BHAVIN JAYENDRAKUMAR SONI,AHMEDABAD vs. THE ACIT CIRCLE 5(2)(1), AHMEDABAD

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ITA 1891/AHD/2025Status: DisposedITAT Ahmedabad19 June 2026AY 2017-1813 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the cash deposits represented genuine sales made by the assessee on November 8, 2016, during the demonetisation period. The Tribunal found the assessee's explanation and supporting evidence, including quantitative tally of stock and sales, to be credible.

What were the facts?

The assessee, a gold jewellery dealer, deposited Rs. 2,47,31,500/- in cash into his bank account during the demonetisation period. The Assessing Officer (AO) treated these deposits as unexplained income, disbelieving the assessee's claim that they represented cash sales.

What were the issues?

Whether cash deposits made during demonetisation, claimed as sales proceeds, can be treated as unexplained income when supported by evidence. The issue also involves whether the AO correctly rejected the assessee's explanation regarding the plausibility of making numerous sales in a short period.

Which sections of the Income-tax Act were involved?

Section 69A,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Bandish Soparkar, AR
For Respondent: Shri Abhijit, SR-DR
Hearing: 07.05.2026Pronounced: 19.06.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 22.09.2025 for the Assessment Year (A.Y.) 2017-18 in the proceeding u/s 143(3) of the Income Tax Act [hereinafter referred as “The Act”].

2.

The brief facts of the case are that the assesse had filed his return of income for A.Y. 2017-18 on 17.10.2017 declaring total income of Rs.31,48,700/-. The case was selected for complete scrutiny under CASS. The assessee is a dealer in gold jewellery. The AO noticed that the assessee had made cash deposits of Rs. 2,47,31,500/- in his bank account during the demonetisation period on 10th and 11th November 2016. The AO was not satisfied with the explanation of the assessee regarding the source of cash deposits. Therefore, he treated the entire cash deposits of Rs. . 2,47,31,500/- as unexplained income of the assessee. The assessment was completed u/s. 143(3) on 23.12.2019 at total income of Rs. 2,78,80,200/-.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the learned CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th

4.

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

1.

The Learned CIT (A) at National Faceless Appeal Centre NFAC) has erred in law and in facts in confirming the Assessment Order passed u/s 143(3) by ld. Assessing Officer assessing income at Rs 2,78,80,200/- as against returned income at Rs 31,48,700/- 2. The Learned CIT (A) at National Faceless Appeal Centre NFAC) has erred in law and in facts in confirming the addition made by the Id Assessing Officer to the tune of Rs 2,47,31,500/- u/s 69A of the Income Tax Act, 1961. 3. The Learned CIT (A) at National Faceless Appeal Centre NFAC) has erred in law and in facts in confirming the addition made by the ld. Assessing Officer despite it is demonstrated by Appellant with adequate documentary evidence that Rs 2,47,31,500/- constitutes cash collections against sale of goods which has already been offered to tax by Appellant. 4. The Learned CIT (A) at National Faceless Appeal Centre NFAC) has erred in law and in facts in so far as he has confirmed the action of Ld AO in taxing the

3 addition made u/s 69A u/s 115BBE of the Act by applying tax rate of 60% which is applicable from Asstt.Year 2018-19. 5. The appellant further reserves its right to add, alter, amend or modify any of the aforesaid grounds before or at the time of hearing of the appeal. . 5. Shri Bandish Soparkar, the Ld. AR of the assessee submitted that the cash deposits in the bank account represented the sale proceeds of the assessee which was duly accounted for in the books of accounts. He explained that the assessee had given complete details of the sales made on 08.11.2016, the date on which the demonetisation was declared. He explained that after declaration of demonetisation, many customers had visited the shop of the assessee and purchased jewellery in old denomination notes of Rs. 500 and Rs. 1000. The Ld. AR submitted that the old denomination notes were valid currency on 08.11.2016 and they ceased to be legal tender on and from 09.11.2016 only. Therefore, there was nothing wrong in the cash sales made by the assessee on 08.11.2016 in old denomination notes of Rs. 500 and Rs. 1000 during the period from 8.30 pm to 12 pm midnight. The Ld. AR submitted that the details of the persons to whom the sales were made was also provided to the Department, but no inquiry was made from them and the veracity of cash sales was not controverted. Further the assessee had furnished the complete reconciliation of stock and no discrepancy therein was found by the AO. The cash sales was also reflected in the CST and VAT returns of the assessee. Considering the evidences regarding cash sales made available on record by the assessee, the AO was not correct in rejecting the sales and treating the cash deposits in the bank account, which represented sales of the assessee, as unaccounted income. The Ld. AR contended that the addition made by the AO had led to double taxation as the profit derived on the cash sales was already offered to tax by the assesse in the return of income. The Ld. AR also relied upon the following decisions in support of his submission that no addition was called for in respect of cash deposits which represented sales of the assessee:

1.

