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Facts
The assessee's assessment order for AY 2017-18 was initially accepted. However, the PCIT initiated revision proceedings under Section 263, alleging that the Assessing Officer (AO) had not made adequate enquiries into the abnormal cash deposits during the demonetization period.
Held
The Tribunal held that the AO had conducted adequate enquiries and verified the documents submitted by the assessee, forming a well-reasoned opinion. Therefore, the assessment order was neither erroneous nor prejudicial to the interest of revenue, and the revision proceedings under Section 263 were not justified.
Key Issues
Whether the assessment order passed under Section 143(3) was erroneous and prejudicial to the interest of the revenue, warranting revision under Section 263, due to alleged lack of proper enquiry by the Assessing Officer into cash deposits during demonetization.
Sections Cited
263, 143(3), 69A, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRYSHRI PRABHASH SHANKAR
Himmatlal Kanhaiyalal PCIT, Mumbai Jain Room No. 541, Kautilya Shop No.3, Jai Narayan Bhavan, C-41 to C-43, G- Niwas, Off. Aarey Road, VS. Block, Bandra Kurla Goregaon (East), Mumbai complex, Bandra (East), 400063 Mumbai 400051 PAN: AAAPJ4427A (Appellant) (Respondent) Present for: Assessee by : Shri Prakash Jhujhunwala Revenue by : Shri. Biswanath Das-CIT DR Date of Hearing : 03.03.2025 Date of Pronouncement : 23.05.2025 O R D E R
Per : Narender Kumar Choudhry, Judicial Member:
1. This appeal has been preferred by the Assessee against the order dated 31.12.2024, impugned herein, passed by the Principle Commissioner of Income Tax, Mumbai - 41 (in short Ld. PCIT)/ u/s 263 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
AY: 2017-18 Himmatlal Kanhaiyalal Jain 2. In the instant case, vide assessment order dated 17.12.2019 u/s. 143 (3) of the Act, the returned income declared by the Assessee at Rs.30,70,790/- was accepted.
Subsequently the then Ld. PCIT in the 1st round of litigation, on perusal of assessment record for the assessment year under consideration, observed that cash sale was unreasonably high between 01.11.2016 and 08.11.2016 and inconsistent with regular sale of business, due to the fact that the Assessee has shown cash sale of Rs.62,98,858/- in just eight days (between 01.11.2016 to 08.11.2016) which is unreasonably high, as compared to other months’ total sale. In the months of October 2016 (including Deepawali sale), cash sale was at Rs.43,21,976/-. Further, average cash sale per day in assessment year 2017-18 was Rs. 58,044/- (Rs 2,11,86,106/365). During the same period (between 01.11.2015 to 08.11.2015) of previous year, cash sales was just at Rs. 9,59,714/-. Moreover, the said period during the assessment year 2016-17 was pre Deepawali period and that of assessment year 2017-18 was post Deepawali period, when generally sales come down.
The then Ld. PCIT thus on the above facts, observed that the Ld. AO should have considered addition u/s. 69A of the Act, pertaining to the cash deposited in the bank, which is above the average cash deposit, for the assessment year 2017-18 during the period.
AY: 2017-18 Himmatlal Kanhaiyalal Jain 5. The Ld. PCIT thus, on being prima facie satisfied and in order to examine the case, initiated the revision proceedings u/s 263 of the Act and consequently by issuing a notice dated 16.03.2022 show caused the Assessee “as to why the assessment order should not be set aside u/s. 263 of the Act”, and asked the Assessee to submit explanation/details on or before 21.03.2022”.
The Assessee in response to such show cause notice, did not file any submission till 21.03.2022 therefore in the constrained circumstances, the then Ld. PCIT while exercising powers u/s. 263 of the Act, passed ex parte order dated 22.03.2022 and consequently set aside assessment order passed u/s. 143(3) of the Act, directing the then AO to frame the assessment de novo, after due verifications and enquiries.
The Assessee being aggrieved challenged the said order dated 22.03.2022 passed by the then Ld. PCIT u/s. 263 of the Act.
