SUSHIL KUMAR CHAUHAN,CHAUBEY JI KA PATHAK, KINARI BAZAR, AGRA vs. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE, AGRA, SANJAY PLACE, AGRA

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH “DB”, AGRA BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUNIL KUMAR SINGH, JUDICIAL MEMBER ITANo.567/AGR/2025 (Assessment Year : 2017-18) Sushil Kumar Chauhan, vs. DCIT, Central Circle, 119B/13A, Chaubey Ji Ka Pathak, Agra. Kinari Bazar, Agra – 282 003 (Uttar Pradesh). (PAN: ADOPC9986C) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Deependra Mohan, CA REVENUE BY : Shri Arun Kumar Yadav, CIT DR Date of Hearing : 21.04.2026 Date of Order : 22.06.2026 O R D E R PER S. RIFAUR RAHMAN, AM : 1. This appeal is filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals), Kanpur-4 [hereinafter referred to as ‘ld. CIT(A)] dated 20.11.2025 for the Assessment Year 2017-18. 2. Brief facts of the case are, assessee filed return of income for Assessment Year 2017-18 declaring an income of Rs. 6,55,94,440/-. A search and seizure action u/s 132(1) of the Income Tax Act, 1961 (in short ‘Act’) was

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carried out on 19.07.2018. The Assessing Officer (A.O.) has completed the assessment u/s 143(3) of the Act, on 30.09.2021 assessing the income at Rs.13,72,19,847/- after making the additions of Rs.6,91,239/- for estimated Gross Profit from business, Rs. 16,28,608/- on account of deemed rent taken as annual lettable value under head Income from house Property and a substantive addition of Rs. 13,49,00,000/-, related to Mr. Nirmal Kumar Jain prop. of M/s. Jain Bullion stating that the transaction of M/s. Jain Bullion have been done on behalf of the assessee for the reason of cash deposited during demonetization period. 3. The assessee Shri Sushil Kumar Chauhan is running a proprietary concern M/s. S L Payal wherein the assessee carried on the business of silver bullion and ornaments business. The AO during the course of assessment proceedings has observed that M/s. Jain Bullion proprietary concern of Mr. Nirmal Kumar Jain (person who was also searched alongwith the assessee) is a concern which is controlled by Mr Sushil Chauhan, the assessee and has also observed that the business of M/s. Jain Bullion belongs to the assessee. The AO has rejected the books of accounts of M/s. Jain Bullion and has estimated the gross profit by taking the highest GP rate of AY 2016-17 at 1.43% to the turnover of the year under consideration i.e. 2017-18, and has estimated the GP at Rs.6,91,239/-. Thereafter the AO has held that the cash

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deposited during demonetization period by Jain Bullion in their bank account on account of their sale proceeds is for and on behalf of Mr Sushil Chauhan, and hence has made a substantive addition in the assessee’s hand u/s 68 for Rs. 13,49,00,000/-. 4. The assessee is in business of silver payal manufacturing and trading, for which audited accounts have been furnished before the AO. The AO has accepted the trading results and the income declared of the assessee from his proprietary concern M/s SL Payal at the returned income. However, during the course of assessment proceedings the AO issued a show cause notice wherein it was alleged that the assessee Mr. Sushil Kumar Chauhan was controlling and managing the business of M/s. Jain Bullion a proprietary concern of Mr. Nirmal Kumar Jain. The AO in the assessment order has pointed out to certain bank accounts stating that they were controlled by the assessee Mr Sushil Chauhan and that the business premises of M/s. Jain Bullion was a small shop and books of accounts etc. were found at the time of search at the assessee’s business premises. Hence, he concluded that the business of M/s. Jain Bullion was controlled and managed by the assessee Sushil Kumar Chauhan. The AO on this basis had made the addition for the business carried out by Mr. Nirmal Kumar Jain Pro. M/s. Jain Bullion as the income of the assessee Sushil Kumar Chauhan for the year under

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consideration and has made these substantive addition for cash deposited during demonetization, as well as addition of gross profit on his silver bullion business. 5. The AO has made further addition for Properties owned by the assessee that were not let out, proceeded to consider the deemed rental value for the year under consideration. 6. Aggrieved, the assessee preferred an appeal before Ld CIT(A) and Ld CIT(A), while dismissing the appeal of the assessee has held in the order that M/s. Jain Bullion was only a front and the real and beneficial ownership of it vested with the assessee and hence has upheld the action of the AO in taxing the income of M/s Jain Bullion in the hands of the assessee which was earned during demonetisation period, M/s. Jain Bullion had deposited substantial cash in its bank account, but failed to substantiate the genuineness of such deposit and observed that M/s. Jain Bullion failed to produce any documentary evidence to establish that the cash deposited were out of genuine business sales, and therefore the AO held the cash deposit as unexplained money within the meaning of section 68 of the Act and taxed it in the hands of the assessee, and has upheld the rejection of books of accounts and estimation of gross profit. It was held by the CIT(A) that several deficiencies and inconsistencies in quantitative details were noted,

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and the declared profit rate was abnormally low as compared to past trends and market condition, hence the rejection was upheld. 7. With regard to the addition of notional annual letting value of Rs.16,28,608/- made by the AO, the Ld. CIT(A) in her order has stated that since the assessee had not furnished any evidence for NIL rent or vacancy allowance in respect of the house properties, the annual letting value determined by the AO was reasonable. 8. Aggrieved with the above order, the assessee is in appeal before us raising following grounds:- 1. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to complete the proceedings ex-parte without providing the proper opportunity to the appellant which is against the principle of natural justice. 2. That the Ld. AO has erred in law and on facts in completing the assessment u/s 143(3) rws 153A of the Act, without considering the explanations, documentations and submissions of the appellant. 3. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after considering M/s Jain Bullion a proprietary concern of Mr Nirmal Kumar Jain, as the appellants concern. 4. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned addition of transactions related to M/s. Jain Bullion on a substantive basis to assessee’s income. 5. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after rejecting the audited books of account of Jain Bullion u/s 145, without pointing out any defect in the said audited books, and even when the same have been accepted in other years. 6. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after making the impugned addition of cash deposited in accounts of M/s. Jain Bullion of Rs. 13,49,00,000/- as unexplained

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cash credit, even when the same was from regular sales credited in the profit and loss account of Jain Bullion. 7. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after making the impugned addition of Jain Bullion as unexplained cash credit, even when the appellant has explained the receipts with cogent evidences. 8. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned gross profit addition of Jain Bullion of Rs.6,91,239/- made by the Ld. AO without drawing any adverse inference in the audited books or defect being pointed out. 9. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned addition made by the Ld. AO without allowing the benefit of expenditures debited in the audited profit and loss account of Jain Bullion while estimating the Gross Profit. 10. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned addition made by the Ld. AO on account of annual lettable value u/s 23 without any incriminating evidence found in search proceedings. 11. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned addition of Rs. 16,28,608/- made by the Ld. AO on account of income from house property without considering the provisions governed u/s 23 of the Act. 12. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned addition made by the Ld. AO for deemed rent in case of vacant property @ 7% of the invested value. 13. That the Ld. CIT(A)-4, Kanpur has erred in law and on facts to uphold the impugned order passed by the Ld. AO after computing the deduction u/s 24 of the Act in respect of some properties only. 14. That the Ld. Authorities has erred in law and on facts in completing the proceedings in hasty manner without complying with the requirement of law and without taking proper approval. 15. That the Ld. Authorities has erred in law and on facts in charging interest of Rs. 4,48,75,913/- under section 234B and Rs.4,01,280/- u/s 234C of the I.T Act 1961 without mentioning the same in the assessment order. 16. That the order is bad in law and against the facts of the case.

