NIRANKARI SONS JEWELLERS PRIVATE LIMITED,DELHI vs. INCOME TAX OFFICER, WARD 18(3), DELHI, DELHI

PER MADHUMITA ROY, JM

The instant appeal filed by the assessee is directed against the order dated 09.05.2024 issued by the National Faceless Appeal
Centre, (referred as “NFAC”) arising out of the order dated
30.12.2019 passed by the Income Tax Officer, Ward- 18(3), New
Delhi under Section 143(3) of the Income Tax Act, 1961

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(hereinafter referred as “the Act”) for A.Y. 2017-18 whereby and where under the addition on account of unexplained cash credit under Section 68 of the Act to the tune of Rs.1,33,09,590/-, and the addition of Rs.46,87,095/- under Section 68 of the Act treating the cash sales during 01.11.2016 to 08.11.2016 as unexplained cash credit has been upheld.
2. The brief facts of the case are that the assessee engaged in the business of trading of gold and diamond jewellery and all types of precious stones filed its return of income on 29.10.2017
declaring total income at Rs.10,19,270/- for the year under consideration.
3. The case was, thereafter, selected for complete scrutiny under CASS. The notice under Section 143(2) dated 24.09.2018
followed by notice under Section 142(1) along with questionnaire were issued to the assessee. Further that the assessee was directed to provide source of cash deposit of Rs.2,25,00,000/- in the HDFC Bank and Rs.3,00,000/- in the Punjab national Bank.
The assessee explained that this cash deposit was due to increase cash sales made by the assessee and such facts were supported by corroborative evidences by furnishing the cash book, ledger, sales and purchase register, bank books, stock register, VAT returns, etc. before the Ld. Assessing Officer.
4. However, rejecting the contentions made by the assessee, the Ld. AO inter alia made addition of Rs.1,33,09,590/- treating the cash sales as unexplained cash credit under Section 68 of the Act and a further addition of Rs.46,87,095/- treating the cash deposit

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out of the cash sales during 01.11.2016 to 08.11.2016 as unexplained cash credit under Section 68 of the Act was made which was further confirmed by the Ld. CIT(A) and thus, impugned before us.
5. So far as the huge cash deposit is concerned it is the case of the assessee that there was a rise in sale of gold / diamond ornaments during the month of October, 2016 on account of festive season of Diwali, Dhanteras, Bhaiya Duj and Karwa
Chauth etc. Such increase in sale of gold/ diamond jewellery was duly backed by the reports published in various newspapers, one of which was also furnished before the lower authorities.
6. However, taking into consideration of two times of the average sales of earlier three months i.e. July, August and September, 2016, the Ld. Assessing Officer came to a finding that the assessee manipulated sale figures and introduced its unaccounted income in the garb of cash sales. The difference between the cash sales shown in the month of October, 2016 i.e.
Rs. 2,09,74,074/- and two times of the above average sale of earlier 3 months i.e. Rs. 38,32,242/- as mentioned above ultimately Rs.1,33,09,590/- of cash sale resulting in cash deposit has been added in the hands of the assessee as unexplained cash credits by the Ld. Assessing Officer under Section 68 of the Act was, in turn confirmed by the Ld. CIT(A) .
7. So far as the cash sales made during the period from 1.11.2016 to 08.11.2016 to the tune of Rs.71,87,098/- is concerned, the assessee explained that with the announcement of 4
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demonetization, the public was in fanatic move and was anxious to convert their invalid currencies into some other form and felt wiser to make investment in jewellery. The sales from 8.00 PM to 12. A.M. on 08.11.2016 were extra ordinary for which extra arrangements was also made as contended by the assessee with supporting documents was rejected by the Ld. AO and only accepting the sale upto Rs.25 lacs, the balance cash sale and cash deposit to the tune of Rs.46,87,098/-was added in the hands of the assessee treating the same as unexplained cash credit under Section 68 of the Act which was further confirmed by the Ld.
CIT(A).
8. At the time of the hearing of the matter the Ld. Sr. Counsel
Sh. Ajay Wadhwa appearing for the assessee while arguing in support of the case submitted that before the First Appellate
Authority the sale invoices containing invoice No., date, party name, address of the parties, contact of purchasers, description of good such as quantity, rate, amount, labor, hallmarking charges,
VAT and mode of receipt of payment were duly submitted as additional evidences in support of the genuineness of the cash transactions and the same were duly confronted to the Ld. AO during remand proceedings. In this regard he has drawn our attention to page Nos. 366 to 425 of the paper book Number II, the contents whereof were duly verified. However, the same was disregarded by the authorities below without pointing out any defect while making the addition. Such submissions made by the Ld. AR neither been able to be denied nor the veracity of those documents has been disputed by the Ld. DR.

