INCOME TAX OFFICER, INCOME TAX DEPARTMENT vs. ESHAN GUPTA, LAKHIMPUR- KHERI

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IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘B’, LUCKNOW BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.A. No.69/Lkw/2024 Assessment Year: 2017-18 Income Tax Officer, Income Tax Vs. Eshan Gupta, Department C/o Maa Ambay Jewellers, O/o Income Tax Officer-3(4), Kutchery Road, Lakhimpur-Kheri- Aaykar Bhawan, Imli Chauraha, 262701. Lakhimpur-Kheri, Uttar Pradesh- PAN – AKJPG3692B 262701. (Appellant) (Respondent) Appellant by Shri R. R. N. Shukla, Addl. CIT-(DR) Respondent by Shri Samrat Chandra, CA Shri Vatsal Kakkar, CA O R D E R PER ANADEE NATH MISSHRA:A.M. (A) This appeal vide I.T.A. No.69/Lkw/2024 has been filed by Revenue for assessment year 2017-18 against impugned appellate order dated 11.12.2023 (DIN & Order No.ITBA/NFAC/S/250/2023-24/1058632930(1) of Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. In this appeal Revenue has raised the following grounds:

“1. Law and on facts of the case by giving relief of Rs.2,82,49,799/- by deleting the addition made by AO who has made the addition after recording the detailed reasons for doing so in length in the order itself. 2. Law and on facts of the case by deleting addition of Rs.2,82,49,799/- after admitting the evidences given by the assessee by filing an application u/s 46A of the IT Rules by the assessee without giving the Assessing Officer an opportunity to examine such additional evidneces filed during the course of appellate proceeding

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and without controverting the finding of AO and therefore has erred by violating the procedure laid down in Rule No.46A of IT Rule, 1962. 3. Law and on facts of the case by ignoring the AO to examine such evidences and Ld. CIT(A) had accepted the additional evidence in the matter, the Ld. CIT(A) erred in deleting the addition without making any independent enquiry & merely relying on the documents submitted by the appellant and failing to collect corroborative evidence of the business activity of the appellant.” (B) In this case, assessment order dated 29.12.2019 was passed by the Assessing Officer u/s 143(3) Income Tax Act, 1961 (“Act”, for short) whereby the assessee’s total income was determined at Rs.2,92,21,369/- (Rounded off to Rs.2,92,21,370/-) as against returned income of Rs.9,71,570/-. In the aforesaid assessment order, separate additions of Rs.1,28,00,000/- and Rs.71,78,799/- were made u/s 68 of the Act. Further, addition of Rs.82,71,000/- was made u/s 69B of the Act. The aforesaid addition of Rs.71,78,799/- was made on account of sundry creditors being treated by Assessing Officer as unexplained. The aforesaid addition of Rs.82,71,000/- was made by the Assessing Officer on account of amount transferred by assessee to Shivam Gupta, Maa Ambey Store and Meena Gupta. The Ld. CIT(A) deleted the aforesaid additions and allowed the assessee’s appeal, vide impugned appellate order dated 11.12.2023. The relevant portion of the order of the Ld. CIT(A) is reproduced as under: -

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(B.1) The total relief given by the Assessing Officer amounting to Rs.2,82,49,799, by deleting the addition made by the Assessing Officer. In the present appeal filed by Revenue, the relief of the aforesaid amount of Rs.2,82,49,799/- granted by Ld. CIT(A) is contested. (C) At the time of hearing, the Ld. Departmental Representative placed reliance on the aforesaid assessment order dated 29.12.2019 whereas the Ld. Authorized Representative for assessee placed reliance on the impugned order of the Ld. CIT(A). (D) We have heard both the sides. We have perused the materials on record. In respect of the aforesaid addition of Rs.1,28,00,000/-, the Ld. CIT(A) deleted this, holding as under: - “5.3 I find that that reasons given by the AO for making the addition are not justifiable. First of all, the addition made by the

