ASHOK NARIYANI,JAIPUR vs. ACIT, CIRCLE-5, JAIPUR

PER DR. S. SEETHALAKSHMI, J.M. By way of the present appeal the above named assessee challenges the order of CIT(A)-4, Jaipur-4 dated 25.10.2024 for assessment year 2017-18. The said order of the ld. CIT(A) arose because the assessee challenged the order of assessment passed u/s. 143(3) of the Income Tax Act [ for short Act ] by ACIT Circle-5, Jaipur [ for short AO ] before him. 2. The assessee has raised following grounds of appeal:-

2. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in dismissing the grounds of appeal summarily without considering the material available on record and case laws submitted by the appellant. The action of Ld. CIT(A) is contrary to the law as well as facts and deserves to be quashed.

3. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in making the addition relying upon the statement recorded/material seized / impounded during survey carried u/s 131 without providing the copies of the same to be appellant. The said action is is bad in law and on facts being against the principal of natural justice.

4. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld.AO in making addition in perfunctory manner on preposterous basis by not issuing valid show cause notice as mandated and prescribed in CBDT instructions and under the law, which omission vitiates the entire action.

5. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in making addition of Rs. 1,30,82,000 u/s 68 of the Act.

6. Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO erred in charging tax under section 115BBE of the Act.

7. Under the facts and circumstances, Ld. A.O. has erred by determining total income at Rs. 1,5 5,28,660 and tax liability at Rs. 1,34,41,682, which was confirmed by Ld. CIT(A). The income determined is excessive, unjustified or illegal.

8. That the appellant craves your indulgence to add, amend, modify, delete or alter all or any grounds of appeal before or at the time of hearing.”

3. Succinctly, the facts as culled out from the records are that the assessee is engaged in the business of trading of tobacco and mouth fresheners products on wholesale, retail and consignment basis in his Ashok Nariyani, Jaipur. proprietary namely M/s Manisha Agencies. The assessee filed return showing total income at Rs. 24,46,660/- on 07.11.2017, which was processed u/s 143(1) of the I.T. Act. Thereafter, the case was manually selected for scrutiny u/s 143(3) of the I.T. Act, 1961 to examine of the cash deposited of Rs. 5,00,98,000/- in his bank accounts during demonetization period from 09.11.2016 to 30.12.2016. Accordingly statutory notice u/s 143(2) was issued on 20.09.2018. Notice u/s 142(1) alongwith questionnaire dated 10.09.2019 was issued to the assessee electronically for filing the reply/details. In response to the notice, the assessee submitted reply on 19.09.2019, 30.09.2019, 08.11.2019, 20.11.2019 and 22.11.2019.

4. On going through the details so filed ld. AO noted that the assessee deposited cash of Rs. 5,00,98,000/- during the period of demonetization from 09.11.2016 to 30.12.2016 in his bank accounts. Ld. AO also observed that there was an abnormal increase in cash deposit in the bank account in November 2016. Therefore, the assessee was issued a show cause notice dated 02.11.2019 asking the assessee to produce source of cash deposited, details of SBN deposited, reconciliation of sale with Vat Returns, justification behind increase of cash sales in November, 2016.

Ashok Nariyani, Jaipur.

5. The assessee submitted written reply on 08.11.2019 contending the cash so deposited are the sale proceeding. The assessee submitted all documents and information from time to time including the details of sales, ledgers, cash and bank books. The assessee also produced details of SBN Notes deposited and new currency notes deposited and justification behind increase in cash sales. The assessee also submitted the comparison of sale and cash deposited into the bank account with the last year for each month and cash book containing details of opening cash in hand as on the date of demonetisation.

6. On going through the details so filed, Ld.AO noted that a survey operation was conducted at the business premises of the assessee on 24.03.2017. During the course of survey, assessee was asked to explain the source of cash deposit of 1.58 Crores SBN Notes made in the period 09.11.2016 to 30.12.2016, to which assessee explained that said cash is out of the cash generated from the cash sales but assesseehad agreed that out of total 1.58 Crores deposited, 60% cash deposit (Rs. 94,80,000) is unrecorded sale of the assessee, which will be declared under Pradhan Mantri Garib Kalyan Yojana (PMGKY). Assessee declared the said amount under PMGKY and paid the due tax, interest and penalties. However, during the course of assessment, Ld. AO observed that since, the cash deposited in old currency noted by the assessee in his bank Ashok Nariyani, Jaipur. accounts is Rs. 2,88,82,000/- against the surrendered amount of Rs. 1,58,00,000/- during the survey proceedings, therefore the balance amount of cash deposited of Rs. 1,30,82,000/- in old currency notes is to be treated as unexplained and out of books sale as admitted by the assessee during the survey.

7. Aggrieved by the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A) along with Paper Book and case laws paper book. Ld.CIT(A)-4, Jaipur vide its order dated 25.10.2024 sustained the addition so made by Ld.AO u/s 68 along with an alternate addition u/s 69 of the Act.

8. Feeling dissatisfied the assessee preferred present appeal on the grounds as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, has filed the written submission in respect of the grounds raised by the assessee. The written submission so filed reads as under:-

“Assessment initiated and completed by non-jurisdictional assessing officer: (a) At the outset it is submitted that the PAN of the assessee has been falling under the jurisdiction of ACIT, Circle-4, Jaipur. Same is evident from the fact that for the very same assessment year, notice u/s 148 dated 30.03.2024 (PBP-182) has been issued by Jurisdictional Assessing Officer (ACIT, Circle-4, Jaipur). Moreover, PAN jurisdiction appearing on income tax portal is also showing the jurisdiction of assessee with ACIT, Circle-4, Jaipur. An image of the same is placed hereunder for your kind perusal:

(b) As jurisdiction of the assessee was falling under ACIT, Circle-4, Jaipur therefore Notice u/s 143(2) being the jurisdictional notice, was required to be issued by the Jurisdictional Assessing Officer, however, in the instant case, notice u/s 143(2) has been issued by ACIT, Circle-5, Jaipur (PBP-1). (c) The facts and circumstances mentioned above makes it evidently clear that Notice u/s 143(2) has not been issued by Jurisdictional Assessing Officer and assessment has also been completed by non-jurisdictional assessing officer, therefore, the entire proceeding taken by non-jurisdictional assessing officer become void for want of jurisdiction. (d) In this regards, we place our reliance on the following case laws:

- PankajbhaiJaysukhlal Shah Vs ACIT in SCA 230/2019 vide order dated 09.04.2019.

