DCIT, CIRCLE-1(1), CHANDIGARH vs. M/S MOOL JI DIAMONDS, CHANDIGARH
आयकर अपीलीय अिधकरण,चǷीगढ़ Ɋायपीठ “बी” , चǷीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”,
CHANDIGARH
HEARING THROUGH: PHYSICAL MODE
ŵी राजपाल यादव, उपाȯƗ एवं ŵी कृणवȶ सहाय, लेखा सद˟
BEFORE: SHRI. RAJPAL YADAV, VP & SHRI. KRINWANT SAHAY, AM
आयकर अपील सं./ ITA No. 188 /Chd/ 2023
िनधाŊरण वषŊ / Assessment Year : 2017-18
The DCIT
Circle-1(1)
Chandigarh
बनाम
M/s Mool Ji Diamonds
SCO-826, NAC, Manimajra
Chandigarh
˕ायी लेखा सं./PAN NO: AALFM9156A
अपीलाथŎ/Appellant
ŮȑथŎ/Respondent
िनधाŊįरती की ओर से/Assessee by :
Shri Sudhir Sehgal, Advcoate
राजˢ की ओर से/ Revenue by :
Dr. Ranjit Kaur, Addl. CIT, Sr. DR
सुनवाई की तारीख/Date of Hearing :
29/01/2025
उदघोषणा की तारीख/Date of Pronouncement : 23/04/2025
आदेश/Order
PER KRINWANT SAHAY, A.M:
This is an appeal filed by the Revenue against the order of the Ld. CIT(A)/NFAC, Delhi dt. 09/02/2023 pertaining to Assessment
Year 2017-18. 2. In the present appeal Revenue has raised the following grounds of appeal:
1. "The Ld. CIT(A) has erred on facts and in law by allowing the appeal of assessee without appreciating the facts of the case.
2. The Ld. CIT(A) has erred on facts and circumstances of the case in deleting the addition of Rs. 1,54,37,576/- that was made on account of disallowance u/s 68 r.w.s.115BBE of the Act.
3. The Ld. CIT(A) has erred on facts and circumstances of the case in allowing the highly disproportionate amounts of cash deposited by assessee in 2
demonetized old currency notes ignoring the well recognized principal of Human Probabilities in Income Tax proceedings and civil liabilities.
4. It is prayed that the order of the Ld. CIT(A) be cancelled and that of the assessing officer may be restored.
The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or is disposed off."
The facts, in brief, as highlighted in assessment order are that the case of the assessee was taken under scrutiny and during the course of assessment proceedings, various queries were made which were replied by the assessee from time to time. It has been stated in the assessment order that the assessee is engaged in trading of high-end watches and jewellery and various details as submitted by the assessee were scrutinized. 4. It was noticed by the Assessing Officer that there was cash deposits during demonetization period and in order to verify the nature and source of above said cash deposits, the assessee was asked to explain the source of cash deposits during demonetization period amounting to Rs. 3,17,96,000/-. It was stated by the assessee that the said deposits were from cash sales of traded goods i.e. watches, jewellery and advances against the goods to be supplied and filed the copies of cash book and detail of cash sales. 5. It was stated by the assessee that earlier also, Investigation Wing, Chandigarh had called for the same detail, which was duly considered and that information was passed on to the Assessing Officer.
The Assessing officer made a comparison of the percentage of cash sales to total sales in financial year 2015-16 and 2016-17 and found that during the month of October 2016, the cash deposit was 41.85% ,against the cash sales of 7.12% in October 2015 and similarly in November 2016, the cash sales were 14.22, against 9.09% in November 2015. On the basis of above data, the Assessing Officer observed that the percentage of cash sales in the month of October 2016 are much more than the cash sales in the month of October 2015. 7. Further, it was noticed that even the cash in hand in financial year 2016-17 is much more than the cash in hand in the preceding financial year 2015-16. Accordingly, the AO issued a show cause notice as to why excess cash deposited during the demonetization period should not be added to the income of the assessee as unexplained cash credit u/s 68 r.w.s. 115BBE of the Act. 8. The assessee filed a detailed reply to the show cause notice and which have been reproduced at pages 5 to 8 of the assessment order and contended that even in the month of May & June 2015, the cash sales were 51.04% and 58.78% as against 26.94 and 31.01% in May & June 2016. As such, there has been at times sales more in certain months on account of various reasons. It was further submitted that there has been gross increase in sale turnover as compared to earlier year and sales are both by cash and cheques. Taking into consideration the various factors i.e.