8. The Hon’ble ITAT in the 1st round of litigation, vide order dated 18.12.2023 in set aside the said order dated 22.03.2022 and remanded the matter to the file of the then Ld. PCIT for passing a fresh order u/s. 263 of the Act, after taking into consideration the submissions of the Assessee.
The Ld. PCIT thus, in pursuance to the direction of the Hon’ble Tribunal, vide notice dated 26.11.2024 afforded an AY: 2017-18 Himmatlal Kanhaiyalal Jain opportunity to the Assessee to present his case or to file submissions on issue of source of cash deposit made during demonetization period and give reasons for continuous increase in the monthly cash in hand, over the period.
The Assessee in response to aforesaid show cause notice dated 26.11.2024 made following submissions:
“SUBMISSIONS: The assessee humbly submits that the revision proposed u/s 263 would be unjustified, since the assessment order passed u/s 143(3) is not erroneous and in so far as is not prejudicial to interest of the revenue and in this respect, the assessee humbly submits as under: 1.0 The assessment order passed u/s 143(3) is not erroneous, since Ld. AO had passed the assessment order after conducting adequate enquiries on issuing specific notices and upon due application of mind and after verifying the facts and figures and on perusing the replies/documents filed by the assessee on assessment record. In this respect, the assessee further submits as under: a) The Ld. AO issued the specific notices u/s.142(1) dated 17/01/2019 and 02/12/2019 (copies enclosed) and specifically directed the assessee to furnish the relevant details/documents to justify the genuineness and source of cash deposits made during demonetization period. The relevant queries raised by Ld. AO in the notices u/s 142(1) dated 17/01/2019 are reproduced as under: "Part: B-CASS Specific Questions 24. Kindly provide following documents:
1. 1. Cash book for FY 2015-16, FY 2016-17 and FY 2017-18.
2. Source of cash receipt in your hand.
3. Reason for keeping such high cash in hand and depositing the same during demonetization period. Kindly provide supporting evidences to substantiate your claim.
4. Your cash in hand position on the dates of deposit of cash in bank during demonetization period. Note: please find the attached AIR" b) In another notice u/s.142 1 dated 02/12/2019 (copy enclosed), Ld. AO, after examining the submissions and documentary evidences filed by the assessee, further directed the assessee to furnish the understated details: "Provide details of month wise cash deposits for full FY16-17 and Nov-Dec FY15-16(Bank statements) Details of month wise sales and cash sales for full FY16-17 and Nov-Dec FY15-16(Sales register)." c) The Ld. AO provided a copy of AIR information to the assessee which contained the details of cash deposits made in bank account and directed the assessee to reconcile such transaction; d) The Ld. AO had selected the case of the assessee under scrutiny to verify "Abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period." Accordingly, it is incorrect to presume that Ld. AO had not conducted the enquiries to verify the source of cash deposits. As verifiable from the above, Ld. AO had issued the notices on raising the specific queries and had properly applied his judicial mind and upon examination of facts and figures, had held that the cash deposits made in bank accounts of the assessee during demonetization period is genuine. Accordingly, the allegations stated in show-cause notice u/s 263 that Ld. AO had not made adequate enquiry is incorrect; AY: 2017-18 Himmatlal Kanhaiyalal Jain 2.0 In response to specific queries raised by the AO, the assessee had furnished the relevant submissions along with understated documents on record (copies enclosed): a) Disclosure of cash deposits made in return of income; b) Justification of cash receipts and cash deposits made during demonetization period; c) Comparative chart of cash deposits made during demonetization period (09/11/2026 to 31/12/20216) and made during similar period of earlier year; d) Comparative chart of cash deposits made during pre- demonetization period and made during similar period of earlier year; e) A comparative chart of cash sales made during pre- demonetization period and made during similar period of earlier year, f) Month-wise summary of opening cash balance, cash sales, cash deposits made in bank accounts and closing balance during the impugned year and earlier year, g) Date-wise details of cash deposits made in bank during impugned year (including demonetization period) and in earlier year; h) Audited cash book for the entire year (F.Y-2016-17); i) Bank