Ashok Nariyani, Jaipur. - Resham Petrochem Ltd Vs ACIT in vide order dated 10.02.2012 - Tejpal Singh Vs ITO in vide order dated 22.11.2017 Assessment made against the principal of natural justice: 1. During the course of appeal before CIT(A)-4, Jaipur, detailed Paper Book, containing the replies submitted before Ld.AO, Charts of Cash Deposits and withdrawals, Bank Books, stock and sale registers for both Rajasthan and Haryana were submitted along with complete compilation of relevant case laws (PBP 180- 181), however, Ld. CIT(A) completely ignored the material available on record. No efforts were made even to look into the material and case laws relied upon by the assessee and all the grounds were summarily dismissed. The said action of Ld.CIT(A) is against the principal of natural justice and resultantly the order so passed by Ld.CIT(A) deserves to be quashed.

2. A perusal of the assessment order (Page-7) clearly shows that addition has been made by placing sole reliance on the statement recorded during the course of survey. Findings so rendered by Ld.AO is placed hereunder:

3. A perusal of the above clearly shows that reliance has been placed on the response given to Question No.27 asked during the course of survey. Once, reliance has been placed on the statements recorded during the survey, it was obligatory on the part of the AO to provide the copy of the same to the assessee. However, the same was not provided. Thereafter, vide notice u/s 142(1) dated 10.09.2019, vide Point No.17 (PBP-13) Ld.AO made the reference to the statement recorded during the course of survey by recording as under:

Ashok Nariyani, Jaipur. In response to this, vide letter dated 30.09.2019, specific request was made before Ld.AO to provide the copy of statements recorded during the course of survey (PBP- 25). However, the same was never provided. The said action has resulted into failure on the part of Ld.AO to provide the evidence he had gathered u/s 142(2) Act, therefore, erroneously skipping the mandatory intermediary step prescribed u/s 142(3) of the Act. Thus, when the A.O. has directly gone on to pass the Assessment Orders u/s 143(3) of the Act to make the impugned additions u/s 68, the same is in direct violation of the procedure of enquiry prescribed in the Statute that inherently encompasses the Principles of Natural Justice.

4. Supporting Case Laws: - ITAT Delhi in the case of M/s Surbuildcon P Ltd Vs DCIT, Central Circle-13, New Delhi in vide order dated 15.07.2021 held as under: (DPB 381-445)

“7.10 To elaborate, Section142 of the Act provides for the procedure to be followed by the A.O. while making the requisite enquiries before concluding an assessment. Section 142(1) of the Act empowers the A.O. to call for information/material from the assessee. Section142 (2) empowers the A.O. to make such enquiry as may be necessary for the purpose of such assessment. Section 142 (3) mandates that the information/evidence collected pursuant to the enquiry conducted u/s 142(2), which is proposed to be utilized during the assessment, shall first be put to the assessee to provide him/her with an opportunity of being heard before the same is even utilized to make an addition/disallowance u/s 143(3). There is, thus, a specific procedure that must be followed by the A.O. while making an assessment under the Income Tax Act. Section 142 (3) uses the word ‘shall’, thus, rendering the same to be by no means discretionary upon the whims and fancies of the A.O.

7.12 We also draw support from the judgment of the Hon’ble Apex Court in Swadeshi Cotton Mills v. Union of India, AIR 1981 SC 818, where the Hon’ble Supreme Court has clearly held that “Where authority functions under a statute and the statute provides for the observance of the principles of natural justice in a particular manner, natural justice will have to be observed in that manner and no other. No wider right than that provided by the statute can be claimed nor can the right be narrowed."

7.13 We further observe that the statement of Shri B.S. Bisht as stated in the ‘Reasons Recorded’ has not been utilized by the A.O. as the basis for passing the Assessment Orders. Therefore, we are of the view that the question of whether this statement had been provided to the assessees for cross examination or not, is not required to be gone into. However, it would not be out of place to hold that for the reasons specified above, even the statement of Shri B.S. Bisht recorded behind the back of the assessees could not unilaterally be used by the A.O. without testing the same on the anvil of 7.14 Since the results of the enquiries conducted by the A.O. u/s 142(2) of the Act have not been confronted to the assessees, we are inclined to agree with the Ld. A.R. that there has been a violation of the Principle(s) of Natural Justice implied within Section142 (2) of the Act and such statutory non-compliance vitiates the entire assessment proceedings, therefore, rendering it to be null and void. Thus, the Cross Objection taken on the violation of the Principle(s) of Natural Justice is also allowed in favour of the assessees. ”

- T Takano Vs SEBI and Anr. In civil Appeal No.487-488 of 2022 vide order dated 18.02.2022 (DPB 446-495)

Evidentiary value of Statements recorded during the course of survey: 5. As submitted above, assessee was subject to a survey u/s 133A of the Act, however, a perusal of order of Ld.AO as well as Ld. CIT(A) clearly shows that there is no such reference of any incriminating material found during survey suggesting that any undisclosed source of income was detected or any document was found suggesting any unrecorded sale being made by assessee to generate any undisclosed cash or any incriminating material was found suggesting that cash deposit was made out of undisclosed sources of the assessee. Which means the addition has been made purely on the basis of statements recorded during the course of survey.

6. The said contention raised before the Ld. CIT(A) along with supply of supporting case laws under a separate heading was rejected by CIT(A) without recording any specific finding. In this regard, it is submitted that there is no denial to the fact that cash has been deposited but the source of cash is duly explainable. The finding of Ld.CIT(A) further shows that the addition has been made purely on the basis of alleged admission given by the assessee during the course of survey. It is a settled law that survey proceedings are different from the search proceedings. Since it is a case of survey, thus the concerned officer did not have any power to record the statement on oath and therefore no addition can be made only on the basis of statement recorded during the course of survey in absence of any corroborative material. The said action is in direct contravention of CBDT Circular No. 286/2/2003- IT(Inv) (DPB 1-4) wherein it was directed that:

7. In this regards, we also place our reliance on the decision of Hon’ble Bench in the case of Satish Chandar Agarwal Vs ITO in vide order dated 12.04.2018 holding as under:

Section 133A, however, enables the income tax authority only to record any statement of any person which may be useful, but does not authorize taking any sworn statement. Thus, it is trite law that Section 133A does not empower any Income tax authority to examine any person on oath and then use it as evidence to make addition. In such a situation, no addition can be made or sustained only on the basis of the statement recorded during the survey U/s 133A of the Act.

8. In this regard, kindly also refer to the decision of Hon’ble Delhi High Court in the case of PCIT, Central-3 Vs ARN Infrastructure Limited in vide order dated 27.07.2023 holding as under:

“18. We have heard learned counsel for the parties and perused the record.

19. According to us, what clearly emerges from the record is that the addition of Rs.10 crores to the taxable income of the respondent/assessee was made purely on the basis of the statement made by its directors.

20. Although the statements appear to have been categorized as voluntary, what emerges is that these statements were made to “buy peace of mind”. Thus, Rs.10 crores was surrendered by the directors during survey, which was added to the taxable income of the respondent/assessee.

21. Furthermore, concededly, while filing its return, the respondent/assessee did not include the amount in issue, i.e., Rs.10 crores which, according to the AO, had remained unexplained.