festival season, marriage season, it was further stated that all such sales have been recorded in the VAT return filed by the assessee and they have never been revised and all such purchases and sales are duly recorded in the books of accounts. Complete quantitative tally is being maintained in respect of purchases and sales and further, the NP rate had substantially increased during the year under consideration, which was 6.89% as compared to last year, it was 2.05%. It was further contended that there was sufficient stock in hand with the assessee in the shape of opening stock and purchases and sales have been made out of that. Thus, no case of unexplained cash deposits can be made out.
9. As regards, the increase in the month of October and November 2016, it was marriage cum festival season and many festivals like, Dhantaresh, 'Annual marriage season', 'Deepawali',
'Bhaiya Dooj' and other festivals were there in November 2016 and October 2016 and the cash was realized on account of sales and the same was deposited in the regular bank account of the assessee, thus, no case of unexplained cash can be made out.
The Ld. Assessing Officer in para 7 of the order has held that the sale pattern during the year under consideration is not matching to the sale pattern in financial year 2015-16 and the Assessing Officer further held that the books of accounts have been manipulated to show more of the cash sales. Further, there is substantial cash in hand in the books of accounts, but it was not deposited in one go in the bank. There is substantial cash in hand in the books of accounts of the assessee and it appears that the 5
assessee has introduced his unaccounted cash in guise of cash sales, which were generated through fictitious sale bills. Thus, on account of the above said facts and circumstances, the Assessing
Officer on the basis of such circumstances, relying upon the judgement of 'Durga Parshad Maurya, 214 ITR 80' and 'Sumiti
Dayal' as per page 11 and 12 of the assessment order held, that the some benefit of cash in the books of accounts can be given.
However, looking at the substantial increase of cash in the year under consideration, as compared to financial year 2015-16, the Assessing Officer, assumed that due to the 'Deepawali season'
and other festivals, some benefit of increase in cash sales can be given to the assessee and held that on the basis of assumption that cash sales increased by 5% during the year,s as compared to the previous year. Thus, 25.05% of total cash sales made in financial year 2016-17 was taken as comparison of total cash sales booked by the assessee in October 2016, which comes to 1,74,71,657/- (25.45% of Rs. 6,66,50,912/- and, thus, cash sales to that extent was accepted as genuine cash sales. However, an amount of Rs. 1,23,57,813/- and further, giving another benefit of advances to the tune of Rs. 19,64,495/-, the AO worked out the total genuine cash in hand at Rs. 1,43,22,308/- i.e. (Rs. 1,23,57,813 +
19,64,495/-).
Further, an amount of Rs. 10 lacs was also accepted on lumpsum basis on account of further cash sales after announcement of demonetization and, thus, finally the total cash in hand on account of genuine cash sales was worked out at Rs.
1,61,88,424/-. Cash of Rs. 13,30,000/- was deposited between
01,.11.2016 to 04.11.2016. The cash in hand as on 08.11.2016 was calculated at Rs. 1,48,58,424/- and out of which, the assessee had deposited Rs. 15 lacs in IIDS Disclosure Scheme 2016 and, thus, finally, it was held by the Assessing Officer that out of the total cash sales, cash as deposited during the year, amounting to Rs,.
3,17,96,000/- was accepted as per calculation made above and the amount of Rs. 1,54,37,576/- was held to be unexplained cash credit and thus, added to the income of the assessee u/s 68 r.w.s
115BBE of the Income Tax Act.
12. The assessee filed appeal before the Ld. CIT(A). In the appeal, the Ld. CIT(A) has taken into consideration the basis of addition as made by the Assessing Officer and discussed the submissions of the assessee that the return has been filed on the basis of audited books of accounts, which has been verified and checked and all purchases and sales are fully vouched. All the details as desired by the Assessing Officer with regard to the monthly purchases and sales and monthly trading account showing opening stock, purchases, sales and closing stock, purchase and sale register were maintained, VAT returns, sample copies of sale bills, detail of opening and closing stock have been submitted. No defects had been pointed out in such audited books of accounts maintained by the assessee and books of accounts have not been rejected by the Assessing Officer u/s 145(3).