statements of the entire year; j) Month-wise stock register disclosing the inward and outward movement of goods (Gold and silver ornaments/jewellery); k) Sales register of Gold and Silver ornaments /jewellery of the entire year: l)VAT audit report for the entire year; m) Quantity details disclosed in tax audit report. During course of assessment, Ld. AO had carefully considered and examined the audited books of accounts and above stated statements/documents filed by the assessee on assessment record and thereafter had passed the assessment order on accepting the transactions as genuine; 3.0 The show-cause notice u/s 263 alleges that the cash deposits made during demonetization period of Rs. 1,13,35,000/is 2.26 times of the cash deposits made during same period in earlier year. In this context, the assessee hereby furnishes the comparative statement of cash deposits AY: 2017-18 Himmatlal Kanhaiyalal Jain made during pre-demonetization period, during demonetization period and post demonetization period vis-a-vis made in earlier year during same months, as under: F.Y 2015-16 (Earlier Year) Amount (Rs.) Cash Deposits from 01-04-2015 to 08- Rs. 1,13,94,166/ 11-2015 Cash Deposits from 09-11-2015 to 31- Rs. 50,08,000/ 12-2015 Cash Deposits from 01-01-2016 to 31- Rs. 64,05,700/ 03-2016 Total Rs.2,28,07,866/ F.Y-2016-17 (Impugned year) Amount (Rs.) Cash Deposits from 01-04-2015 to 08- Rs. 73,03,700/ 11-2015 Cash Deposits from 09-11-2015 to 31- Rs. 1,13,35,000/ 12-2015 Cash Deposits from 01-01-2016 to 31- Rs. 2,70,000/ 03-2016 Total Rs. 1,89,08,700/ As seen from the above, the cash deposits made during impugned year of Rs. 1,89,08,700/is less than the cash deposits made in earlier year of Rs.2,28,07,866/-. The reason for increase in cash deposits made during demonetization period is for the reason that the assessee had made substantial cash sales in the month of October, 2016, since the Diwali festival, Dhanteras and marriage functions were held in the month of October, 2016. Further, the assessee on 08/11/2016 (day of announcement of demonetization) had made the cash sales on issuing 35 cash memos of Rs.28,46,361/-; 4.0 It is to further submit that once the AO had adopted one of the 2 legally sustainable views, then such order cannot be held as erroneous. In impugned case, Ld. AO had reasonably AY: 2017-18 Himmatlal Kanhaiyalal Jain conducted adequate enquires and had verified the details and documents filed by the assessee and upon application of mind, had passed the assessment order. Accordingly, it would be incorrect to state that Ld. AO had not examined the issues and therefore, the revision proposed u/s 263 may kindly be dropped. Further, Hon'ble High Court of Delhi in the case of CIT vs. Vikas Polymers reported in 194 Taxman 57 (HC-Del) had decided that there is a distinction in 'lack of enquiry' and 'inadequate enquiry'. The cases of lack of enquiry can result in erroneous order, however the powers of Sec. 263 cannot be exercised in a case of inadequate enquiry. As the Ld. AO, on due verification, had applied his mind and had formed an opinion which, at no stretch of imagination, would not lead the assessment order as erroneous. The assessee submits that once an issue has been considered and decided by Ld. AO on forming an opinion with due application of his mind, thus the assessment order passed u/s 143(3) cannot be held as erroneous in so far as prejudicial to the interest of the revenue; 5.0 The assessment order passed u/s 143(3) is not prejudicial to the interest of revenue under the reason that the assessee had disclosed the sales corresponding to cash deposits made in bank account. The source of cash deposits made during demonetization period is sourced out of cash sales and such sales had been credited in assessee's audited P & L account and corresponding income thereon had been offered to tax. The assessee submits that once the sales had been credited in audited P & L account and income thereon had been offered to tax in the return of income, then the cash realised against such sales deposited in bank account would not lead to an order prejudicial to interest of the revenue; 6.0 In order to invoke the provisions of Sec. 263, the order sought to be revised should be erroneous and also should be prejudicial to the interest of the revenue. Both the conditions have to be cumulatively satisfied and absence of any one ingredient would not permit the revision of the order w/s 263 of the Act. In impugned case, both ingredients are missing since:(a) The order is not erroneous as Ld. AO, on issuing specific notices and on due application of mind and on perusing the submissions/documents