22. It is also not in dispute that the respondent/assessee was not furnished with a copy of the survey report. This is an aspect which the Tribunal has noted in the impugned order.

23. Concededly, the directors were not confronted with the contents of the survey report.

24. Given this position, the Tribunal, in our view, quite correctly has concluded that since there was no corroborative material available for making addition, the assessment order, qua this aspect, could not be sustained.

25. As observed by the Madras High Court in S. Khader Khan Son’s case, there is a qualitative difference between the statement recorded under Section 133A and Section 132(4) of the Act.

27. Given this position and the fact that no corroborative evidence was found to support the addition, we are not inclined to interfere with the impugned order passed by the Tribunal.

28. According to us, no substantial question of law arises for our consideration.

29. The appeal is, accordingly, closed.”

9. We further place our reliance on the following case laws: - Supreme Court of India in case of CIT Vs S Khader Khan Sons. 352 ITR 480 (SC) Civil Appeal No.6747/2012 order dated 20.09.2012 (DPB-5)

- Gujrat High Court in case of CIT Vs Shardaben Modi Tax Appeal No.123/2013 order dated 30.04.2013 (DPB 6-12) - Delhi High Court in the case of PCIT Central-3 Vs Anand Kumar Jain HUF ITA 23/2021 order dated 12.02.2021 (DPB 13-23) - Rajasthan High Court in case of Micro Marble P Ltd Vs ITO Ward-1 Civil Writ Petition No.13719/2021 (DPB 24-27)

10. In view of the facts and judicial precedents cited hereinabove, it is evidently clear that any addition to the income of the assessee made solely on the basis of statements recorded during a survey under section 133A of the Act, without any independent corroborative evidence or material substantiating such addition, is legally unsustainable and devoid of merit. The settled position of law, consistently upheld by various judicial forums including the Hon'ble Supreme Court, High Courts, and Income Tax Appellate Tribunals, categorically holds that statements obtained during survey operations lack evidentiary value and cannot independently justify additions to taxable income. Therefore, the impugned addition, being purely based on uncorroborated statements recorded during the survey proceedings, deserves to be deleted.

GROUND OF APPEAL-

5: Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO in making addition of Rs. 1,30,82,000 u/s 68 of the Act. Brief Facts: a. At Page-2, Para 4.1 Ld.AO has mentioned that in order to verify the details of cash deposit of Rs.5,00,98,000/- the assessee was required to furnish the details of SBN Notes deposited along with details of cash deposited in AY 2015-16 (immediately preceding year) and details of cash deposited before the period of demonetization, during monetization and after monetization, along with month wise details of sale. Both cash sale and credit sales, which were as under: Sales Purchases S.No. Month Cash Credit Total Credit Total Cash

1. April-16 10,149,300.00 14,822,000.00 24,971,300.00 - 35,829,000.00 35,829,000.00

2. May-16 20,526,650.00 22,691,500.00 43,218,150.00 - 55,137,500.00 55,137,500.00

3. June-16 13,052,900.00 13,778,500.00 26,831,400.00 - 26,762,440.00 26,762,440.00

4. July-16 13,875,362.50 5,054,000.00 18,929,362.50 - 31,836,264.00 31,836,264.00

5. Aug-16 21,661,172.50 10,605,500.00 32,266,672.50 - 34,997,706.04 34,997,706.04

6. Sept-16 28,187,115.00 11,450,000.00 39,637,115.00 - 28,459,511.99 28,459,511.99 7 oct-16 26,188,370.00 16,331,100.00 42,519,470.00 - 55,411,620.38 55,411,620.38

8. Nov-16 32,072,770.00 21,600,500.00 53,673,270.00 - 33,159,660.00 33,159,660.00

9. Dec-16 15,077,325.00 22,350,902.00 37,428,227.00 - 48,163,858.35 48,163,858.35

10. Jan-17 14,197,240.00 26,494,000.00 40,691,240.00 - 61,107,602.40 61,107,602.40

11. Feb-17 16,178,642.00 17,025,000.00 33,203,642.00 - 20,450,372.01 20,450,372.01

12. March-17 20,266,174.56 38,029,902.00 58,296,076.56 - 60,036,282.98 60,036,282.98

Total 231,433,021.56 220,232,904.00 451,665,925.56 - 491,351,818.15 491,351,818.15

Sales Purchases S.No. Month Cash Credit Total Credit Total Cash 1 April-15 5,149,590.00 16,755,900.00 21,905,490.00 - 34,443,886.45 34,443,886.45 2 May-15 5,077,355.00 20,222,000.00 25,299,355.00 - 23,531,000.00 23,531,000.00 3 June-15 7,891,275.00 25,109,250.00 33,000,525.00 - 39,546,780.00 39,546,780.00 4 July-15 17,400,195.00 23,749,500.00 41,149,695.00 - 52,207,340.00 52,207,340.00 5 Aug-15 18,830,792.50 24,083,750.00 42,914,542.50 - 39,137,070.00 39,137,070.00 6 Sept-15 23,585,302.50 16,252,500.00 39,837,802.50 - 27,752,550.00 27,752,550.00 7 oct-15 9,961,990.00 25,556,800.00 35,518,790.00 - 30,544,950.00 30,544,950.00 8 Nov-15 11,098,040.00 13,581,500.00 24,679,540.00 - 34,469,630.00 34,469,630.00 9 Dec-15 10,308,100.00 18,665,500.00 28,973,600.00 - 27,424,800.00 27,424,800.00 10 Jan-16 8,281,040.00 17,495,000.00 25,776,040.00 - 17,040,000.00 17,040,000.00 11 Feb-16 10,600,540.00 17,796,500.00 28,397,040.00 - 33,686,000.00 33,686,000.00 12 March-16 22,958,595.00 19,096,600.00 42,055,195.00 - 33,415,000.00 33,415,000.00 Total 151,142,815.00 238,364,800.00 389,507,615.00 - 393,199,006.45 393,199,006.45

Sales Purchases S.No. Month Cash Credit Total Credit Total Cash 1 April-14 6,829,412.00 15,271,500.00 22,100,912.00 - 32,273,160.00 32,273,160.00 2 May-14 4,091,680.00 16,423,000.00 20,514,680.00 - 17,261,900.00 17,261,900.00 3 June-14 4,112,450.00 19,671,320.00 23,783,770.00 - 19,093,990.00 19,093,990.00 4 July-14 4,684,590.00 9,960,000.00 14,644,590.00 - 15,965,970.00 15,965,970.00 5 Aug-14 5,418,855.00 13,661,000.00 19,079,855.00 - 13,869,200.00 13,869,200.00 6 Sept-14 4,922,880.00 16,810,200.00 21,733,080.00 - 29,920,460.00 29,920,460.00 7 oct-14 9,995,451.00 11,590,800.00 21,586,251.00 - 32,287,657.00 32,287,657.00 8 Nov-14 12,902,745.00 16,162,500.00 29,065,245.00 - 22,429,810.00 22,429,810.00 9 Dec-14 17,445,040.00 10,871,485.00 28,316,525.00 - 25,532,554.00 25,532,554.00 10 Jan-15 7,725,440.00 22,850,150.00 30,575,590.00 - 19,699,380.00 19,699,380.00 11 Feb-15 7,392,020.00 12,172,150.00 19,564,170.00 - 17,908,688.00 17,908,688.00 March- 12 15 10,760,515.00 14,541,875.00 25,302,390.00 - 24,745,368.00 24,745,368.00 Total 96,281,078.00 179,985,980.00 276,267,058.00 - 270,988,137.00 270,988,137.00