The assessee also relied upon number of judgments of various Benches of the ITAT and High Courts that, when the assessee has sufficient stock and sales have been made of the stock available with the assessee, no addition could be made on account of unexplained cash deposited in the regular bank account out of the sale. It was also contended by relying upon various evidences that there was no bar in making the cash sales and also that since the books of accounts have not been rejected u/s 145(3), the estimated addition of unexplained cash deposits in the regular bank account which was out of the sales and such sales having been accepted by the Assessing Officer, there was no basis of making the addition by the Assessing Officer. 14. The Ld. CIT(A) held that since the cash sales are out of the available stock which consisted of opening stock and purchases and sales. Merely on the basis of variance with the cash sales viz- a-viz last year and percentage of cash sales during the year is higher than the previous year, the addition of unexplained cash as made by the Assessing Officer to the tune of Rs. 1,54,37,576/- u/s 68 r.w.s. 115BBE could not be sustained. 15. The Ld. DR relied upon on the assessment order and stated that addition of Rs. 1,54,37,176/- has rightly been made by the Assessing Officer, since the sales seems to be colorful and sham transactions. There has been substantial increase in the cash sales during the year under consideration and, as such, there was no justification in the deletion of addition of Rs. 1,54,37,176/- as made by the Assessing officer. It was further argued that genuineness of 8 17. It was further argued that the Assessing Officer has adopted a very narrow approach and has not found any defect in the quantitative tally, purchase register, sale register. The Counsel for the assessee also vehemently argued that the books of accounts of the assessee have not been rejected u/s 145(3). He relied upon the judgment of Juri ictional High Court in the case of CIT Vs. Ludhiana Steel Rolling Mills, reported in 295 ITR 111, in which, it was held that if the books of accounts have not been rejected, there cannot be any basis of making the addition. The Counsel of the Assessee also relied upon on number of judgments on account of cash deposited during demonetization period as under :- i). PCIT Vs Akshit Kumar in ITA No. 348 of 2019, reported in 197 Court) iii). Smt. Charu Aggarwal & Others Vs DCIT, reported in 140 339 (Jaipur Trib.) viii). Hirapanna Jeweller Vs DCIT, CC-1, Vashakhapatnam in ITA No. 253/Viz/2020. 18. In the above said cases, on similar facts and circumstances, there was substantial deposit of cash in the books of accounts during the demonetization period in financial year 2016-17, certain additions were made on account of unexplained cash and it was held by the Hon'ble High Court, and Different Benches of ITAT that under such circumstances, when the quantitative tally is there, there is availability of stocks in the books of accounts, no addition could be made on account of unexplained cash in the books of accounts. 19. The Ld. Counsel of the assessee also relied upon the judgements of Chandigarh Bench, wherein certain additions were made during the demonetization period, under similar facts and circumstances. The 'Chandigarh Bench' had deleted the addition and held that there is sufficient and reasonable stock in the books of accounts of the assessee and the cash was realized on account of sales made by the assessee which were recorded in the books of accounts and under such circumstances, no addition could be made on account of such facts and circumstances by relying upon above judgements. 20. We have considered the finding given by the Assessing Officer in the assessment order and CIT (A) in the appeal order, and arguments of the DR and Ld. Counsel as well as written submissions filed by the Ld. DR and reply to that filed by the Ld. Counsel of the Assessee. We have carefully gone through the paper book, brief synopsis and arguments of both the sides. The facts have not been disputed, by both the parties as per the order of the AO and Ld. CIT(A). The assessee is trading in High-end watches and sale of gold ornaments and maintaining proper books of accounts including stock register, purchase and sale registers. All the purchases and sales are fully vouched and the Assessing Officer during the course of assessment proceedings has not pointed out any defect in such books of accounts. We have also seen that copy of the VAT returns, which has been filed in the paper book and the same were also submitted during the course of assessment proceedings and no defect/omission have been pointed out by the Ld. Assessing Officer in maintenance of such books of accounts.