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accounts at Punjab National Bank, & IndusInd Bank also where only Mr Nirmal Jain is the authorised signatory, we are submitting the screenshot of the same to prove our point. It would also be apt to add here that during the assessment year 2017-18 relevant to financial year 2016-17 turnover routed through the three bank accounts of the assessee is as follows : Axis Bank Punjab National Bank IndusInd Bank Rs. 28,000/- 27.70 crores 1.35 crores Thus, it would be against the facts of the case to say that the bank accounts were totally controlled by Mr Sushil Kumar Chauhan or he was a dummy proprietor and benamidar. Mr Nirmal Jain has been filing his income tax return much before the search proceedings and has got his accounts audited by independent chartered accountant and has shown the income in assessment year 2016-17 and 2017-18 from the said proprietorship firm M/s. Jain Bullion. He also has a separate VAT registration of his proprietary concern M/s. Jain Bullion, where before giving the registration the VAT officials visit the premises of the applicant and confirm his existence. Further, all the purchases have not been made through M/s Shivam Traders, we are enclosing herewith the copy of purchase ledger of M/s Shivam Traders in the book of M/s. Jain Bullion wherein your honour would see that out of total purchase Rs. 17,95,07,010.82/- in the F.Y. 2016-17, the purchase Rs.4,72,93,038.99/- was made from M/s Shivam Traders. In addition to above we would also like to submit before your honour’s that the assessee, Nirmal Jain also signed the cheques frequently as and when business required. We are enclosing herewith the copy of account opening form with Axis Bank, wherein it was duly established that the assessee deals in bullion, which was most valuable and risky commodity. 2. With regard to your honour’s query that Books of Accounts of Jain Bullion were found on Main Server of Sushil Chauhan, in this connection we would like to state that as Mr. Nirmal Jain, had closed his proprietary firm M/s. Jain Bullion on 31st March 2017 (copy of intimation given to VAT Department is being enclosed to justify and prove the same) and as has been stated by Mr Nirmal Jain during the course of statement under section 132(4) at the time of search proceedings on 19th July 2018, that Mr Rahul used to do his part time accounts who was also working for Mr Sushil Chauhan and after closure of his proprietary firm M/s. Jain Bullion, he had disposed of its assets and thus the accounts data was with Mr Rahul who was working for Mr Sushil Chauhan and that is the precise reason that accounts data was on the computers at the office of M/s. Sushil Chauhan. The shop of M/s. Jain Bullion was at 119-C/12-A Chaubey Ji ka Phatak, Kinari Bazar, Agra which is in close vicinity to the shop of Mr Sushil Chauhan at 119-C/13-B Chaubey Ji ka Phatak, Kinari Bazaar, Agra, and since the business had closed of M/s. Jain Bullion as on the date of search i.e. 19- 7-2018, hence it's part time accountant Mr Rahul took that account data and kept

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it on the computer system at 119-C/13-B Chaubey Ji Ka Phatak, Kinari Bazaar, Agra, without the knowledge of Mr Sushil Chauhan. Your honour’s assertion that physical infrastructure to carry out the quantum of business in bullion as reflected in the ITR of M/s. Jain Bullion was not there at the time of survey proceedings at the shop of M/s. Jain Bullion on 19-7-2018, is due to the fact that on the date of survey, the business had closed as has already been mentioned above, under due intimation to the VAT Department. Thus, there was no occasion to have the infrastructure to carry out the business after one and a half years of the closure of business. 3. As required, in the statement recorded of Shri Nirmal Jain u/s 132(4) dated 19.07.2018, against question no. 2, he stated that he is an employee and working for Sushil Chauhan; in this connection we would like to submit before your honour’s that, Shri Nirmal Kumar Jain in the said very statements of 19-7-2018, has stated itself in answer to Q-2, that he has a proprietorship concern M/s Jain Bullion, Chaubey Ji ka Phatak which has been closed and where trading of silver took place, thus your honour’s assertion that Nirmal Kumar was employee is totally misplaced, as in the same answer he has categorically stated that he was running a proprietorship concern in the name of M/s Jain Bullion which closed its business sometime back. Thus, at the time of search on Nirmal Jain on 19th July 2018 his proprietary concern had closed business and would be against the facts that he was not having a proprietary business in the name of M/s. Jain Bullion. Further in the said statements dated 19th July 2018 he has further stated the modus operandi of his business of M/s Jain Bullion, when questions were raised to him particularly at question number 3,4, 6, 7, 8, 10, 11 etc. He has never denied to be the proprietor of M/s Jain Bullion during the financial year 2015-16 and 2016-17. Nirmal Jain has regularly filed his Income tax return for past several years after taking the entire income earned from his proprietorship concern M/s Jain Bullion. Further in addition to above, the Books of accounts of M/s Jain Bullion was duly audited by an independent Chartered Accountant. 4. With regard to the statements recorded of Sri Sushil Chauhan under section 131(1A) on 1st November 2018, during the post search investigations, particularly at question number 8, 9 and 10, nowhere Sri Sushil Chauhan has stated that M/s. Jain Bullion belonged to him or he had any stake in the said concern, he has always maintained and stated that M/s Jain Bullion was a proprietary concern of Mr Nirmal Jain. With regard to blank signed cheques of Sri Nirmal Jain found from his residence, it has already been stated above, and we would again like to reiterate that as a prudent businessman to safeguard his financial dealings and stake of M/s Shivam Traders who used to supply silver bullion to M/s. Jain Bullion, they used to take blank signed cheques from Mr Nirmal Jain, this being a common trade practice, so that as and when adequate credit bank balance is there in the account of Jain Bullion, those cheques could be presented for payment, as many times Mr Nirmal Jain used to be out of station for business purposes. Since trade of silver bullion is very fast rotating, hence the payment has to be realized at the earliest as the trade is done on very meagre margins. Thus, as a prudent businessman Mr Sushil Chauhan had taken some

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blank cheques of Mr Nirmal Jain proprietor of Jain Bullion to safeguard his financial interest in the dealings of M/s. Shivam Traders with M/s. Jain Bullion, this also aptly proves that not all cheques were signed by Mr Sushil Chauhan as has been alleged in your said show cause notice. The personal mobile number of Mr Sushil Chauhan was mentioned in the Axis Bank account of M/s. Jain Bullion just to keep a tab on the balance in the account of M/s. Jain Bullion, so that the cheques drawn in favour of M/s. Shivam Traders could be presented in time so that they would be honoured by the bank. Thus, from no point of view it can be assumed that the financial transactions of M/s. Jain Bullion were actually controlled or managed by Mr Sushil Kumar Chauhan, he has nowhere in the statements during the course of search or during post search proceedings stated that M/s. Jain Bullion was managed or controlled by him and neither Mr Nirmal Kumar Jain has stated during the search proceedings or post search assessment proceedings, that M/s. Jain Bullion belong to Mr Sushil Kumar Chauhan nor Mr Sushil Kumar Chauhan has ever stated directly or indirectly that the affairs of M/s. Jain Bullion were controlled and managed by him. The Department could also not place any other evidence except for signatures of Mr Sushil Kumar Chauhan as the other authorised signatory in only one the bank account of M/s. Jain Bullion at Axis Bank, which was as closed on 8-7-2016, where meagre turnover was routed, which has been aptly discussed in our submissions above which was done only to safeguard the interest of his concern M/s. Shivam traders as they were supplying silver bullion to M/s. Jain Bullion. Mr Nirmal Kumar Jain has been filing his income tax return much before the such proceedings, including the profit from his proprietary concern M/s. Jain Bullion, thus, the income of M/s. Jain Bullion exclusively belongs to Mr Nirmal Kumar Jain. Submission Regarding Cash deposit during demonetization period In regard to the below submission, help and guidance has been taken from Mr. Nirmal Kumar Jain, proprietor of M/s Jain Bullion so that the reply can be submitted, as all the allegations pertain to M/s Jain Bullion. With regard to cash deposit during demonetization period, in this connection, we would like to submit before your honour that M/s Jain Bullion which deals in Bullion’s Retail Trading having bank account with Punjab National Bank current account no. 1656005900000042. 1. During the demonetization period from 9-11-2016 to 31-12-2016, M/s. Jain Bullion has deposited cash of Rs. 13,14,00,000/- in its bank account, from the availability of cash as available from regular sales made by the concern, in the year under consideration. To substantiate the cash availability, we are submitting herewith month wise cash flow for the F.Y. 2015-16 and 2016-17 for your honour’s kind consideration. JAIN BULLION MONTH WISE CASH FLOW F.Y 2015-16