Cash Deposited in Bank Month FY 2016-17 FY 2015-16 April 12,579,000.00 6,572,900.00 May 29,694,100.00 6,156,500.00 June 15,503,300.00 11,377,300.00 July 13,798,700.00 22,227,000.00 August 23,015,000.00 24,518,000.00 September 34,568,700.00 23,145,500.00 October 23,614,200.00 15,034,500.00 November 40,396,500.00 15,364,500.00 December 16,883,500.00 9,394,800.00 January 12,258,700.00 11,637,100.00 February 12,502,900.00 12,797,100.00 March 44,547,250.00 33,505,400.00 b. Admittedly all the above details were submitted before the Ld.AO. Now, the details of cash deposited were doubted on the ground sale is not reliable as the same is not reconciling with Vat Returns along with the observation that why there is increase in sale of November when there was a cash crunch in the market and why in comparison to sale of November, 2015 there is 288% increase in cash sale in November, 2016. c. In response to this, complete details of cash, sales book, stock details, details of deposits and Bank Books were submitted along with reconciliation between the turnover shown in Vat Returns and shown in the ITR. Justification for increase in sale was also provided duly supported by documentary evidences. No defects were found in the details submitted. d. In subsequent paras, Ld.AO has placed its sole reliance on the facts that during the survey, assessee has agreed and confessed that out of total SBN deposited, 60% constitute his unaccounted sale (emphasis supplied) e. On the said ground, section 68 was invoked and assessment was made by holding as under:

Submissions: Addition so made out of contradictory findings, vague and illogical observations and issuing vague SCN: 1. Contradictory Observations by AO: It is pertinent to highlight that at Page 7 of the Assessment Order, the Ld. Assessing Officer (AO) has categorically observed that 60% of the cash deposited in Specified Bank Notes (SBN) represents the assessee’s unrecorded sales. Contrarily, the AO simultaneously stated that the genuineness of these sales could not be verified due to the absence of sales bills. Once the AO is of the view that these constitute unrecorded sales, the question of verifying the same with sales bills becomes redundant and contradictory.

Ashok Nariyani, Jaipur.

2. Inconsistency in Quantum of Addition: Further, if the Ld. AO, following the statements of the assessee, concluded that only 60% of the total cash deposits represent unrecorded sales, then there is no rationale behind the AO's decision to treat the entire amount of ₹1,30,82,000/- as unexplained income subject to addition, that too u/s 68. Such an inconsistent finding is inherently illogical and unsustainable in law.

3. Unjustified Addition on Entire Deposited Amount: In the assessment order at Page 6.3, the AO explicitly noted that the assessee failed to substantiate the source of the cash deposit amounting to ₹76,50,000/- made on 14.11.2016 into his HDFC Bank account. However, without providing any basis or reasoning, the AO proceeded to add the entire cash deposit amount of ₹1,30,82,000/- as unexplained income. This arbitrary expansion of addition beyond the stated unexplained amount is manifestly unjustified.

4. Fatal Impact of Lack of SCN as per Binding CBDT Instruction: The Ld. AO failed to issue any valid and reasoned Show Cause Notice (SCN). Specifically, the AO neither mentioned the proposed quantum of additions nor disclosed the material relied upon. Such omission constitutes a fundamental judicial irregularity and violates CBDT Instruction No. 20/2015, which mandates the issuance of a reasoned SCN explicitly detailing proposed additions and confronting the assessee with relevant material, which is reproduced hereunder:

‘ In all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, due consideration shall be given to the submissions made by the assessee in response to the show cause notice.

Additionally, the show cause notice issued as annexed at Page 100 to 101 of PB is without any statutory provision under which addition was proposed which is core foundation of the entire assessment proceedings are indisputably part of records before lower authorities as well as before Honourable bench. There are plethora of decisions of supreme court and jurisdictional high court where it is held principally that show cause notice issued cannot be vague and generic and must whisper the exact charge/provision under which action is proposed in law. Without jurisdictional ingredient show cause notice cannot be held valid. Hence, any addition made under these circumstances is legally untenable.

Ashok Nariyani, Jaipur. - ITAT Delhi bench in case of Jaina Marketing vs DCIT in ITA 224/Del/2023. - ITAT Delhi decision in case of Rohtas Jaiswal order dated 30.09.2024 - Hon’ble Delhi High court in case of POONAM JAIN VS UOI Reported at 2017 SCC OnLine Del 8872 “ Mr. Manchanda went one step further to state that there was no requirement for any SCN to be issued to the Petitioners in the first place in terms of Section 279 of the Act..

10. As regards the contention that a SCN is not required to be issued, it is obvious that the Department itself recognises the importance of complying with the rules of natural justice and has therefore rightly issued the SCN to the Petitioners, which has to be responded to by them. Indeed, for an effective response, the Petitioners would be required not merely to be ‘shown’ the material relied upon in the SCN but with copies thereof. This would include their own statements, documents seized during the search and documents gathered from other sources including statements of bank accounts, relied upon against them to be provided copies thereof. Such a requirement inheres in the principles of natural justice and would be applicable even if the statute governing the proceedings does not specifically mandate it.”

- Three judge bench decision of hon’ble apex court in case of Sona Builder vs UOI reported at 251 ITR 197 (Three Judge bench Hon’ble Apex court order) in context of income tax law has held that “.... Further, the notice alleged that the apparent consideration of the transaction between the appellant and the transferor was low based on the sale instance mentioned thereon. To be able adequately to respond to that allegation, it was necessary for the appellant to ascertain what the merits and demerits were of that property which had been auctioned, and to know what were the terms and conditions of the auction. No copy of any document relating to the sale instance was furnished by the Appropriate Authority to the appellant along with the notice, or at any time whatsoever....There is no doubt in our minds that on both counts there has been a gross breach of the principles of natural justice because adequate opportunity to meet the case made out in the notice was not given to the appellant....Having regard to the statutory limit within which the Appropriate Authority has to act and his failure to act in conformity with the principles of natural justice, we do not think we can remand the matter to the Appropriate Authority. We must set his order aside. The appeal is accordingly allowed. The judgment and order under appeal is set aside. The order of the Appropriate Authority dated May 31, 1993, is quashed”

- Hon’ble apex court decision in case of Oryx Fisheries Pvt ltd vs UOI reported at 2010 13 SCC 427 “ 24. It is well settled that a quasi-judicial authority, while acting in exercise of its statutory power must act fairly and must act with an open mind while initiating a Ashok Nariyani, Jaipur. show cause proceeding. A show cause proceeding is meant to give the person proceeded against a reasonable opportunity of making his objection against the proposed charges indicated in the notice.