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AO under section 68 itself is not in accordance with the law. The cash deposits in bank do not represent any credit in the books of the appellant attracting the provisions of Section 68. The credit in respect of such cash deposits, if any, is in the books of the Bank. However as held by the Bombay High Court in the case of CIT vs Bhaichand H Gandhi 141 ITR 67 bank statement is not part of the books of the assessee hence credits in such bank statements cannot be construed as credits in the books of the assessee. Relevant portion of the judgement is as under: as under: "As the Tribunal has pointed out, it is fairly well settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book supplied by the bank to its constituent is only a copy of the constituent's account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, not can it be said that the pass book is maintained by the bank under the instructions of the constituent. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. In our view, the Tribunal was justified in the conclusions at which it arrived." 5.4 In light of this, the addition made by the AO under section 68 is not on firm grounds and seems difficult to be sustained in view of the aforementioned decision of the Bombay High Court. 5.5 Even otherwise, the partial addition of the AO of cash deposits is not justified. It must be noted that the books of the appellant have not been rejected by the AO. The assessment order is conspicuously silent in this respect. In view of this factual position availability of the cash in hand as on 08.11.2016 as per records as claimed by the appellant cannot be denied particularly when there is no abnormality in sales reported by the appellant and also in view of the fact that the appellant has not only maintained the stock details, but the stock summary was submitted before the AO during the assessment proceedings. The sales are also reflected in the VAT Returns of the appellant which have been also brought on record. 5.6 Further I am in agreement with the argument of the appellant that there is nothing that the appellant was required to deposit the cash in on instance. Rather it is very logical that there certainly was a security risk in carrying the cash to bank in one Instance. To alienate such risk it is possible that the cash might have been deposited in instalments. 5.7 The various case laws relied upon by the appellant are also equally important and relevant as to the facts of the case in hand. In a recent decision in ACT VS Ramlal Jewellers Private

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Limited (ITA No. 1600/Mum/2023 AY 2017-18 has held as under: "Another important fact is that assessee has duly filed cash compliance report with respect to cash sales in Form 61A giving all the details with respect to cash sales. Nowhere, the Id. AO has pointed out that assessee did not have sufficient stocks in its possession or otherwise found any defect in the stock register. If that finding has not been given and no discrepancy has been pointed out, then how the corresponding sales of same stock and quantity can be treated as 'undisclosed income' of the assessee. Once, AO has accepted the sales and there is direct nexus with the closing stock and the sales along with movement of stock linked to purchases then such credit on account of sales cannot be added u/s.68. If the cash sales have been accepted, then deposit of the same cash in the bank account which is tallying with the entries in regular cash book, cannot be treated as deposits made out of any undisclosed income. ……………….. 5.8 In view of the foregoing discussion, I am of the considered opinion that the additions made by the AO on this ground are not tenable and needs to be deleted. Accordingly, the ground raised by the appellant in this respect is allowed. (D.1) In respect of the aforesaid addition of Rs.71,78,799/-, the Ld. CIT(A) deleted the addition, holding as under: -

“5.11 I have considered the arguments against and in favor of the addition. The addition has been made u/s 68. Section 68 applies only in respect of the unexplained credits in the books of the appellant. The addition has to be made in the year in which such sums are found to have been credited in the books. It is nowhere brought by the AO that the subjected credits, of which addition was made u/s68, were credited in the books of the appellant in the previous year relevant to the assessment year under appeal. Thus, validity of the additions in the year under consideration remains to be established. 5.12 Going further, the appellant appears to have satisfied all the ingredients of the requirements of Section 68 i.e., identification of the creditors, genuineness of the transaction and creditworthiness of the parties, inasmuch as the required details were brought on record. It is worth noting that the AO did not consider part of the creditors just on the ground that the address of such creditors was available on the purchase bills submitted by the appellant. If this be the case, the details of other creditors are also available on record and should have been accorded the similar treatment by the AO. 5.13 Further receiving advances from the customers for jewellery making is a normal practice in this line of business and as rightly claimed and brought on record by the appellant all such advances are settled later by actual sales to them in later period.