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MONTH OPENING CASH SALE CASH CASH CASH CLOSING CASH CASH IN W/D DEPOSITED IN EXPENSE IN HAND HAND BANK APRIL 50,000 - - - 19,436 30,564 MAY 30,564 39,01,647 - 30,00,000 49,177 8,83,034 JUNE 8,83,034 2,91,43,532 - 2,11,00,000 93,314 88,33,252 JULY 88,33,252 4,44,95,991 - 2,45,00,000 33,761 2,87,95,482 AUGUST 2,87,95,482 4,17,29,354 - 7,05,00,000 17,818 7,018 SEPTEMBER 7,018 2,15,52,777 - 2,05,00,000 1,11,673 9,48,122 OCTOBER 9,48,122 1,23,46,818 - 1,15,00,000 4,73,520 13,21,420 NOVEMBER 13,21,420 6,98,70,614 - 6,50,00,000 1,00,467 60,91,567 DECEMBER 60,91,567 11,22,20,163 - 10,65,00,000 44,299 1,17,67,431 JANUARY 1,17,67,431 8,14,824 - - 67,803 1,25,14,452 FEBRUARY 1,25,14,452 10,22,657 - - 58,150 1,34,78,959 MARCH 1,34,78,959 46,20,766 - 1,80,00,000 37,680 62,045 TOTAL 34,17,19,143 34,06,00,000 11,07,098

MONTH WISE CASH FLOW F.Y 2016-17 MONTH OPENING CASH SALE CASH CASH CASH CLOSING CASH CASH IN W/D DEPOSITED IN EXPENSE IN HAND HAND BANK APRIL 30,54,066 - 25,00,000 39,660 5,76,451 62,045 MAY - - - 21,935 5,54,516 5,76,451 JUNE 1,02,377 - - 19,532 6,37,361 5,54,516 JULY - - - 20,625 6,16,736 6,37,361 AUGUST - - - 23,850 5,92,886 6,16,736 SEPTEMBE 3,40,73,889 - 3,39,00,000 5,94,245 1,72,530 R 5,92,886 OCTOBER 99,97,307 - - 25,254 1,01,44,583 1,72,530 12,47,60,853 - - 4,517 13,49,00,919 NOVEMBER 01/11/2016 1,01,44,583 TO 08/11/2016

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NOVEMBER - - 13,14,00,000 20,155 34,80,764 09/11/2016 13,49,00,919 TO 30/11/2016 DECEMBER - - 11,26,184 24,04,580 34,80,764 50,000 JANUARY - - - 72,800 23,31,780 24,04,580 FEBRUARY - - - 40,835 22,90,945 23,31,780 MARCH - - 20,00,000 14,570 2,76,375 22,90,945 TOTAL 17,19,88,492 50,000 16,98,00,000 20,24,162

From the perusal of cash flow statement, it is established before your honour that the cash deposit by the assessee is in line with the previous preceding year which was as under: Month Cash Deposit F.Y. Cash Deposit F.Y. 2015-16 2016-17 October to December 17,15,00,000/- 13,14,00,000/-

From the above it is conclusively established before your honour that no unusual cash was deposited in the year under consideration during demonetization period, but in fact lesser cash was deposited in the period of demonetization as compared to last year. Further, in addition to above we would also like to submit before your honour for understanding the cash deposited during the demonetization period are in line with business operation as under: Cash deposited in F.Y. 2015-16 and F.Y. 2016-17 with breakup of cash of the period commencing 1st April to 8th November and 9th November to 31st December. Cash Deposit in Bank (a) Total cash deposit in Bank in F.Y. 2015-16 34,06,00,000

1.1 (b) Total cash deposit in Bank from 01.04.2015 to 08.11.2015 15,11,00,000

(c) Total cash deposit in Bank from 09.11.2015 to 31.12.2015 17,15,00,000

1.2 (a) Total cash deposit in Bank in F.Y. 2016-17 16,98,00,000

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(b) Total cash deposit in Bank from 01.04.2016 to 08.11.2016 3,64,00,000

(c) Total cash deposit in Bank from 09.11.2016 to 31.12.2016 13,14,00,000

(a) Percentage decrease between 1.1(a) and 1.2(a) 50.15

1.3 (b) Percentage decrease between 1.1(b) and 1.2(b) 75.90

(c) Percentage decrease between 1.1(c) and 1.2(c) 23.40 Cash sales in the F.Y. 2015-16 and F.Y. 2016-17 with breakup of sales from 1st April to 8th November. Cash Sales

(a) Total cash sales in F.Y. 2015-16 34,17,19,143 2.1 (b) Total cash sales from 01.04.2015 to 08.11.2015 15,31,70,119

(a) Total cash sales in F.Y. 2016-17 17,19,88,492 2.2 (b) Total cash sales from 01.04.2016 to 08.11.2016 3,64,00,000

(a) Percentage decrease between 2.1(a) and 2.2(a) 49.67 2.3 (b) Percentage decrease between 2.1(b) and 2.2(b) 75

From the above it was duly established before your honour that the cash turnover deceased in the Financial year 2016-17, to Rs. 17,19,88,492/- from Rs. 34,17,19,143/- in the preceding F.Y. i.e. 2015-16. So, proportionately reduced cash was deposited into the bank account, so, it is not a single event when Jain Bullion has deposited the cash into its bank account during demonetization, it is regular business activities wherein the firm has deposited the cash in past also. All the sales affected have been out of the stock which was duly shown in its books of accounts. We would also like to state that the VAT department (which has the primary onus of verifying and taxing the sale and purchase) has accepted the sales and purchase for the year 2016-17 relevant to assessment year 2017-18 the year under consideration, we are enclosing the copy of the VAT assessment order to justify stand that the sales and purchases have been accepted by the VAT authorities. The increase in sales in the month of October 2016 and November 2016, was on account of Diwali and festive wedding season sales which is a regular feature in the bullion trade of business as most of the sales happen during the festive months only, which is a general trend in our business and has happened with mostly all the other bullion traders also. We are also

