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

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR

MkWa- ,e- ,y- ehuk] ys[kk lnL; ,oa MkWa- ,l- lhrky{eh] U;kf;d lnL; ds le{k
BEFORE: DR. M.L. MEENA, AM & DR. S. SEETHALAKSHMI, JM vk;dj vihy la-@ITA. No. 1532/JPR/2024
fu/kZkj.k o"kZ@Assessment Years : 2017-18
Circle-5,
Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFWPN0855K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh.Deepak Sharma, Adv. &

Sh. Deepak Gupta, C.A.
jktLo dh vksj ls@ Revenue by : Mrs. Anita Rinesh, JCIT, Sr.-DR a lquokbZ dh rkjh[k@ Date of Hearing : 17/07/2025
mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 15/09/2025

vkns'k@ ORDER

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:-
Ashok Nariyani, Jaipur.
2
“1. Impugned assessment order dated 27.11.2019 passed under section 143(3) is bad in law and on facts being against the principal of natural justice and for many more other reasons.

“Assessment initiated and completed by non-juri ictional assessing officer:
(a)
At the outset it is submitted that the PAN of the assessee has been falling under the juri iction 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 Juri ictional Assessing Officer (ACIT, Circle-4, Jaipur). Moreover, PAN juri iction appearing on income tax portal is also showing the juri iction of assessee with ACIT, Circle-4, Jaipur. An image of the same is placed hereunder for your kind perusal:
Ashok Nariyani, Jaipur.
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(b)
As juri iction of the assessee was falling under ACIT, Circle-4, Jaipur therefore Notice u/s 143(2) being the juri ictional notice, was required to be issued by the Juri ictional 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 Juri ictional Assessing Officer and assessment has also been completed by non-juri ictional assessing officer, therefore, the entire proceeding taken by non-juri ictional assessing officer become void for want of juri iction.
(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.
7
-
Resham Petrochem Ltd Vs ACIT in ITA No. 2777/Ahd/2011 vide order dated
10.02.2012
-
Tejpal Singh Vs ITO in ITA No. 3087/Del/2017 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.

“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.

-
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.

“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.”
Ashok Nariyani, Jaipur.
12

“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.
26. The statement recorded under Section 133A of the Act has no evidentiary value, since the officer concerned is not authorized to administer oath and record a sworn statement. This is in contradiction with the statement recorded under Section 132(4) of the Act, which is recorded on oath by an officer who is vested with necessary powers.

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:
S.No.
Month
Sales
Purchases
Cash
Credit
Total

Cash
Credit
Total
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
Ashok Nariyani, Jaipur.
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Total

231,433,021.56
220,232,904.00
451,665,925.56
-

491,351,818.15

491,351,818.15

S.No.
Month
Sales
Purchases
Cash
Credit
Total

Cash
Credit
Total
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

S.No.
Month
Sales
Purchases
Cash
Credit
Total

Cash
Credit
Total
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
12
March-
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

Month
Cash Deposited in Bank
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
Ashok Nariyani, Jaipur.
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Total
279,361,850.00
191,730,600.00

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.
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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 juri ictional 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 juri ictional ingredient show cause notice cannot be held valid. Hence, any addition made under these circumstances is legally untenable.
Ashok Nariyani, Jaipur.
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-
ITAT Delhi bench in case of Jaina Marketing vs DCIT in ITA 224/Del/2023. -
ITAT Delhi decision in case of Rohtas Jaiswal ITA No.2142/Del/2024 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.
18
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.

Double Additions and no addition u/s 68 for sales already recorded in the books of accounts:
Ashok Nariyani, Jaipur.
19

-
ITAT Jaipur in the case of Mahesh Kumar Gupta Vs ACIT, Circle-4,
Jaipur in ITA No.149/JP/2022 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 ITA no. 253/Viz/2020 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. 68. The second decision relied upon is in the case of AgsonGobal Private Limited
115 taxmann.com 342 wherein it is held that “ “It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer. The assessee has maintained the complete stock tally in its accounting software. Such books of accounts are audited, quantitative records produced before the tax auditor, such quantitative records are certified by tax audit and no questions have been raised by the assessing officer. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details”
9.4 As regards the applicability of section 68 in this case we have persuaded the decision of Hon’ble Delhi High Court in the case of Keshav Social and Charitable
Foundation 278 ITR 152 wherein the court considered a situation where the assessee, a charitable trust, had disclosed donations received by it as its income, and claimed exemption 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.
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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 ITA No.
172/JP/2022
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, ITA No. 165/JP/2022, 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.
21
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 third member decision in case of JMK Exports in ITA
1428/Del/2021 order dated 26.03.2024)

-
No.383/Del/2024 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.

-
No.449/Del/2024 order dated 27.08.2024 (Delhi-Trib.)
Ashok Nariyani, Jaipur.
23
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.
21. In that view of the matter, we are of the considered view that the ratio of Hon'ble
ITR 288 forcefully apply to the facts and circumstances of the instant case. The Hon'ble Supreme Court LalchandBhagatAmbica Ram (supra) had held that when entries in books of accounts in regard to cash balances were held to be genuine, there can be no escape from the conclusion that assessee had offered reasonable explanation as to source of all high denomination notes which it encashed on 19th January 1946
and it was not open to ITAT to accept genuineness of those books and accept assessee's explanation in part and reject the same in regard to balance sum. In the instant case, the AO has relied on the figures of cash deposits on the basis of books of accounts of the assessee and once he relies on the book results, he cannot reject the assessee explanation with regard to cash deposit.
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 ITA
No. 136/Chd/2021 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.
24
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.
25
(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.

