Loading judgment…
Facts
The assessee, an individual engaged in trading gold and silver ornaments, reported cash sales during the demonetization period. The Assessing Officer added a significant portion of the cash deposits as unexplained income under Section 69A of the Act, which was confirmed by the CIT(A).
Held
The Tribunal held that once the sale proceeds were accepted as business income by the AO and reflected in the books of accounts, re-taxing the same amount as unexplained cash credit under Section 69A would amount to double taxation. The assessee had provided sufficient documentation to substantiate the cash sales and deposits.
Key Issues
Whether cash deposits made during the demonetization period, if supported by documentation and reflected in business income, can be taxed again as unexplained cash credit under Section 69A of the Income Tax Act.
Sections Cited
143(3), 69A, 145(3), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri T.R. Senthil Kumar & Shri Makarand Vasant Mahadeokar
ITA No: 1083/Ahd/2023 Assessment Year: 2017-18 Anilbhai Hasmukhbhai Soni The ITO, Abhishek A. Choksi, Ward-3(1)(3), Tower No.-F-8/1, Vs Vadodara Flat No. 304, Green City, Pal, Near Bagban Circle, Bhatha, Surat-390001 PAN: AHCPS7711H (Appellant) (Respondent) Assessee Represented: Shri Anil Kshatriya & Shri Ajay Anil Kshatriya, A.Rs. Revenue Represented: Ms. Ketaki Desai, Sr. D.R. Date of hearing : 28-04-2025 Date of pronouncement : 26-05-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Assessee as against the appellate order dated 30.10.2023 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 Anilbhai Hasmukhbhai Soni vs. ITO
Brief facts of the case is that the assessee is an individual, deriving income from business in trading in Gold and Silver Ornaments in the name and Style of Shri Riddhieshwari Jewellers. The assessee filed his Return of Income for the Asst. Year 2017-18 on 31.10.2017 declaring total income of Rs.3,63,000/-. The return was taken for scrutiny assessment and a show cause notice was issued to explain the cash sales on 08-11-2016 of Rs.94,90,890/-, whereas the assessee had stock of only Rs.18,96,682/- and purchased stock on 11-11-2016 of Rs.94,15,842/- from M/s. D.S. Jewellers.
The assessee filed a detailed reply dated 07-12-2019 explaining the stock register, purchase and sales register, cash book and SBN deposited in bank accounts. However the Assessing Officer was not satisfied with the explanation offered by the assessee and added cash deposit of Rs.93,12,000/- as unexplained money u/s. 69A of the Act and demanded tax thereon.
Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) who has also confirmed the addition made by the Assessing Officer.
Aggrieved against the appellate order, the assessee is in appeal before us raising the solitary ground of appeal:
The learned Commissioner (Appeals) erred in confirming the addition of cash deposit of Rs.93,12,000/- in Bank Account during demonetization period as income from undisclosed sources.
A.Y. 2017-18 Page No 3 Anilbhai Hasmukhbhai Soni vs. ITO
6. Ld. Counsel Shri Anil Kshatriya appearing for the assessee submitted that the assessee is engaged in trading in Gold and Silver Ornaments and making charges which is mainly collected in cash. On being announced by the Government of India, demonetization of currency on 08-11-2016 at 8.00 P.M. but demonetization was to take effect from Midnight. As a result, public had enough time in hand to use the available cash and thought it best to convert cash into Gold or Silver. Thus, there were huge rush of buying Gold/Silver during the period. The assessee being a Jeweller made substantial sales on that account and this was the reason for substantial increase of cash on hand. The assessee further submitted that date-wise cash deposit, source of cash deposit and furnished complete copies of computerized cash book and bank book along with the statement of accounts and explained the total sales which includes cash sales of Rs.1,31,51,561/-. The assessee also submitted that month-wise sales and cash deposits during the previous Financial Year 2015-16 and further details of month-wise cash sales and cash deposits from 01-04-2016 to 08- 11-2016. The assessee also furnished cash deposits in his SBI account as follows: DETAILS OF CASH DEPOSITED IN STATE BANK OF INDIA DURING DEMONETIZATION PERIOD Date of Amount of Available cash in the Paper Source of Deposit Deposit of cash Cash Cash Book on book in Bank Deposited immediate preceding Page No. date 10/11/2016 32,50,000 94,99,253 101 Cash has been deposited in Bank out of cash balance of Rs. 1,56,364/- available on 07-11-2016 and balance of Rs. 91,55,636 out of sale proceeds on 08-11- 2016 as per extract of A.Y. 2017-18 Page No 4 Anilbhai Hasmukhbhai Soni vs. ITO
cash book attached herewith 10/11/2016 30,00,000 94,99,253 101 11/11/2016 30,62,000 32,49,253 101 Total Cash 93,12,000 6.1. Ld. Counsel further submitted that the purchase of 3 Kg of Gold is from M/s. D.S. Jewellers on 11-11-2016 for a sum of Rs.94,15,842/- against which VAT Tax at 1% of Rs.94,158/- paid by the assessee. The assessee made payments through SBI cheque dated 10-11-2016 and 11-11-2016 as mentioned in the table above.