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enclosing a copy of our reply submitted at the time of cash transaction 2016 enquiries, much before the search proceedings, which were done by the department online, wherein also we had submitted the same, thus the stand of the assessee has always been the same regarding the cash deposit in its bank account. (2) In regard with the cash deposit during demonetization period your honour has made some observations which are being clarified/commented as under : (a) Your honour has required us to explain the cash sale in the small shop 5ft * 5ft area wherein some data regarding time required for making single sale was depicted, in this connection, we humbly like to submit before your honour that the details wherein time calculation for making sales was computed is merely your calculation without any scientific or actual data, it has been prepared to show that more time is consumed to effect the sale, however, the fact is that many jobs go simultaneously and simultaneously the customers are being dealt with, hence the calculation of time provided by your honour is totally based on conjunctures and surmises, whereas we've actually done the sales which has been accepted by the VAT Department and they have assessed the VAT returns for the said period of demonetisation. Jain Bullion has regularly sold their goods in the previous years also which was duly accepted by the Government Authority i.e. Sales Tax Department, duly assessed the sales on which sales tax was duly paid (copy of order is enclosed herewith), hence, there is no question about the non-genuineness of transactions as all the dues taxes i.e. VAT on Sales, Income Tax on profits, etc have been paid. Your honour has based the time calculation only on human probabilities and have ignored the market dynamics and the trade which is being done throughout the industry in the entire country, where the sales have always been accepted by the VAT Department as well as by the Income Tax Department all throughout, in assessments and in assessment of other traders also. Further, your honour’s assertion in the show cause notice, that the cash sales reflected in the books of M/s. Jain Bullion a few days before demonetisation be treated as unaccounted income of Mr Sushil Kumar Chauhan, as the source of such cash sales has not been proven to be genuine. In this regard we would most humbly submit that Mr Nirmal Jain has already been submitted before your honour the source of cash sales as the sale of Silver bullion effected by M/s. Jain Bullion, which was a normal business transaction by them, as have been carried on by them in AY 2015-16 and AY 2016-17, for which due returns have been filed by him before the VAT Department and the Income Tax Department. In their statements taken on oath u/s 132(4), during the course of search proceedings on 19th July 2018 Sri Nirmal Kumar Jain had categorically stated that he runs a proprietary concern in the name of M/s. Jain Bullion, nowhere in any of the proceedings Mr Nirmal Kumar Jain or Mr Sushil Kumar Chauhan have stated that M/s Jain Bullion belongs to Mr Sushil Kumar Chauhan, There is no iota of doubt or evidence with the Department to prove this otherwise, hence now to state that the cash sales effected by M/s. Jain Bullion is unaccounted income of Mr Sushil Kumar Chauhan is totally against the facts and unlawful, to which we object strongly.

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(b) The assessee has purchased the goods from the unregistered person also during the year apart from buying goods from regular traders. It is a regular practice in the silver trade wherein the purchases have been made from both type of dealers i.e. registered and unregistered. The unregistered purchase have also been depicted in the VAT returns and due tax was paid thereon which was duly accepted by the VAT authority. Further, we have duly submitted the details regarding the persons from whom goods was purchased, wherein the entire details regarding name, address, PAN, quantity, amount, tax amount were shown and the entire payment have been done through banking channel. Furthermore, the suppliers from whom the assessee has purchased the bullion, also admitted the sales to the assessee in their statements u/s 132(4) taken at the time of search proceedings, which itself is a strong evidence in assessee’s favour. None of the persons from whom the purchases were made have denied making the sales to M/s. Jain Bullion, all of them have proven the fact as to how the silver was acquired by them, and how the sales were affected by them, everyone in univocal terms have accepted and confirmed the transactions done before demonetization period. Thus, when each and every person from whom purchases were done have in their statements under section 132(4) have confirmed and clarified in the strongest terms that they have sold the silver bullion before demonetization period to M/s. Jain Bullion, then how without any credible evidence and iota of doubt, just on surmises and conjunctures the Department can say that the sales were effected actually after start of demonetisation. The onus is on your honour to prove that what has been said in the statements and evidences produced and gathered by the department, are false and the case of the department can be proved with solid and credible evidences. So, the purchases of silver bullion done by the assessee are genuine and needs to be accepted. Any allegation which has been alleged on the assessee has to be corroborated with credible evidence, which the department has failed to put forth before the assessee. (c) In the show cause notice at page 9, your honour have tabulated the stock, the value of silver purchase on credit, the sales effected by Jain Bullion, from 3rd November 2016 to 7th November 2016, which itself proves that the stock in question for affecting the sales was very much physically available with the assessee and as the stock was being sold, so it was being replenished by further purchases being done by the assessee, being a continuous process in silver bullion trade. Since, Jain Bullion has adequate stock to make the sales of silver bullion, which has been duly tabulated in the show cause notice, thus there is no iota of doubt that sales were not done by the assessee from his shop between 3-11-2016 to 7-11-2016. (d) In the show cause notice your honour has tried to bring out anomaly in transfer of funds for credit purchase of silver bullion of 2648 kgs from the IDS declarants, in this regard it is submitted that as a trade practice and market dynamics, payments were made within a few days i.e. to each and everyone from whom silver was bought by Jain Bullion, as has already been deposed by all the

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sellers in their statements. All of them got payment only and only through banking channels, either by way of account payee cheques or the fund were transferred through RTGS etc. Since, the buyer and the seller had agreed on the payment being made in a short span of time, how can this trade practice be objected or looked by suspicion. As Jain Bullion had good business relationship with M/s. Shivam Traders from whom it bought the bulk of silver bullion, hence at times advance payment were made to M/s. Shivam Traders for purchase of silver bullion and at times when the bullion could not be delivered or sold by M/s. Shivam Traders, they refunded the amount so paid by M/s. Jain Bullion, which is a very normal trade practice, as at times deals do not happen on account of several reasons being rate fluctuation, unavailability of bullion, unviability of price offered, etc. Thus, when M/s. Shivam Traders was not able to supply required bullion to M/s. Jain Bullion, hence the amount paid in advance was refunded by them. (e) Your honour has required us to comment on the distress credit sale by IDS declarants and their family members to Jain Bullion, in this regard, it is humbly submitted that to our knowledge none of the IDS declarants have done any kind of distress sale, all of those who have sold the silver bullion have duly declared the same in their income tax returns, have paid due and proper taxes on the transactions, filed their ITR’s much before search proceedings, have realised the market price of silver then prevailing in their bank account, made gains on sale of silver bullion, invested the amount so realised in bank FDR’s or elsewhere, thus, none appeared to have made any kind of a distress sale. (f) In the show cause notice your honour has required us to explain as to why delivery of bullion was done prior to realization of consideration which is contrary to the trade business of bullion business, in this regard we would most humbly submit before your honour, that Jain Bullion has bought silver bullion from unregistered persons with whom he was not doing regular bullion trade. These people who had declared the bullion under the IDS 2016 scheme, which has been duly accepted by the Income Tax Department as their true disclosure, hence, after verifying the facts the assessee bought silver bullion from these people, so as to ascertain that it was genuine silver bullion, which had a genuine source also, hence, payment was done to these people after the delivery of silver bullion as none of them in their individual capacities were regular dealer of bullion, as has also been stated by your honour in the said show cause notice. Thus, there is no infirmity in the transactions of purchase of silver bullion from unregistered persons done by Jain Bullion, as it had regularly sold the said silver bullion after getting the delivery and purchase of the same. (g) With regards to your honour’s contention of unsigned cheques being issued to Sri Rakesh Agarwal, Sri Rajesh Agarwal and Smt. Meena Agarwal, we would like to state before your honour that nowhere in their statements these three people have stated to have not received the amount against these cheques, as in hurry these cheques were made and left unsigned, hence, were returned back and

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payment through RTGS was made to them, which has been stated by them in their statement as annexed with the showcause notice. Since, the amount was duly and fully paid for these purchases of silver bullion, hence, nothing unusual can be read out of these unsigned cheques found during the course of search proceedings. The transactions of purchase of bullion from these three persons stands completely confirmed by them as well as Nirmal Jain in their statements against which payment has been duly received through banking channel by them, and that is why these unsigned cheques were returned by them. Thus, when delivery and sale of bullion and payment after said purchase is clearly established, accepted and confirmed by both the parties to the transaction, to state that these were not genuine or were pre-dated, would be unlawful and unjust of the part of the department. (h) In the show cause notice your honour has required us to show cause the discrepancy in the rate of purchase of unregistered silver and VAT @ 1% paid on purchase of such bullion, in this connection, we would humbly submit that bullion is bought at the prevailing market price which is duly accepted by your honour in the said show cause notice, further, the VAT paid of 1% on unregistered purchase is modvatable and the input credit of the VAT paid is immediately available to the buyer of goods i.e, M/s Jain Bullion (as per the VAT rules), hence there is no loss on purchase of silver form these unregistered persons. This is also one of the reason as to why we bought goods from them on credit of a few days, thus, no anomaly can be established from the said transactions of purchase of silver bullion from the IDS declarants who have all along confirmed the transactions with Jain Bullion, and have paid the due taxes, Jain Bullion have also paid the due taxes on the said transactions in the form VAT for which assessments have also been framed by the VAT Department accepting the said transactions as genuine and complete, in the hands of M/s Jain Bullion. (i) In the showcause notice your honour has pointed out to an alleged anomaly that the weight as per the valuation reports submitted at the time of IDS declaration were the same as have been mentioned in the purchase bills by M/s. Jain Bullion, in this regard we would most humbly submit that the bullion was delivered at the shop of Jain Bullion at Chaubey Ji ka phatak, Kinari Bazaar, Agra, by the said sellers and the purchases done by Jain Bullion whereon the delivery of the said silver bullion duly supported by the valuation report issued by government approved valuer, valuing and certifying the purity of silver, weight of silver declared by each one of the IDS declarants. Since, as a prudent businessman we were looking for genuine source of the purchases and to establish the genuineness of the purchases and the purchaser, required them to produce the valuation reports of the Government Approved valuer, certifying the purity of silver and the weight of silver, so that no unconfirmed or extra silver is bought Jain Bullion, this in fact proves the genuineness of the transaction and effort to establish the complete trail as to how this silver was procured by them and also verifying the purity and the weight delivered to Jain Bullion. Thus, when all complete precautions were taken by Jain Bullion in purchase of silver as a prudent businessman, the same needs to be accepted by the Department and no anomaly in