29. Justice is rooted in confidence and justice is the goal of a quasi-judicial proceeding also. If the functioning of a quasi- judicial authority has to inspire confidence in the minds of those subjected to its jurisdiction, such authority must act with utmost fairness. Its fairness is obviously to be manifested by the language in which charges are couched and conveyed to the person proceeded against. In the instant case from the underlined portion of the show cause notice it is clear that the third respondent has demonstrated a totally close mind at the stage of show cause .

5. Erroneous Treatment of Recorded Sales as Unrecorded: During the survey conducted at the assessee’s business premises, all relevant books of accounts and supporting documents, including sales bills pertaining to the demonetisation period, were duly impounded and available with the AO. Importantly, the cash deposits made during the relevant period were explicitly recorded in the assessee's books of accounts as cash sales. These books were furnished before the AO, and the sales figures correspond with the sales reported under VAT, which the tax department has duly accepted. The AO has acknowledged that these cash deposits were indeed recorded as cash sales. Thus, categorising the same sales simultaneously as both "recorded" (for rejecting the genuineness) and "unrecorded" (for relying on assessee’s statement) defies logic.

Double Additions and no addition u/s 68 for sales already recorded in the books of accounts:

1. The AO arbitrarily made an ad-hoc and estimated addition of ₹1,30,82,000/- despite the assessee having thoroughly discharged the burden of proof by submitting extensive documentary evidence, including sales registers, purchase registers, VAT returns, and cash flow summaries. It is pertinent to mention that all these documents were independently submitted during assessment proceedings. Furthermore, the trading results of the assessee were neither rejected nor questioned. Hence, this ad-hoc addition results in double taxation, taxing the very profits already offered for taxation in the audited Profit & Loss Account through recorded cash sales. Once it is established and accepted that the source of cash deposits into the bank account is from routine cash sales to customers, no further addition or presumption regarding the genuineness of sales can legally arise unless the books of accounts are rejected explicitly under Section 145 of the Income Tax Act, 1961. For this preposition we rely upon the following case laws:

- ITAT Jaipur in the case of Mahesh Kumar Gupta Vs ACIT, Circle-4, Jaipur in vide order dated 23.03.2023 held as under (DPB: 182): “9.3 The bench noted the ld. AR of the assessee has relied upon the various judgment and the some of the judgment which has direct bearing on the dispute and having similar facts are considered one by one in brief. Decision in the case of Hirapana Jewellers in where in it is held that since the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s.

11. The Assessing Officer, on finding that the assessee was unable to satisfactorily explain the donations and the donors were fictitious persons, held that the assessee had tried to introduce unaccounted money in its books by way of donations and, therefore, the amount was to be treated as cash credit u/s.

68. The Delhi High Court held that section 68 did not apply, as the assessee had disclosed such donations as its income.

Ashok Nariyani, Jaipur. 9.5 The bench has also noted that the ld. AO accepted the opening stock, purchase, as well as the closing stock at the year end to be genuine and correct. It is also worthwhile to mention that the ld. AO has not rejected the books of accounts of the assessee by invoking the provisions of Section 145(3) and even there is no whisper in the order about any defects in the books of account. The ld. AO has not brought any material on record to establish that the sale bills were bogus or any evidences indicating that sales were bogus. The ld. AO is wrong in not accepting the declared cash sales as not verifiable which are recorded in books of accounts which were found to be correct and complete. We have also noted that the assessee has undertaken cash sales of Rs. 1,86,45,067. Out of the total cash sales, cash sales amounting to Rs. 80,00,000 has been found to be non-genuine and added under section 68 of the Act. Explanation offered to substantiate the cash sales has been arbitrarily rejected without holding that the sales is duly recorded in the books and is also supported by the various records produced in the assessment proceedings. ”

- ACIT Central Circle-1 vs. Shri Mahendra Kumar Agarwal We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact, the AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account - Similar observations were made by ITAT, Jaipur Bench, in the case of Raj Kumar Nowal, Jaipur Bench (DPB 108-166)

- Attention is drawn towards Hon’ble ITAT, Vishakhapatnam Bench in the case of Hirapanna Jewellers, I.T.A. No. 253/Viz/2020. The facts in this case are that the assessee firm was engaged in the business of trading of jewellery. During the period of post demonetisation period, it had deposited Rs. 5.72 crores (SBN) in its bank account. Out of above, Rs. 4.72 crores pertained to sales before demonetisation period. The AO, treated the sales as unexplained cash credits, as no details of sales were provided, and made addition of Rs. 4.72 crores u/s 68 r.w.s. 115BBE. Hon’ble Bench held that where assessee has admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. The relevant para 9 is reproduced hereunder:

In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone Ashok Nariyani, Jaipur. through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld.

- ITAT Delhi in case of Durga Fire Work vs ITO Ward 59(8) in order dated 03.07.2024 18. We further observed that the AO except stating that the assessee has not furnished bills and vouchers for purchases he has not found fault with the books of account maintained by the assessee, the cash book, purchases, sales register, stocks, etc. The AO did not reject the books of accounts of the assessee. The contention of the assessee that it had received cash of Rs.13,95,000/- from Zegar Gas out of sales invoices of Rs.32,62,011/- raised from 13.06.2016 to 26.10.2016 was not disputed. It is not even the case of the authorities below that the assessee has received cash after the demonetization on 09.11.2016. Whatever released by the assessee through sales was recorded in the cash book and the amount of cash deposited was the collections made till 07.11.2016 which fact was also admitted by the Ld.CIT(A) in his order and there has been no amount of cash collection by the assessee after demonetization period. It is not in dispute that the assessee is into the business of trading in fire crackers.

19. We further observed that the coordinate bench of the Tribunal in the case of M/s Shivam Industries Pvt. Ltd. Vs. ACIT the coordinate bench of the Tribunal held that when the audited books of account were not rejected and the sales of the assessee have not been disturbed the Revenue authorities are precluded from making any addition u/s 68 of the Act in respect of the cash deposits made into bank account during demonetization period.

20. In view of the above discussion, we are of the considered view that there cannot be any addition u/s 69A of the Act in respect of cash deposits made by the assessee into its bank account as unexplained income in the case of the assessee. Therefore, we reverse the findings of the Ld.CIT(A) and direct the AO to delete the addition made u/s 69A of the Act. Grounds raised

by the assessee are allowed.

21. In the result, appeal of the assessee is allowed.

- ITAT Delhi in case of AG India Retail Pvt Ltd vs ACIT in order dated 27.08.2024 (Delhi-Trib.)

