ASHISH BHARGAVA,JAIPUR vs. DCIT, JAIPUR

5. The Ld. CIT(A) has erred in confirming the action of Ld.AO in concluding that the appellant has not discharged the onus of proving genuineness of cash deposit, without appreciating the submission made by the appellant.

6. The Ld. CIT(A) has erred in law as well as on the facts of the case by confirming the action of Ld. AO in invoking Sec 115BBE, which is contrary to provisions of law as well as facts of the case.

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

4. The ld. AO noted, during assessment proceedings that the assessee has deposited cash of Rs. 1,26,72,500/- in his Axis Bank a/c and submitted that the source of such cash is regular cash sales of the assessee but he failed to produce the documentary evidence of such sales and failed to discharge his onus to prove identity, genuineness and creditworthiness of the person to whom sales were made. Therefore, considering the facts, the total cash deposits of Rs. 1,26,72,500/- is treated as unexplained cash credit u/s 68 of the Act and is added to the total income of the assessee and further invoked the provision of section 115BBE of the Act.

5. Aggrieved from the order of AO, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:

“7.0 DECISION 7.1 The grounds of appeal

, copy of assessment order, submissions of the appellant, statement of facts and Form 35 have been carefully considered and adjudicated as under: 7.2 Ground Nos. 1.2 to 1.6 has been filed against the assessment of the cash deposit of Rs. 1,26,72,500/- during the demonetization period u/s 68 of the I.T. Act. During the demonetization period the appellant has made cash deposit of Rs.1,26,72,500/- and claimed that the source of cash deposit was from sale of cameras, memory cards, computer printers. The Assessing Officer has called for the month wise opening balance in cash, cash sales, cash deposited in bank and closing cash balance for the F.Y. 2015

16. Ashish Bhargava, Jaipur. & 2016-17. The Assessing Officer has analysed the cash sales pattern and cash deposits pattern for the F.Y. 2015-16 & 2016-17 and find that huge variation is there in cash deposit pattern between the F.Y. 2015-16 &2016-17. Further, the Assessing Officer has observed that the appellant has not furnished the sales bills and the identity of the person to whom the sales was made. Therefore, the Assessing Officer has concluded that the source for cash deposit ofRs.1,26,72,500/- is not from sales and the same is from some other unexplained source, hence, the cash deposit of Rs.1,26,72,500/- is assessed u/s 68 of the I.T. Act. 7.3 During the course of appellant proceedings, the appellant has not furnished any new evidences which were not furnished before the Assessing Officer. The cash deposit details in the F.Y. 2015-16 are given as under: … The undersigned has analysed the cash deposit and cash balance pattern of the appellant for the F.Y. 2015-16 & 2016-17. During the F.Y. 2015-16, the appellant has deposited more than ninety percentage of cash in hand in every month whereas for F.Y. 2015-16 the cash deposit was less than ten percentage. The appellant has not given any valid reason that why the huge cash was accumulated from April 2016 to till demonetization period. If any requirement is there for the cash, the same might be utilized as cash expenditure or the same should be deposited in the bank. The appellant has claimed that the cash was kept as cash in hand without furnishing any valid reason for accumulating the cash. 7.4 Further, it is clear from the cash deposit pattern that the appellant has made cash deposit of Rs.1,63,11,200/- in the F.Y. 2016-17 out of which Rs.1,26,72,500/-pertains to demonetization period which is eighty percentage of the total cash deposit whereas the ratio for F.Y. 2015-16 for the same period is twenty six percentage only. The appellant has not explained the reason for sudden increase in cash sales of camera and its accessories during demonetization period. The appellant has not furnished the sales bill for the cash sale and identity of the person to whom the sales was made before the Assessing Officer as well as the undersigned also. The appellant has relied upon various case laws which are perused by the undersigned. The facts of those case laws, which are relied upon by appellant, are not relevant to assessee’s facts. 7.5 In view of the above mentioned facts and discussion, the appellant could not establish through documentary evidences that the source of the cash deposit made during the demonetization period was from sale of cameras and its accessories. The appellant could not give valid reason with documentary evidences for accumulating the huge cash from April 2016 to till demonetization period. Further, the appellant failed to prove the Ashish Bhargava, Jaipur. identity, genuineness and creditworthiness of the cash deposits during the course of assessment proceedings as well as during the appellate proceeding also. Therefore, the Assessing Officer has correctly assessed the cash deposit made of Rs. 1,26,72,500/- during demonetization u/s 68 of the I.T. Act. Hence, Ground Nos. 1.2 to 1.6 are decided against the assessee and the assessment order is upheld. Ground No. 1.7 is general in nature.