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same is matching with the sales which further establishes that the cash generated represents the sales, the addition made by Ld. AO is arbitrary, erroneous and thus liable to be deleted as was the crux of the submissions made by the Ld. AR.
11. On the other hand the Ld. DR relied upon the orders passed by the authorities below.
12. We have heard the rival contentions made by the respective parties and have also perused the materials available on record.
We find the following documents annexed to the paper books filed by the assessee before us :- i. Cash Book, ledger, sales and purchase register, bank book, stock register were examined by auditor-refer tax audit report at page 13 of the PBK-I.
ii. Quantitative details of principal items traded during the AY showing opening, purchases, sales, closing of diamond, silver, gold and colored stones-refer tax audit report at page 20 of the PBK1
iii. Quantitative details of inventory as on 31.03.2016 and 31.03.2017 at page 266 of the PBKI.
iv. Purchase register with name & address of buyer, date of purchase, sales tax no., voucher no., quantity purchased, narration, amount, VAT, Labor charges and excise amount at page 300-307 of PBK1. v. Details of purchases made with name, address, PAN & TIN of vendors, opening balance, description of goods purchased, quantity purchased, amount with VAT, date of invoice, total amount paid and amount outstanding as on 31.03.2017 at page 42-44 of the PBKI.
vi. Copy of ledger of the persons from whom purchases have been made at page 45-53 of the PBK1. 7
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vii. Detail of purchases amounting to Rs. 4.2 crores with R.N.
Bullion Pvt. Ltd. along with date, invoice no., item description, weight and amount with VAT at page 277 of the PBK1. viii. Copy of Purchase invoices amounting to Rs. 4.2 crores with R.N. Bullion Pvt. Ltd. at page 87-107 of the PBK1. ix. Detail of labour charges from 01.04.2016 to 31.03.2017 at page 279-282 of the PBK.
x. Month wise detail of sale & purchases for FY 2016-17, FY
2017-18 & FY 2018-19 at page 269 of PBK1. xi. Sale Register with date, mode of payment, name & address of buyer, voucher number, narration, quantity sale amount, labour Charges, VAT & Total Amount at page 54-77 of the PBK1. xii. Detail of sales showing mode of payment, name and address of buyer, voucher number, narrations, quantity, gross total, sale, labour charges, VAT at page 283-288 of PBK1. xiii. Detail of sale showing mode & bank etc. in which sales is reflected along with date, invoice number, total sale amount at page 342-357of PBK1. xiv. Month wise details of cash deposit and cash sale along with opening cash in hand, cash sales, cash deposit, cash withdrawn and closing cash in hand from 01.04.2015 to 08.11.2015 at page 272 and from 01.04.2016 to 08.11.2016
at page 273 of PBKI.
xv. Month wise detail of cash sale and cash deposited in Punjab National Bank, HDFC Bank & ICICI Bank-page 358 of PBKI.
xvi. Details of cash sale for FY 2015-16 and FY 2016-17; cash sales from 01.04.2015 to 08.11.2015 and from 01.04.2016 to 08.11.2016 page 271 of PBКІ.