filed by the assessee had formed an opinion-and thereafter had passed the AY: 2017-18 Himmatlal Kanhaiyalal Jain assessment order; (b) Further, the order sought to be revised is not prejudicial to the interest of the revenue, since the cash deposits corresponding to sales of goods had been credited to audited P & L account and income thereon had been offered to tax. As the order passed u/s 143(3) is not erroneous in so far not prejudicial to the interest of the revenue and since both limbs expressly provided in Sec. 263 are missing, accordingly the proceeding u/s 263 may kindly be dropped; 7.0 In this context, the assessee relies in understated decisions: Lack of enquiry vis-a vis in adequate enquir a. MOIL Ltd vs. CIT 81 Taxmann.com 420 (HC-Bom) "The Tribunal was not justified in holding that the query under section 142(1) was very general in nature and the reply of the assessee was also general in nature, The query pertaining to Corporate Social Responsibility was exhaustively answered and the assessee had provided the data pertaining to the expenditure under each head of the claim in respect of Corporate Social Responsibility, in detail. The Tribunal was not justified in holding that the reply/explanation of the assessee was not elaborate enough to decide whether the expenditure claim was admissible under the provisions of the Income Tax Act. The Assessing Officer is not expected to raise more queries, if the Assessing Officer is satisfied about the admissibility of claim on the basis of the material and the details supplied. In the facts and circumstances of the case, the question of law is answered in negative and against the revenue." b. CIT vs. Development Credit Bank Ltd 196 Taxman 329 (HC-Bom) "Whether when in order of assessment Assessing Officer after making enquiry and eliciting response from AY: 2017-18 Himmatlal Kanhaiyalal Jain assessee had come to conclusions that capital gain in question was earned on long-term investments held for a period in excess of one year which assessee treated as investments held to maturity; and that assessee was entitled to depreciation claimed on value of securities held in trading account, Commissioner was justified in exercising jurisdiction under section 263 in instant case - Held no." c) CIT vs. Vikas Polymers 194 Taxman 57 (HC-Del) "Whether if a query was raised during course of scrutiny by Assessing Officer which was answered to satisfaction of Assessing Officer but neither query nor answer was reflected in assessment order, that would not, by itself, lead to conclusion that, order of Assessing Officer called for interference and revision - Held, yes." d) CIT vs. Hindustan Marketing & Advertising Co. Ltd 196 Taxman 368 (HC-Del) "Whether in view of fact that ITO had made reasonable detailed enquiries, had collected relevant material and discussed various facets of case with assessee, order of Commissioner to direct fresh assessment by going deeper into matter would not form a valid or legal basis to exercise jurisdiction under section 263 - Held, yes" Order cannot be revised u/s 263 if Ld. AO had applied his mind and adopted one of the possible view a. CIT vs. Ballarpur Industries Ltd 85 Taxmann.com 37 (Bom-HC). "It is settled position in law that where two views are possible and the Assessing Officer has taken one of the two possible views, then it is not open to treat such a view as an order which is erroneous or prejudicial to the interest of the revenue. Merely because the AY: 2017-18 Himmatlal Kanhaiyalal Jain Commissioner takes a different view to that of the Assessing Officer will not certainly justify exercise of his powers under section 263." b. Grasim Industries Ltd vs, CIT 188 Taxman 327 (Bom-HC) "Following the judgments of the Supreme Court in Malabar Industrial Co. Ltd.'s case (supra) and CIT y. Max India Ltd. [2007] 295 ITR 282, it is now a settled principle that where the Assessing Officer has adopted one of the courses permissible in law or where two views are possible and the Assessing Officer has taken one of the views with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the Assessing Officer is unsustainable in law. In the instant case, two views were inherently possible and the assessee, therefore, could not be subjected to the exercise of the jurisdiction under section 263." c. CIT vs. Kelvinator of India Ltd 12 Taxmann.com 445 (Del-HC) "At the inception itself, the question which arose was whether in the facts of the case, section 263 could have been invoked. The phrase "prejudicial to the interests of the revenue" used in section 263 has to be read in the conjunction with an "erroneous" order passed by the