Ashok Nariyani, Jaipur.

20. We find that the Assessing Officer has not questioned the cash sales and has also not rejected the books of account. The AO has accepted the sales made during the year and the books of accounts of the assessee. We find considerable force in the ld AR argument that when the AO has not questioned the audited books of account and the cash flow statement and cash book, he cannot draw an adverse view without bringing any contrary cogent material. The Assessing Officer has also not pointed out any element of undisclosed income in the form of cash sales and has also not substantiated as to how the cash deposits relates to the assessee's unaccounted income. When the AO draws the conclusion that the cash in hand "definitely bears some unaccounted income of the assessee", we find that the AO has travelled in the realm of conjectures. We also note that the Assessing Officer's conclusion that 60% of the cash deposited constitute unaccounted deposits to be added u/s 68 is not supported by any cogent and material evidence.

22. In conclusion therefore, we hold that the addition made by the Assessing Officer is based on suspicions, conjectures and surmises. We also hold that the addition is not legally permissible and the ld. CIT(A) fell in error in sustaining the addition. Accordingly, the grounds 1(i) to 1(iv) raised by the assessee are allowed. As we have decided the case on merits we are not giving any opinion on the additional ground taken by the assessee. - ITAT Chandigarh in case of Roop Fashion Ludhiana vs DCIT CC-1 in order dated 14 June 2022.

We have considered the submissions of both the parties and material available on the record. In the present case it is not in dispute that the books of accounts maintained by the assessee in the regular course of its business were audited and accepted by the AO while framing the assessment through deep scrutiny under section 143(3) of the Act. The AO did not point out any specific defect in the books of account maintained by Ashok Nariyani, Jaipur. the assessee, no inflated purchases or suppressed sales were found. In the instant case, even the Investigation Wing asked the assessee to furnish the details which were submitted, copy of which is placed at page no. 75 to 123 of the assessee's compilation, on those details, no adverse comment was made by the Investigation Wing. It is also noticed that the assessee is having cash sales in all the years which is evident from page no. 4 of the impugned order passed by the Ld. CIT(A). For the year under consideration the assessee was having cash sales of Rs. 4,12,59,227/- out of total sale of Rs. 13,82,27,373/-, the cash sale was about 1/3rd of the total sales, similar was the position there in the preceding year. The assessee was also having cash realized from the debtors and it was not the case of the AO that the debtors of the assessee were bogus or those were not related to the business of the assesee. The cash deposited in the bank by the assessee during the demonetization period was out of the cash sales and the realization from the trade debtors duly shown in the book of accounts which were accepted by the A.O. The assessee had deposited Rs. 2,47,50,000/- during the demonetization period in the bank account, the AO accepted Rs. 1,50,00,000/- as cash sale on estimated basis but no basis or method was adopted for that estimation, in other words the AO considered the aforesaid estimated sales only on the basis of surmises & conjectures which is not tenable in the eyes of law. In the present case, in the month of October 2016 and November 2016 the assessee was having cash sales of Rs. 1,04,97,098/- and Rs. 62,00,849/- which had not been doubted by the AO who had also not commented on the claim of the assessee that the balance of the amount which was deposited in the bank account was out of the realization of cash from the debtors which for the year under consideration was at Rs. 3,09,78,586/-. In the present case the AO accepted the trading results and had not doubted opening stock purchase sales and closing stock as well as GP rate shown by the assessee. Therefore, the addition of Rs. 97,50,000/- made by the AO on the basis of surmises and conjectures was rightly deleted by the Ld. CIT(A). We do not see any valid ground to interfere with the detailed and logical findings given by the Ld. CIT(A) in the impugned order.

No Proper satisfaction for invocation of Section 68 or 69A: 1. As submitted above, during the period of demonetization, a total cash of Rs.5,00,98,000/- was deposited, out of which, Rs.2,88,82,000/- were in the specified bank notes. Out of said amount, Ld.AO has considered that 60% of Rs.1.58 Crores was unrecorded sales of the assessee, which was offered under PMGKY. Remaining entire amount has been termed as unrecorded sale of assessee and addition has been made u/s 68 of the Act, without appreciating and considering the following facts: (a) That at the end of October, 2016 assessee was in possession of Rs.97,64,871/- as cash in hand after depositing 2,36,14,200/- in the bank, clearly suggesting that deposit in the bank was a regular feature of business of the assessee. (b) That between 01-11-2016 to 08-11-2016 an amount of Rs.71,62,000 has been deposited in the bank.

Ashok Nariyani, Jaipur. (c) That during the period of demonetization, not only the SBN Notes but almost an equal amount of regular/valid currency notes were deposited. (d) That in the subsequent months, regular cash has been deposited. In March, 2017 total cash of Rs.4,44,47,250/- was deposited.

2. Here it is important to note the findings of Ld.CIT(A) made at Page-7, Para 9.1(i) of the order:

A perusal of the above, clearly shows that AO has to apply his mind in each and every individual entry when an explanation is offered as observed by Hon’ble Rajasthan High Court in the case of CIT Vs RS Rathore.

3. As explained in facts mentioned above, the credit entries appearing in the sales and bank books were subject to scrutiny by Ld.AO. Deposits and sales were on different dates and in total 9 accounts of the assessee, complete details of which were before the Ld.AO.

- DC Rastogi Vs CIT (2014) 224 Taxman 250 (Delhi HC), held as under:

- Sahara India Financial Corporation Ltd Vs DCIT (2014) 41 taxmann.com 251 (Delhi Trib), held as under:

24.1. Apropos assessee's legal contention that fiction created by deeming provisions of sec 68 contemplate any addition at all, refers to a specific deposit and there is no provision for making estimated adhoc addition @ 35%. Besides department on a sample check basis has been adopting varying rates without any reasonable basis. It has been ignored that most of the deposits are recurring deposits coming from earlier years. We are of the view that the scope of a deeming fiction, and the method of specific addition of deposit is to be followed strictly. A plain reading of sec. 68 contemplates that the satisfaction of AO has to be exercised qua each deposit or cash credit. It does not prescribe any adhoc or estimated addition. Therefore, we are inclined to agree with the reasoning adopted by ld. CIT(A) on this issue and uphold his findings that such addition can not be made u/s 68. 24.2. In consideration of the aforesaid discussions and observations we uphold the order of CIT(A) deleting this addition, this ground of the revenue is dismissed.

- CIT Vs Kinetic Capital Finance Ltd (2011) 14 taxmann.com 150 (Delhi HC) “6. In so far as the assessment year in issue is concerned, we are not made any wiser as to which specific entry the A.O. had found fault with, given the fact that names of the depositors were known. It has to be borne in mind that while making an addition Ashok Nariyani, Jaipur. under Section 68 of the Income Tax Act, 1961 (in short 'I.T. Act') the A.O. has to advert to each and every entry and not pick up a couple of entries, as in the present case, and label the entire set of deposits made during the assessment year as undisclosed income of the assessee. As noticed above, the discrepancy appeared qua four (4) credits, which were answered suitably to the satisfaction of the CIT(A); therefore, it is not understood how the A.O. could make an ad hoc addition of ` 46,40,978/-.”

- CIT Vs Mansarovar Urban Co-Operative Bank Ltd (2009) 124 TTJ 269 (Lucknow Trib)

5. Without prejudice to the above and without admitting anything contrary, it is further submitted that the initial onus lying on the assessee was fully satisfied when it was explained that the credit appearing are on account of sales duly recorded in the regular books of accounts and the cash deposits in bank are coming out of such sales.

Ashok Nariyani, Jaipur.

6. Even otherwise also, admittedly cash deposit in bank account of the assessee represents the regular business receipts deposited in the current account of the firm and there is no evidence that such deposits are from any other source of income neither department has located any other source. The sole source of income for the assessee is business income only, therefore, the cash deposits in the bank can be nothing but the business receipts on which only a net profit rate can be applied, which has already been offered. The case of the assessee is squarely covered by the decision of Hon’ble Ahemdabad Bench of Tribunal in the case of ITO Vs Shri Pawan Kumar Bhagat Ram Sharma in vide order dated 11-04-2016

7. we further place our reliance on the decision of Sri Ramchandra Reddy Vs DCIT in vide order dated 09.01-2014, holding as under:

- Shri Lovish Singh Vs ITO in vide order dated 25-05- 2018. - Abdul Hamid Vs ITO (2020) 117 Taxmann.com 986 (Gauhati Trib) - The Hon’ble ITAT, Visakhapatnam, in the case of ACIT Vs. M/s Hirapanna Jewellers, in vide order dated 12.05.2021 held that: “9. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon’ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon’ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld.

11. In the result, appeal of the revenue as well as the cross objection of the assessee are dismissed.”

Under the facts and in the circumstances of the case and in law, Ld.CIT(A) erred in confirming the action of Ld. AO erred in charging tax under section 115BBE of the Act.

1. Without prejudice to above grounds and above contentions on standalone basis we hereby submit that Section 115BBE has no application where assessee is mainly in business and addition made can safely be attributed to undisclosed business income (no other head other than business) than 115BBE will not be applicable .

2. That Ld AO has arbitrarily applied section 115BBE without valid satisfaction and determination in assessment order and without appreciatinig that section 68 does not apply on revenue sales .

Ashok Nariyani, Jaipur.

7. ITAT Delhi in Tirath Dass vs PCIT, Order dated 11/09/2023 3.1 The Hon'ble PCIT has failed to appreciate that section 115BBE can be invoked under two conditions namely if the assessesuo-moto reflects the income under section 68, 69, 69A, 69B, 69C or 69D in his return of income or if the Assessing Officer Ashok Nariyani, Jaipur. determines the income under those sections and in case of the assessee, none of the two conditions are satisfied. 3.2 The Hon'ble PCIT has grossly erred in law and on facts in stating that the income surrendered by the assessee was in the nature of unexplained stock and unexplained cash without appreciating the settled law that nature of income surrendered in survey proceedings is business income which is not liable to be taxed under sections 68/69/69A/69B/69C/69D of the Act. 3.3 The Hon'ble PCIT has failed to appreciate that the assessee reflected the surrendered income as other income in his return of income and paid the advance tax on it and he never at the time of survey proceedings or thereafter admitted that income surrendered was unexplained stock and unexplained cash. 3.4.1 The Hon'ble PCIT has also failed to consider that the Hon'ble President of India gave his assent in respect of the amendment made in section 115BBE of the Act on 15.12.2016 whereas the survey took-place on the business premises of the assessee on 16.09.2016 and therefore, on the date of survey this amended provision was not in force. The issue as to whether the new provision would apply to the assessee or not is prima-facie debatable and therefore, the revisionary proceedings on the said issue are not valid and without any jurisdiction.

6. The submissions/contentions of the assessee were not acceptable to the Ld. PCIT being devoid of merits. According to him, the surrendered income was in the nature of unexplained cash and unexplained stock and the same was liable to be added as income from other sources and tax was liable to be paid @ 60% under section 115BBE of the Act which the Ld. AO failed to do. Therefore, his order was erroneous and prejudicial to the interest of Revenue which he set aside with direction to the Ld. AO to pass fresh order in accordance with law.

11. At this juncture, it is expedient to reproduce the relevant findings recorded by the Tribunal in Shri Bharat Malhotra’s case (supra) herein below:- “13. We have given thoughtful consideration to the orders of the authorities below. The bone of contention is whether the amount surrendered during the survey operation, which has been shown in the return of income as ‘income’ from other sources’ be taxed as per provisions of section 115BBE of the Act and having not done so, whether the order of the Assessing Officer is erroneous and prejudicial to the interest of the Revenue.

Ashok Nariyani, Jaipur.

14. At the very outset, we would like to state that an amendment has been brought in section 115BBE w.e.f. 2017-18, but the same was not there in the statute on the date of survey, which is 15.09.2016.

15. Taking a leaf out of the amended provisions, the PCIT was of the opinion that the tax rate should have been 60% instead of 30%, because of which the assessment order has become prejudicial to the interest of the Revenue.

17. In our considered opinion, this is clearly a debatable issue which cannot be subject matter of assumption of jurisdiction u/s 263 of the Act.