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
4. Very strangely, Ld.AO took up just the difference amount of deposits discussed in the statement vs actual deposit made and difference was treated as unexplained, without specifying, as to which particular deposits or credit entries are being treated as unexplained. In this regards it is submitted, It is a settled legal principle that addition u/s 68 can be made of a specific sum found credited in the books of the assessee. Thus AO’s power of verification is qua a specific cash credit, which clearly means each person and each cash credit. By no stretch of imagination,
AO has the power to adopt an ad-hoc method or work out or estimate the addition u/s 68 of the act. In the instant case, Ld.AO has made the addition by taking just the difference between the amount deposited and amount surrendered, which is not permissible u/s 68. Thus, the action of Ld.AO is contrary to the law. In this regard we place our reliance on the following case laws:

-
DC Rastogi Vs CIT (2014) 224 Taxman 250 (Delhi HC), held as under:
Ashok Nariyani, Jaipur.
26

-
(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.”

-
“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.
27
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)
Ashok Nariyani, Jaipur.
28

-
Shri Lovish Singh Vs ITO in ITA No. 143/Jodh/2018, vide order dated 25-05-
2018. -
-
The Hon’ble ITAT, Visakhapatnam, in the case of ACIT Vs. M/s Hirapanna
Jewellers, in ITA No.253/Viz/2020, 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.

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.

-
ITR 480 (SC) Civil Appeal No.6747/2012 order dated 20.09.2012,
-
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.
39
13. The bench notes that out of total cash deposits of Rs. 5,00,98,000/-,
Rs. 2,12,16,000/- consisting of new currency notes deposited in the banks during the period of demonetisation out of sale proceeds have been accepted by the Ld.AO and dispute remains only with respect to cash deposit of Rs.2,88,82,000/-, which are SBN or Old Currency Notes.
Assessee has submitted details of cash in hand as on the date of demonetisation derived from sale proceeds along with detailed stock registers. The assessee also submitted the comparison of sales and cash deposited into the bank account with last year for each month. From that, the assessee submitted that during the month of November 2016 not only the case sales increased but also the Local Credit Sales made by the assessee increased by 493.89% when compared to Local Credit Sales made by the assessee during November 2015. Even the Local Credit
Sales made on consignment basis increased by 112.66% when compared to immediate preceding year's November month. Further, when the trend of total cash deposits in each month of 2016 is compared with 2015 it will emerge that the assessee right from the beginning of April 2016 has deposited almost double the amount of cash compared to corresponding month of 2015. For example in April 2016 cash deposited was 191.38%
more compared to April 2015, likewise in May it was 482.32%, in June
136.27%, in September it was 149.35% and so on.
Ashok Nariyani, Jaipur.
40
14. Ld.AR filed the copies of Vat Returns filed under Rajasthan Vat and Haryana Vat Acts and the products assessee is dealing into are taxable under Rajasthan at very high VAT rates, i.e. 45% and 35%. Thus
Ld.AR contended that for every Rs. 100/- sales assessee needs to pay
VAT of Rs. 45/-, resulting in balance of just Rs. 55/-. Therefore, no prudent businessmen would ever inflated his sales particularly when the VAT rates are as much high as 45% out of total cash deposited in 2015-
16, almost 35-40% approx. represents VAT.
15. The bench notes that on the one hand at page 7 Ld. AO noted that balance amount of cash deposited of Rs.1,30,82,000/- in old currency notes is to be traded as unexplained and out of books sale whereas at page
9 para 6.3 it has been contented that genuineness of sales bills could not be verified. At the time of hearing of the appeal, ld. DR did not controvert said aspect argued by the ld. AR of the assessee. The justification for increase in cash sales and the fact that even before the period of demonetisation, the amount of cash deposits and significantly higher than the earlier year remained uncontroverted by the Ld.AO as well as Ld.DR.
In support of the cash sales, ld. AR of the assessee also submitted that the assessee has maintained all the records that sales are duly reflected in the VAT return and also in the books of accounts. On this information Ld.
AO has not made any independent inquiry. He considered part of the Ashok Nariyani, Jaipur.
41
sales as genuine (made in new currency notes) and on the same set of records, part of the sales were not considered as genuine. This pick &
chose approach was not correct on same set of evidence. Thus, ld. AO could not make an addition on ill-founded assumption and presumption more so when books of accounts are held reliable without rejecting the same u/s 145(3). In support of such contentions, Ld.AR has relied upon various decision along with decision of our own Juri ictional Hon’ble
Rajasthan High Court in the case of Smt. Harshila Chordia Vs. ITO [ 298
ITR 349 ] wherein it has held that:
“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.
42
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.
”

In the result, the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. ¼ MkWa- ,e- ,y- ehuk ½

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(Dr. M.L. Meena )

(Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 15/09/2025
*Santosh
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
1. vihykFkhZ@The Appellant- Ashok Nariyani, Jaipur.
2. izR;FkhZ@ The Respondent- ACIT, Circle-5, Jaipur.
2. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत.
6. xkMZ QkbZy@ Guard File { ITA No. 1532/JPR/2024 }

vkns'kkuqlkj@ By order

सहायक पंजीकार@Aेेज. त्महपेजतंत