Assessing Officer. Thus, it is not, as if in every case where there is loss of revenue, as a consequence of an order passed by the Assessing Officer, it can be treated as prejudicial to the interests of the revenue. Consequently, if the Assessing Officer has adopted one of the courses permissible in law, which resulted in loss of revenue or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree it cannot be treated as an erroneous order pre judicial to the interests of the AY: 2017-18 Himmatlal Kanhaiyalal Jain revenue unless the view taken by the Assessing Officer is unsustainable in law. d) CIT vs. Mepco Industries Lto 163 Taxman 648 (Mad-HC) "As held by the Apex Court in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83, every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible, in law, and it has resulted in loss of revenue, or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue, unless the view taken by the ITO is unsustainable in law. [Para 5] In the instant case, the Commissioner, while exercising power under section 263 had not rendered an independent finding to the effect that the course adopted by the Assessing Officer was neither permissible, nor the view taken by the Assessing Officer resulted in the loss of revenue which was prejudicial to the interest of the revenue. In the absence of any such finding, the Tribunal was right in setting aside the order of the Commissioner." PRAYER A humble and respectful prayer is made to drop the proposed proceedings u/s 263 since the assessment order u/s 143(3) sought to be revised is not erroneous in so far is not prejudicial to the interest of the revenue for which the assessee shall ever remain grateful and oblige. A letter of authority in my favour is enclosed herewith."
The Ld. PCIT though considered the above submissions of the Assessee, however observed as under:
AY: 2017-18 Himmatlal Kanhaiyalal Jain “That no enquiry regarding the normal increase in bank deposit of cash sale proceeds which is 2.26 times more than that of the corresponding bank deposit of cash sale proceeds of previous financial year nor about the number of cash memos between 01.11.2016 to 08.11.2016 was raised by the Ld. AO. The cash memo of the said period should have been verified in comparative chart of cash sales as well as total sale with the previous year and the next year should have been examined, however, no such details had been called for, with respect to the above. The Ld. AO has failed to conduct such enquiry. Even during the initial proceedings u/s. 263 of the Act, this has not been explained. The Ld. AO has passed the impugned assessment order u/s. 143(3) of the Act, without considering or examining any of the issues as above, therefore it requires necessary verification. Failure on the part of the Ld. AO to do so, prima facie renders assessment order erroneous, in so far as it is prejudicial to the interest of the revenue”.
The Ld. PCIT further, observed “that in view of the above, it is clear that source of cash deposit made by the Assessee as well as the normal increase in cash deposits during demonetization period was not verified properly while passing order u/s. 143(3) of the Act. Thus, the provisions of Section 263 are applicable in this case. The Assessment order, therefore, suffers from this infirmity and the same is erroneous, as it is prejudicial to the interest of the revenue in the light of explanation 2 to Sub Section 1 of Section 263 of the Act”.
The Ld. PCIT, consequently on the aforesaid analyzations set aside the impugned assessment order with the direction to the Ld. AO to carry out due verification and enquires regarding abnormal increase in cash deposit made during demonetization as compared to pre demonetization period and thereafter to
The Assessee therefore, being aggrieved has preferred instant appeal.
Heard the parties and perused the material available on record. Admittedly, during the assessment proceedings, the Ld. AO vide para 7 of annexure sent along with notice dated 17.01.2019 u/s. 142(1) of the Act, asked the Assessee specifically to reconcile the AIR with books of accounts for the financial year 2016-17 and by attaching documentary evidence to support the claim.
16. The Ld. AO further vide question no.24, asked the Assessee to provide following information/documents:
a. Cash book for financial years 2015-16, 2016-17 and 2017-18. b. Source of cash receipt. c. Reason for keeping such cash in hand and depositing the same during the demonetization period (kindly provides supporting evidences to sustained your claim). d. Cash in hands position on the – of deposit of cash in bank during demonetization period.