6. During the course of hearing, the ld. AR of the assessee has filed following written submission with the prayer to delete the addition so made by the AO and confirmed by the ld. CIT(A).

2. The Assessee e-filled his original return of income for the A.Y. 2017-18 on 30.10.2017 declaring therein total income of Rs.13,30,540/-.

3. Government of India demonetized notes in denomination of Rs.1000/- and Rs.500/- (Specified Banking Notes or SBN for short) with effect from 09-11-2016 and deposit of such SBNs in banks were permitted from 09-11-2016 to 31-12-2016. 4. Owning to demonetisation, the appellant deposited cash of Rs. 1,26,72,500/- in the bank account during demonetisation period (09-11-2016 to 31-12-2016). The source of cash deposited was:

(i) Cash generated from cash sales made during the month of October 2016 and November (up to 8.11.2016) of Rs. 71,39,483/-, (54,52,591 + 16,86,892). Out of such cash sales Rs. 1,13,000 was already deposited in the month of October and Rs. 6,72,500/- in the month of November before 08.11.2016, and (ii) Opening cash balance of Rs. 63,06,166/- as on 30.9.2016 that was also generated through cash sales, not deposited up to the 30.9.2016.

5. Case of the appellant was selected for scrutiny and notice u/s 143(2) of the Act was issued on 10.08.2018. Subsequently for verification of source of cash deposited Rs. 1,26,72,500/-, during demonetization period, notice u/s 142(1) was issued on various dates. Appellant complied with the notice and submitted the response to substantiate source of cash.

Ashish Bhargava, Jaipur. 6. However, the Ld. AO has deduced on the premises of his own presumptions and without comparison of excel sheets and comparative charts that the cash deposit of Rs. 1,26,72,500/-, in the bank account, is unexplained and out of undisclosed source of income and made an addition of Rs. 1,26,72,500, u/s 68 r.w.s. 115BBE of the Act, vide his order u/s 143(3), dated 27.12.2019 and assessed the total income at Rs. 1,40,03,040/-.

7. Aggrieved with the order, the appellant preferred an appeal before Ld. CIT(A) whereas the Ld.CIT(A) confirmed the AO order in its entirety.

8. Aggrieved with the order of Ld.CIT(A), the appellant preferred an appeal before Hon’ble bench. Ground of Appeal

No.

1. The Ld. CIT(A) has erred in law as well as on the facts of the case in confirming the action of Ld.AO of initiating the assessment proceeding u/s 143(3) of the Income Tax Act. The very action taken u/s 143(3) of the act, is bad in law and without jurisdiction. Hence, the same kindly be quashed. Ground of Appeal No.

2. The Ld. CIT(A) erred in law as well as on the facts of the case in confirming the action of Ld.AO of making addition u/s 68 of the Act, despite impliedly rejecting books of accounts u/s 145(3). The addition so made is wrong in law as well as on the facts of the case. Hence, the same kindly be quashed. Ground of Appeal No.

3. The Ld. CIT(A) erred in confirming the action of Ld.AO in making addition of Rs. 1,26,72,500/- despite accepting the declared turnover and at the same time treating the cash sale to the extent of Rs. 1,26,72,500/- as bogus. Hence, the addition so made has resulted in double taxation in case of the assessee and is unjustified, excessive and illegal, and may kindly be deleted. Ground of Appeal No.

4. Alternatively, and without prejudice to anything stated above, the Ld. CIT(A) has erred in law as well as on the facts of the case by confirming the action of Ld.AO in not reducing the GP in respect of sale of Rs.1,26,72,500/-, which was alleged to be bogus. Findings of Ld. AO: (Para A on Page No. 6 and Para 5 on Page No. 7 of the order) “...The sale recorded in September and October is purely adjustment and sounds abnormal. And therefore, it is also not justified.