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this regard can be held against Jain Bullion, as have to see the genuine purchases are made by Jain Bullion. (j) With regard to your honour’s assertion of there being similarity in printing errors of purchase invoices, we would like to bring to your honour’s kind attention that the description of the goods as mentioned in the purchase invoice as “dot silver” was purposely done to show that the same could have been identified as stock of silver bullion bought from unregistered person's, as on this silver we had to pay 1% input VAT, whereas when the silver is bought from registered dealer then VAT is charged by them, for which we take the credit, thus to have this stock bifurcated and for our stock and accounting purposes, we had purposely put a “dot” in the description to segregate the unregistered purchases from the registered purchases. There is nothing unusual about it, many dealers do like this, that is why another dealer M/s. Shivam Traders also did like this. Further, the dealers are using the same software for maintaining accounts and that is the reason purchase invoices format are generally the same in the entire trade. To draw any inference out of the said facts would be stretching it too far, and this is not a clinching piece of evidence to prove that the purchase invoices were bogus. However, at the cost of repetition, we would again state that all the persons who had sold silver bullion to Jain Bullion have specifically to questions raised to them in statement under section 132(4) or 131 have univocally stated to have sold silver bullion which they had declared in IDS Scheme 2016 to M/s. Jain Bullion they have confirmed to have delivered the silver bullion at shop Chaubey Ji ka Phatak, Kinari Bazaar, Agra, all of the purchasers have confirmed to have received the payment through banking channels either by cheque or by RTGS transfer, hence, to state that the purchases of silver bullion were not genuine, would be unlawful, as the departments is basing its contentions only on conjunctures and surmises without there being any evidence in support of their contention. (k) In the show cause notice your honour has further stated that the IDS declarant have paid short term capital gain of around 8% to 10% and have further showcaused as to why certain percentage of Commission in a range of 15% to 20% be held to be paid Jain Bullion as commission to build up stock prior to demonetisation. In this regard, it is humbly submitted that we have amply and adequately, point by point rebutted your alleged allegations of unaccounted money being routed to the accounts of M/s. Jain bullion. We have established that Jain Bullion has bought silver bullion from the IDS declarants in above paragraphs, we have also categorically stated that there is no evidence with the Department not to treat the purchases as genuine or pre-dated, thus the transactions of purchase of silver bullion are genuine, transactions against which sales have taken place for which cash has been deposited by the assessee in bank account. Further, there is no iota of evidence that any commission or any amount over and above the silver purchased amount has been paid to the IDS declarant, none of the

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persons either in the search proceedings or post search proceedings in their statements have ever said that any amount over and above the purchase amount has been paid to them. Thus, merely on surmises and conjunctures, without there being any evidence of whatsoever nature, payment of Commission in a range of 15% to 20% cannot be held to be lawful. No silver found during search at IDS declarant premises nor at Sushil Chauhan’s premises or at his business places, then when was the silver sold by the IDS declarant, if not, as shown by them. We again, most humbly request your honour to treat the transactions of purchase of silver bullion as genuine as has been done by Jain Bullion in the past also and we have tried to prove it in the cash flows statement of Jain Bullion for the sale deposited in his bank account in AY 2016-17 & AY 2017-18, which is very much commensurate and in line with what has been happening with the assessee in the past. Further, without prejudice to our above submission, if the income from the transactions are treated as sham and are treated as unaccounted income then where does a question of commission being paid to the IDS declarant arise, this is without prejudice to our submission that the transactions of purchase of silver are genuine.”

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summarily rejected by the AO. The Ld. AR also pointed out to the audit report, audited financial statements and the tax audit report of the assessee where in the description of cash in hand and the specified bank notes held by the assessee on 8 November 2016 has been specifically mentioned. The cash in hand as on 8-11-2016 was Rs. 13,48,95,596/-, he has also stated that since the purchases have been duly accepted, hence the sales cannot be rejected or faulted upon as the quantitative details and the stock records have been duly maintained by the assessee and have been produced before the AO during the assessment proceedings. Therefore, it was argued that the books of accounts should not have been rejected by the AO and the addition for estimating the gross profit and the cash deposit during demonetisation period of ₹12.97 crores was unwarranted for. 12. During the course of the hearing before us, a brief synopsis has been submitted by the Ld AR discussing the issues as under : “Ground number 3 to 9 before your honours are with regard to the addition of Rs 6,91,239/- for estimated G. P. @ 1.43% and Rs. 13,49,00,000/- as unexplained cash credit u/s 68 on substantive basis in the hands of the appellant Sushil Chauhan for the business carried out by M/s. Jain Bullion proprietary concern of Mr Nirmal Kumar Jain by holding that Mr Nirmal Kumar Jain is a benamidar of Mr Sushil Chauhan the appellant, even when the appellant was doing his silver bullion trading business in the name of M/s. S L Payals which has been accepted as such. The addition made are on substantive basis in the hands of the appellant, whereas protective additions have been made in the hands of Mr Nirmal Kumar Jain. We wish to draw your honour’s kind attention that in the assessment order the Ld. AO has tried to rope-in Mr Nirmal Kumar Jain as a benamidar of the appellant Mr Sushil Chauhan and the same has been mentioned in the show cause notice dated

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07.04.2021 issued to the appellant which is at assessment order Page 3 to 24. The appellant has rebutted the claim of the Ld. AO by submitting a reply to the said SCN dated 06.09. 2021 which is at assessment order page 24 to 46. 1. The main focus of the department is that M/s. Jain Bullion is a benami concern of Sushil Chauhan which has been mentioned by the Ld. AO and each and every contention of the Ld. AO has been categorically rebutted by the appellant in his reply to the SCN, but without controverting the contents of the appellant’s reply the Ld. AO has held M/s. Jain Bullion as a benami concern of Sushil Chauhan and hence the additions have been made on a substantive business in his hands and on protective basis in the hands of Mr Nirmal Kumar Jain. We are submitting the contentions of the department and the stand of the appellant in a tabular manner as below :