17. The Assessee in response to the aforesaid notice dated 17.01.2019 and enquires raised vide questions no. 7 & 24, filed following reply along with documents which reads as under:
AY: 2017-18 Himmatlal Kanhaiyalal Jain “With reference to your notice dated 17.01.2019 regarding Limited Scrutiny due to cash deposit during demonetization period, I submit the following information as required in your annexure of notice as under:
1.
1. Letter Of Authority already submitted online on 31.08.2018 2. M/s Ratnmani Jewellers (Proprietor: Himmatlal K. Jain) Conducting Retail Business of Jewellery. Source of Income are Business income and other income as interest and dividend 3. (A) Following documents are already submitted on 25/01/2019 for FY 2016-17 (i) Copy of return of income ITR V. (ii) Statement of computation. (iii) Tax Audit Report. (iv) Financial Statements (v) Letter of Aurhority (B) Following documents are enclosed for FY 2015-16, & FY 2017-18 (i) Copy of return of income ITR V. (ii) Statement of computation. (iii) Tax Audit Report. (iv) Financial Statements.
4. Enclosing Documentary Evidence in support of Deductions and Exemptions claimed In FY 2016-17. As under: I. Housing loan interest and repayment certificate enclosed II. Copies of LIC Premium paid Receipts 5. No Partner or Shareholder in any other concern.
6. Not Applicable.
7. We are Requesting you to provide AIR Copy for reconciliation for 2016-17
Details of all bank accounts maintained by me during the above mentioned year, providing details like Account No, Type of Account, Bank Name & Address, etc. Enclosed bank statement of all account for the financial year 2016-17 Account 1: Bank: State Bank of India, 5/6/7 Khandelwal House, Poddar Road, Malad, (East) Account no.: 35000104895 Type of Account: Current Account Account 2: Bank: Axis Bank, Shop No.3 Aarey Road, Goregaon, (East) Account no.: 912020054998377 Type of Account: Current Account Account 3: Bank: The Deccan Marchant Co. Op. Bank, Aarey Road, Goregaon, (East) Account no.: 0000061854002520 Type of Account: Overdraft Account Account 4: Bank: Bharat Co. Operative Bank, 303,304, 2nd Floor, Brindavan Bldg, Upper Goving Nagar, Kailashpuri, Malad Account no.: 000310100263901 Type of Account: Saving Account 9. Enclosing Details of Immovable Assets Held during FY 2016-17. 10. No Purchase/Sale of Immovable Assets during F.Y. 2016-17. 11. Sec 40A(2)(b) salary to son Hitesh Jain Rs. 3,00,000/- 12. Expense claimed of Rs.1,00,000/- or more in FY.2016- 17 are as under: a) Electricity Expenses Rs. 1,17,755/- b) Salary Rs. 14,56,000/- c) Packing Material Rs. 1,19,242/- d) Shop Expenses Rs. 1,94,652/- e) Bank Interest Rs.3,33,201/- AY: 2017-18 Himmatlal Kanhaiyalal Jain f) Interest on Loan Rs. 5,24,200/- g) Interest on top up loan Rs. 3,08,643/- 13. Depreciation Chart for FY 2016-17. As per financials enclosed 14. Enclosing List of Sundry Creditors above Rs.1,00,000/- .
15. Details of Unsecured Loans and Squared Up Loan for FY 2016-17 is Enclosed.
Enclosing details of Loans and Advances Given during FY 2016-17.
TDS paid and Filed copy of return is enclosed herewith.
No Scrutiny Assessment was completed.
19. Sec 14A of IT Act 1961 Not Applicable.
20. Not Applicable 21. Not B/f Losses.
22. Sec 115JB Not Applicable 23. No Exempt Income earned in FY 2016-17. Except dividend Rs. 70/- 24.
Cash Book of 2016-17 enclosed 2. Cash Receipt are from sales as business of retail jewellery 3. its trend of business in years that cash balance is keeping and depositing as and when not required. 4. cash book enclosed The above information is as per your requirements and fulfil the requirements. If you require any other information I will be pleased to provide the same.”