Ashish Bhargava, Jaipur. ….there is no any seasonal factor (like Festival etc) is affecting the sales of the assessee every year. The assessee is simply making a story of cash sales as a source of cash deposits. …… The assessee has not produced the bills for such sales. In absence of any supporting evidence, truthfulness of such sales cannot be verified. In such case, the transaction is genuine or not cannot be ascertained. It is humanly impossible to sell goods worth Rs. 71,39,483 in such a short time span if other circumstances are unchanged. …… 5. Applicability of section 68: The onus to prove the identity, genuineness and creditworthiness was on the assessee and it failed to discharge it. Therefore, the amount of Rs. 1,26,72,500/- which is cash deposited in the bank during the period of demonetization is considered as unexplained cash credits……”

Findings of the Ld. CIT(A): (Para 7 on Page No. 40 of the order u/s 250, dated 27.12.2019) “The undersigned has analysed the cash deposit and cash balance pattern of the appellant for the F.Y. 2015-16 & 2016-17. During the F.Y. 2015-16, the appellant had deposited more than ninety percentage of cash in hand in every month whereas for F.Y. 2015-16 the cash deposit was less than ten percentage. The appellant has not given any valid reason that why the huge cash was accumulated from April 2016 to till demonetization period. If any requirement is there for the cash, the same might be utilized as cash expenditure or the same should be deposited in the bank. The appellant has claimed that the cash was kept as cash in hand without furnishing any valid reason for accumulating the cash. 7.4 Further, it is clear from the cash deposit pattern that the appellant has made cash deposit of Rs.1,63,11,200/- in the F.Y. 2016-17 out of which Rs.1,26,72,500/- pertains to demonetization period which is eighty percentage of the total cash deposit whereas the ratio for F.Y. 2015-16 for the same period is twenty six percentage only. The appellant has not explained the reason for sudden increase in cash sales of camera and its accessories during demonetization period. The appellant has not furnished the sales bill for the cash sale and identity of the person to whom the sales was made before the Assessing Officer as well as the undersigned also. The appellant has relied upon various case laws which are perused by the undersigned. The facts of those case laws, which are relied upon by appellant, are not relevant to assessee’s facts.

Ashish Bhargava, Jaipur. 7.5 In view of the above mentioned facts and discussion, the appellant could not establish through documentary evidences that the source of the cash deposit made during the demonetization period was from sale of cameras and its accessories. The appellant could not give valid reason with documentary evidences for accumulating the huge cash from April 2016 to till demonetization period. Further, the appellant failed to prove the identity, genuineness and creditworthiness of the cash deposits during the course of assessment proceedings as well as during the appellate proceeding also. Therefore, the Assessing Officer has correctly assessed the cash deposit made of Rs. 1,26,72,500/- during demonetization u/s 68 of the I.T. Act.” Submission: A. Consistent Sales Growth and Absence of Any Abnormality: 1. At the outset, it is humbly submitted that the entire basis for the opinion, formed by the Ld. AO and the Ld. CIT(A), rests on a comparative/trend analysis of sales and cash deposits for the Financial Years 2015-16 and 2016-17. However, the inferences drawn by the Ld. AO from this comparative analysis are factually incorrect and not supported by the actual records.

2. For the sake of clarity, the relevant details of sales for both years are summarized below: Particulars F.Y. 2016-17 F.Y. 2015-16 % Change Total Sales 14,12,84,431 12,07,68,635 16.98 % Total Cash Sales 2,28,28,614 4,02,01,106 43.21 % Cash Sales During the 71,39,483 58,09,920 22.88 % month of October and November up to 8th

3. As is evident from the above, there was an overall increase in total sales by 16.98% in F.Y. 2016-17 compared to the previous year. However, cash sales actually decreased by 43.21% over the same period. This clearly demonstrates that the Ld. AO’s observation regarding alleged inflation of cash sales is factually incorrect. Contrary to the assertion that cash sales were inflated, the figures show a significant reduction and there is no evidence of any abnormal increase in the appellant’s business activity.

4. Furthermore, the allegation of the Ld. AO that “the sales recorded in September and October are purely adjustment and sound abnormal” is baseless. A review of the business trend further supports this position. In F.Y. 2014-15, the total turnover was Rs. 10,27,50,419/-, which increased to Rs. 12,07,68,635/- in F.Y. 2015-16, reflecting a growth of 17.54%. This consistent growth pattern indicates that the increase in F.Y.

Ashish Bhargava, Jaipur. 2016-17 is in line with the normal business trajectory, and the characterization of cash sales in F.Y. 2016-17 as ‘abnormal’ is merely presumptive and not based on any substantive evidence. The Audit reports for all three years are enclosed for reference [PBP: 1 to 28].