Mahendrakumar Laljibhai Patel ITA 194/Ahd/2023 (Para 2, 2.2, 6-6.4) (notes 223 customers) 2. Radhika Jewellers ITA 201/Ahd/2023 (Para 2, 6.1, 7-7.3) 3. Rajeshkumar Rameshchandra Shah 178 taxmann.com 171 (Ahm) (Para 4-7) 4. Senco Alankar 142 taxmann.com 578 (Kol) (Para 3.2-8) (notes 275 customers) 5. J. R. Rice India (P.) Ltd 157 taxmann.com 337 (Delhi) (Para 4) 6. Hinima Atul Shah 164 taxmann.com 439 (Ahm) (Para 7) 7. Mahesh Kumar Gupta 151 taxmann.com 339 (Jaipur) (Para 6-10) 8. Smt. Charu Aggarwal 140 taxmann.com 588 (Chandigarh) 9. Shree Balaji Processors 169 taxmann.com 220 (Chandigarh) 10. Hirapanna Jewellers 128 taxmann.com 291 (Visakhapatnam) (Para 6-9) 11. Viswa and Devji Diamonds (P.) Ltd 171 taxmann.com 474 (Chennai) (Para 7-10) 12. Jitendra Kumar Tahilramani 171 taxmann.com 229 (Jaipur) 13. Bhaumik Jewellers Private Limited ITA No.1642/Ahd/2024 (Ahm)

6.

Per Contra, Shri Abhijit, the Ld. SR-DR, submitted that the assessee was wholesale dealer in gold ornament and not a retail dealer. The assessee had never made any cash sales except on the day of demonetization, i.e. on 8.11.2016, when he had sold jewellery to 145 different persons of value ranging from Rs.1.5 to Rs.1.99 lakhs. The Ld. SR-DR submitted that sale of such quantum of jewellery to so many persons within a time span of 3.5 hours was humanly impossible, considering the space and the manpower available with the assessee. Therefore, the AO had rightly rejected the contention of cash sales made by the assessee and treated the cash deposit in the bank account as unexplained. According to the Ld. SR-DR, the AO had considered the surrounding circumstances and human probability and thereafter rejected the contention of the assessee regarding the cash sales. He further

5 submitted that all cash sales were of Rs. less than 2 lakhs which was with an intention to accommodate/help the customers to launder their black money. He, therefore, strongly supported the order of the lower authorities.

7.

We have carefully considered the rival submissions. It is true that no cash sale was made by the assessee during the year except on 08.11.2016. However, this fact alone does not negate the sales, considering the evidences brought on record by the assessee for the cash sales. The demonetization declared on 08.11.2016 was an unusual event, as the currency notes of Rs.500 and Rs.1000 denomination were declared to be not a legal tender from the midnight of 08.11.2016. It is a common knowledge that the general public, out of panic, had rushed to spend their old denomination notes on the night of 08.11.2016 and this fact was also widely reported in the media. Therefore, the contention of the assessee that he had made cash sales on the evening of 08.11.2016 in the old denomination notes of Rs. 500 and Rs. 1000; could not have been out- rightly disbelieved. The contention of the AO is that it was not humanly possible to accommodate and make sale to 145 different persons on the evening of 08.11.2016 between 8.30 pm to 12 pm midnight. According to the AO, a customer would have taken approx. 45 minutes to complete the purchase. However, the AO had completely disregarded the fact that the purchases made by the customers on the evening of 08.11.2016 was not a normal purchase, when one has to make selection of the ornaments, but it was a panic buying by the customers. Further, the AO has not brought any evidence on record to establish that 145 customers, to whom sales were made, did not visit the shop of the assessee on the evening of

6 08.11.2016. The AO didn’t bring on record any data regarding dimension of the shop of the assessee. Further, the camera recording of the shop for that day, was also not obtained and analysed, to prove this fact. The shop of the assessee is located at a premium site on C.G Road and the camera footings available on the street were not obtained and analysed to establish that so many persons did not visit the shop on that evening. Further, the entire cash sales of the assessee couldn’t have been rejected even if the AO was of the opinion that so many persons couldn’t have visited the shop. The AO didn’t apply his mind and made any reasonable estimate of the cash sales made by the assessee. In the absence of any evidence to controvert the sales of the assessee, the AO's conclusion that 145 persons could not have visited the shop, is found to be based on mere surmise and conjecture.

8.