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e. Bank book of HDFC Bank, ICICI Bank and Punjab National
Bank are made available at pages 158-182 of the PBK1. f. The Cash book is also annexed at pages 183-265 of the PBK1. g. Banks statement of HDFC bank & PNB bank are annexed at pages 308-341of the PBK1. 17. Most importantly the Sale invoices containing invoice No., date, party name, party address, contact of purchasers, description of good such as quantity, rate, amount, labor, hallmarking charges, VAT and mode of receipt of payment in respect of sales made from 01.11.2016 to 08.11.2016 are appearing at pages 366-
425 of the PBK2. 18. It is relevant to mention that the Ld. DR has not been able to raise any objection in regard to the above details annexed to the paper book filed by the assessee which was duly submitted before the First Appellate Authority and duly confronted to the Ld.AO during remand proceedings. These documents clearly establishes that the cash deposit was made out of cash sales duly recorded in the books of account which was further audited under Section 44AB of the Act. In that view of the matter without referring any defect in the evidences so produced by the assessee in support of claim, the sales cannot be disregarded as contended by the Ld. AR is found to be acceptable. We have considered the fact that such cash deposit made out of cash sales duly accepted by the VAT/GST department; there was no revision in those returns neither any difference or defect was pointed out in these references which further establishes the fact of stock available with the assessee in 10
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the form of opening stock and purchases been accepted by the Income Tax Department and also the VAT and GST Department too. Further that, the books of accounts were neither refuted by the AO or CIT(A) neither has it been said to be ingenuine. Particularly, when the balance in cash is matching with the books the assessee, explanation to the nature and sources of such deposits deserved to be accepted. The books of accounts of the assessee were duly audited by the independent Chartered Accountant under Section 44AB of the Act, the recording of sales, purchase and stock therein not been doubted by the authorities below neither specific defect was pointed out in the books of account maintained by the assessee and having regard to this aspect of the matter, the additions made on ad-hoc basis doubting sales of the assessee in the case in hand is found to be arbitrary, erroneous. The book result shown by the assessee had been accepted by the department in the current year and preceding years. The finding of the AO that the sales made by the assessee is his unaccounted income would certainly disturb the trading results of the company and would also change the GP ratio which is neither permissible without the books of account having being rejected. The authorities below did not doubt the trading results of the assessee. Thus, treatment of sales as unexplained cash credit tantamount to disregarding the audited accounts; if sales is disregarded, it must be followed by rejection of books of accounts under section 145(3) of the Act. It is never the case of the revenue that the cash was utilized elsewhere and not deposited and that sales were not made out of existing stock. The cash in hand in the present facts of the case, cannot be ascribed to bogus sales in absence of cogent evidence in the hands of the 11
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revenue, particularly when sales and purchases register, invoices,
Stock Register were though furnished, the AO failed to make any further enquiry on this. Moreso, only cash credit was considered under Section 68 of the Act and not the trading receipts.
19. Sales were offered as revenue receipt and the same has been admitted as income and therefore, addition on the same amount as un-explained cash credit under Section 68 of the Act tantamount to double taxation, as argued by the learned AR, is also found to be acceptable. There is no statutory bar in making cash sales in A.Y. 2017-18. Section 269 ST bars receiving money in cash over and above of Rs. 2 lacs against sale was introduced only in F.Y. 2017-18 w.e.f. 01.04.2017 i.e. A.Y. 2018-19. Neither there is any legal bar in keeping its money in the Bank Account.
Then, considering the entire aspect of the matter, we find that the assessee has discharged the initial burden cast upon him to prove the credit entries in the books of accounts and thus, the burden shifted to Revenue to conclusively prove that the credit entries appearing in the books of accounts are unexplained in terms of the provision of Section 68 of the Act which is completely absence in the case in hand. We note that the sale are backed by documentary evidences cannot be rejected arbitrarily; the above disallowance is, thus, also found to be without any basis.
Upholding the addition made by the Ld. AO by the Ld. CIT(A) merely on the premises that the purchasers did not respond to the notices issued by the Ld. AO or that the assessee failed to produce confirmations from the purchasers only because letters were issued by the AO (though without mentioning any section of 12
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the statute) remained un-answered cannot lead to the conclusion that sales are bogus when there are documents galore brought on record by the assessee in support of his case, in the form of audited books of accounts / stock register item wise purchase and sales, VAT returns to demonstrate that the assessee indeed has affected the sales, the addition made by the Ld. AO further confirmed by the First Appellate Authority is found to be complete non application of mind, erroneous, arbitrarily and, therefore, not sustainable in the eyes of law. Thus, the additions made by the authorities below are deleted.
20. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 09.04.2025. (NAVEEN CHANDRA) (MADHUMITA ROY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date:- 09.04.2025
Neha, Sr. PS