S.No. Particular Page Nos. A. Sole statements having no evidentiary value 1. CBDT Instruction F No.286/2/2003-IT (Inv) dated 1-4 10.03.2003 2. Supreme Court of India in case of CIT Vs S Khader 5-5 Khan Sons. 352 ITR 480 (SC) Civil Appeal No.6747/2012 order dated 20.09.2012 3. Gujrat High Court in case of CIT Vs Shardaben Modi 6-12 Tax Appeal No.123/2013 order dated 30.04.2013 4. Delhi High Court in the case of PCIT Central-3 Vs 13-23 Anand Kumar Jain HUF ITA 23/2021 order dated 12.02.2021 5. Rajasthan High Court in case of Micro Marble P Ltd Vs 24-37 ITO Ward-1 Civil Writ Petition No.13719/2021 B. Cash Sales doubted on Surmises and Conjectures without books rejection u/s 145 6. Punjab and Haryana High Court in case of CIT Vs Dulla 38-43 Ram in order dated 22.10.2013 7. Delhi High Court in the case of PCIT Vs Agaon Global P 44-58 Ashok Nariyani, Jaipur. Ltd in order dated 19.01.2022 8. ITAT Jaipur in the case of Nawal Kishore Soni Vs ACIT 59-107 Central Circle-3. order dated 15.09.2020 9. ITAT Jaipur in the case of ITO Ward-1(2) Vs Shri Raj 108-166 Kumar Nawal. ITA No.165/JP/2022 order dated 22.11.2022 10. ITAT Jaipur in the case of ACIT Central Circle-2 Vs 167-181 Shri Chandra Surana ITA No.166/JP/2022 order dated 15.12.2022 11. ITAT Jaipur in the case of Mahes Kumar Gupta Vs 182-225 ACIT Circle-04. ITA No.149/JP/2022 order dated 23.03.2023 12. ITAT Jaipur in the case of Shree Jee Jewellers Vs ITO 226-268 Ward (2)-1. Order dated 27.01.2020. ITA No.393/JP/2017 13. ITAT Delhi in the case of ACIT Circle-49(1) Vs M/s 269-276 Goel Jewellers P Ltd in ITA No.1597/Del/2022. Order dated 24.08.2023 14. ITAT Mumbai in the case of ACTI-3(1)(1) Vs M/s 277-293 Ramlal Jewellers P Ltd in ITA No.1600/Mum/2023. Order dated 26.07.2023 C. Alternatively, only profit rate could be taxed only in the business head of Income without application of Section 115BBE since no other source of income discovered by the AO/Survey Party 15. Andhra Pradesh High Court in the case of PCIT Vs 294-304 Deccan Jewllers P Ltd in ITA No.8, 9 and 14/2021 16. Rajasthan High Court in the case of PCIT Vs Bajargan 305-309 Trades Vs ITO in Income Tax Appeal No.258/2017 vide order dated 12.09.2017 17. ITAT Delhi in the case of Tirath Das Vs PCIT in ITA 310-317 No. 825/Del/2022. Order dated 11.09.2023 18. ITAT Chandigarh in the case of Bhuwan Goyal Vs DCIT 318-331 Central Circle-1 in ITA No.1385/Chd/2019 vide order dated 28.09.2020 19. ITAT Guhati in the case of Shri Abdul Hamid Vs ITO 332-345 Ward-3. ITA No.46/Gau/2019, order dated 17.07.2020 20. ITAT Pune in the case of Vijay Shriram Gundale Vs 346-351 ACIT Central Circle-1 in ITA No.79/PUN/2023 order dated 03.08.2023 21. ITAT Chennai in the case of M/s Overseas Leathers Vs 352-378 DCIT Central Circle-3(3). ITA No.962/Chny/2022 order dated 05.04.2023 D. Show cause Notice without following Section 142 and CBDT Instruction No.20 of 2015 (Non furnishing of any relied upon document)

Ashok Nariyani, Jaipur.

10. The ld DR has relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). Ld. DR has submitted that the assessee deposited cash during demonetization period and therefore, the sales made by the assessee are required to be seen from the angle and the purpose of demonetization.

No.1, assessee challenged finding CIT(A)-4, Jaipur while confirming the addition of Rs.1,30,82,000/- made by the ld. AO as unexplained cash deposits u/s 68.As the brief facts of the case have already been discussed herein the above paras and therefore, the same are not being repeated. The broadissue raised before this Tribunal is as to whether the cash sales recorded and supported by sale invoices, cash book, availability of stock, purchases be considered as Ashok Nariyani, Jaipur. unexplained money and that too when the profit derived from those sales proceeds is already taxed as part of sales.

12. As culled out from the findings of Ld.AO, the addition has been made relying upon the statements recorded during the course of survey. The bench notes that to drive home to this contention ld. AR of the assessee relied upon the CBDT Instruction F No.286/2/2003-IT (Inv) dated 10.03.2003 and following case laws:

- Supreme Court of India in case of CIT Vs S Khader Khan Sons. 352 ITR 480 (SC) Civil Appeal No.6747/2012 order dated 20.09.2012, - Gujrat High Court in case of CIT Vs Shardaben Modi Tax Appeal No.123/2013 order dated 30.04.2013 - Delhi High Court in the case of PCIT Central-3 Vs Anand Kumar Jain HUF ITA 23/2021 order dated 12.02.2021 and - Rajasthan High Court in case of Micro Marble P Ltd Vs ITO Ward-1 Civil Writ Petition No.13719/2021 Ld.AR has contended that during the course of survey, no incriminating document/material was found to suggest that assessee is involved in out of books sales nor any other source of income was detected. The said fact remained uncontroverted by Ld.AO as well as Ld.DR. Thus there is no evidence except the statement recorded u/s 133A of the Act of assessee. Therefore, in our opinion, Ld.AO was not justified in relying such statement which had no other independent evidence of out of books sales or any other undisclosed source of income.

Ashok Nariyani, Jaipur.

Ashok Nariyani, Jaipur.

“So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise. We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them. Question No. 2 relates to the directions given by the Tribunal for adjustment of Rs. 6,98,000 found in paragraph 36 to be part of unexplained cash credits in the books of account of the assessee by the comparative reading of audited and unaudited books of account. However, we find that wh0e a categorical finding has been reached in paragraph Nos. 36 and 23, the Tribunal has curiously found that while repayment of the aforesaid amount after December 31, 1991, would not affect the peak of cash credit but this amount is liable to be considered while considering the assessee's Ashok Nariyani, Jaipur. explanation by the Assessing Officer to whom the issue about the receipt of cash money from the customers and the delivery of the vehicles against such receipts has been remanded back. In our opinion, the two findings are contradictory in terms, if Rs. 6,98,000 could form the part of consideration received from the customers and paid to the dealer M/s. Ganesh Automobiles, it could not form the part of the unexplained cash credit. Therefore, the finding in respect of Rs. 6,98,000 should necessarily depend upon the outcome of the consideration to be made by the Income-tax Officer in pursuance of the directions issued by the Tribunal and cannot be outrightly rejected at this stage and to that extent the order of the Tribunal is set aside and ultimate decision in that respect would depend on the consideration by the Income-tax Officer about the issue relating to the unexplained cash credit in the light of the Tribunal's order. Until then no additions in respect of Rs. 6,98,000 or lesser amount can be sustained. Accordingly, while we set aside the Tribunal's order to the extent it sustains the addition of Rs. 40,13,000, we modify the directions of the Tribunal relating to addition Rs. 6,98,000 as part of the cash credit and hold that it should also be part of consideration by the Income-tax Officer in respect of other unexplained cash credits unembellished by any observation made in that regard. ”

16. Thus, when the cash sales were duly recorded in the books of account and even part of the sales in new currency notes were already considered and part was not considered only due to the fact that in the survey statement, assessee has surrendered 60% of cash deposits as unrecorded sales. In support of the sales the assessee had submitted extensive details of cash, stock, vat returns etc. Thus, we see no reason to sustain the addition of the amount recorded as sales i.e., for an amount of Rs. 1,30,82,000/- as “unexplained cash deposits” u/s 68 and thereby Ashok Nariyani, Jaipur. direct the ld. AO to delete the same. Based on these observations, ground no. 5 raised by the assessee is allowed.