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Facts
The assessee, a jewellery business, reported significant cash sales during the demonetization period. The Assessing Officer (AO) treated these cash deposits as unexplained money under Section 69A of the Income Tax Act, 1961, and made an addition. The CIT(A) upheld the AO's order.
Held
The Tribunal held that since the cash sales were accounted for in the books of accounts, supported by sales registers and VAT returns, and were already assessed as business income, it was improper to tax them again as unexplained cash under Section 69A, leading to double taxation.
Key Issues
Whether cash deposits during the demonetization period, supported by proper documentation and accounted for as business income, can be taxed again as unexplained money under Section 69A of the Income Tax Act.
Sections Cited
143(3), 133, 69A, 115BBE, 234A, 234B, 234C, 234D, 145(3), 68
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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar
Assessee Represented: Shri Tushar Hemani, Sr. Adv. Revenue Represented: Shri Hargovind Singh, Sr. D.R. Date of hearing : 19-06-2025 Date of pronouncement : 07-08-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the appellate order dated 30.09.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18.
A.Y. 2017-18 Page No 2 M/s. Bhanu Jewellers Art vs. ITO
Brief facts of the case is that the assessee is a partnership firm engaged in the business of retail purchase and sale of jewellery/ bullion. For the Asst. Year 2017-18 the assessee filed its return of income on 28-09-2017 declaring total income of Rs.19,50,932/=. The return was selected for scrutiny assessment as abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period. The assessee made cash sales worth Rs.3,82,69,000/= during demonetization period from 09-11-2016 to 30-12-2016 which was forming part of total sales, duly accounted for in the books of accounts and deposited in Dena Bank and SBI accounts and accordingly offered for tax. Verification of the same by the AO observed that the cash sales are less than Rs.2 lakhs per transaction so that there is no need to provide the details of purchaser’s PAN and address. The AO further noticed that the assessee made payments to the suppliers during demonetization period after a lapse of three months, whereas there were no past records that purchases being made on credit basis, which is abnormal trend in assessee’s business. Therefore, the AO issued notice u/s.133[6] to eight suppliers of goods to the assessee, against which six suppliers furnished details and two suppliers namely M/s. Suvarna Shilpi Jewellers Pvt Ltd and M/s. 24 Carat not replied to the notices. Therefore A.O. issued show cause notice to the assessee why not make the cash deposits made during demonetization period as unexplained money u/s 69A of the Act.
2.2. The assessee replied that the increase in sales during the demonetization period because of most of the sales were made in A.Y. 2017-18 Page No 3 M/s. Bhanu Jewellers Art vs. ITO cash owing to “special discounts” and “No making charges” given to customers coupled with festivel season of Diwali. However, stock of goods were clearly reflecting in the books of accounts and VAT returns. Further the assessee also availed cash credit from the bank in order to meet its working capital requirements and in terms of the said facility assessee is required to submit monthly stock statements, which were duly accepted by the Bank. The assessee also submitted comparative chart of gross profit for past five years and average profit of the same was 10.03% whereas assessee offered gross profit of 12.63% declared this Asst. Year. Assessee further submitted that M/s. Suvarna Shilpi Jewellers Pvt Ltd and M/s. 24 Carat also filed their reply through email and relevant copies produced before the AO and requested to send IT Inspector to verify the above address. Thus, the assessee explained that the cash deposits made in bank accounts are nothing but cash sales made during demonetization period and no addition is warranted u/s.69A of the Act. However, the AO was not convinced with the above reply and made addition of Rs.3,82,69,000/= as unexplained money u/s.69A of the Act and demanded tax u/s.115 BBE of the Act.
Aggrieved against the assessment order, the assessee filed appeal before CIT[A] who has confirmed the addition and dismissed the assessee appeal.
Aggrieved against the appellate order, the assessee is in appeal before us raising the following Grounds of Appeal:
A.Y. 2017-18 Page No 4 M/s. Bhanu Jewellers Art vs. ITO
In law and in the facts and circumstances of the appellant's case, the Hon' in CIT(A) has erred upholding the addition made by the Ld. A.O u/s. 69A.
2. The Hon' CIT(A) has erred by taxing the impugned sum of Rs. 3,82,69,000/- doubly in the hands of the appellant since the same had already been offered to tax by the appellant.
