Clearly this is an incomplete bill containing no detail of the buyer . 8. Further, the contention of the Revenue, that the bills raised by the assessee immediately prior to the demonetization period were below Rs.2,00,000/-, I find applies to almost all the bills raised by the assessee during the entire year .Except for a very few instances, the rest of the bills raised are less than Rs.2,00,000/-. 9. The assessee clearly is a small trader in gold, silver and bullion. Therefore, the contention of the Revenue that the bills raised immediately prior to the demonetization period were all bogus, while

P a g e | 7 ITA No.1072/JPR/2025 Subhash Chand Agrawal the rest of the bills raised by the assessee during the year were genuine, does not appear to be correct. Besides , having rejected the Books of accounts of the assessee, the AO/CIT(A) have still adopted the book results of the assessee as declared in the return of income filed and made addition thereto of the alleged unexplained cash deposited by the assessee, which I find is contrary to their own finding that the Book results could not be relied upon for determining the taxable income of the assessee. 10. Besides, I have noted that the assessee has made purchase during the year, from one party alone, the detail of which was furnished, and is reproduced in the Ld. CIT(A)s’ order at page 23. The entire purchases have been made by the assessee from one Pushpa Enterprises, whose PAN number, and complete postal address was furnished by the assessee. The AO has admittedly, verified the purchases made by the assessee, which finds mention at page 2 of the assessment order, wherein he notes that, books of account were produced before him, and were examined on test check basis mainly focusing the purchase made prior to demonetization period. Clearly no anomaly has been found by the AO in the purchases made by the assessee, and they have been found to be genuine. The assessee produced complete stock register showing availability of stock which was sold during the pre- demonetization period, and there is no finding of the Revenue of any negative stock. There is no adverse finding with regard to the stock maintained by the assessee.

P a g e | 8 ITA No.1072/JPR/2025 Subhash Chand Agrawal 11. What arises from the above therefore, is that, the Revenue Authorities were unable to point out any infirmity worth its while, in the books maintained by the assessee for rejecting the Books of the assessee. The facts on record as noted above, do not support the case of the Revenue. In fact, I find and hold that, there is no basis with the Revenue Authorities for rejecting the assessee’s explanation of the cash deposited during demonetization period emanating from sales made by the assessee. A mere statistical analysis of the cash sales made in the impugned year as compared to the preceding year in the same period can at the most lead to a suspicion, but the same, has to be supported with evidences collated from investigation and inquiry done by the Department to reject the explanation of source of cash deposited. 12. In the light of the above, I hold that the addition made in the present case amounting to Rs.40,81,919/- is not sustainable on facts, and the addition therefore, made is deleted. 13. In effect, appeal of the assessee stands allowed. Order pronounced in the open court on 02.07.2026.

Sd/- (Annapurna Gupta) ACCOUNTANT MEMBER Dated 02.07.2026 Mittali, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent

P a g e | 9 ITA No.1072/JPR/2025 Subhash Chand Agrawal 3. CIT 4. CIT(Appeals) 5. DR: ITAT By Order, Asst. Registrar ITAT, Jaipur