It is found that the books of accounts of the assessee were duly audited and the assessee had disclosed total net sales of Rs.39.05 crores during the year. From the month-wise details of sales brought on record, it is found that the sales disclosed in the month of November’16 was not unusually high or exceptional. The sales for this month are found to be comparable with the sales of the preceding month, from the following data:

Month Sales

Weight in g/m (22 carat) Weight in g/m (24 carat)

October 2016 10621.85 8000

7

November 2016 10249.94 9429.710

9.

Thus, it is not the case that the assessee had disclosed unusually high sales in the Month of November’16 to explain the cash deposits. The assessee has also brought on record the complete evidence for purchase and sales along with bills and vouchers which was not disputed by the AO. It is also not the case that the assessee did not have stock available for making cash sales on 08.11.2016. The assessee had furnished a reconciliation of stock available on 08.11.2016 which is found to be as under:

Particulars 24ct Stock Details (gms.)

Op. Stock 2000.000

Sales 1429.710

Balance Stock 570.290

Particulars 22Ct Stock Details (gms.)

Op. Stock 4692.969

8 Mfg. Receipts on 08-11-2016 2845.750

Sales 5605.050

Balance Stock 1933.669

10.

It is evident from the above tables that the assessee had sufficient stock to make cash sales on 08.11.2016 and this fact was not controverted by the AO. Further, the factum of cash sales was not brought before the AO for the first time. The Department had made inquiry from the assessee earlier also and the assessee had furnished an explanation for the cash deposits before the ADIT (Investigation) – Ahmedabad, in response to summon dated 23.03.2017, wherein the factum of the cash deposit with details of cash sales made to 145 persons along with their name, address, amount, etc. was brought to the knowledge of the Department. The details of cash sales made to 145 persons was also made available to the AO. However, the AO did not make inquiry with any of the persons to disprove the cash sales of the assessee. Further, the books of accounts of the assessee were duly audited u/s. 44AB of the Act, and the same was not rejected by the Assessing Officer. Once the books results are accepted by the AO, the sales reflected therein cannot be doubted, otherwise it will result in double taxation. The auditor also did not point out any discrepancy in the books of accounts and in the stock. The stock position reflected in the books of accounts were thus accepted by the AO. The cash sales made out of accounted stock represented only exchange of asset from stock to cash. The sales

9 recorded in the books of accounts having been accepted by the AO, the corresponding cash deposit made out of cash sales, cannot be rejected. It is a settled position that the entries in the books of accounts depict the true state of affairs, unless some contrary evidence is found and the books are rejected by the AO. In the present case, no finding of any adverse evidence or any bogus sales or bogus purchase by the assessee has been brought on record by the AO. The addition for the cash deposits which was duly accounted for in the books of accounts, without rejecting the books of accounts, was totally unwarranted.

11.

The Supreme Court in the case of Lalchand Bhagat Ambica Ram v. Commissioner of Income Tax 37 ITR 288(SC), has held that where the cash deposited was out of the books of accounts and cash-book and where such books had not been rejected, then part of addition for cash deposit was not sustainable. The Apex Court had held that when entries in books of account in regard to cash balances were held to be genuine, there was no escape from conclusion that assessee had offered reasonable explanation as to source of all high denomination notes which it encashed on 19-1-1946 and it was not open to Tribunal to accept genuineness of those books and accept assessee's explanation in part and reject same in regard to balance sum.

12.

The Co-ordinate bench of Tribunal in the case of Hirapanna Jewellers in 128 taxmann.com 291 (Visakhapatnam Trib.), has held as under:

“9. We have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It is also on record that the assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. Hon'ble Kolkata Tribunal in the case of Associated Transport (P.) Ltd. (supra) on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. The Hon’ble Vishakapatnam Tribunal in the case of Hirapanna Jewellers (supra) on identical facts held that when cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. I am of the view that in the light of the facts and circumstances of the present case, the addition made is not sustainable and the same is directed to be deleted.”

13.

The Co-ordinate Bench of this Tribunal in the case of ITO –Vs Rakesh Kumar Chhanalal in ITA No.2159/Ahd/2016 dated 21-04- 2023 held as under: -

“17. As for the cash deposits not accepted as explained by the AO, his contention we find is that the invoices of the sales made in Jalgaon produced by the assessee did not corroborate the explanation of the assessee that the sales were made outside the Gujarat, since the invoices to the extent of Rs.9.73 crores were raised for clients in Gujarat. We agree with the ld.CIT(A)that this argument merits no consideration.

The case of the Revenue is that the cash deposit of Rs.9.73 Crs in Jalgaon bank account, which apparently does not conform to the assesses explanation of being cash sales outside Gujarat, is unaccounted income of the assessee. But the fact of the matter is that all cash deposit in Jalgaon bank account was already accounted for as income by the assessee by way of sales in 11 its Books of accounts and the sales and purchases made by the assessee was shown to tally quantitatively to the Revenue authorities. The AO found no infirmity in the quantitative tally.

In the light of the same, with all the cash deposits in the Jalgaon Bank account of the assessee admittedly treated as sales by the assessee and the sales and purchases found to tally quantitatively also, there cannot be any case for treating any portion of the cash deposits as unexplained income of the assessee.

18.

In view of the above, we uphold the order of the ld.CIT(A) deleting the entire addition of Rs.86.75 crores made under section 69A of the Act and grounds of the appeal raised by the Revenue are dismissed.

19.

In the result, appeal of the Revenue is dismissed.”

14.

Similarly, the Co-ordinate Bench of this Tribunal in the case of ACIT vs. Zinzuwadia & Sons IT(SS)A no. 50/Ahd/2021 dated 10- 05-2024 observed as under:

“20. Taking up first the anomaly noted by the AO that it was not possible to make sales to 223 customers in short span of 240 minutes on 08/11/16, the CIT(A) has dealt with the same at para 6.11 of his order as under:

“6.11. On perusal of assessment order, it is observed that AO has proceeded to make addition of treating accounted sales in books of account as bogus sales through backdating on assumption that it was not possible to make such sale of huge jewellery post announcement of demonetization In the present case, sales on 08/11/2016 was claimed to have been made for Rs 3.58 crore out of aggregate addition of Rs 7.88 crore. The following is the few video and news items available in public domain justifying that post declaration of demonetization till the midnight of 8th November, 2016, there were huge rush of people to buy the jewellery all over the India.

Sr. Headline of News/Video Link of Youtube Video No.

1 People rush to goldsmiths in Jalandhar to https://www.youtube.co convert black currency into gold at m/watch?v=mep1rEP1rE midnight NTuKiW

2 People rush to buy gold jewellery after 500 https://www.youtube.co m/watch?v=bLfxEyWXV U & 1000 notes banned

https://www.youtube.co 3 People take note of change rush to ATMs m/wat ch?v=A 97EQ8ROYO and jewellery shops Daijiworld Television

The AO has observed that it was impossible to cater such huge customers in very short time, appellant has provided its modus operandi of doing sales on a particular day, how accounting was made etc. The reasons provided by appellant from the perspective of a prudent and pragmatic businessman as well as based on the advanced billing technology adopted by appellant, that due to unprecedented rush of customers post-demonetization the appellant realized a huge business opportunity and decided to keep showroom open till 12 o'clock of the night on 8th November 2016. The appellant realized that it would not be possible to cater such huge crowd of customers if the option of selection of ornaments of their choice is provided and such option of selection could also increase the risk of theft/defalcations of Gold Ornaments from showroom and therefore the appellant decided not to give option of selection of jewellery but to give readily prepared packet of Gold Ornaments only, that the administrative staff and family members were instructed to keep aside all other work and to prepare such small package of gold ornaments, two persons were exclusively allotted the work of preparing and handling the bills to the customers through the computerized billing process, due to barcode labels on each and every jewellery/ ornaments of showroom with all the requisite details of jewellery for preparing bills mere scanning the barcode through barcode reader would fetch all the details of the jewellery on the ORNET Software for billing purpose and there is no need to enter the details of the jewellery and therefore billing process was quick and easy The circumstantial evidences as referred supra and billing processes adopted to cater huge rush, AO's contention that it was not possible to make sale to 223 customers cannot be accepted.

21.

As is evident from a bare perusal of the above AO found the assessee's explanation plausible of having managed its affairs in such a manner so as to grab the opportunity of huge rush of public to jewellers on account of demonetization announced by the Government which was acknowledged by reports in the public domain. No infirmity in the explanation of the assessee has been pointed out to us during the course of hearing, neither do we find any in the same. Therefore we find no infirmity in the order of the Ld. CIT(A) accepting the 13 assesses explanation with regard to allegedly unusually large number of customers catered to by the assessee on one single day.”

15.

In view of the facts as discussed earlier in the order and also respectfully following the above judicial precedences, we are of the considered opinion that the AO was not correct in treating the cash deposits in the bank account, which represented sales of the assessee, as unexplained. Therefore, the addition of Rs.2,78,80,200/- made in respect of unexplained cash deposits in the bank account, is deleted.

16.

In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on 19/06/2026 at Ahmedabad.

Sd/- Sd/- (SANJAY GARG) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 19th June, 2026 Neelesh, Sr. PS (True Copy) आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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