The Hon' CIT(A) has erred in levying tax under section 115BBE of the I.T. Act 4. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) has erred in confirming the levy of interest u/s. 234(a), 234(b), 234(c), 234(d). 5. The appellant craves leave to add, amend, edit, delete, change or modify all or any of the ground before or at the time of hearing. 5. Ld. Senior Counsel Shri Tushar Hemani appearing for the assessee submitted a detailed paper book consisting of sales register, stock summary details of cash deposits and also quantity records of gold and silver jewells maintained by the assessee. The assessee made cash sales worth Rs.3,82,69,000/= during demonetization period from 09-11-2016 to 30-12-2016 which was forming part of total sales, duly accounted for in the books of accounts and deposited in Dena Bank and SBI accounts and accordingly offered for tax. The ld. Sr. Counsel further submitted that the assessee furnished the sales register to the AO and also submitted assessee’s VAT return for the financial year 2016-17 and there is no mismatch in the data submitted to the VAT authority. Further, the cash deposits report filed before the Ld AO also carry the address of the customers. The assessee also produced the stock register thus, the AO has not found any shortage of physical A.Y. 2017-18 Page No 5 M/s. Bhanu Jewellers Art vs. ITO stock with that of the sales made by the assessee. The assessee also availed cash credit from the bank in order to meet its working capital requirements and in terms of the said facility assessee is required to submit monthly stock statements which were duly accepted by the Bank and thus the stock and sales are not doubted by the AO.
5.1. Ld Senior Counsel further submitted that M/s. Suvarna Shilpi Jewellers Pvt Ltd and M/s. 24 Carat also filed their reply through email and relevant copies produced before the AO and requested to send IT Inspector to verify the above address of the parties, however the AO has not made efforts to verify the same. Thus, Ld Senior Counsel submitted that the lower authorities completely erred in treating the cash deposits made in bank accounts as unexplained and made addition u/s.69A of the Act, which is liable to be deleted and allow the appeal filed by the assessee.
6. Per contra Ld Senior DR appearing for the Revenue supported the orders passed by the lower authorities and requested to sustain the same and dismiss the assessee appeal.
We have heard the rival submissions as well as paper books and case law compilation filed by the assessee. The assessee claims that the cash deposit is on account of demonetization and in fact cash sales was essentially generated on retail sales to various customers which is duly reflected in the cash book maintained by the assessee. A copy of the computerized cash book was submitted before the Assessing Officer, during the course of assessment A.Y. 2017-18 Page No 6 M/s. Bhanu Jewellers Art vs. ITO proceedings, which are duly audited with Tax Audit Report. The Ld. A.O. has not found any defect or discrepancy in the audited books of accounts. The assessee has proved with reference to corroborative material evidence in the cash deposits with retail sales bill, purchase bill with name of the customers. Thus, the initial burden is fully discharged by the assessee. Whereas the Ld. A.O. without rejection of books of accounts and with partial enquiry with the seller of gold and no enquiry with the purchaser of smaller denominations, made the additions which is not sustainable in law.
7.1. Further the sales are found recorded in the sales register, stock register, cash book, etc. The impugned sum also formed part of the overall sales credited in the Profit & Loss account and offered for taxation under the head “Business Income”. Perusal of the stock register along with sales register shows that the movement of the stock fully reconciles with the reported sale proceeds on the day of demonetization. The Ld. D.R. was also unable to controvert the fact that the A.O. had accepted the sales and the stocks in as much as he did not invoke provisions of Section 145(3) of the Act and rejected the books of accounts. The Ld. D.R. although emphasized on the suspicious features which were noticed by the A.O. casting aspersions of the sales made on the day of demonetization and stock movement etc., but the fact remains that the Ld. A.O. ultimately did not reject the books of accounts and trading account, Profit and Loss account and the financial statements. We therefore agree with the Ld. Senior Counsel for the assessee that once the book results and inter alia the sale proceeds has been A.Y. 2017-18 Page No 7 M/s. Bhanu Jewellers Art vs. ITO accepted by the A.O. as assessee’s business income, it is not justified on AO’s part again to assess the same by way of unexplained cash u/s. 69A of the Act.
7.2. Ld. Senior Counsel drawn our attention to the decision of Vishakhapatnam Tribunal in the case of ACIT Vs Hirapanna Jewellers (128 taxmann.com 291) wherein sales made to 270 different customers was held to be plausible by observing as follows:
“7.2 In the instant case the assessee has established the sales with the bills and representing outgo of stocks. The sales were duly accounted for in the books of accounts and there were no abnormal profits. In spite of conducting the survey the AO did not find any defects in sales and the stock. Therefore, we do not find any reason to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in the span of 4 hours, non-availability of KYC documents for sales, non-writing of tag of the jewellery to the sale bills, nonavailability of CCTV footage for huge rush of public etc. The contention of the assessee that due to demonetization, the public became panic and the cash available with them in old denomination notes becomes illegal from 9-11-2016 and made the investment in jewellery, thereby thronged the jewellery shops appear to be reasonable and supported by the newspaper clippings such as The Tribune, The Hindu etc. It is observed from the newspaper clippings that there was undue rush in various jewellery shops immediately after announcement of demonetization through the country.” 7.3. The Ld. AR also showed us that the assessee had achieved average gross profit of 10.03% in comparison to preceding years which supported the assessee’s case that the sales made during the demonetization period was 12.63%.