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5.14 In view of the above facts and discussion, I find hardly any justification for the addition made by the AO u/s 68. And therefore, in my considered opiono, the addition made on this count needs to be deleted. I, therefore, allow the ground of the appellant and direct the AO to delete the addition of Rs.71,78,799/-.” (D.2) In respect of the aforesaid addition of Rs.82,71,000/-, the Ld. CIT(A) deleted the addition, holding as under: -

“5.16 The appellant on its part submitted that the party Mr. Shivam Gupta is none else than the real brother of the appellant. He further submitted that all the transactions with his brother Mr. Shivam Gupta are through banking channel and are duly reflected in the books. Further the appellant brought on record the income tax return and balance sheet of Mr.Shivam Gupta and thus vehemently challenged the addition u/s 69B. 5.17 I am in agreement with the submission of the appellant. First of all, as per the version of the AO himself, the funds of Rs.82,71,000/- have been transferred by the appellant to Mr Shivam Gupta as per the books. This clearly means that the transactions are duly recorded in the books and the entries are found in the bank account of the appellant. In such circumstances how the payments made (funds transferred) to Mr. Shivam Gupta become unexplained is not explained by the AO. Once the transactions are reflected in the books, provisions of section 69B have no application. Provisions of section 69B are attracted only in respect of the transactions that are not found books. 5.18 Be that as it may, the appellant also has got the transactions duly confirmed by his brother by bringing on record the ITR and Balance Sheet of him. It is worth noting that not only the funds have been transferred by the appellant to him, he also has received funds from him. The AO has ignored this aspect and seems to have adopted choose and pick approach for making the addition, which I found totally unjustified. 5.19 In light of above, I find myself not in agreement with the observations and findings of the AO, and am of the considered opinion that this addition needs to be deleted. I therefore allow this ground of the appellant and direct the AO to delete the addition of Rs.82,71,000/-.” (D.2.1) On perusal of the aforesaid relevant portions of the impugned order of the Ld. CIT(A), as referred to in foregoing paragraphs (D), (D.1) and (D.2) of this order; it is found that the impugned order of the Ld. CIT(A) is not based on any additional evidence filed by the assessee during the course of appellate proceedings. Therefore, the objections raised by Revenue in Grounds Nos. 2 and 3 of the appeal regarding admission of additional evidence are without merit and are dismissed. As regards Ground No. 1 of the appeal, wherein the Revenue has contested the addition of Rs.2,82,49,799/-

I.T.A. No.69/Lkw/2024 Assessment Year:2017-18 20 the relevant facts are not in dispute. It is an admitted position that the books of account were not rejected by the Assessing Officer; therefore, the cash balance claimed by the assessee as on 08.11.2016 deserves to be accepted. Further, there is no abnormality in the scale of sales turnover reported by the assessee. Moreover, the assessee maintained quantitative stock records, and a stock summary was also furnished to the Assessing Officer during the assessment proceedings. The Assessing Officer did not find any discrepancy in the quantitative stock details reported by the assessee. In view of the foregoing, the order of the Ld. CIT(A) deleting the aforesaid addition of Rs.1,28,00,000/- is worthy of being sustained. Further, as regards the addition of Rs.71,78,799/-, it is not in dispute that the assessee had made sales of gold ornaments/jewellery to the persons from whom the aforesaid advances, reflected as sundry creditors, were received. Further, it is common knowledge that customers do pay advance amounts to jewellers to lock in the prevailing price of gold, so as to safeguard themselves against fluctuations in gold prices by the time the ornaments/jewellery are delivered to them by the assessee. In view of the foregoing, the order of the Ld. CIT(A) deleting the aforesaid addition of Rs.71,78,799/- is worthy of being sustained. Also, reasoning of the Ld. CIT(A) for deleting the aforesaid addition of Rs.82,71,000/-, as referred to in paragraph (C.2) of this order; is just, fair, and in accordance with law, having regard to the facts and circumstances of the case. In view of the foregoing, we find no reason to interfere with the impugned order of the Ld. CIT(A). Revenue has failed to make a good case for making any of the additions in the assessment order. Therefore, ground no. 1 of appeal is also dismissed.

I.T.A. No.69/Lkw/2024 Assessment Year:2017-18 21 (D) In the result, the appeal of Revenue is dismissed. (Order pronounced in the open court on 29.04.2026)

Sd/. Sd/. (KUL BHARAT) (ANADEE NATH MISSHRA) Vice President Accountant Member Dated: 29.04.2026 Vijay Pal Singh, (Sr. PS) Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. Concerned CIT 4. D.R. ITAT, Lucknow