6.2. Thus Ld. Counsel submitted that the cash deposits were out of receipts from customers which were already included in the sales and therefore there cannot be undisclosed sources. The abnormal increase was not on account any income from undisclosed sources but on account of demonetization implementation. The Assessing Officer further not made verification with the supplier of Gold as well as purchasers of Gold. Thus the addition made by the Lower Authorities are liable to be deleted.
Per contra Ld. Sr. D.R. appearing for the Revenue supported the orders passed by the Lower Authorities and requested to confirm the addition.
Heard rival submissions and perused the materials available on record including the Paper Book and case laws 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 A.Y. 2017-18 Page No 5 Anilbhai Hasmukhbhai Soni vs. ITO cash book maintained by the assessee. A copy of the computerized cash book was submitted before the Assessing Officer, during the course of assessment 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 without making enquiry with the seller of gold namely M/s. D.S. Jewellers or with the purchaser of smaller denominations made the additions which is not sustainable in law.
8.1. 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 A.Y. 2017-18 Page No 6 Anilbhai Hasmukhbhai Soni vs. ITO therefore agree with the Ld. Counsel for the assessee that, once the book results and inter alia the sale proceeds of Rs. 93.12 lakhs has been 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 credit u/s. 69A of the Act, only on the issue of sales made to different customers on the night of demonetization day.
Ld. 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, non- availability 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.” 9.1 The Ld. AR also showed us that the assessee had achieved higher gross profit & net profit margin in comparison to preceding year which supported the assessee’s case that the sales made on A.Y. 2017-18 Page No 7 Anilbhai Hasmukhbhai Soni vs. ITO the night of demonetization was in pursuance of the excellent opportunity present to them.
In view of the above facts, in our considered view, when the sale proceeds of Rs.93.12 lacs had been supported with book results & primary 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 credit 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 A.Y. 2017-18 Page No 8 Anilbhai Hasmukhbhai Soni vs. ITO
findings, do not require any interference and, in any event, no substantial question of law arises for our consideration.” 10.1. Following the above judicial precedents, it is noted that similar view has been expressed by the coordinate Bench of this Tribunal in the case of DCIT Vs Kundan Jewellers Pvt Ltd [ITA No. 1035/Mum/2022] dated 29.05.2023. The relevant findings are noted to be as under:- “4. The CIT(A) has considered the details of sales, the stock register and the turnover is consistently maintained. The assessee has submitted the details of cash sales/receipts and party wise details of sales above Rs.2 lakhs and when a query was raised to Ld.AR on submissions of details were the cash sales are below Rs.2 Lakhs. The Ld.AR mentioned that the assessee has submitted details of sales below Rs2 lakhs and highlighted rule 114B of the I T Rules r.w.s139(a)(5)(c) of the Act and there was no KYC required. Further the Ld.AR demonstrated the sample Tax Invoice below Rs.2 lakhs in the demonetization period and the invoice contains, name and address etc. Further there is no significant increase in the cash sales out of total sales, whereas for F.Y.2016-17 it is @ 31.27% and in comparison to F.Y. 2015-16 @ 31.44%, the Ld.AR referred to the cash flow statement, cash book and demonstrated the details of deposits made out of the cash sales and the assessee has been consistently maintaining the stock of Rs.68.07 crs for the F.Y 2015-16 and for F.Y 2016-17 it was maintained at Rs.65.38crs and the cash sales are part of the stocks maintained which is not disputed. Further 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 cash sales proceeds/receipts received from the customers are reflected in the Audited Profit & Loss account 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. The AO has not pointed out any specific adversity but made a generalize addition without considering the factual aspects and primary evidences. The A.O has failed to make further enquiries on the information filed and the assessee has discharged the initial burden placed by submitting the information and details. We find the CIT(A) has dealt on the facts, provisions of law, notes and judicial decisions. The Ld. DR could not controvert the findings of the CIT(A) with any new cogent material or information on the disputed issues to take different view. We considered the facts, circumstances, submissions and ratio of judicial A.Y. 2017-18 Page No 9 Anilbhai Hasmukhbhai Soni vs. ITO decisions as discussed above are of the view that the CIT(A) has passed a reasoned and conclusive order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.” 10.2. 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: “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.”
A.Y. 2017-18 Page No 10 Anilbhai Hasmukhbhai Soni vs. ITO
Respectfully following the above judicial precedents, we have no hesitation in deleting the addition made by the Lower Authorities and the ground of appeal raised by the assessee is hereby allowed.
In the result, the appeal filed by the Assessee is allowed.
Order pronounced in the open court on 26 -05-2025 Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 26/05/2025 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