S.No. Departments Contention Appellants Rebuttal 1. Nirmal Kumar Jain is In the statements dated 19.7.2018 he has stated that employee of Sushil Chauhan as he is employee of M/s. S L Payal at present and his per his statements u/s 132(4) proprietary concern Jain bullion was closed few months back. Hence, Mr Nirmal Jain has accepted in his statements that he was proprietor of Jain bullion in impugned assessment year. AO page 48- 49 2. Bank accounts of Jain bullion As mentioned in SCN reply AO page 24-25, As were controlled and operated Sushil Chauhan promoted Nirmal Jain for doing by Sushil Chauhan silver bullion work, hence he used to give on credit silver bullion to him and to safeguard his interest in one account of Axis Bank Sushil Chauhan was the Co-Signatory. The other accounts were solely operated by Nirmal Jain -Axis Bank account number Account closed on 8th July 2016 and cheques 7839 mentioned at AO page 6-7 are for AY 2016-17, during the AY 17-18 turnover through this bank account was only Rs. 28,000/-. Hence it has no relevance in AY 17-18, to say that the business was controlled by Sushil Chauhan. -Axis Bank account number Minuscule transactions were carried out in this 7668 account -PNB account number 0042 Major transactions done through this bank account where only signatory was Mr Nirmal Kumar Jain AO page 4-5

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-IndusInd Bank account Some transactions done through this bank account number 7761 where only signatory was Mr Nirmal Kumar Jain 3. Books of accounts of Jain The ex-accountant of Nirmal Jain i.e. Mr Rahul was Bullion found at the shop of also accountant for Sushil Chauhan, hence after Sushil Chauhan closure of Jain Bullion on 31-03-2017 the accounts data was kept by the accountant on the computers of Sushil Chauhan without his knowledge. Since the business of Jain Bullion was closed on 31-03-2017, hence no books etc. were found during the course of survey in July 2018 at their premises during the course of search proceedings

In the assessment order the Ld. AO has not been able to controvert these explanations and contentions of the appellant and has simply rejected them. Thus it cannot be said that Nirmal Kumar Jain was a benamidar of Sushil Chauhan and that Sushil Chauhan controlled his business, so as to make addition in the hands of Sushil Chauhan, given the fact that in the preceding assessment year the same Ld. AO has held the business transactions of Jain Bullion to be genuine and which have been taxed in the hands of Nirmal Kumar Jain itself when same line of business was done by Nirmal Kumar Jain. 2. With regard to the addition of Rs 6,91,239/- for estimation of GP @ 1.43% the Ld. AO rejected the books of accounts without assigning any specific defects in the said books of accounts even though the same were independently audited by a chartered accountant and no adverse inference was ever drawn in them, the same books of accounts have been duly accepted in the search assessments for other years, i.e AY 2016-17 in the case of Jain Bullion prop. Nirmal Kumar Jain. No specific defects were pointed out before rejecting the said books of accounts and were rejected only on the assertion that cash was deposited during demonetization period. The comparative trading results have been tabulated at AO order page 95, wherein during the year under consideration GP rate was 0.90% however the Ld. AO chose to apply the GP rate of 1.43% for the year. Proper stock records were maintained by Jain Bullion and the monthly sale / purchases figures were also provided to the Ld. AO, bills and vouchers were also produced during the course of assessment proceedings by Jain Bullion and also by the appellant. It has been further held in the case of International Forest Co. vs CIT101 ITR 721 by the Honorable Jammu and Kashmir High Court, that : “24. We would also like to observe that even if the income tax officer considered the material placed before him by the assessee to be unreliable keeping in view the comparative statement of accounts of previous years, he could not proceed to make an arbitrary addition and base his conclusion purely on guesswork. He ought to have related his estimate to some

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evidence or material on record as it is now well settled that if the profits shown by the assessee in his return are not accepted, it is for the taxing authorities to prove that the assessee made more profits.” No addition can be made in the trading results without any material on record and without pointing out any defect, either in the method of accounting of the assessee, or in the books of account maintained by the assessee. It has been so held, inter-alia, in the following cases: - J.A. Trivedi Brothers vs. CIT, 158 ITR 705 (MP) - CIT vs. Modi Enterprises, 2 DTR 47 (Raj.) - CIT vs. Realest Builders & Services Ltd., 307 ITR 202 (SC) - Aluminium Industries (P) Ltd. vs. CIT, 80 Taxman 184 (Gau). - Malani Ramjivan Jagannath vs. ACIT, 207 CTR (Raj.) 19 - Madnani Construction Corporation (P.) Ltd. v. CIT [2008] 296 ITR 45 (Gau. - Pyarelal Mittal v. Asstt. CIT [2007] 291 ITR 214 (Gau.) - CIT Karnal v. Om Overseas, [2008] 173 Taxman 185 (P&H) the High Court has overturned any rejection of the books, bereft of justification and pinpointing the deficiencies in the audited books of accounts. 3. With regard to the Ld. AO’s contention of cash deposit during demonetization period of Rs. 13,14,00,000/- in the bank account of Jain Bullion, we would like to state that as has been said in the reply to the SCN at page 29 to 32 of the AO order during the FY 2015-16 cash of Rs. 34.06 cr was deposited whereas in FY 16-17 cash of Rs. 16.98 cr. Was deposited. In the month of October to December in FY 15-16 cash deposited was 17.15 cr compared to Rs 13.14 deposited in Oct to Dec of FY 2016-17. Thus lesser cash was deposited in the impugned year of demonetization. Also it has been established that there were cash sales in these months due to Diwali festival and wedding season. In the VAT assessment orders of Jain Bullion the sales and purchase have been duly accepted by authorities PB page 104-175. The persons from whom silver bullion was purchased by Jain Bullion were also covered in the search proceedings and none of the person have denied of making sales to Jain Bullion during the entire search proceedings. In their assessment and appellate proceedings their sales have been accepted as such, thus when the sales made by the IDS declarants have been accepted, hence to hold that the purchases made by Jain Bullion were questionable would not be prudent and correct. Further, as per the tax audit report of Jain Bullion adequate stock was depicted and shown in the said report. Since silver bullion was a fast moving item, silver bullion of 2648 kgs was actually bought and sold by Jain Bullion. The payment to these persons was made after delivery of silver bullion as they were not regular dealer of bullion. Further, the payments for all these persons were made within a short span

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of time by way of banking channel, further when silver was purchased from these persons VAT was paid under reverse charge which was modvatable, hence there was no loss when silver was brought from these unregistered persons. These transactions were duly shown in the VAT returns which have already been accepted by VAT department. The contention of the Ld. AO that there were similarity in printing errors of purchase invoice as “dot silver” was mentioned, it was purposely done to identify that this silver bullion was bought from unregistered persons and we had the liability to pay 1% input VAT on them. Hence it was purposely done to segregate the unregistered purchases from registered purchases which is not unusual and to say that this was a clinching piece of evidence would be irrelevant. We would also like to mention that no undeclared silver was found from the premises of the IDS declarant nor from Sushil Chauhan's place, then if the silver was not genuinely sold then where was it has not been addressed by the Ld. AO. M/s Jain Bullion had adequate cash in hand of Rs. 13,49,00,919/- as of 08-11-2016, out which Rs. 13.14 cr was deposited during demonetization period by Jain bullion. 4. Further during the course of the assessment proceedings, the appellant had submitted the following details before the Ld. AO to prove the cash sales effected by them. - VAT Return for FY 2016-17 - VAT Order for FY 2016-17 - Quantitative Monthly Stock Summary - Cash flow statements for AY 2016-17, 2017-18 - Copy of Purchase invoices All these documents are being annexed as part of paper book before your honour. 5. The appellant places reliance of the following case laws where similar kind of additions have been deleted. a. In DCIT vs SPR Jewels Pvt. Ltd. In ITA no 2723/Del/2024 (Del ITAT) dated 30-9-2025, b. The Hon’ble ITAT, Mumbai, in the case of DCIT vs. Kundan Jewellers Pvt. Ltd., in ITA No. 1035/Mum/2022 dated.- May 29, 2023. c. ITO Vs Manasa Medicals (ITAT Bangalore) ITA No. 552/Bang/2022 Dated: 31/10/2022. d. In Hirapanna Jewellers v. ACIT in ITA No.253/Viz/2020 [2021] 128 taxmann.com 291 (Vishakhapatnam – Trib.) vide order dated 12.05.2021, e. THE ITAT DELHI BENCH 'B' Fine Gujaranwala Jewellers vs. Income-tax Officer [2023] 151 taxmann.com 340 (Delhi - Trib.)

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f. THE ITAT AMRITSAR BENCH Balwinder Kumar vs. Income-tax Officer [2023] 151 taxmann.com 338 (Amritsar - Trib.) g. The Hon’ble HIGH COURT OF DELHI in PCIT v. Agson Global (P.) Ltd[2022] 134 taxmann.com 256 (Delhi) h. THE ITAT MUMBAI BENCH 'SMC' R. S. Diamonds India (P.) Ltd. v. ACIT [2022] 145 taxmann.com 545 (Mumbai - Trib.) i. IN THE ITAT JAIPUR BENCH 'B' Mahesh Kumar Gupta v. ACIT [2023] 151 taxmann.com 339 (Jaipur - Trib.) j. IN THE ITAT CHANDIGARH BENCH 'A' Smt. Charu Aggarwal v. DCIT [2022] 140 taxmann.com 588 (Chandigarh - Trib.) k. In the case of Salem Sreeramavilas Chit Company (P.) Ltd. v. DCITHIGH COURT OF MADRAS [2020] 114 taxmann.com 492 (Madras) In light of the above facts and cited case laws, we humbly request your honour’s to kindly delete the addition made on substantive basis in the hands of the appellant of Rs. 6, 91,239/- for estimated GP and Rs. 13.49 crores for cash deposited in the bank account of Jain Bullion proprietary concern of Nirmal Kumar Jain. 6. We would also like to state before your honours that the Ld. AO has rejected the books of accounts of the appellant and has estimated the GP on the sales less amount deposited during demonetization period, and then has further made addition u/s 68 as cash credits for the amount deposited in bank account in demonetization period in SBN Thus, when the Ld. AO has rejected the books of accounts then he is precluded from placing reliance on the same books of accounts for making addition u/s 68 for cash deposited in bank account as unexplained cash credit u/s 68 of the Act. - CIT vs Dulla Ram [2014] 42 taxmann.com 349 (Punjab & Haryana) - CIT vs Bahubali Neminath Muttin [2016] 73 taxmann.com 100 (Karnataka)” 13. It was vehemently argued by the Ld. AR that since in the preceding assessment year when the search assessments took place in the case of Mr Nirmal Kumar Jain proprietor of Jain Bullion, the assessment was completed at the returned income wherein he was carrying on the trading in silver

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bullion and the AO had accepted the same, then how in the year under consideration for the same set of transactions the assessee is considered a benamidar for Nirmal Kumar Jain, wherein consistent established business of Nirmal Kumar Jain was there. It was also argued that Nirmal Kumar Jain in his statements stated that when the search took place on 19-07-2018, he was working for Sushil Chauhan, whereas in the impugned assessment year 2017-18, he was running his proprietary concern of Jain Bullion. The VAT assessments also were made in the name of Jain Bullion by the VAT authorities and the bank accounts in the impugned year were operated by Mr Nirmal Kumar Jain and not by Mr Sushil Chauhan as was alleged by the AO in the assessment proceedings, and as has been pointed out in the synopsis submitted during the course of the hearing before us. Thus, the Ld. AR contended that considering the transactions of Jain bullion to be that of Sushil Kumar Chauhan, without establishing that he was a benamidar or even referring to those provisions, would not be correct and hence the addition made by the AO for the transactions of Jain Bullion in the hands of the assessee were not justified. 14. On the other hand, Ld. DR submitted that M/s. Jain Bullion was a benami concern of the assessee and therefore the action of the AO was correct in treating its cash deposited during demonetization period as that belongs to

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the assessee. It was also stated that Jain bullion being in the business of Trading of Silver bullion after the announcement of demonetisation, has tried to make up the stock by buying silver bullion from the IDS 2016 declarants being unregistered assessee. Ld DR argued that there were similarities in the description of Silver, purchased in the invoices which have been submitted in the paper book to prove the purchases for all the said purchases made by the assessee and that the purchases were made by unregistered persons, whereas the assessee generally buys Silver from registered dealers only. He also argued that in these cases, the payments were made after the Silver was delivered to the assessee which was against the general trade practice. It was argued by the Ld DR that since huge cash was deposited during the demonetisation period in specified bank notes hence the same cannot be treated as genuine sales transactions of Jain Bullions. The addition made by the AO under section 68 being unexplained cash credit was rightly sustained, the orders of the lower authorities should be upheld. 15. Considered the rival submissions and material placed on record. We observed that assessee is running a business of manufacturing and trading in Silver payals in the name and style of S L Payals. During the course of assessment proceedings, the AO asked for various details at various points

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of time and the assessee had filed detailed replies and necessary documents in response to AO's notices, wherein the AO has accepted the trading results and the income disclosed in his prop. concern of S L Payals. However, after considering the same, the AO has showcaused the assessee as to why Jain Bullion proprietorship of Mr Nirmal Kumar Jain be not considered as a benami concern of the assessee and the transactions carried on by it and the cash deposited during demonetization period be not considered of the assessee even when the assessee was running a full-fledged business of silver manufacturing and trading of silver payals in his own proprietary concern. The Ld AR had submitted at the time of hearing before us that in the statements of Nirmal Kumar Jain taken during the course of search proceedings on 19-7-2018, wherein he had stated that he was running a proprietary concern in the name of Jain Bullion in the impugned assessment year and it was stated by him that he was at present i.e. on 19/7/2018 working for SL Payal. Even the bank accounts which were mentioned by the AO in the assessment order, it was seen that they were being managed and controlled solely by Nirmal Kumar Jain for the transactions carried in the assessment year 2017-18, the business premises of Jain Bullion was also covered under survey proceedings which establishes that it was a different entity in the impugned assessment year which had closed its business on

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31st March 2017. Having adduced the necessary evidences and the facts on record, we are inclined to hold that M/s. Jain Bullion was a proprietary concern of Nirmal Kumar Jain in the year under consideration, as has been considered and held by the AO in the preceding assessment years, and that the transactions of Jain Bullion cannot be treated as transactions belonging and related to the assessee Sushil Kumar Chauhan merely because Nirmal Kumar was found to be working with the assessee during the search or survey proceedings. It is also brought on record during the course of hearing before us that the AO has made a similar addition in the hands of Nirmal Kumar Jain on protective basis. 16. Further with regard to the transactions of M/s. Jain Bullion the assessee and Nirmal Kumar Jain have filed detailed analysis of cash sales made in AYs 2016-17, and 2017-18 and also filed necessary stock details as called for by the AO. We observe that M/s. Jain Bullions also filed VAT returns as submitted to the VAT authorities which have been accepted by the VAT authorities. We observed that the AO even though acknowledged furnishing of above details but did not find any inconsistencies or discrepancies in the details submitted by the assessee. We further observe that without giving proper reasoning or showing any inconsistencies, the AO simply rejected the books of accounts and proceeded to make the addition. The Assessee

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furnished a detailed chart of monthly cash sales and cash deposits in bank a/c which was reconciled with reference to cash book and from this chart it is noticed that M/s. Jain Bullions was having cash balance of Rs. 13,49,00,919/- as on 8-11-2016. Hence the above facts clearly substantiates that the M/s. Jain Bullions was having sufficient cash balance as on 09.11.2016 to deposit the same in bank accounts. The cash sales were also substantiated with reference to available stock in the premises which was shown in the books of accounts. The AO rejected the books of accounts summarily without pinpointing any defects in the same, as has been brought out above by the Ld. AR of the assessee and that too were rejected at the fag end of the assessment proceedings. It has been held by various courts that rejection of books of accounts without pinpointing specific defects in the same cannot be upheld, hence we have no hesitation in accepting the audited books of accounts of Jain Bullion and its trading results. 17. The assessee filed details to substantiate the sources of cash deposits during the demonetization period in the books of Jain Bullion during the assessment proceedings, but the AO did not establish any deviations in the above details. The purchases made from the IDS declarant have all been held to be genuine purchases for the reason that in the appellate proceedings of those IDS declarants held to be genuine. Once when the sales were proved to be