AY: 2017-18 Himmatlal Kanhaiyalal Jain 18. The assesse in response to the said notice dated 17.01.2019 u/s. 142(1) of the Act, vide submissions dated 25.01.2019 also filed bank statements of the accounts maintained with Bharat Co-operative Bank, Decen Merchants Co-operative Bank and Axis Bank and ISBI Bank.
The AO thereafter issued another notice dated 02.12.2019 u/s. 142(1) of the Act, along with annexure and asked the Assessee to provide details of month wise cash deposit for full financial year 2016-17 and November-December of financial year 2015-16 (bank statements). Details of month-wise sales and cash sales for full financial year 2016-17 and November– December of financial year 2015-16 (sales register).
The Assessee in response to the said notice, vide submission dated 05.12.2019 uploaded various documents, such as cash deposited statement for financial year 2015-16 and 2016-17, sales register for financial year 2016-17 and of November-December of 2015. The Assessee also submitted, the gold and silver stock pertaining to 2015-16 and 2016-17.
We have given thoughtful consideration to the aforesaid peculiar facts and circumstances of the case and documents referred to above. Admittedly, the Ld. AO raised specific quires with regard to the source of the cash receipts and reason for keeping high cash in hand and depositing the same during the demonetization period along with supporting evidences. Further, the Ld. AO also asked the assesse to reconcile its books AY: 2017-18 Himmatlal Kanhaiyalal Jain of accounts with the AIR information. The Assessee in response to aforesaid quires raised, had filed the requisite details pertaining to bank accounts maintained by it during the years, as inquired by the AO. Further, the Assessee also demonstrated the reason for cash receipts from sales as business of retail jewellery, and trend of business in the years for keeping and depositing the cash by submitting the relevant cash books, for the years as inquired by the Ld. AO. Further, the Assessee also submitted the cash deposits statement for the financial year 2015-16 and 2016-17 and sales register for the financial year 2016-17 and for a period of November- December 2015. The Assessee also produced the gold stock and silver stock, pertaining to financial year 2015-16 and 2016-17. From the aforesaid facts and circumstances and documents, it goes to show that the Assessee also demonstrated that during November, 2016 and December, 2016 biggest – season was thereafter a long gap. The Assessee is doing the regular cash sales and depositing the cash into bank account regularly maintained by it. The Assessee also demonstrated the cash deposits and cash sales and analysis of month wise cash sales and cash deposits from 01.04.2015 to 08.11.2015 and 01.04.2016 to 08.11.2016.
22. Though the Ld. AO has not mentioned about all the aforesaid notices issued u/s. 142(1) of the Act, however, in para 1 of the assessment order there is a reference of notice dated 17.01.2019 u/s. 142(1) of the Act and it is also not in denial that the Ld. AO has also issued various other notices u/s. AY: 2017-18 Himmatlal Kanhaiyalal Jain 142(1) of the Act, such as dated 02.12.2019, 17.01.2019 and the Assessee in response to the such notices, duly filed its submissions along with the documentary evidences, as it Clearly appears from the acknowledgments filed by the Assessee before us {kindly refer pages 27 to 38 of paper book}.
No doubt, the Ld. AO in the assessment order has not specifically mentioned the quires raised and the answers given by the Assessee however, the same cannot lead to the conclusion that the assessment order is called for interference and revision, as held by Hon’ble High Court, Delhi in the case of Commissioner of Income Tax Vs. Vikash Polymers (2010) 194 taxman 57, (Delhi).
From the aforesaid analyzations, it has become clear that the Ld. AO in the original assessment proceedings, not only made the detailed enquiry but also examined various relevant documents as mentioned above and the reasons stated by the Assessee for making the high cash sale between 01.11.2016 to 08.11.2016 and thereafter only came to the conclusion in accepting the returned income of the Assessee and thus the assessment order cannot be faulted with and consequently cannot be held as erroneous in so far as, it is prejudicial to the interest of the revenue, which would render the same as invalid and/erroneous as held by the Ld. PCIT.
Thus, on the aforesaid analyzations, the impugned order is liable to be quashed, resultantly, the same is quashed.
In the result, appeal filed by the Assessee stands allowed.
Order pronounced in the open court on 23.05.2025.