The Assessing officer out of the total cash deposits of Rs. 3,17,96,000/- has accepted cash deposits of Rs 1,63,58,424/- and made an addition of Rs. 1,54,37,576/- on the basis of some permutation and combination and on estimate basis. He has not made the entire addition of cash deposits. The Assessing officer has made an addition of Rs. 1,54,37,576/- and taxed the same as unexplained credit u/s 68 r.w.section 115BBE.
We have gone through the various judgements as cited above by both the sides and find that the very basis of making the addition by the Assessing Officer is devoid of any valid consideration in the sense that without rejecting the books of accounts or finding out any omission or error, the Assessing Officer has made the addition of unexplained cash credit. He has failed to appreciate that the cash sales were out of the available stock in the books of accounts of assessee and by way of making the sales, which have been recorded in the books of "accounts, the stock has been reduced. Cash has been realized and that has 12
been disclosed in the books of accounts. There is no basis of making the addition of unexplained cash u/s 68 r.w.s. 115BBE. We have also gone through the various judgements as cited of Delhi
High Courts and number of judgments of different Benches of the ITAT, including juri ictional Bench of the ITAT and find ourselves in agreement with the order of CIT(A) that merely on account of variance in cash sales during the year under consideration viz-a- viz last year, without pointing any error or omission in purchases and sales or available stocks in the books of accounts, no case could be made out on account of unexplained cash credit u/s 68
r.w.s 115BBE. We find judgments of Juri ictional Bench of the ITAT, in which, the following finding has been given:
i). DCIT vs. Fashion Zone in ITA No. 331/CHD/2023 (Chandigarh-
Trib) [20.03.2024]
"In the above said case the assessee has furnished the cash book containing the entire towards the cash sales, bank statement for the relevant period, VAT returns, Copy of trading and Profit and loss account and balance sheet which are duly audited. No defect has been pointed out by the AO in the terms of availability of stock or in any of the documentation so submitted by the assessee or in the books of account. Therefore, merely the fact that certain cash deposits have been made by the assessee during the period of demonetization and such deposits are on the higher side considering the past year figures cannot be basic to hold the explanation made by the assessee as unsustainable and trade this cash sale as bogus and bringing the cash deposit to Tax u/s 68 of the Act. The comparative figures for past years can no doubt provides a starting point for further examination and verification but basis such comparative analysis along and without any further examination which point out any defect or manipulation in the documentation so submitted or in the terms of availability of requisite stock in the books of account, the sales so under taken by the assessee, which is duly recorded in the books of accounts cannot be rejected and treated as bogus. Therefore, we agree with the contention of the Ld. AR that where the cash sales duly offered to tax have been accepted, bringing the realization of sale proceeds in cash to tax will amount to double taxation and the same is clearly unsustainable in law and cannot be upheld. In view of the same, we find the explanation of the assessee as genuine and reasonable duly supported by the documentation and books of accounts and the addition so made by the AO and confirmed by the Ld. CIT(A) is hereby directed to be deleted".
ii). ITO vs. Aakriti Jain in ITA No. 481/CHD/2023 (Chandigarh
Tribunal) 14.06.2024;
"We have also heard the rival submissions of the parties and perused the material available on record. The Id. Counsel for the Assessee has explained the source of such cash deposits and it has also explained that such cash sales are subject to VAT where
VAT has been collected and deposited with the Government treasury. In support of her explanation, the Assessee has furnished the documents of the relevant period of VAT returns, copy of trading and profit and loss accounts and balance sheets, which are duly audited. We find that the Assessing Officer has accepted the cash sales and the Assessing Officer has also accepted the VAT collected and deposited in the Government account. Even the Assessing Officer has accepted the VAT returns filed by the Assessee and accepted by the Indirect Taxes
Department. Therefore, it clearly shows that the Assessing Officer has not doubted the availability of cash in the hands of the Assessee. Once availability of cash in the hands of the Assessee is accepted, then deposit of such cash in bank account cannot be rejected.
10. Lastly, we find that accepting the cash sale by the Assessee offered to tax, and then addition of same cash deposited in the bank, will amount of double taxation and the same is clearly unsustainable in the law and cannot be justified. Therefore, we find that the explanation offered by the Assessee is genuine, reasonable and duly supported by the documentation, books of account and audited accounts of the Assessee. Therefore, we find no reason to disturb the findings of the Ld. CIT(A).