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genuine, the corresponding purchases have to be treated as genuine, there is no occasion for the AO to disbelieve the sales made, when the quantitative details of the sales, purchases have all been submitted before the AO wherein he has not found any fault or deviation. Even in the VAT returns filed and the VAT assessment order for the impugned year, the VAT authorities have accepted the sales, purchases of Jain Bullion. The assessee submitted the quantitative monthly stock summary, cash flow statements and the purchase vouchers along with the sales Ledger to prove the purchases and the sales made wherein the AO has not found any fault and the AO simply rejected the detailed submissions of the assessee as the AO did not unearth any inconsistencies or discrepancies in details submitted for the transaction of Jain Bullion. The AO simply proceeded to reject the details summarily without any reasoned order. Accordingly, we observe that the AO failed to bring out the basis for the addition made by him. 18. The action of the AO is largely influenced by consideration not borne from records. It is settled position in law that suspicion howsoever strong cannot be allowed to take the place of proof. The Court has to be watchful and ensure that conjectures and suspicions do not take the place of legal proof. Hon’ble Supreme Court in the case of Jaharlal Das v. State of Orissa, reported in (1991) 3 SCC 27, has observed in para 9 that caution

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must be borne in mind that in cases depending largely upon circumstantial evidence there is always a danger that the conjecture or suspicion may take the place of legal proof and such suspicion however strong cannot be allowed to take the place of proof. 19. In this regard it has been held by various courts that the amount deposited in demonetisation period were genuine business transaction and hence the additions made were deleted, some of the judicial decision are as follows: - Hon’ble I.T.A.T. Vishakhapatnam in the case of ACIT vs. Hirapanna Jewellers[2021] 128 taxmann.com 291 (Vishakhapatnam – Trib.) held as under: “…The A.O. made addition under section 68 on account of huge cash amount deposited by assessee-jeweller in its bank account post demonetization since assessee had explained source of said cash deposits as sales of jewellery, produced sale bills and admitted same as revenue receipt as well as offered it to tax and assessee also represented outgo of stocks which was matching with sales impugned addition was to be deleted….” - In DCIT vs SPR Jewels Pvt. Ltd. In ITA no 2723/Del/2024 (Del ITAT) dated 30-9-2025, it was held as under : “The assessee also substantiated the above cash sales with reference to available stock in the premises which was shown in the books of accounts. We observe that the assessee filed details to substantiate the sources of cash deposits during the demonetization period during assessment proceedings but the AO did not establish any deviations in the above details but the AO simply turned a blind eye towards the assessee's submissions and the AO did not unearth any inconsistencies or discrepancies in details given by the assessee but simply proceeded to reject the details summarily without any reasoned

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order. Accordingly, we observe that the AO failed to bring out the basis for the addition made by him. Therefore, we hold that the ld. CIT (A) rightly deleted the addition made by the AO on account of unexplained cash credits which is totally baseless and not substantiated. Accordingly, we are inclined to uphold the order of the ld. CIT (A) who has passed a speaking order. Hence, the Revenue’s grounds are hereby deleted.” - The Hon’ble ITAT, Mumbai, in the case of DCIT vs. Kundan Jewellers Pvt. Ltd., in ITA No. 1035/Mum/2022 dated.- May 29, 2023. - ITO Vs Manasa Medicals (ITAT Bangalore) ITA No. 552/Bang/2022 Dated: 31/10/2022. - The ITAT Delhi Bench in Fine Gujaranwala Jewellers vs. Income- tax Officer [2023] 151 taxmann.com 340 (Delhi - Trib.) - The ITAT Amritsar Bench in Balwinder Kumar vs. Income-tax Officer [2023] 151 taxmann.com 338 (Amritsar - Trib.) - The Hon’ble HIGH COURT OF DELHI in PCIT v. Agson Global (P.) Ltd[2022] 134 taxmann.com 256 (Delhi) - THE ITAT MUMBAI BENCH 'SMC' R. S. Diamonds India (P.) Ltd. v. ACIT [2022] 145 taxmann.com 545 (Mumbai - Trib.) - The ITAT Jaipur Bench in Mahesh Kumar Gupta v. ACIT [2023] 151 taxmann.com 339 (Jaipur - Trib.) - The ITAT Chandigarh Bench in Smt. Charu Aggarwal v. DCIT [2022] 140 taxmann.com 588 (Chandigarh - Trib.) - In the case of Salem Sreeramavilas Chit Company (P.) Ltd. v. DCITHIGH COURT OF MADRAS [2020] 114 taxmann.com 492 (Madras) 20. We observe that in view of the above facts on record where at the first place it has been held by us that M/s. Jain Bullion was a proprietary concern of Mr Nirmal Kumar Jain and hence the trading results and the income of the same

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should have been taxed in the hands of Nirmal Kumar Jain and not in the hands of assessee Sushil Kumar Chauhan. Further in the books of Jain bullion the purchases, sales have all been proved by the assessee to be genuine and just because cash sales were made much prior to announcement of demonetization in the last week of October and early November and Jain Bullion was having enough cash in hand as on 8th November 2016 and the AO has not been able to point out any specific defects in the books of accounts nor has been able to rebut the contentions as were submitted before him in the assessment order with possible explanation, therefore we hold that Jain Bullion has done genuine business sales, and the cash deposited during demonetization period of Rs. 13.49 crores being out of the cash in hand available with Jain Bullion on 09-11-2016, hence the addition made for the same under section 68 as cash credit is hereby deleted. The addition made for estimating the gross profit of the Jian Bullion in the hands of the assessee at Rs.6,91,239/- by the AO after rejecting the audited books of accounts is also here by deleted. Hence, the assessee’s grounds are hereby allowed. 21. With respect to grounds 10 to 13 raised by the assessee before us for addition of notional annual letting value u/s 23 of Rs. 16,28,608/- it has been contended by the Ld. AR that with respect to the same no incriminating

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evidence was found during the course of search proceedings and hence has argued that the same may be deleted relying upon the judgement of Hon’ble Supreme Court in the case of Abhishar Buildwell Pvt Ltd. It was also submitted by the Ld. AR that in the appellate proceedings for AY 2013-14 to 2018-19 except for the impugned assessment year, the additions made in the assessee’s own case have been deleted by the then CIT(A) relying upon the decision of Hon’ble Supreme Court in the case of Abhishar Buildwell Pvt Ltd, the appellate order were placed before us, since no incrementing material was found during the course of search proceedings. It was even pointed out that in Assessment year 2019-20 where the search took place, the AO has not made any addition for deemed notional annual letting value u/s 23. 22. The Ld. DR while relying on the order of the AO contended that since it is a statutory provision hence the addition for deemed notional annual letting value u/s 23 was rightly done by the AO even if no incrementing document was found. 23. Considered the rival submissions placed on record before us and observe that as has been held by the CIT(A) also, that no incriminating material was found with regard to the addition of taxing notional annual letting value u/s 23 of Rs. 16,28,608/- during the course of assessment proceedings and we

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observe that in the assessee’s own cases for AY 2013-14 to 2018-19 except for the impugned assessment year, the additions have already been deleted by the CIT(A) relying on the judgement of Hon’ble Supreme Court in the case of Abhishar Buildwell Private Limited and even no such addition has been made in the search year i.e. AY 2019-20 which is also before us for adjudication, the addition made by the AO of Rs. 16,28,608/- cannot be sustained and hence the same is being deleted as being notional annual letting value. 24. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 22nd day of June, 2026.

Sd/- sd/- (SUNIL KUMAR SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 22.06.2026 TS