7. Further, The Hon’ble ITAT, Delhi in the case of ACIT Vs. Baldev Raj Charla 121 TTJ (Del) 366, held as under: “We have heard the rival submissions and perused the material available on record and have gone through the orders of the authorities below. We find that this explanation of the assessee was found correct that against these five deposits on dated 14th June, 1996, Rs. 31,000; 21st July, 1997, Rs. 1,27,000; 19th Sept., 1997, Rs. Ashish Bhargava, Jaipur. 22,000; 4th October, 1997, Rs. 26,000 and on 7th November, 1997, Rs. 52,000/- there were sufficient cash withdrawals from AWI and from SBL Mayapuri, but this addition has been confirmed by Ld. CIT(A) on the basis that there is time gap between the assessee’s withdrawals from his own partnership M/s AWI or from his own bank. There is finding recorded by the Ld. AO or by the Ld. CIT(A) that apart from depositing these cash into bank as explained by the assessee, there was any other user by the assessee of these amounts and in the absence of that, simply because there was a time gap, the explanation of the assessee cannot be rejected and hence the addition confirmed by the Ld. CIT(A) is not correct. We, therefore, delete the same. This ground of the assessee is allowed.”

8. In the present case as well, the timing of deposits is irrelevant as long as the Assessing Officer has not pointed out any inconsistency. Please note that no defects have been found in the books or VAT returns of the appellant. Accordingly, the source stands explained, and thus, the addition merely on the ground of timing is unsustainable in law.

B. Addition Cannot Be Made on Account of Alleged Bogus Cash Sales When the Turnover Is Already Accepted: 1. The appellant maintained regular books of account, which were duly audited under Section 44AB of the Income Tax Act and the same was produced before the Ld.AO. The sales are duly recorded in the books of accounts of appellant and there was availability of stock to affect such sales. Said sales were also shown in the return of Value Added Tax and duly accepted by the Commercial Tax Department, Government of Rajasthan, which were produced before the Ld. AO earlier [PBP: 29 to 63].

2. The Ld. A.O., in assessment order dated 27.12.2019, had not doubted opening stock, purchases, gross profit and closing stock as declared by appellant. The A.O. has not doubted the declared closing stock which implies outgo from opening stock and purchases has been accepted which can be on account of sales made by appellant and thus out of declared sales some sales cannot be held as bogus or ingenuine sales.

3. The cash deposited during the demonetisation period represents sales proceeds, as recorded in the books. The genuineness of cash sales was doubted on the ground that cash sales are made to unidentifiable persons. In this regard, it is important to understand the nature of business operations of the appellant. The appellant is in the retail trading of cameras, memory cards, computer printers and accessories of cameras. In this kind of business, items are often small in value and sold to walk – in customers and small transactions are usually executed in cash. Even as per Rule 114B Ashish Bhargava, Jaipur. of the income tax rules, there is no need to quote PAN when transaction of sales or purchase of goods is of value not exceeding two lakh rupees. Thus, sales transactions should not be disbelieved only for the reason that the assessee could not give the identity of all the purchasers, In this regard, we rely on the following judgement:

 Hon’ble Bombay High Court in the case of R.B. Jessaram Fetehchand (Sugar Dept.) vs Commissioner of Income-Tax, Bombay, (1970) 75 ITR 33, held sas under: “….. . In these circumstances, the reason given by the Income-tax Officer for rejecting the book results shown by the assessee's accounts or for not accepting the cash transactions as genuine cannot be accepted as good and sufficient unless there was an obligation on the part of the assessee to keep a record of the addresses of the cash customers. It could not, therefore, be said that the failure on his part to maintain the addresses was a suspicious circumstance giving rise to a doubt about the genuineness of the transactions entered into by the assessee.

4. In the case of a cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser. In our opinion, therefore, the rejection of the results of the assessee's cash book by the Income-tax Officer was not at all justified and the Appellate Assistant Commissioner, therefore, was right in deleting the addition made by the Income-tax Officer.”

C. No Addition Warranted u/s 68 of the Income Tax Act, 1961: 1. Without prejudice to anything stated above and without any admission, it is humbly submitted that the invocation of Section 68 of the Act, in the present case, is misplaced and contrary to settled legal principles.

2. Section 68 of the Act provides that if any sum is found credited in the books of an assessee and such assessee either (i) does not offer any explanation about nature and source of money; or (ii) the explanation offered by the assessee is found to be not satisfactory by the Assessing Officer, then, such amount can be taxed as income of the assessee.

3. In the present case, the source of cash deposit has already been explained as arising from recorded sales and opening cash balance, both supported by the books of accounts, reflected in the turnover and taxed under the head “Profit and Gains of Business or Profession”, the same amount cannot be taxed again as unexplained under Section 68. Further, VAT returns filed by the assessee and accepted by the

4. It is a settled legal position that once sales are accepted and taxed as business income, the cash deposited out of such sales cannot again be treated as unexplained cash credit under Section 68. Doing so would result in double taxation of the same income, which is impermissible in law.

5. Therefore, the very foundation for invoking Section 68 is absent, and the addition made on this basis is liable to be deleted in full. In this regard, we rely on the following case laws:  Hon’ble ITAT Jaipur in the case of Assistant Commissioner of Income Tax Vs. Shri Chandra Surana [ITA No. 166/JP/2022], dated 15.12.2022, held as under: “2.6 We have heard both the parties and perused the materials available on record. From the assessment records, it is noted that the AO made an addition of Rs.2,90,93,500/- in declared income by holding that said amount of cash deposited by the assessee in his bank account during the demonetization period is nothing but the undisclosed income of assessee which was shown under the garb of cash sales and thus it is liable to be added u/s 68 of the Act and taxable @ 60% under the provision of Section 115BE of the Act. It is also noted from the order of the ld. CIT(A) at para 4.1 wherein the ld. CIT(A) has described para 1.4 of assessee written submission that complete regular books of accounts, bill, vouchers and day to day stock register having complete quantitative details have been maintained by the assessee. The said books of accounts are audited. A copy of audited statement of account alongwith complete quantitative details have been submitted alongwith the return of income. The assessee maintained manual itemwise stock register. The said stock register was bulky and so could not be produced in e-proceedings but was produced before the AO in course of hearing as is evident from submission dated 27-09-2019. The fact of maintenance of stock register manually is stated in Tax Audit Report also. Thus the cash sales transaction is recorded in regular books of accounts, sales are made out of stock-in-trade. The assessee also filed copies of sales invoice No. 82 to 158 of Bangaluru and 110 to 216 of Koklata outlets before AO which were of 28-10-2016 and these were earlier produced before Investigation Wingh in F.Y. 2016-17 i.e. after the sales were made and same were verified by the Investigation Wing also. This view of the ld. CIT(A) indicates that the assessee has maintained regular books of accounts, bills, vouchers and day to day stock register having complete quantitative details and said books of accounts are audited. The assessee vide submission dated 27-09-2019 had produced stock record during the course of hearing. The cash sales transactions are recorded in regular books of accounts and the sale are made out of stock in trade for which no adverse finding had been observed by the AO except for Ashish Bhargava, Jaipur. the change in the methodology in issuing bills as mentioned at page 7 to 8 of the assessment order. Further the ld. CIT(A) observed that the AO had treated the cash deposited in the bank during the demonetization period in demonetized currency as unexplained cash credit u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales etc. was evident from the entries in the audited books of accounts of the assessee. In this case, the books of account of the assessee had been audited by an independent auditor. The cash sales and receipts are duly supported by relevant bills which were produced in the course of assessment proceedings before the AO and it is not the case of the AO that the assessee did not have sufficient stock for making the sales. Hence, it cannot be said that the figures of sales and purchases are not supported by the quantitative details and the AO did not make any enquiry on the material supplied by the assessee. Thus the AO neither brought any material on record to establish that the sale bills are bogus nor provided any evidence that such sales are bogus. It is also an open fact that the demonetization of Rs.500/- and Rs.1000/-note was declared by the Hon’ble Prime Minister at 8 PM on 8-11-2016 and after this announcement the persons reached the jewellery shop to buy jewellery in exchange of notes. Thus all such scenario indicates that the assessee had duly substantiated its claim from the documentary evidences and also with the facts. It is also observed from the assessment order that the AO had not rejected the books of account of the assesee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition of Rs.2,90,93,500/- made by the AO by applying the provisions of Section 68 of the Act, it is noted that provisions of Section 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P&L account. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act. In view of the above deliberations and case laws relied upon by both the parties, we find that the AO was not justified in making an addition of Rs.2,90,93,500/- u/s 68 of the Act which has rightly been deleted the ld. CIT(A) and we concur with his findings. Thus the appeal of the Revenue is dismissed.”

 Hon’ble ITAT, Delhi in the case of Jatin Arora Vs. ITO [ITA No. 1833/Del/2023], dated 30.05.2025, held as under: “The Learned AR also submitted that the amount of cash deposits of Rs 49,88,748/- which the Learned AO made addition u/s 68 of the Act is already included in the turnover declared of Rs 55.49,170/-by the assessee in his return of income which is total receipts received by the assessee during the relevant year and the Learned AO nowhere mentioned that the cash deposits which made addition u/s 68 of the Act is different from those mentioned by the assessee as turnover in his return of income.

Ashish Bhargava, Jaipur. 10. On the basis of foregoing fact situation, we find merit in the contentions raised by the assessee. Accordingly, the appeal of the assessee deserves to be allowed. The impugned addition made in the assessment order dated 14.12.2019, as sustained by the order of the Ld. CIT(A) dated 18.04.2023, is directed to be deleted.

11. In the result, appeal of the assessee is allowed as indicated above.”

 Hon’ble Delhi High Court in the case of PCIT Vs Singhal Exim Pvt. Ltd, [ITA 228/2020], dated 22.02.2021, held as under: “On the aspect of additions being made under Section 68 of the Act, we notice that the ITAT was intrigued with the approach of the AO, and rightly so, in our view. The Assessee had worked out the business income after considering the sales and purchases of mobile phones which included the high-sea sales. In these circumstances, the ITAT observed that the addition under Section 68 or 69C is contradictory to the stand taken while accepting the business income. ……. …..

13. The genuineness of the transactions has been accepted on the basis of documentary evidence and other material gathered, which cannot be re-appreciated under Section 260A of the Act. We also do not find any perversity in the approach of the ITAT.” Ground of Appeal

No. 5: The Ld. CIT(A) has erred in confirming the action of Ld.AO in concluding that the appellant has not discharged the onus of proving genuineness of cash deposit, without appreciating the submission made by the appellant. Submission:

1. As already explained in grounds above, the appellant maintained books of accounts, recorded all transactions therein, and provided all the supporting records. The source of cash deposit was clearly explained as arising from recorded sales and opening cash balance. Further, the appellant has already offered the sales for taxation, hence the onus has been discharged by the appellant and the same income cannot be taxed again

3. It is a settled legal principle that onus of proof is on the person who makes the allegation and not on the person who has to defend. As per legal maxim “affairmanti non negantiincumbit probation” means burden of proof lies upon him/ her who affirms and not upon him/ her who denies. Similarly, as per doctrine of common law “incumbit probation qui digit non qui negat” i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. Therefore, the Ld. AO has failed to discharge his onus of proof, especially when addition has been made under “deeming fiction”.

4. It would be pertinent to refer to the decision of Hon’ble Apex Court in the case of Umacharan Saha & Bros Co. v/s CIT 37 ITR 21 (SC) wherein it was held that suspicion, however, strong cannot take place of proof.

5. Further, Hon’ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd v/s CIT (1954) 26 ITR 775 (SC) has held that although strict rules of evidence Act do not apply to income tax proceedings, assessment cannot be made on the basis of imagination and guess work.

6. Hon’ble ITAT, Jaipur in the case of Dinesh Kumar Soni, Jaipur vs Dcit Cen Cir 1 Jaipur, Jaipur, 27 September, 2024, [ITA. No. 863/JPR/2024], held as under: “….thereby he hold balance amount of Rs. 12,90,178/- [ 32,22,668 less 19,32,490/- ] as unexplained credit and the sales to that extent not considered and added as income as per provision of section 68 of the Act. While doing so ld. AO noted that the assessee has not provided satisfactory explanation about the nature and source of cash deposits. Here we note that one the one hand ld. AO accepted the sales of Rs. 19,32,490/- and on the other hand on the same set of evidence placed before him he is not considered the other part of the sales and that too based on the estimation, presumption and assumption he has not placed on record failure on the part of the assessee as when the part of the sale is considered then why the other part is not considered. Looking to the overall facts of the case and material available on record we are of the considered view that the addition made by the ld. AO and sustained by the ld. CIT(A) merely based on the presumption and assumption. They did not deal to the fact of the case on the same set of evidence part of the sale is accepted and part of the same were not accepted. Considering that factum we do Sh. Dinesh Kumar Soni vs. DCIT not find any reason to sustain the addition and therefore, we direct the ld. AO to delete that addition made in the hands of the assessee.

Ashish Bhargava, Jaipur.

