INCOME TAX OFFICER, WARD-2(1), CHANDIGARH, CHANDIGARH vs. ATMA RAM JEWELLERS, CHANDIGARH

आदेश/ORDER

PER PARESH M. JOSHI, JM

2.2 That the assessee filed its return of income for assessment year 2017-18 on 31.10.2017 declaring taxable income at Rs.5,80,190/-.

2.3 That the case of the assessee was selected under CASS for scrutiny.

2.4 That during the course of the assessment proceedings, due submissions were made by the assessee in response to notice(s) served upon.

2.5 That after due examination of submissions filed by the assessee before AO; the ld. AO concluded the assessment under Section 143(3) of the Act. The ld. AO assessed total income at Rs.104,53,290/-. The ld. AO

ITA 206/CHD/2024 A.Y. 2017-18 3 made an addition of Rs.98,71,000/-. [30% of Rs.3,29,07,000/-. Cash deposited during the demonetization period). The assessment order bears No. ITBA/AST/S/143(3)/2019-20/102280815(1) dated 21.12.2019 which was passed under Section 143(3) of the Act which is hereinafter referred to as the “Impugned Assessment order”.

2.6 The assessee being aggrieved by the ‘Impugned Assessment Order’ preferred first appeal under Section 246A of the Act before ld. CIT(A) who by the impugned order has partly allowed the appeal of the assessee on substantial issue of addition.

2.7 In the impugned order, the ld. CIT(A) has held as follows :

“5.3 I have considered the facts and circumstances of the case, submissions of the appellant and material available on record and various case laws referred on the above matter. The sole issue involved in present appeal is regarding cash deposits made by the appellant during the demonetization period. Appellant has made total cash deposits of Rs.3,29,07,000/- during the demonetization period as against total cash deposits of Rs.4,73,52,345/- made during the entire year under consideration. AO noticed that appellant has shown cash sale of Rs.3,29,96,895/- in November 2016 before demonetization i.e till 08.11.2016. On perusal of copies of cash sale bill it was seen that in all the sale bills were below 2 lacs and without any proper address of the purchasers. Hence AO concluded that appellant has manipulated the cash sales since there was no single cash sale above Rs.2 lac. AO stated that appellant

ITA 206/CHD/2024 A.Y. 2017-18 4 failed to prove the genuineness of transactions (cash sale). AO noticed that neither in past trend was observed in appellants behavior to hoard large sum of cash/money. Appellant has a habit of depositing cash regularly. AO concluded that appellant has simply introduced his own unaccounted cash into his cash book under the guise of cash sale by generating sale bills with fictitious name of value below Rs.2,00,000/- per sale bill. Thus AO disallowed 30% of cash deposited i.e Rs.98,72,100/- (30% of 3,29,07,000/-) as unexplained money u/s 69A of the IT. Act.”

5.4 The appellant is contending that the cash deposited was on account of sale of jewellary. Appellant is pleading that the AO has made the addition only on suspicion hypothetical imagination, presumption and assumptions. Appellant contends that the sale invoices are supported by documentary records. The AO has accepted the purchases and stock of the appellant. It is noted that the AO has not pointed out any discrepancy in the stock register of the appellant. There is no finding / any documentary evidence to show that the purchases were exaggerated or the sales have been manipulated. AO has mere place a theory without any proof. AO has not made any enquiry on the material supplied by the appellant. AO has not brought out any evidence to show that the sales bills are bogus. Further, it is seen that the AO has not rejected the books of account of the appellant as AO had no contrary material to reject the books of accounts. Neither the AO has shown that the cash deposited in bank has not been recorded on the books of accounts. AO has made additions u/s 69A of the IT Act. Before proceedings further, let us take a look at the provisions of section 69A of the IT. Act.

69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. From plain reading of the above provision it is clear that section 69A is applicable, when assessee is found to be owner of any money, bullion, jewellery and the same has not been recorded in the books of account. Since the appellant has already recorded the said cash deposits in his books of account, adding the same again u/s 69A lead to double taxations which is incorrect. Reliance is placed on the decision of the Hon'ble ITAT Jaipur in the case of Chandra Surana 149 taxmann.com 379 wherein it has been held that" Where assessee-jeweller claimed that cash deposited in bank account during demonetization period pertained to cash sale transaction of gold jewellery, since assessee had maintained regular books of account, bills, vouchers and day-today stock register having complete quantitative details of ITA 206/CHD/2024 A.Y. 2017-18 5 cash sale transaction of jewellery, addition under section 68 could not be made". In the case of Smt Tripta Rani 142 taxmann.com 278, Hon'ble ITAT Chandigarh has held "Where cash deposits made in bank accounts of proprietorship concern during demonetization period were routed through regular books of account of assessee which were not rejected by AO and no incriminating material was found during search conducted at premises of sister concern of assessee to point out that assessee introduced her own unaccounted money in her concern in garb of sale to its sister concern, additions made by AO in respect of such cash deposit were merely based on surmise and conjectures and, thus, same were to be deleted". In view of the above judicial decision and circumstance of the case, AO is directed to delete the additions of Rs.98,72,100/- made u/s 69A of the IT. Act. Hence ground no 2 to 9 of appeal are hereby allowed.” “6. In tenth ground of appeal, appellant challenged that Interest charged under section 234A, B and C amounting to Rs. 24,51,682/- is arbitrary unjustified and in the alternative is highly excessive.

6.1 Charging interest u/s 234A, 234B and 234C is mandatory and consequential in view of Hon'ble Supreme Court decision in the case of Anjum M.H. Ghaswala - 252 (2001) ITR 1 (SC). Since ground no 2 to 9 of appeal is allowed. AO is directed to re-compute the interest as per law. Thus, ground of appeal number 10 is disposed off accordingly.”

9. In result the appeal is partly allowed.”

2.8 The Revenue being aggrieved by the impugned order has filed the present appeal before this Tribunal and has raised following grounds against the impugned order which are as follows :

1. Whether the Ld. CIT(A) has erred on facts and in law by allowing the appeal of the assessee without appreciating the facts of the case.

2. Whether the Ld. CIT(A) had erred on both facts and in law by allowing the claim of the assessee by setting aside the findings of the AO and deleting the addition of Rs. 98,72,100/-.

ITA 206/CHD/2024 A.Y. 2017-18 6 3. That the Ld. C1T(A) has wrongly allowed the appeal of the assessee by deleting the addition of Rs, 98,72,100/- u/s 69A of the Income Tax Act, 1961 as the same remained unexplained during the assessment proceedings.

4. The Ld. CIT(A)/NFAC has erred in deleting the addition merely on the technical ground that the addition was made u/s 69A of the Income Tax Act, 1961 without going into the merits of the case that the assessee had shown abnormally high cash sales in the month of November especially on the night of 08.11.2016 just before demonetization.

5. It is prayed that the order of the Ld. CIT(A) be revoked and that of the Assessing Officer may be restored.

The ld. DR contended that the impugned order of the ld. CIT(A) is bad in law, illegal, not proper and ought to be set aside by this Tribunal on grounds specified (supra).

The addition of Rs.98,72,100/- was rightly made by the ld. AO and CIT(A) has erred in law to set aside the said

ITA 206/CHD/2024 A.Y. 2017-18 7 addition basis any sound evidence and material on record. The ld. CIT(A) ought to have appreciated that ld.

AO in the impugned order had given cogent reason basis material on record in support of additions made. It was contended that huge cash came to deposited by the assessee during the period of demonetization to the extent of Rs.3,29,07,000/- in two bank accounts maintained by the assessee in Union Bank of India. This deposit was huge in comparison with last year/previous year’s cash deposit. The assessee was asked to explain the sources of these deposits which had happened during the period of demonetization but no plausible and reasonable explanation alongwith necessary proof was given by the assessee and whatever material was placed on record was insufficient to satisfy the ld. AO and accordingly, ld. AO had rightly made addition. In the assessment order, the ld. AO has rightly made comparison between cash deposit made in the Financial Year 2015-16 vis-à-vis cash deposit made in the Financial Year 2016-17 and upon comparison ld. AO has ITA 206/CHD/2024 A.Y. 2017-18 8 rightly noticed huge difference in their cash deposit pattern in the bank accounts of assessee in Financial Year 2016-17. The ld. AO has also noticed and observed in the “impugned assessment order” that out of cash sales of Rs.4,73,52,345/- made during Financial Year 2016-17 there are cash sales amounting to Rs.3,29,96,895/- booked in November before demonetization i.e. till 08.11.2016. The assessee filed copies of sale bills of 08.11.2016 as proof of sales. On perusal of the copies of “Cash Sale Bills” filed, the ld. AO has rightly observed that in all the sale bills, complete address of the purchaser were not mentioned and all the sale bills were below Rs.2 lakhs. The ld. AO in the assessment order has observed that all the cash sale bills filed by the assessee were below the value of Rs.2 lakhs which is the threshold above which buyers have to provide the PAN and TCS has to be deducted under Section 206 of the Act. While it is possible that a majority of cash sale bills were below Rs.2 lakh but it is highly unlikely that not even a single cash sale above

ITA 206/CHD/2024 A.Y. 2017-18 9 Rs.2 lakh has been actually made by the assessee. The ld. AO finally concluded by placing reliance on ld. AO order which according to him was just, proper and fair.

It was a well reasoned and speaking order which not only has analyzed cash statement of assessee's bank for both years i.e. Financial Year 2015-16 but Financial Year 2016-17 also. This cash deposit was compared with sale bills. The ld. AO has considered in the impugned assessment order surrounding circumstances, human conduct, preponderances of possibilities as litmus test for lifting the veil from a sham/make belief theory. The ld. AO in the impugned assessment order has rightly placed reliance on the decisions of Hon'ble Supreme Court of India in case of CIT Vs Durga Prasad More (214 ITR 801), Sumati Dayal Vs CIT (1995 AIR 2109), McDowell & Co. Ltd. Vs CTO 1986 AIR 649. Basis these judgements, the ld. AO has rightly held that keeping factual aspect of the case, it is concluded on basis of peculiar facts and circumstances and preponderance of probabilities that the explanation furnished by the ITA 206/CHD/2024 A.Y. 2017-18 10 assessee as source of high cash deposit during demonetization period is a part of after thought story in an attempt to explain the source of sudden high cash deposit during demonetization as part of sale proceeds of his business. The ld. DR also justified the order of ld. AO that he has clearly held that it would be fair and reasonable to give benefit to the assessee to the extent of regular business quantum i.e. part pattern of cash sales, total volume of business and the fact that due to demonetization, there is increase in sale. Since the assessee has manipulated cash sales and cash book that cannot be accepted, thus 30% of the cash deposited during demonetization is disallowed which comes to Rs.96,71,100/- [30% of Rs.3,29,07,000/-] and added back to the income of the assessee. The ld. CIT(A) has overlooked this aspect of reasonableness on part of the ld. AO and has thus passed erroneous order. Per contra, ld. AR has fully supported the impugned order and has contended that same is just, proper and legal. It should not be disturbed. The ld. AR contended that income

ITA 206/CHD/2024 A.Y. 2017-18 11 cannot be computed on basis of estimation. The ld. AO went by estimation of 30% of cash deposit as unexplained source of income which was wrong and that ld. CIT(A) has rightly set aside the addition. It was contended that ld. AO had not examined the evidence produced by the assessee in form of cash book, sales bills, stocks, purchases etc. which are not expressly discarded/rejected alongwith books of account, hence ld.

CIT(A) has rightly allowed the appeal of the assessee by passing impugned order. It requires no intervention.

4.2 The limited issue under consideration relates to the nature and source of “cash Deposit” during the period of demonetization and whether the explanation so furnished by the assessee can be held to be just, fair and ITA 206/CHD/2024 A.Y. 2017-18 12 reasonable in the facts and circumstances of the case.

Further the “impugned order” of ld. CIT(A) is just, fair and proper whereby the appeal of assessee is allowed on main issue of addition and revenue is in appeal before us on grounds (supra). The assessee had placed on record both before ld. AO and ld. CIT(A) copy of ITR, computation of total income for assessment year 2017- 18, copies of VAT Returns, cash transaction sheet-2016 [pages 55 and 56 of Paper Book], copy of cash ledger for 01.04.2016 to 31.12.2016, copy of Audit Report, audited balance sheet, P&L Account etc. We observe that these documents are expressly not rejected by the ld. AO while computing the income of the assessee. In the absence of rejection of these documents we are of the considered view no addition ought to have made by ld. AO and CIT(A) has rightly held in the impugned order that ld. AO has accepted the purchases and stock of the assessee.

Ld. AO has not pointed out any discrepancy in the Stock Register of the assessee. There is no finding/any documentary evidence to show that the purchases were ITA 206/CHD/2024 A.Y. 2017-18 13 exaggerated or the sales were manipulated. The ld. AO has placed a theory without any proof. The AO has not made any enquiry on the material supplied by the assessee. AO has not brought out any evidence to show that the sale bills are all bogus. AO has not rejected any books of account as AO was not having any contrary material to reject the books of account. AO has not said cash deposited in bank has not been recorded in the books of account by the assessee. AO has wrongly made addition under Section 69A when admittedly assessee is found to be owner of money and same is recorded in books of account. Since it is recorded in the books of account adding again under Section 69A would amount to double taxation.

4.3 We also hold that CIT(A) in the impugned order has rightly placed reliance on Hon'ble ITAT Jaipur Bench decision in case of Chandra Surana 149 taxmann.com 379 wherein it has been held that “where assessee- jeweller claimed that cash deposited in bank account during demonetization period pertained to cash sales

ITA 206/CHD/2024 A.Y. 2017-18 14 transaction of gold jewellery, since the assessee had maintained regular books of account, bills, vouchers and day-to-day Stock Register having complete quantitative detail cash sale transaction jewellery addition under Section 68 could not be made.”

4.4 We also hold that ld. CIT(A) in the impugned order has rightly relied upon the case of Smt. Tripta Rani 142 Taxmann.com 278 wherein this Tribunal has held that “Where cash deposits made in bank accounts of proprietorship concern during demonetization period were routed through regular books of account of assessee which were not rejected by AO and no incriminating material was found during search conducted at premises of sister concern of assessee to point out that assessee introduced her own unaccounted money in her concern in garb of sale to its sister concern, additions made by AO in respect of such cash deposit were merely based on surmise and conjectures and, thus, same were to be deleted".

4.5 We hold that revenue has failed to bring out any material on record basis which it can be contended that impugned order is bad in law and must be set aside by ITA 206/CHD/2024 A.Y. 2017-18 15 this Tribunal in exercise of its appellate jurisdiction.

Revenue thus has failed to set-at-naught the findings and conclusions reached by ld. CIT(A) in his impugned order. In any event, we find that explanation furnished by the assessee that the receipt so deposited are out of his business receipts realized in cash and that such explanation is corroborated by sale bills, Sale Register, cash book and VAT Returns. We too find such explanation to be reasonable as assessee has established the necessary nexus/linkage between the deposits and the sales so reported/made as part of gross receipts.

The ld. CIT(A) too in the impugned order has not disputed in any manner whatsoever that cash sales have been undertaken by the assessee. Therefore, where all the requisite details are available on record, the explanation so furnished by the assessee regarding the nature and source of cash deposits to the tune of Rs.3,29,96,895/- deserves to be accepted in totality and there cannot be a question of accepting the said explanation partly and sustaining the addition to the ITA 206/CHD/2024 A.Y. 2017-18 16 extent of 30% by Rs.98,71,100/- [30% of Rs.3,29,07,000/-] as was done by ld. AO and same was rightly set aside by the CIT(A) in the impugned order.

The Revenue has failed to bring on record of this Tribunal any plausible explanation to hold the impugned order as unsustainable in law.

5.2 In the result, appeal of the Revenue is dismissed.