Accordingly, Departmental appeal on this issue is dismissed."
iii). Gujranwala Jewels vs. the ITO in ITA No. 700/CHD/2023
(07.05.2024)
"We have considered the arguments put forward by both the parties and perused the material available on record. We find that during the assessment proceedings, all the vouchers of cash sales were produced before the Assessing Officer. The Assessing
Officer has not pointed out any lacuna or shortcoming in those vouchers nor any doubt has been raised regarding genuineness of any cash sales on such vouchers. The Assessing Officer has also accepted the corresponding entries in sale book and cash book. The stock register, sales and purchase registers etc. have also been accepted by the Assessing Officer without bringing any discrepancy therein. Complete set of audited books of account and auditor's report were also accepted without pointing out any shortcoming. Therefore, we are of the view that once the complete set of books of account have been produced before the Assessing Officer and no question has been raised regarding genuineness of the entries therein by the Assessing Officer, there is no point in making disallowance of cash deposit based on the same set of books of account. The Id.
CIT(A) has also not brought anything on record to question the correctness or genuineness of vouchers, ledgers, sales book, purchase book, stock register etc. of the Assessee, therefore, his action of giving partial relief to the Assessee is purely on estimate basis. We have also considered various case laws brought on record by the Id. Counsel of the Assessee. The Hon'ble juri ictional High Court of Punjab 8t
Haryana in ITA No. 194 of 1999 dated February 21, 2014 in the case of 'M/s S.V. Auto Industries, Phagwara Vs. CIT, Jalandhar and Another", has given a clear finding on this issue."
"7. We have also considered the case law of the Hon'ble
Supreme Court in the case of Mehta Parikh and Company Vs.
CIT, (1956) 30ITR 181 (SC). In both these orders, higher authorities have clearly and categorically brought out a case that any cash deposit or cash sales cannot be doubted unless short comings are pointed out in the books of account and unless all accounts, as such are rejected. Herein this case, we find that not only all the vouchers of cash sales, cash register and other ledgers and registers in the complete set of books of account have been accepted by both the Assessing Officer and CIT(A), authorities below have failed to bring any discrepancy whatsoever in the balance of cash as on 8.11.2016 and cash sales during the de-monetization period. Once, everything has been accepted by the Assessing Officer and the Id. CIT(A), there is no reason to make addition on estimate basis by the Assessing
Officer and its partial confirmation by the Id. CIT(A). Accordingly, the appeal of the Assessee is allowed."
The Counsel of the Assessee has also placed reliance on the judgment of Hon'ble Chandigarh Bench in the case of DCIT Vs M/s
Tirupati Balaji Exim Pvt. Ltd., in ITA No. 618/Chd/2023, wherein, the Hon'ble Bench has held as under:-
"The assessee has filed complete details, including details of cash purchases, purchase bills, cash sales as well as vouchers copies of ledger account of purchases, copies of ledger account of sales made, copies of ledger accounts of charts, from whom purchase and sales have been made and confirmed copy of ledger account of certain parties. The assessee has also filed complete detail of debtors and creditors list. We find no infirmity into the finding of the CIT(A), as the AO could not point any mistake in the cash sales made and even these parties were never examined by AO to rebut the claim of assessee. Hence, the source of cash deposits made by assessee during demonetization period of Rs. 5,07,54,538/-, out of cash sales of Rs.5,42,54,578/-, stands explained and, hence, we affirm the order of CIT(A). Hence, this issue of Revenue's appeal is dismissed."
24. Thus, following the above said judgments and upon the facts and circumstances of the case, we have no hesitation in confirming the order of the CIT(A) and, thus, the appeal of the Revenue is dismissed.
25. In the result, appeal of the Revenue is dismissed.
Order pronounced in the open Court on 23/04/2025 राजपाल यादव
कृणवȶ सहाय
(RAJPAL YADAV)
(KRINWANT SAHAY)
उपाȯƗ/VICE PRESIDENT
लेखा सद˟/ ACCOUNTANT MEMBER
AG
आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :
1. अपीलाथŎ/ The Appellant
2. ŮȑथŎ/ The Respondent
3. आयकर आयुƅ/ CIT
4. आयकर आयुƅ (अपील)/ The CIT(A)
5. िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH
6. गाडŊ फाईल/ Guard File
आदेशानुसार/ By order,
सहायक पंजीकार/