7.4. 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- A.Y. 2017-18 Page No 8 M/s. Bhanu Jewellers Art vs. ITO 05-2024 observed the sales made on the demonetization day 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 https://www.youtube.co Jalandhar to convert black m/watch?v=mep1rEP1rE currency into gold at NTuKiW midnight 2 People rush to buy gold https://www.youtube.co jewellry after 500 & 1000 m/watch?v=bLfxEyWXV notes banned U 3 People take note of change https://www.youtube.co rush to ATMS and jewellery m/wat ch?v=A 97EQ8RO- shops Daijiworld Television YO
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 A.Y. 2017-18 Page No 9 M/s. Bhanu Jewellers Art vs. ITO 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.
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 assesses explanation with regard to allegedly unusually large number of customers catered to by the assessee on one single day.”
7.5. In view of the above facts, in our considered view, when the sale proceeds had been supported with book results & primary A.Y. 2017-18 Page No 10 M/s. Bhanu Jewellers Art vs. ITO evidences, which were not disproved by the AO, and that the same had already been assessed by the AO as revenue receipts from ‘Business’, then it was wholly improper for the AO to again tax these sale proceeds as unexplained cash u/s 69A of the Act, as it would amount double taxation of the same sum. The reliance placed by the Ld. AR in support thereof on the following decisions are found to be relevant. a. CIT Vs Vishal Export Overseas Ltd [TA No. 2471 of 2009] (Guj HC) “5. ...... The Tribunal however, upheld the deletion of Rs.70 lakhs under section 68 of the Act observing that when the assessee had already offered sales realisation and such income is accepted by the Assessing Officer to be the income of the assessee, addition of the same amount once again under section 68 of the Act would tantamount to double taxation of the same income.
Having heard learned counsel for the parties and having perused the documents on record, we are in agreement with the above view of the Tribunal.” b. CIT Vs Kailash Jewellery House [TA No. 613/2010] (Del HC) “The Tribunal also observed that it is not in dispute that the sum of Rs 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. It is in these circumstances that the Tribunal observed that the cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The findings of the Commissioner of Income-tax (Appeals) and the Tribunal, which are purely in the nature of the factual findings, do not require any interference and, in any event, no substantial question of law arises for our consideration.” 7.6. Further very recently, Co-ordinate Bench of this Tribunal in dated 30-10-2024 in the case of Jaykumar Nemichand Jain HUF Vs ITO wherein it was held as follows:
A.Y. 2017-18 Page No 11 M/s. Bhanu Jewellers Art vs. ITO
“8.1. The assessee relied on various judicial precedents, including Sobha Devi Dilipkumar vs. ITO, ACIT vs. Chandra Surana, ITO vs. J.K. Wood India (P.) Ltd., and ACIT vs. Hirapanna Jewellers. These decisions collectively emphasize that cash deposits during demonetization or otherwise, if duly recorded and substantiated, cannot be taxed under Section 69A unless the revenue demonstrates the unreliability of the books or evidence provided. 8.2. It is pertinent to note that mere cash deposits during the demonetization period do not automatically trigger the provisions of Section 69A of the Act, if the transactions are supported by proper documentation and the cash has been accounted for in the books. In cases where cash sales or deposits are accounted for and recorded in the regular course of business, the provisions of Section 69A of the Act are not attracted. The revenue must find defects in the assessee’s books of accounts to invoke Section 69A of the Act. The existence of stock records, sales invoices, and proper tax filings (VAT returns in this case) are sufficient to substantiate the cash deposits. Demonetization-related cash deposits should not be treated as unexplained merely because they occur during a sensitive period. Where all supporting documents are provided, the burden of proof shifts back to the department to demonstrate that the deposits are unexplained. 8.3. In light of the facts and the documentary evidence presented, it is evident that the assessee maintained regular books of account, recorded all sales, and provided sufficient evidence to substantiate the cash deposits during the demonetization period. The AO did not bring any concrete evidence to counter the claims of the assessee, nor did he reject the books of account. The sales were duly reflected in the VAT returns, and no discrepancies were found in stock records. Accordingly, the addition of Rs. 55,00,000 made by the AO under Section 69A is deleted, and the appeal of the assessee is allowed.”
Respectfully following the above judicial precedents, we have no hesitation in deleting the addition made u/s.69A of Rs.3,82,69,000/= by the Lower Authorities and the grounds of appeal raised by the assessee are hereby allowed.
A.Y. 2017-18 Page No 12 M/s. Bhanu Jewellers Art vs. ITO
In the result, the appeal filed by the Assessee is allowed.
Order pronounced in the open court on 07 -08-2025 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 07/08/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद