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Facts
The assessee, engaged in the business of manufacturing and trading of jewellery, made substantial cash sales on November 8, 2016, the day demonetization was announced. The AO treated these cash sales and subsequent bank deposits as unexplained income and added Rs. 4,35,91,454/- to the total income, invoking Section 68 and Section 115BBE of the Income Tax Act.
Held
The Tribunal held that the addition made by the AO was unwarranted as the assessee had maintained regular books of accounts, which were not rejected, and the cash sales were duly recorded and supported by sale bills. The Tribunal noted that the AO failed to provide any material to establish that the sales bills were bogus and that the sales were part of the income already offered for tax.
Key Issues
Whether the cash sales made on the day of demonetization, which were recorded in the books of accounts, can be treated as unexplained income under Section 68 and taxed under Section 115BBE, especially when the books of accounts were not rejected.
Sections Cited
68, 115BBE, 143(3), 142(1), 250, 139, 145A, 269ST, 271AAC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No.1121/JPR/2025
fu/kZkj.k o"kZ@Assessment Years : 2017-18 Abhay Chordia cuke The ACIT, Prop. of Ashok Jewels, 4459, KGB Vs. Central Circle-4, Jaipur. Ka Rasta, Johari Bazar, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ADLPC7128H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Dheeraj Borad, C.A. jktLo dh vksj ls@ Revenue by : Shri Rajesh Ojha, Ld. CIT a lquokbZ dh rkjh[k@ Date of Hearing : 23/09/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 12/11/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM By way of present appeal, the assessee–appellant challenges the order of the Learned Commissioner of Income Tax ( Appeals)– 5, Jaipur [ for short CIT(A) ] dated 29.07.2025 for assessment year 2017-18. The said order of the ld. CIT(A) arises as against the order dated 28.12.2019 passed u/s 143(3) of the Income Tax Act, 1961 [for short ‘Act’] by the ACIT, Circle-2, Jaipur [for short ‘AO’].
“1. That the learned CIT(A) ought to have appreciated the contention of the appellant that the AO failed to discharge the burden of proof which squarely lay upon him for not treating the cash sales made by the assessee on 08/11/2016 of Rs. 4,35,91,454/- as genuine and consequentially treating the cash/SBNs deposited at Rs. 4,35,91,454/- in the bank accounts during the period of demonetization as undisclosed income of the assessee.
2. That the action of the learned CIT(A) while sustaining addition of Rs. 4,35,91,454/- is not justified because he (the learned CIT(A)) failed to appreciate that the AO in one side is not rejecting books of account of the assessee, meaning thereby that he (the AO) is accepting the assessee's books of account as correct and complete, and on the other side he (the AO), by not treating the cash sales in the form of SBNs of Rs. 4,35,91,454/-made by the appellant on 08/11/2016 and duly accounted for in the books of account of the assessee as genuine, is adding the cash/SBNs of Rs. 4,35,91,454/- which he deposited in his bank accounts on the very next banking hours as unexplained income.
3. That the appellant craves leave to add, alter, amend and substitute one OR more grounds of appeal
as and when necessary.
4. That, on the facts and in law, the impugned order passed under section 250 of the IT Act, 1961 on 29/07/2025 by the Id. CIT(A) dismissing assessee's appeal is most arbitrary, unjust, untenable and liable to be cancelled.
5. That, on the facts and in law, the learned CIT(A) grossly erred in sustaining the additions of Rs. 4,35,91,454/- made by the AO under section 68 r.w.s 115BBE of the IT Act in the relevant assessment order, which sustaining of the additions of Rs. 4,35,91,454/- by the learned CIT(A) are most arbitrary, unjust and untenable and in the alternative highly excessive w.r.t facts and circumstances of the case.
6. That the learned CIT(A) erred in sustaining the invoking of provisions of section 68 r.w.s. 115BBE of the IT Act by the AO whereby he (the AO) levied tax @ 60% plus 25% S.C., etc. on the additions made by him at Rs.4,35,91,454, which sustaining by the learned CIT(A)
Abhay Chordia, Jaipur. of invoking of provisions of section 68 r.w.s. 115BBE of the I.T. Act by the AO and consequentially sustaining levy of tax @ 60% plus 25% S.C., etc. on the additions of Rs. 4,35,91,454/- is most arbitrary, unjust and untenable in fact and in law.
7. That the Id. CIT(A) failed to appreciate that provisions of section 68 are not applicable in this case because there are proper entries of sale, SBNs/cash received against sale of Gold Ornaments and Jewellery and cash balance etc. in the regular books of account of the assessee.
8. That the Id. CIT(A) has erred in not taking into consideration the fact that the cash/SBNs deposited by the appellant in his bank account has already been offered for taxation being included in the total sales forming part of regular books of account of the appellant and consequently forming part of the annual financial statements like trading account, profit and loss account etc. on the basis of which total income has been computed and duly filled in the IT return of the assessee for the subject assessment year i.e. AY 2017-18 and as such the separate additions of Rs. 4,35,91,454 by way of treating cash/SBNs deposited in bank account as unexplained income of the assessee will tantamount to double addition/taxation of the same receipts/income.”
Brief Facts of the case are that the assessee has e-filed his return of income for assessment year 2017-18 on 20.08.2017 declaring total income of Rs. 1,09,73,250/-. The return was processed u/s 143(1) of Income Tax Act, 1961. Subsequently, the case was selected for scrutiny through CASS and notice u/s 143(2) of Income Tax Act, 1961 was issued on 22.09.2018 which was duly served upon the assessee. Notices u/s 142(1) along with query letter dated 05.10.2019, 24.11.2019, 14.12.2019 were issued and duly served upon the assessee. In response to these notices, online responses on e-proceedings portal were received Abhay Chordia, Jaipur. from the assessee. Necessary details and explanations were furnished by the assessee through e-proceedings portal, printouts of which were placed on record. Books of accounts were examined by the ld.AO. The assessee is engaged in the business of manufacturing and trading of jewellary such as gold, silver and diamond in the name & style of M/s Ashok Jewels Pvt. Ltd. M/s Ashoka Jewels has two units namely unit No. 1 and unit No2. In addition to these two units M/s Ashok Jewels has got a retails outlet in the name of M/s Ashok Jewels India limited, situated at 303, 3rd A road, Jodhpur.
3.1 The AO noted that during the year the assessee is also having other income under the head income from other sources. During the year under consideration the assessee has shown sales of Rs. 52,87,44,117/-against the sale of Rs. 38,77,32,624/- in the just preceding previous year. Net profit has been shown at 3.41% against the 4.3% in the immediately preceding year.
3.2 As there was deposit of cash of Rs. 4,51,46,000/- in the bank accounts between the period of demonetization i.e. during 9.11.2016 to 31.12.2016 to this effect the credentials of the Abhay Chordia, Jaipur. assessee in the year of scrutiny as compared to the preceding financial year 2015-16 were compared which reads as under:- Particular FY 2015-16 2016-17 Sales 38,77,32,62 52,87,44,117 Gross profit 72688236(18.75) 79896555(15.11) Net profit 17575266(4.53) 18017473(3.41)
From the above credentials of the assessee, it was noticed that the sale of assessee abruptly risen astronomically as compared to the preceding previous year by around 136%. To examine such huge rise in the sales specially just before the time of demonetization period, the books of accounts have been examined by the ld. AO. While assessment proceeding the assessee vide questionnaire dated 05.10.2019 was asked to furnish the sources of the cash deposits. In response to the notice the assessee filed its submission through e-filing on 26.11.2019 as under:- "As regard details and sources of cash deposited during demonetization period 08.11.2016 to 31.12.2016 it is submitted that source of cash deposit at Jodhpur during the period 08.11.2016 to 31.12.2016 is cash sales made at Jodhpur retail out let of the assessee. As regard cash deposit in pre-demonetization period it is out of such cash in hand include cash sale, cash in hand on the opening of the day brought forward from the immediate preceding day, cash withdrawal from the bank, cash amount received from debtors" In order to examine the genuineness of the cash sales various details and evidences called for vide notice dated 14.12.2019 were Abhay Chordia, Jaipur. called for and examined by the ld. AO. On analysis of the month wise sales of the assessee, it was found that the assessee had booked in its unit M/s Ashok Jewels India Retails, Jodhpur one of the units of the assessee, it revealed that the sales are equally poised till the month of October. 2016, the rise of month wise comparative sales were not significant and can be accepted. But on perusal of the sale in the month of the November 2016, it raises a suspicion that sales have risen by unbelievably high percentage especially on 08.11.2016. A comparison has been made with the cash sales of the assessee with the preceding previous year which is as under:-
Month F.Y. Cash Sales Rise in % 2016-17 2015-16 October 15201376 NIL Infinite During 01st to 07th 1272387 NIL Infinite November On 8th November 43591454 NIL Infinite As the government of India demonetized the SBNs i.e. 500 & 1000 w.e.f. 08.11.2016. From the financial credentials of the assessee, it raises a suspicion that in order to deposit the SBNs the assessee has made manipulation in the books of accounts by introducing Abhay Chordia, Jaipur. bogus sales. In order to confirm the same, the details relating to the sale and purchase and transfer of stock has been called for vide notice u/s 142(1) of the Act on 12.12.2019. In response the assessee produced the copy of purchase and sales bills which were examined. Although the purchase side of the P&L a/c and inward stock is in order, the sales side of the P&L A/c specially as claimed on 08.11.2016 is having a big question mark. It is seen that the assessee has raised around 347 bills in a single day against very few bills raised during the rest of the preceding period. Ld. AO noted that this cannot be possible by any probabilities which leads to the suspicion that assessee has booked bogus sale to introduce the unaccounted cash. Hence, the show cause was issued on 24.12.2019 to the assessee asking as to why the amount of specified bank notes deposited by in bank subsequent to announcement of demonetization should not be added to income under the provisions of section 68 of Act as the explanation furnished by you in respect of 347 bills during the short period available in the evening of 08.11.2016 does not sound plausible. The assessee submitted its reply which reads as under :
1. That as per the information submitted earlier in the course of assessment proceedings assessee has got a retail outlet in the name of M/s Ashok Jewels India Retail and it is situated in a three storeyed Abhay Chordia, Jaipur. building at 303, 3d A Raod, Sardarpura Jodhpur. At every floor of this building there is a sale counter interalia equipped with computer. The entire showroom managed by Shri Ashwani Purohit and Aditya Purohit who are having deep knowledge of marketing and sales and both managerial are assisted by salesman and other staff members. 2 That as regards your mentioning in the show cause notice," issue of 347 bills during the short period available in the evening of 08.11.2016 does not sound plausible", it is submitted that on 08.11.2016 total sale invoices issued during the day were from serial no.572 to 918 i.e. total 347. The total cash collection made upto the date 08.11.2016 was immediately deposited as soon as the bank opened after the close of 09.11.2016. In other words cash of Rs. 4,09,61,000/- and Rs. 38,25,000/- were deposited on 10.11.2016 and 11.11.2016 respectively in the bank account with HDFC Bank at Jodhpur. In support of it a certificate issued by the bank authorities stands already filed with your goodself. The deposit of cash amount in the bank account immediately after the reopening of the bank after a close of one day on 09.11.2016 undoubtedly proves the gaminess of the cash sale made on 18.11.2019. In other words cash of Rs. 4,09,61,000/- 3.3. That towards genuineness of effecting cash sales and depositing the cash amount in the bank account the assessee craves leave to draw your kind attention towards a summon issued u/s 131 of the Income Tax Act, 1961 to the assessee by the then A.O., namely, Dy. Commissioner of Income tax. Circle-2, Jaipur on 17.03.2017 for attending the office to appear before him on 21.03.2017 and produce books of accounts and other documents before the AO. Compliance to this summon was immediately made by the assessee and the following books of accounts and other documents required by the AO vide the above mentioned summon were not only produced before the AO but the copy of the same were filed with the AO then and there. The details of such books of accounts and documents which were produced before the AO and copy given to the AO of these books of accounts and documents are as under:- a) Cash book for the F.Y. 2015-16 & 2016-17 for verification of source of cash deposited in Bank Accounts(s). b) Sale bills/sales register of the basis of which cash was generated. c) Purchase bills/purchase register for AY 2015-16 & 2016-17. d) Stock Register for the F.Y. 2015-16 & 2016-17, e) Bank Statement for the year under consideration.
3.3. The submission justifying the cash by the assessee was not acceptable on the following reasons as noted by the ld. AO in his order:-
Abhay Chordia, Jaipur. a) The arguments of the assessee are too general in nature and lack any substance. b) the assessee in its reply stated that two persons managing the affairs of Jodhpur outlets are having deed knowledge of selling the articals are too sketchy as their still will works during the entire year for making such huge sale not only during the four hour of the demonetization period. c) The jewellery items are too selective in nature no purchaser would buy the jewellery without making particular choices. It will be considered here that a persons will take around half an hour to buy jewellery of his/her choice from its hard earned money. In the case of the assessee he had make sales to 347 persons during the 4 hours which will take a month of time if all the skills will put to sale the jewellery article. Further, no details of the purchasers has been mentioned in the bills issued and the bills are below Rs. 2,00,000/- just to avoid the obligation of maintaining the details of the customer as well as to evade the provisions of TDS and to introduce the unaccounted money through bogus sales. During the assessment proceedings, the assessee submitted that the retail showroom at Jodhpur is approximately 1600 sq. feet in size and it is spread over three stories and there are approximately 9 to 10 employees besides the MOU correspondence. It has also been submitted that there is one billing counter on each floor. In this regard, it is pertinent to mention here that the declaration of demonetization of SBN was made at 8.00 PM and after that, the persons who made such purchases from the assessee, must have taken atleast 1 or 2 hours to get their SBNs at one place and they went to the shop of the assessee accompanied with atleast one or two persons. In such situation, almost all the persons to whom the assessee made sale would have been presented altogether, and to attend the all of them is not possible, considering the size and man power available with the assessee. Even the size of the showroom is not possible to accommodate such huge number at a time. In view of the above, it is not possible to make such huge sale in only 2 to 3 hours and therefore the plea of the assessee is not acceptable. d) On perusal of the expenses incurred in the unit of the Jodhpur is not corroborating with the factors that would increase the sale in a very short span i.e. advertisements, commissions and other expenses e) The comparison of expenses itself describe the entire story that the increase in sales are incomparable with the expense incurred for promotion of sales. f) The assessee has not produce the complete stock register which is mandatory to be maintained by the assessee as it is essential part of the books of accounts without which no assessee could monitor the flow of precious metals held with the entity. The provisions of section Abhay Chordia, Jaipur. 145A makes it's amply clear that the assessee must maintain inventory of sale of good and goods purchase with its valuation. The assessee not maintained the day to day stock register and it should have been furnished before the assessing officer for verification. g) It is also pertinent to mention here that the tranches of sales made by the assessee during the month of October, 2016 is much higher then what the assessee booked in the preceding previous year. There is no change in the business of the assessee during the year, no new factor has been introduced by the assessee during the year. h) From the above discussion and facts highlighted above, that the sales introduced by the assessee is an afterthought to introduce its unaccounted money which cannot be used by virtue of the demonization done by the Government of India. There are many issues were pointed out in the above paras that also fortify the fact that the assessee tried to create an illusionary and cinematic story by way of introducing the cash in his books of 1,454/-cannot be accounts. Hence, the entire cash deposit of Rs. 4,35,91,454/-cannot be accepted as explained, and by virtue of section 68 of the Act which specifically says that any entry in the books of account should invariably be explained to the satisfaction of the Assessing Officer, in which the assessee failed. Based on that reasons ld. AO added the cash deposit of Rs.4,35,91,454/- under the provisions of section 68 r.w.s. 115BBE of the IT Act, 1961 @ 60%.
4. Aggrieved from the order of AO, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here inbelow:-
” 4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- 4.2.1 In this case, the assessee filed the return of Income u/s 139(9) for the A.Y. 2017-18 on 20.08.2017 declaring total income of Rs. 1,09,73,250/-. The case was selected for scrutiny through CASS. The Abhay Chordia, Jaipur. whole proceedings going through for completion for assessment proceedings, During the year the assessee is also having other income under the head income from other sources. During the year under consideration the assessee has shown sales of Rs. 52,87,44,117/- against the sale of Rs. 38,77,32,624/- in the just preceding previous year. Net profit has been shown at 3.41% against the 4.3% in the preceding year. 4.2.2 The AO had clearly mentioned in the assessment order that Assessee had deposited cash of Rs. 45146000/- in the bank accounts between the period of demonetization i.e. during 9.11.2016 to 31.12.2016. Before examination of this issue the credentials of the assessee in the year of scrutiny as compared to the preceding financial year 2015-16 are as under Particular FY 2015-16 2016-17 Sales 38,77,32,62 52,87,44,117 Gross profit 72688236(18.75) 79896555(15.11) Net profit 17575266(4.53) 18017473(3.41) From the above credentials of the assessee it is noticed that the sale of assessee abruptly risen astronomically as compared to the preceding previous year by around 36%. In order to examine such huge rise in the sales specially just before time of demonetization period, the books of accounts have been examined in-depth. The AO had also submitted in the assessment order that during the year under consideration assessee had deposited cash amounting to Rs. 4,51,46,000/-during the demonetization period i.e. during 09.11.2016 to 31.12.2016 in his bank accounts. In view of the fact that gross receipt as per P&L account of ITR was only Rs. 52,87,44,117/- and no satisfactory explanation had been furnished w.r.t. cash deposits amounting to Rs. 4,35,91,454/- in the bank accounts was added to the total income of the assessee as his undisclosed income during the relevant A.Y. 2017-18 Penalty proceedings u/s 271AAC of the I.T.Act has also been initiated.
5. Ground of Appeal No. 1 to 9 are inter related hence they are clubbed together for adjudication and the appellant has also filed combined Abhay Chordia, Jaipur. written submissions for these grounds. These grounds of appeal
are related to addition of Rs 4,35,91,454/-. 5.1 I have considered the reply of the appellant but I find that the facts mentioned by the appellant are beyond truth. The detailed discussion is as under: The assessee, engaged in the manufacturing and trading of jewellery under Ashok Jewels India Ltd., filed its return of income u/s 139(9) for A.Y. 2017-18 on 20.08.2017. declaring total income of Rs.1,09,73,250/- . The case was selected for scrutiny through CASS. During the year, the assessee declared gross turnover of Rs.52,87,44,117/-, against the sale from Rs.38,77,32,624/- in the preceding year, registering a substantial increase of over 36%. However, the net profit margin declined to 3.41% from 4.3% in the preceding year. The AO, while examining the books of accounts and supporting documents, noted unusually high cash deposits of Rs.4,51,46,000 during the demonetization period (9 November to 31. December 2016). Of this, a suspiciously large portion Rs.4,35,91,454 was claimed to have arisen from cash sales on 8. November 2016 the very day demonetization was announced. The A.O. noticed that there is surge in Turnover & Timing of Deposits and also observed that while turnover increased significantly, this was concentrated disproportionately around the demonetization period. A massive Rs 4,35,91,454/- was claimed as cash sales in one evening (8 Nov 2016), with 347 invoices each below Rs. 2 lakh, thereby avoiding statutory PAN/TDS disclosures which is Implausible of Sales Pattern which is as under- No such volume of sales existed in the preceding year for the same period. No customer details, contact information, or documentary evidence of delivery or identification were provided. The showroom's operational hours and infrastructure were inconsistent with the claimed sales volume. Further there is Failure to Substantiate Transactions: The stock register was inadequately maintained and not aligned with sales figures as required under Section 145A.
Abhay Chordia, Jaipur. There was no corresponding increase in staff costs, advertisement, or operational expenses. The cash ledger and other books appeared manipulated post facto to justify cash deposits of demonetized currency. The AO concluded that the claimed cash sales were non-genuine, used as a colourable device to introduce unaccounted money in the form of old currency, and thus added Rs.4,35,91,454/- to the total income under Section 68. The AO rightly invoked Section 115BBE, which mandates a 60% tax rate plus surcharge and cess on such unexplained income, and also initiated penalty proceedings under Section 271AAC. The assessee was unable to discharge the onus under Section 68 as in this case, the assessee has Failed to prove genuineness of the cash transactions, Provided no verifiable identity of customers, Lacked supporting evidence like KYC documents, delivery acknowledgments, or corroborating ledgers. Mere book entries or self-generated invoices, in the absence of customer verification or stock reconciliation, cannot justify large-scale cash deposits. Further regarding the ground of 115BBE and Penalty section 271AAc of the I.T.Act the decision is as under.- Justified Addition u/s 68 r.w.s. 115BBE: Section 115BBE applies to additions made u/s unexplained income at a higher rate (60% + ge/cess) 68, taxing The cash deposits being unsubstantiated, the AO's action of invoking this section is legally sound.
Penalty u/s 271AAC: The penalty under Section 271AAC is mandatory in case of addition under section 68 when the assessee fails to explain the source satisfactorily. Since the addition is upheld, the penalty proceeding is valid and tenable in law. Thus, on the basis of above discussion grounds of appeal 1 to 9 are hereby dismissed.
Abhay Chordia, Jaipur. 6. Ground of Appeal
No.10 6.1 The appellant has not added or altered, amend or withdraw any of the above mentioned grounds of appeal. Accordingly, such mention by the appellant in its ground is treated as general in nature, no needing any specific adjudication and is accordingly treated as disposed off.
7. In the result, the appeal is treated as Dismissed.
5. Feeling aggrieved from the above order of the ld. CIT(A), the assessee preferred the second appeal before this tribunal. Apropos to the grounds raised by the assessee, ld. AR of the assessee relied upon the following written submission:- ” With reference to above and in continuation to Form No. 36 of appeal inter- alia containing grounds of appeal
, the humble appellant craves leave to make following submissions in respect of grounds of appeal for the kind consideration of the hon'ble bench: Background 1. That the appellant assessee carries on business of precious and semi- precious Stones, Gold ornaments and Jewelleryunder the name and style of M/s. Ashok Jewelsas its sole proprietor. For the year under consideration he filed his return of income under section 139 on 20/08/2017 declaring an income ofRs. 1,09,73,250. Subsequently, case of the assessee was selected for scrutiny and order dated 28/12/2019 was passed underSection 143(3) at a total income of Rs. 5,45,64,700, thereby resulting into addition of Rs. 4,35,91,454 under Section 68and also invoking the provisions of Section 115BBE.
2. Against the order passed by ld. AO, assessee preferred first appeal. Vide order under section 250 dated 29/07/2025, Ld. CIT (A), Jaipur –5 in Appeal No. CIT(A), Jaipur 1/10987/2019-20, dismissed the appeal of the assessee. Against the order passed by ld. CIT(A), Jaipur 5, the present appeal has been preferred by the assessee before Hon'ble ITAT, Jaipur Bench.
Abhay Chordia, Jaipur. Grounds of Appeal
No. 1 to 5 & 7:Against sustaining by the ld. CIT(A)ofadditions made by the AO under section 68 r.w.s 115BBE of Rs. 4,35,91,454.
1. Brief Facts 1.1. The appellant assessee carries on business of precious and semi- precious stones, Gold ornaments and Jewellery under the name and style of M/s Ashok Jewels at Jaipur.It has inter alia a retail outlet/showroom at Jodhpur (Rajasthan) in the name of M/s. Ashok Jewels India Retail where goods, namely, gold ornaments and jewellery are sold. 1.2. On the first day of demonetization i.e. on 08/11/2016, cash sales almost against SBNs amounting to Rs.4,35,91,454 was made at assessee's aforesaid retail outlet/showroom at Jodhpur.On 09/11/2016 all the banks were closed. On next bank working days i.e. 10/11/2016 and 11/11/2016, out of cash sales effected on 08/11/2016 (day of demonetization) at Rs. 4,35,91,454 mostly against SBNs and opening cash balance including SBNs as on the start of the day 08/11/2016, the assessee deposited SBNs of Rs. 4,09,61,000 and Rs. 38,25,000 respectively i.e. totaling to Rs. 4,47,86,000 at Jodhpur in HDFC Bank in the account of the assessee.
2. Assessing Officer 2.1. As mentioned above assessee's case was selected for scrutiny, notices under section 143(2) and 142(1) were issued to him and the same were complied by the assesse. However, in the assessment order the learned AO without rejecting the books of accounts treated the SBNs of Rs. 4,35,91,454/- deposited at Jodhpur in HDFC Bank, as not explained u/s 68 r.w.s. 115BBE and added this amount of Rs. 4,35,91,454 to the total income of the assesse.
3. CIT (Appeals), Jaipur - 5 3.1. The appellant assessee filed first appeal against the above mentioned additions of Rs. 4,35,91,454/-. 3.2. Before the CIT (Appeals), elaborated submissions were made by the assesse which have also been reproduced at page 5 to 25 of the impugned order. 3.3. Ld. CIT (A), without any cogent basis, dismissed the appeal of the assessee by mentioning that the assessee was unable to discharge the Abhay Chordia, Jaipur. onus under section 68, the assessee has failed to prove genuineness of the cash transactions and provided no verifiable identity of customers.
4. Submissions 4.1. Elaborate submissions made by the assessee before ld. CIT(A), also reproduced by ld. CIT(A) in the impugned order at Pages 5 to 25, may please be considered in correct perspective. 4.2. Assessee maintained regular books of accounts including day to day stock records. Books of accounts of the assessee stand Audited under the provisions of Section 44AB of the Income Tax Act, 1961. In the Audit report, there were no adverse remarks of the Auditors and the Auditors found the underlying evidences, substantiating the transactions recorded in the books of accounts, to be adequate and reasonable. 4.3. Cash sales in the jewellery trade is a normal practice. Assessee has been selling jewellery in cash in past also. Breakup of the cash sales vis a vis total sales made by the assessee, during the year under consideration and in the immediately preceding year is as under: PARTICULARS AY 2017-18 AY 2016-17 (Period: Dec 2015 to Mar 2016 because sales at the showroom started in December 2015 only) Total Sales 11,38,44,076 1,20,05,368 Cash Sales 7,26,67,262 83,81,502 % of Cash Sales to Total 63.83% 69.81% Sales Besides the appellant is enclosing herewith month wise details in tabular form of total sales, total cash sales, total cash deposited in bank and Percentage of cash deposited out of total cash sales for financial years 2015-16 to 2021-22 relevant to assessment years 2016-17 to 2022-23.From the perusal of these details, the hon'ble Bench will very kindly find that the same practice of issuing sales bills, effecting cash sales anddepositing of proceeds of cash sales in the bank account was being followed by the assessee in the preceding financial years, subsequent financial years and other periods of this same financial year.
Abhay Chordia, Jaipur. 4.4. Ld. AO disbelieved the cash sales for the sole reason that details of the buyers, including their name, PAN, addresses etc, were not available with the assessee, therefore, the same were not verifiable. 4.5. It is submitted that the law nowhere prohibits making cash sales. Assessee by selling the goods in cash did not violate any of the provisions of the Income Tax Act, 1961. It is submitted that Id. AO has not mentioned any provisions of the Act/ Rules having been violated by the assessee while effecting such cash sales. Moreover, cash sales made by the assessee were duly supported by valid Invoices. 4.6. Ld. AO invoked provision of Section 68 in respect of sales. In this regard it is submitted that section 68 deems non-income to be income. In the instant case, the cash sales of Rs. 4,35,91,454 effected on 08/11/2016 have duly been credited in the regular books of account of the assessee and further while computing total income for the purposes of filing of return of income, these cash sales form part of audited financial statements. Return of income for AY 2017-18 has been prepared by the assesseeon the basis of such financial statements. As mentioned earlier, return of income for AY 2017-18 has been suo moto filed by the assessee under section 139 of the IT Act declaring total income of Rs. 1,09,76,250 and income tax has been deposited on such income. Hence, Section 68 per se cannot be invoked in this case.Provisions of Section 68 can only be invoked in cases where an assessee is unable to explain the source of a particular receipt to the satisfaction of the Assessing Officer. These provisions have no application in a case where an amount already forms part of assessee's regular books of account. In this case the appellant duly filed his return of income on the basis of his regular books of account under section 139 as per details given above. It is reiterated that provisions of section 68 are not applicable on the sale transaction recorded in the books of account as sales are already part of the income which is already credited in the Profit and loss account. 4.7. Sections 68 creates deeming fictions, whereby certain amounts which are not considered as income by the assessee, are deemed to be income of the assessee. A deeming fiction of income cannot apply to an item which is already treated as income by the assessee himself. The question of deeming an item to be income can only arise if the item is not otherwise an income. Section 68 converts non-income into income and has no application where income is already offered for tax.
Abhay Chordia, Jaipur. 4.8. There is a consensus of judicial opinion that a deeming provision enables the revenue to raise an inference against an assesseeon the basis of tangible material and not on mere suspicion, conjectures or perceptions. In support of it the humble appellant craves leave to refer to and rely upon the judgment of CIT vs. Jawaharlal Oswal & others reported in 382 ITR 453- Punjab and Haryana High Court. Some other judgments on this issue forms part of list of judicial pronouncements annexed to the written submissions. 4.9. If the contention of the lower authorities is accepted then the same income would be taxed twice, once when being offered for tax by the assessee as part of cash sales and subsequently as separate addition under Section 68, which is impermissible in law. In support of it, the assessee places reliance on the cases of MotisonsJewellers Ltd. vs ACIT for AY 2017-18 & The ACIT, central circle 2, Jaipur vs MotisonsJewellers Ltd. for AY 2017-18; Mahesh Kumar Gupta vs ACIT for AY 2017-18 and The ACIT, central circle - 2, Jaipur vs. Shri Chandra Surana ITA No. 166/JP/2022 for AY 2017-18. Summary of all three cases forms part of the list of judicial pronouncements being annexed herewith. 4.10. It is submitted that ld. AO without enquiring the matter further, just for lack of name and addresses, reached to an adverse conclusion. It is submitted that assessee maintained complete stock records. Each item of sale, including the alleged non-genuine cash sales, is identifiable in the stock records. Ld. AO has not found any defect in the said stock records. Complete set of the documents in respect of the entire alleged non-genuine cash sales were placed before the lower authorities.Following details were submitted in order to substantiate the sales made by the assessee: a) That towards genuineness of effecting cash sales and depositing the cash amount in the bank account the assessee craves leave to draw the kind attention of the hon'ble Bench towards a compliance made by the assessee to a summon issued to him u/s.131 of the Income tax Act, 1961 by the then A.O., namely, Dy. Commissioner of Income tax, Circle - 2, Jaipur on 17.03.2017 for attending his office and to appear before him on 21.03.2017 and produce books of accounts and other documents before him (the A.O.). Compliance to this summon was immediately made by the assessee by attending before the A.O. with all the books of accounts on the given date i.e. 21/03/2017.On 21/03/2017 following books of accounts and other documents required by the AO vide the above mentioned summon were not only produced Abhay Chordia, Jaipur. before the AO but the copy of the same as asked by the AO were filed with the AO then and there itself. The details of such books of accounts and documents which were produced before the AO and copy of the same was given to the A.O. then and there, are as under: i) Cash book for the F.Y. 2015-16 & 2016-17 for verification of source of cash deposited in Bank Account(s). ii) Sale bills/sales register in support of generation of cash. iii) Purchase bills/purchase register for FY 2015-16 & 2016-17. iv) Stock Register for the F.Y. 2015-16 & 2016-17. v) Bank Statement for the year under consideration i.e. FY 2016-17 relevant to AY 2017-18. b) As per the requisition made by the learned A.O. on 21/03/2017 assessee uploaded on the Income Tax site copies of all sale invoices made by assessee on 8.11.2016 in regard to cash sales. From the perusal of these cash invoices your honor will find that not a single cash invoice is of value exceeding Rs.2,00,000/-. Issuing of a cash invoice upto the value of Rs.2,00,000/- is duly authorized under the provisions of section 269 ST of Income tax Act, 1961. This section reads as under: "Mode of undertaking transactions, 269ST. No person shall receive an amount of two lakh rupees or more - In aggregate from a person in a day; or In respect of a single transaction; or In respect of transaction relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed];" c) Before the assessing officer the assessee inter alia furnished, in the format provided by the A.O., month wise details of stock giving figures of opening stock of each month as well as the figures of goods received and sold in each month, month wise details of cash sales and cash deposit in bank during F.Y. 2015-16 (relevant to A.Y. 2016-17) and F.Y. 16-17(relevant to A.Y. 2017-18), particulars of the purchasers and the sellers in the format provided by the A.O. and copy of stock Abhay Chordia, Jaipur. register from 01/04/2016 to 31/03/2017 under acknowledgment No.03121912478477. The assessee also inter alia furnished with the A.O. purchase Invoices for the period 01/04/2016 to 31/03/2017 and sale bills for the period 01/10/2016 to 31/12/2016 as required by the AO. 4.11. That before making addition of Rs. 4,35,91,454/- u/s 68 and charging income tax as per section 115BBE, the learned AO erred in ignoring various related papers, documents and explanation furnished/produced for the financial year 2016-17 relevant to AY 2017-18 before the AO: i) Month wise details of stock inter alia giving figures of opening stock of each month. ii) Copy of stock register maintained by the assessee for the period 01/04/2016 to 31/03/2017 inter-alia containing separate details of each item dealt with, in terms of quantity and value for FY 2016-17 relevant to the year under appeal in relation to the outlet/showroom at Jodhpur. iii) Month wise details of sales and purchases in the given format for FY 2016-17. iv) Details of month wise cash sale and cash deposit in bank during financial years 2015-16 and 2016-17 respectively. v) Particulars of identity and address of all the purchasers and the sellers in the given format. vi) Bifurcation of date wise cash sales from 1st to 8th November, 2016. vii) Month wise details of sales and purchases in the given format for F.Y. 2017-18 & 2018-19 relevant to A.Y. 2018-19 and 2019- 20. viii) Month wise details of cash sales and cash deposits in the given format for F.Y. 2017-18 & 2018-19 relevant to A.Y. 2018-19 and 2019-20. ix) Copy of purchase and sale invoices for the period 01/04/2016 to 31/03/2017. x) Copy of annual VAT return on Form 10A and relevant VAT and CST assessment order for FY 2016-17 (relevant to AY 2017-18). The turnover mentioned in the VAT returns as well as in VAT Abhay Chordia, Jaipur. and CST assessment orders are fully in consonance to and comparable with the amounts mentioned in the audited financial statements like trading account, P & L account, Balance Sheet of previous year ended on 31/03/2017 relevant to AY 2017-18. xi) Copy of certificate of cash deposit issued by the bank submitted along with submission dated 17/12/2019. xii) Cash book, stock register, bank statements and invoices etc were manually given to the A.O. on 21.03.2017 in compliance to summon u/s 131 of the IT Act. xiii) Copy of all delivery challans for transferring goods from head office at Jaipur to retail outlet/showroom at Jodhpur and sometime vice-versa also as well as other supporting documents of travelling of employees to and from Jodhpur. xiv) Confirmations by selling dealer in regard to goods sold by them to assessee. 4.12. That both the lower authorities failed to appreciate the following: i) Assessee has maintained computerized cash book, bank book, ledger, manual and computerized stock registers, jewellery manufacturing register, export realization register, sale/purchase invoices and expense vouchers, etc. ii) Month wise details of stock giving figures of opening stock of each month (e-filed with the A.O. vide Acknowledgement No. 03121912478477). iii) Copy of stock register from 01.04.2016 to 31.03.2017 (e-filed with the A.O. vide Acknowledgement No. 03121912478477). iv) Quantitative details of principal items of goods traded (as per annexure VIII to Form 3CD of Tax Audit Report). v) Assessee being Manufacturer of Gold Ornaments, Quantitative details of the principal items of Raw Materials have been given as per annexure IX to Form 3CD of Tax Audit Report. vi) Assessee being Manufacturer of Gold Ornaments, Quantitative details of the principal items of Finished Goods have been given as per annexure X to Form 3CD of Tax Audit Report.
Abhay Chordia, Jaipur. 4.13. That the cash sales of Rs. 4,35,91,454/- effected on 08/11/2016 has duly been included in the VAT returns filed by the assessee under RVAT Act and CST Act before the state government authorities and assessee has deposited VAT/CST on these sales. Copy of Annual VAT Return on Form 10A and relevant VAT and CST assessment order for F.Y. 2016-17 (relevant to income tax assessment year 2017-18 i.e. year under appeal) passed by Commercial Taxes Officer, circle-H, Zone Jaipur-II, Jaipur (Rajasthan) form part of the paper book. From the perusal of these, the hon'ble Bench will kindly see that gross total sales inclusive of cash sales as per assessment order under RVAT Act and CST Act are Rs. 52,87,44,117/- and this fully tallies with the gross turnover of Jaipur head office as well as of outside Jaipur outlets Rs. 52,87,44,117/- as per books of accounts. 4.14. Further the assessee has regularly maintained stock register for every item dealt by him on day to day basis containing requisite details for the whole year. The stock register maintained by the appellant contained complete quantitative records relating to purchase and sales and the sales were properly accounted for and reduced from the stock in hand as on that date. No difference was found by the A.O. in the stock register nor in the stock statement of the assessee. Purchases, sales and the stock are inter linked and inseparable. Every purchase increases the stock and every sale decreases the stock and as such to disbelieve the sales the A.O. should have pointed out defects in the stock register or purchases or sales or in maintaining books of accounts but the A.O. has not pointed out any kind of defect in purchases, sales, stock registers and books of accounts etc. 4.15. So far as heavy cash sales of Rs. 4,35,91,454/- on 08.11.2016 i.e. the day on which the demonetization was announced the assessee's explanation is as under: a. With the announcement of the Hon'ble Prime Minister in respect of demonetization of currency notes of denomination Rs. 500/- and Rs. 1000/-, there was frenzy amongst people who wanted to convert their SBN into gold. The jewellery stores had remainedopened till midnight on 8th of November 2016 in order to meet the high demand from customers. The appellant too had met with the high demand of the customers and had thus made cash sales amounting to Rs. 4,35,91,454/- on 08/11/2016. b. Here it may be submitted that demonetization itself was a historical event for the Indian public which had led to such a high Abhay Chordia, Jaipur. demand of the goods like gold in order to convert the SBN during the intervening period of 8.00 PM (when declaration was made by the Hon'ble PM) up to the midnight i.e.12.00 AM at night of 8th November 2016). It is very well known fact that people had flocked to the shops of jewellers to spend soon to be scrapped currency notes with bags full of cash. It will not be out of place to mention that as per media news including the news article of 'The Econimic Times' dated 08/12/2016, wherein the secretary of the India Bullion &Jewellers Association mentioned that the jewellers had sold 15 tonnes of Gold ornaments and bars worth around Rs. 5000 crores on the intervening night of November 8 and 9, 2016 after the government demonetized the Rs. 500 and Rs. 1000 currency notes and the assessee also grabbed that opportunity, which is not a magic but an opportunity for the assessee and thus the sales recorded on the evening of 08/11/2016 i.e. the day of demonetization cannot be looked as compared to the other previous years. As regards the sales accounted for by the assessee, they were supported by bills which are already in possession of the revenue and the proceeds of the same were duly accounted for in the books of accounts and after a day of close of the banks all over India on 09/11/2016, were deposited at Jodhpur in HDFC Bank on 10/11/2016 & 11/11/2016 in assessee's account. The certificate of the bank stood duly filed. c. That the learned A.O. failed to appreciate that assessee's retail outlet in the name of M/s. Ashok Jewels India Retail, Jodhpur is situated in a three storeyed building having approximate total area of 1600 square feet carpet area and in the vicinity of posh localities at 303, 3rd A Road, Sardarpura Jodhpur (Rajasthan). At every floor of this building there is a sale counter inter alia equipped with computer. The entire show room is managed by Shri Ashwani Purohit and Aditya Purohit, both permanent resident of Jodhpur having deep knowledge of marketing and sales and both these managerial persons are assisted by salesmen and other staff members. d. In regard to the observation of the learned A.O. made in sub para (d) of para 3.3 at page 6 of the relevant assessment order, "On perusal of the expenses incurred in the unit of Jodhpur is not corroborating with the factors that would increase the sale in a very short span that isadvertisements commissions and other expenses". It is submitted that activities like giving Abhay Chordia, Jaipur. advertisements, discount offering, if any commission or incurring of expenses on sale promotion and like are done on normal days and not at the time when cash in the form of SBNs is going to be of zero value in the hands of a person of a person after four hours. Moreover, in the time of panic a person approaches nearby shop to purchase an article like gold and that too in odd hours of night. Such was the situation in appellant's case also. 4.16. That on 08.11.2016 total cash sale invoices issued were from serial no. 572 to 918 i.e. total 347. The total cash collection made on 08.11.2016 was immediately deposited on 10th and 11th November, 2016 in the bank as soon as it opened after the close of 09.11.2016. In other words cash of Rs. 4,09,61,000/- and Rs. 38,25,000/- were deposited on 10.11.2016 and 11.11.2016 respectively at Jodhpur in HDFC Bank in assessee's account. In support of it a certificate issued by the bank authorities stands already filed with the learned A.O. 4.17. It is further submitted that all the stock in trade in the opening day of 08/11/2016 in the concern M/s Ashok Jewels India Retail, Jodhpur emanated from finished goods transferred by M/s Ashok Jewels, Jaipur i.e. Head Office of Jaipur before the date 08/11/2016. No goods were sent from Jaipur head office on 08/11/2016. Here it may again be clarified that all the goods, namely, gold ornaments and jewellery sold in the retail outlet at Jodhpur (Rajasthan), namely M/s. Ashok Jewels India Retail are mainly manufactured and/or purchased at Jaipur by M/s. Ashok Jewels, Jaipur and then these goods are transferred by M/s Ashok Jewels, Jaipur to Ashok Jewels India Retail, Jodhpur for sale. 4.18. It is also a fact that the sale for the other periods i.e. period other than 08/11/2016 was accepted by the learned AO and as a result barring the cash sales made on 08/11/2016 the assessment order has been passed by accepting the books of accounts maintained by the assessee as correct, complete and genuine. 4.19. It is further submitted that on one hand sales shown by the assessee are fully backed with the sales bills, duly recorded in books of accounts and also in the stock register, while on the other hand the ld. AO has not brought any material on record to establish that the sales bills are bogus nor any evidence indicating that such sales were bogus and merely having some doubt and giving some findings which are not alone sufficient to justify the additions, made as additions of Rs. 4,35,91,454 to the total income and accordingly the income so assessed by the AO and sustained by the Id. CIT(A) is not sustainable Abhay Chordia, Jaipur. in the eye of law. Besides, it is not the case of the revenue that assessee had no sufficient stock for making the sales nor is there any allegation of non-existing of cash balance in the books of account. So much so books of accounts of the assessee have not been rejected. In other words, assessee’s books of accounts have been accepted by the lower authorities. 4.20. That the learned A.O. has accepted the purchases shown by the assessee in the books of accounts. It is respectfully submitted that once the purchases have been accepted then the corresponding sales cannot be disturbed without there being any conclusive evidence/finding. 4.21. That in para No. 3.1 at page 2 of the relevant assessment order the A.O. by mentioning comparative figures of sales of F.Y. 2015-16 and 2016-17 has observed that the sales of assessee in the previous year relevant to A.Y. 2016-17 have abruptly risen by 136% as compared to the sales of assessee in F.Y. previous year relevant to A.Y. 2016-17. In this regard it is submitted as under: a. That the sales have increased by 26% and not 136% as wrongly mentioned in the relevant assessment order passed by the A.O. b. Consensus of judicial opinion has been that mere addition on the ground that there is deviation in ratio is not proper. In this regard reliance is placed on recent judgement of ITAT Delhi bench in the case of Agrawal Global PVT. Ltd. vs. ACIT in 3742, 3743, 3744, 3745, 3746/DEL/2019 wherein Hon'ble Delhi tribunal held that merely difference in ratio of cash sales cannot be made sole ground for making an addition u/s 68 of the Act. The Hon'ble Tribunal further held that the assessee had regular cash sales and deposit of cash in bank account and if nothing incriminating is found contrary than addition under section 68 of such cash sales would tantamount to double taxation. 4.22. That though the assessee furnished all the above mentioned supporting evidence but while passing the assessment order the A.O. ignored all these supporting evidences furnished before the A.O. and treated the cash sales of Rs. 4,35,91,454/- made on 08/11/2016 as afterthought and held the entire cash deposit in bank in the form of SBNs of Rs. 4,35,91,454/- as unexplained and added the same in the total income of assessee u/s. 68 of the IT Act. The action of the A.O. is an utter disregard of law and particularly the CBDT instructions No.
Abhay Chordia, Jaipur. 03/2017 dated 21/02/2017 which clearly say that the assessing officer is required to take into consideration the record of theassessee such as stock register, bank statements, sales tax return etc. before arriving at a conclusion and accordingly the impugned assessment order is liable to be cancelled. 4.23. In the case of the present appellant his books of accounts have not been rejected but all the books of accounts including stock register, purchases, sales, bills and vouchers etc. and the audited financial statements that have been found to be in order. The consensus of judicial opinion is that without challenging the books of accounts no addition can be made. Moreover, assessee's book of account have not been rejected by the AO. 4.24. Therefore, in the facts and circumstances of the case the addition sustained by the ld. CIT(A) at Rs.4,35,91,454/- is devoid of any substance or merit but solely on the presumption and surmises which is not sustainable in law and thus it is requested that the amount of specified bank notes deposited by the assessee in his bank account during demonetization period should not be treated as unexplained income and further it is requested that it should not be added in the total income of assessee under the provisions of section 68 of IT. Act. Ground of Appeal
No. 6:
1. The provisions of Section 115BBE were inserted in the ITA by Finance Act, 2012, with effect from 1.04.2013. Section 115BBE taxed the unexplained credits, Money, investment, expenditure, etc., which were deemed as income under Section 68, Section 69, Section 69A, Section 69B, Section 69C or Section 69D, at the rate of 30% (plus surcharge and cess) without allowing any deduction for any expenditure or allowance.
2. Thereafter, the provisions of sub-section (1) of Section 115BBE were substituted by Taxation Laws (Second Amendment) Act, 2016, w.e.f. 1.04.2017 i.e. AY 2017-18 ("Amendment 115BBE"). Although, Taxation Laws (Second Amendment) Act, 2016 received the assent of the President of India on 15.12.2016, but both the cash sales amounting to Rs. 4,35,91,454 and cash deposited in the bank account on 10/11/2016 and 11/11/2016 amounting to Rs. 4,47,86,000 fell before this date i.e. before 15/12/2016 when the assent was given by the humble President of India.
3. Chronology of various events, as discussed hereinbefore, is as under:
Abhay Chordia, Jaipur. Particulars Date 115BBE Introduced for the first time in the Income Tax Act, 01.04.2013 Rate of Tax to assessee Cash Sales by the assessee 08.11.2016 Amendment u/s 115BBE Introduced in Lok Sabha 28.11.2016 Amendment u/s 115BBE passed by Lok Sabha 29.11.2016 Amendment u/s 115BBE received President assent 15.12.2016
4. Thus, the law, applied by the ld. AO did not see the light of the day when the transactions of cash sales took place on 08/11/2016. The said law for the first time was introduced on 28.11.2016.
On comparison of the amended provision with the earlier provision, it is clear that the above-stated clause (a) of sub-section (1) of section 115BBE retains the essential features of the earlier provision with the difference that the rate of tax is ENHANCED from 30% to 60%. Simultaneously, Section 2(9) of Chapter II of the Finance Act, 2016 was amended by inserting the Seventh proviso to provide for a levy of surcharge at the rate of twenty five per cent of tax u/s 115BBE thus the rate of tax after the amendment to Section 115BBE was 77.25% (60% + 25% Surcharge + 3% Cess), as against 30%.
6. Withdrawal or modification of provision with retrospective effect, depriving the assessee of the vested statutory right or which has the effect of imposing a levy with retrospective effect for the PERIOD for which there was no such levy unless there be strong and exceptional circumstances justifying such modification, cannot be held to be reasonable or rational.
The amendment to section 115BBE, cannot, in any way, be considered to be introduced to overcome any defects of the law, previously in place, nor it canbe considered to be clarificatory in nature, explaining the intention of the law already in place. Per contra, such amendment has resulted into increases in tax burden of the assesses. 8. Section 92B of the ITA setting the meaning of 'International Transaction' was introduced by Finance Act, 2001 w.e.f. 01/04/2002. Subsequently, an explanation was added to section 92B, increasing the scope of “international transaction” by Finance Act, 2012 with retrospective effect from 01/04/2002. As such explanation increased the scope of section 92B, it was considered, in the below mentioned judgments, to have a prospective effect, even though introduced with a view to give a retrospective effect:
Abhay Chordia, Jaipur. 8.1. Rishabh Diamonds (2016) 158 IPD 0564 (Mumbai) 8.2. HiracoJewellery (India) Pvt. Ltd., (Mumbai) 8.3. Gitanjali Exports Corporation Limited (2016) 178 TTJ 529 (Mumbai) 8.4. Shiv Clinphram Private Limited (2016) 177 TTJ 609 (Mumbai) 9. Hon'ble ITAT, Jaipur Bench, in the case of KGK Enterprises (2017) 88 taxmann.com 264 (Jaipur - Trib.) accepted the above proposition and held that Explanation to section 92B enhancing its scope to be applicable from A.Y. 2013-14 onwards.
It is submitted that when the assessee made cash sales, the amended provisions of section 115BBE were not in existence.
Where an amendment, as under 92B, although was introduced having a retrospective effect, was held by the courts, to have a prospective effect, by the same analogy, an amendment to Section 115BBE, putting an additional burden on the assessee, introduced on 15.12.2016, w.e.f. 01.04.2017 i.e. AY 2017-18, should not be made applicable on any act committed between 01.04.2016 to 14.12.2016.
The amendment to Section 115BBE is penal in nature, which aims to penalize the assesses,if additions referred to in Section 68 to Section 69A are made. Penal statutes which create offences or which have the effect of increasing penalties for existing offences will only be prospective by reason of the constitutional restriction imposed by ARTICLE 20 of the CONSTITUTION OF INDIA.Therefore, if an Act creates a new offence, it will bring into its fold only those offenders who commit all ingredients of the offense after the Act comes into operation. This rule of construction against retrospectivity of penal laws is not restricted to criminal offences punished with imprisonment, but also applies to laws which provide for other penal consequences, such as fines and penalties.
Thus, as per the facts of the present case, provisions of Section 115BBE cannot be invoked as the income has been voluntarily declared by the assessee, in its return of income. Sale is income offered for tax against which deduction of purchases are claimed.
Thus, the amended provisions of Section 115BBE should not be made applicable on the assessee for the following reason:
Abhay Chordia, Jaipur. 14.1. At the time of cash sales by the assessee company, the amended provisions were not in place. 14.2. The amendment to section 115BBE, being 'onerous on the assessee, should not be given a retrospective effect. 14.3. Where any amount is converted by AO to income under section 68 to 69B, then only Section 115BBE can be made applicable. In the present case, assessee himself offered amount for taxation. In view of the above, application of Section 68 read with Section 115BBE by the ld. AO to the amount of cash sales of Rs. 4,35,91,454/- which is duly accounted for in the books of account by the assessee and thereafter this amount deposited by the assessee in his bank accounts, is illegal and deserves to be quashed. Ground of Appeal
No.
8. This ground of appeal is of general nature and may please be decided accordingly.” 5.1 In support of the contention so raised in the written submission and the oral arguments the ld. AR of the assessee relied upon the following evidence / records :-
Sr. No. Nature of paper Page No.
Written submissions accompanied with month wise 1-32 details in tabular form of total sales, total cash sales, total cash deposited in bank and percentage of cash deposited out of total cash sales for FY 2015-16 to 2021-22 relevant AY 2016-17 to 2022-23 and List of judicial pronouncements referred to and relied upon by the appellant assessee.
Daily Stock register which contains separate details of 33-82 each item dealt by the assessee in terms of quantity and value for FY 2016-17 in relation to retail outlet at Jodhpur namely Ashok Jewels India Retail.
3. Consolidated and monthly trading account for the 83-87 period 01/04/2016 to 31/03/2017 in relation to retail outlet at Jodhpur namely Ashok Jewels India Retail.
4. Copy of cash book in relation to retail outlet at Jodhpur 88-180 namely Ashok Jewels India Retail for FY 2016-17.
Abhay Chordia, Jaipur.
5. Bill wise list of parties to whom goods were sold during 181-208 the FY 2016-17 in relation to retail outlet at Jodhpur namely Ashok Jewels India Retail.
6. Sample copies of invoices of cash sale issued on 208-237 08/11/2016 i.e. date of demonetization in relation to retail outlet at Jodhpur namely Ashok Jewels India Retail. (Copies of all cash sale invoices issued on 08/11/2016 stand already filed before both the lower authorities) 7. Copy of CBDT instruction no. 03/2017 dated 238-245 21/02/2017 8. Copy of Annual VAT return, VAT and CST assessment 246-265 order passed by commercial taxes officer, Government of Rajasthan for F.Y. 2016-17 relevant to A.Υ. 2017-18.
The ld. AR of the assessee in addition to the written submission so filed vehemently argued that Jwellers selling ornaments. The ld. AO added the whole proceeds of the sales made on the 8.11.2016 as unexplained credit as per provision of section 68 of the Act. In support of the sales so made by the assessee the ld. AR of the assessee stated that the assessee has submitted for the year under consideration and for the previous year cash book, sales bills / sales register, stock register and Bank statement. The books of accounts were regularly maintained and are audited by an independent chartered accountant and once the ld. AO accepted the book results by not rejecting the same as per the provision of section 145(3) of the Act the addition so made is the double taxing the same income once as sales and other as unexplained cash credit as alleged. As regards the sales made by Abhay Chordia, Jaipur. the assessee, the assessee was having sufficient stock and the stock records were submitted before the lower authority. The assessee also submitted list of invoice and sample copy of invoices and the ld. AO has not doubted not a single transaction nor attempted to get it verified and therefore, the said sales cannot be rejected merely on the reason that the assessee has made the sale it on the date of demonetization by raising 347 sales invoice. It is already on record that the day being the highest sale of gold as reported in the news and therefore, the same should have been accepted by the ld. AO. Considering the facts being similar he serviced the decision of the co-ordinate bench of Jaipur in the case of in the case of Motisons Jewellers Ltd, in the case of Shri Chandra Surana and in in the case of Mahesh Kumar Gupta.
7. Per contra, ld. DR relied upon the finding recorded in the order of the lower authority. Ld. DR referring to the page 17 of the assessee’s paper book submitted that out of the total sale of Rs. 11,38,44,076/- for the month of November there was sale of Rs. 4,80,71,055 and that of the sale on the date of demonetization was for Rs. 4,35,91,954/- which cannot be believed. The sales invoice are self serving documents. He referred to the month wise sales Abhay Chordia, Jaipur. position and that of the stock given at page 84,85 and 86 itself suggest that the sale made in the November and thereby on the day of demonetization cannot be believed having sudden spike. Referring to page 6 of the AO para f wherein the ld AO noted that the assessee has not produced the day-to-day stock records as required and thereby he has referred to the provision of section 145 of the Act. As is evident from the record that the assessee the assessee claim that they have made the 347 invoices of sale in single day which cannot be possible. Based on these contention ld. DR relied upon the finding recorded in the order of the ld. AO and that of the ld. CIT(A). Ld. DR also relied upon the decision of J.M.J. Essential Oil Company 113 taxmann.com 463 holding that whole credit can be added if the assessee failed to establish how the sales was made.
We have heard both the parties and perused the materials available on record. The bench noted that the assessee has taken multiple grounds but in all it relates to the addition of sales made by the assessee on the date of demonetization for an amount of Rs. 4,35,91,454/- as made by the ld. AO. Therefore, we deal with all these grounds together.
Abhay Chordia, Jaipur. Record reveals that the assessee has shown sales of Rs. 52,87,44,117/-against the sale of Rs. 38,77,32,624/- in the just preceding previous year. Net profit has been shown at 3.41% against the 4.3% in the immediately preceding year. As there was deposit of cash of Rs. 4,51,46,000/- in the bank accounts between the period of demonetization i.e. during 9.11.2016 to 31.12.2016 to this effect the credentials of the assessee in the year of scrutiny as compared. Ld. AO noticed that the sale of assessee abruptly risen astronomically as compared to the preceding previous year by around 136%. To examine such huge rise in the sales specially just before the time of demonetization period, the books of accounts have been examined by the ld. AO. While assessment proceeding the assessee vide questionnaire dated 05.10.2019 was asked to furnish the sources of the cash deposits. In response to the notice the assessee filed its submission through e-filing on 26.11.2019 there in the assessee submitted that the sources of cash deposited during demonetization is the proceeds of cash sales made at Jodhpur retail out let of the assessee. As regard cash deposit in pre-demonetization period it was out of such cash in hand include cash sale, cash in hand on the opening of the day brought forward from the immediate preceding day, cash withdrawal from the bank, Abhay Chordia, Jaipur. cash amount received from debtors. So as to examine the genuineness of the cash sales various details and evidences called for vide notice dated 14.12.2019 by the ld. AO. On analysis of the month wise sales of the assessee, it was found that the assessee had booked in its unit M/s Ashok Jewels India Retails, Jodhpur one of the units of the assessee. Ld. AO on perusal of the sales details for the month of the November 2016 and that of it on 08.11.2016 raise suspicion. As is known to all that the government of India demonetized the SBNs i.e. 500 & 1000 w.e.f. 08.11.2016. From the financial credentials of the assessee, it raises a suspicion that to deposit the SBNs the assessee has made manipulation in the books of accounts by introducing bogus sales. To confirm the same, the details relating to the sale and purchase and transfer of stock has been called for vide notice u/s 142(1) of the Act on 12.12.2019. In response the assessee produced the copy of purchase and sales bills which were examined by the ld. AO and he noted that the purchase side of the P&L a/c and inward stock is in order, the sales side of the P&L A/c specially as claimed on 08.11.2016 is having a big question mark as the assessee has raised around 347 bills in a single day against very few bills raised during the rest of the preceding period. Ld. AO Abhay Chordia, Jaipur. noted that this cannot be possible by any probabilities which leads to the suspicion that assessee has booked bogus sale to introduce the unaccounted cash. Hence, the show cause was issued on 24.12.2019 to the assessee asking as to why the amount of specified bank notes deposited by in bank subsequent to announcement of demonetization should not be added to income under the provisions of section 68 of Act as the explanation furnished by you in respect of 347 bills during the short period available in the evening of 08.11.2016 does not sound plausible. The assessee submitted its reply stating that the assessee has got a retail outlet in the name of M/s Ashok Jewels India Retail and it is situated in a three storeyed building at 303, 3d A Raod, Sardarpura Jodhpur. At every floor of this building there is a sale counter interalia equipped with computer. The entire showroom managed by Shri Ashwani Purohit and Aditya Purohit who are having deep knowledge of marketing and sales and both managerial are assisted by salesman and other staff members. It was also submitted that on 08.11.2016 total sale invoices issued during the day were from serial no.572 to 918 i.e. total 347. The total cash collection made upto the date 08.11.2016 was immediately deposited as soon as the bank opened after the close of Abhay Chordia, Jaipur. 09.11.2016. In other words cash of Rs. 4,09,61,000/- and Rs. 38,25,000/- were deposited on 10.11.2016 and 11.11.2016 respectively in the bank account with HDFC Bank at Jodhpur. In support of it a certificate issued by the bank authorities was placed on record. The deposit of cash amount in the bank account immediately after the reopening of the bank after a close of one day on 09.11.2016 undoubtedly proves the genuineness of the cash sale made on 08.11.2016. The details were also submitted immediately on receipt of the summons on 17.03.2017 wherein the assessee has already placed on record following documents; a) Cash book for the F.Y. 2015-16 & 2016-17 for verification of source of cash deposited in Bank Accounts(s). b) Sale bills/sales register of the basis of which cash was generated. c) Purchase bills/purchase register for AY 2015-16 & 2016-17. d) Stock Register for the F.Y. 2015-16 & 2016-17, e) Bank Statement for the year under consideration.
All the details and submission so made by the assessee were not considered by the ld. AO holding that the explanation of the assessee too general and lack any substance. He has not appreciated the fact that the 347 invoices were made during the day and not only after the time of demonetization as contended by the assessee. As regards the contention of the ld. AO that the assessee has not submitted the stock details on this aspect of the Abhay Chordia, Jaipur. matter the bench noted that the assessee vide paper book page 33 to 82 filed the daily stock record maintained by the assessee and the ld. AO did not raised any question paper book filed well before the date of hearing by the assessee and the ld. AR of the assessee also certified that the said paper were placed on record at the time of assessment proceedings.
Thus, as is evident the ld. AO himself accepted the fact that purchase side of the P&L a/c and inward stock is in order. Be that it may once the stock record and purchases were not doubted and the assessee submitted all the details by filling the stock register, sales register, cash book and the books of account maintained by the assessee were not rejected. The cash receipt shown by the assessee is after giving the delivery of goods and therefore, the cash so received on deliver of goods cannot be considered as unexplained credit. The bench also noted that the assessee has also reported this sales into the VAT return filed.
Based on these discussion and finding that has been recorded by us in the preceding para we are of the considered view that the action of the ld. AO making an addition under section 68 for an amount of Rs. 4,35,91,454/- as unexplained cash deposit The bench also noted that ld. AO has not rejected the book results by pinpointing any defects in the books of accounts and the details submitted by the assessee and audited books were considered accepted wherein the sales recorded was also accepted. On the same set of facts this co-ordinate bench of Jaipur in the case of Chandra Surana in held that; 2.6 We have heard both the parties and perused the materials available on record. From the assessment records, it is noted that the AO made an addition of Rs.2,90,93,500/- in declared income by holding that said amount of cash deposited by the assessee in his bank account during the demonetization period is nothing but the undisclosed income of assessee which was shown under the garb of cash sales and thus it is liable to be added u/s 68 of the Act and taxable @ 60% under the provision of Section 115BE of the Act. It is also noted from the order of the ld. CIT(A) at para 4.1 wherein the ld. CIT(A) has described para 1.4 of assessee written submission that complete regular books of accounts, bill, vouchers and day to day stock register having complete quantitative details have been maintained by the assessee. The said books of accounts are audited. A copy of audited statement of account alongwith complete quantitative details have been submitted alongwith the return of income. The assessee maintained manual itemwise stock register. The said stock register was bulky and so could not be produced in e- proceedings but was produced before the AO in course of hearing as is evident from submission dated 27-09-2019. The fact of maintenance of stock register manually is stated in Tax Audit Report also. Thus the cash sales transaction is recorded in regular books of accounts, sales are made out of stock-in-trade. The assessee also filed copies of sales invoice No. 82 to 158 of Bangaluru and 110 to 216 of Koklata outlets before AO which were of 28-10-2016 and these were earlier produced before Investigation Wingh in F.Y. 2016-17 i.e. after the sales were made and same were verified by the Investigation Wing also. This view of the ld. CIT(A) indicates hat the assessee has maintained regular books of accounts, bills, vouchers and day to day stock register having complete quantitative details and said books of accounts are audited.
Abhay Chordia, Jaipur. The assessee vide submission dated 27-09-2019 had produced stock record during the course of hearing. The cash sales transactions are recorded in regular books of accounts and the sale are made out of stock in trade for which no adverse finding had been observed by the AO except for the change in the methodology in issuing bills as mentioned at page 7 to 8 of the assessment order. Further the ld. CIT(A) observed that the AO had treated the cash deposited in the bank during the demonetization period in demonetized currency as unexplained cash credit u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales etc. was evident from the entries in the audited books of accounts of the assessee. In this case, the books of account of the assessee had been audited by an independent auditor. The cash sales and receipts are duly supported by relevant bills which were produced in the course of assessment proceedings before the AO and it is not the case of the AO that the assessee did not have sufficient stock for making the sales. Hence, it cannot be said that the figures of sales and purchases are not supported by the quantitative details and the AO did not make any enquiry on the material supplied by the assessee. Thus the AO neither brought any material on record to establish that the sale bills are bogus nor provided any evidence that such sales are bogus. It is also an open fact that the demonetization of Rs.500/- and Rs.1000/-note was declared by the Hon’ble Prime Minister at 8 PM on 8-11-2016 and after this announcement the persons reached the jewellery shop to buy jewellery in exchange of notes. Thus all such scenario indicates that the assessee had duly substantiated its claim from the documentary evidences and also with the facts. It is also observed from the assessment order that the AO had not rejected the books of account of the assesee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition of Rs.2,90,93,500/- made by the AO by applying the provisions of Section 68 of the Act, it is noted that provisions of Section 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P&L account. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act. In view of the above deliberations and case laws relied upon by both the parties, we find that the AO was not justified in making an addition of Rs.2,90,93,500/- u/s 68 of the Act which has rightly been deleted the ld. CIT(A) and we concur with his findings. Thus the appeal of the Revenue is dismissed.
On being consistent to the finding so recorded in the above case and that facts of the case on hand being similar having the same factual matrix, we direct the ld. AO to delete the duplicate addition Abhay Chordia, Jaipur. of Rs. 4,35,91,454/- made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO. In the result the appeal filed by the assessee is allowed. Order pronounced in the open Court on 12/11/2025.