8. Hon’ble ITAT, Ahmedabad in the case of Abhishek PrakashchandChhajed Vs. ITO [ITA No. 113/AHD/2023], dated 04.10.2023, held as under: “13.3 In view of the above detailed discussion and after considering the facts in totality, we are of the view that the assessee has duly discharged the onus cast upon him u/s 68 of the Act and the burden shifted upon the AO/revenue authority to bring the material on record before rejecting the explanation/evidence submitted by assessee is not satisfactory. However, the revenue authorities failed to discharge the burden shifted on them. Therefore, in such facts and circumstances, the sum credited in the books of the assessee cannot be treated as unexplained u/s 68 of the Act. Hence, we hereby set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition made by him. thus, the ground of appeal

of the assessee is allowed.

14. In the result, the appeal filed by the assessee is hereby allowed.”

9. Hon’ble ITAT, Jaipur in the case of Sh. Sanjay Godha, Jaipur vs. ACIT [ITA No. 539/JP/2024], dated 29.08.2024, held as under: “This withdrawal and source of this amount withdrawn is not in disputed. Even the assessee claimed that the revenue did not proved in the assessment proceeding subsequent to the search the utilization of the said cash so withdrawn from the bank account. The belief of the assessee after the search to have the demand and to avoid recovery of those demand he has made withdrawal of cash from the bank account. This explanation of the assessee was rejected merely based on the surmises and conjecture and the evidence so filed was rejected based on these assumptions and presumptions. …… Ashish Bhargava, Jaipur. …… 17. Thus, once the assessee explained that source of cash deposit in the bank account is out of the earlier withdrawals made from the same bank account, the burden of proof is on the department to establish that cash has been utilized elsewhere if the explanation of assessee is not to be accepted. We get support of this view from the decision of CIT vs. Sh. Sanjay Godha vs. ACIT Kulwant Rai 291 ITR 0036 (2007) (Delhi HC) wherein the high court held that; The relevant Para 16 is reproduced as under: "16. This cash flow statement furnished by the assessee was rejected by the AO which is on the basis of suspicion that the assessee must have spent the amount for some other purposes. The orders of AO as well as CIT(A) are completely silent as to for what purpose the earlier withdrawals would have been spent. As per the cash book maintained by the assessee, a sum of Rs. 10,000 was being spent for household expenses every month and the assessee has withdrawn from bank a sum of Rs. 2 lacs on 4th Dec., 2000 and there was no material with the Department that this money was not available with the assessee. It has been held by the Tribunal that in the instant case the withdrawals shown by the assessee are far in excess of the cash found during the course of search proceedings. No material has been relied upon by the AO or CIT(A) to support their view that the entire cash withdrawals must have been spent by the assessee and accordingly, the Tribunal rightly held that the assessment of Rs. 2.5 lacs is legally not sustainable under s. 158BC of the Act and the same was rightly ordered to be deleted." Based on the discussion so recorded herein above ground no. 1 raised by the assessee is allowed.”

10. In the present case, the Ld. AO has not brought on record any concrete or corroborative evidence to disprove the explanation offered by the appellant. The findings are based solely on presumptions, surmises, and conjectures, all of which have been specifically rebutted with supporting documentary evidence in the foregoing submissions. It is a settled principle of law that additions cannot be sustained merely on the basis of suspicion or assumptions in the absence of any credible material. Ground of Appeal No. 6:

Ashish Bhargava, Jaipur. The Ld. CIT(A) has erred in law as well as on the facts of the case by confirming the action of Ld. AO in invoking Sec 115BBE, which is contrary to provisions of law as well as facts of the case. Submission: 1. At the outset, and as already explained in detail under the submissions relating to Section 68, the provisions of Section 68 are not applicable in the present case, since the cash deposits, in question, have been duly explained as arising from recorded cash sales and opening cash balance. Therefore, since provision of Section 68 is not applicable, provision of section 115BBE is not attracted in the current case.

2. Without prejudice and without any admission, even otherwise the rate of tax applied by the Ld. AO u/s 115BBE is incorrect and excessive.

3. The Ld. AO has applied tax at the rate of 60%, relying on the amended provisions of Section 115BBE introduced by the Taxation Laws (Second Amendment) Act, 2016, which came into effect from 01.04.2017.

5. Since the relevant transactions of cash deposit occurred before the amendment came into force (i.e., during November 2016), the enhanced rate of 60% under Section 115BBE cannot be retrospectively applied to the present case.

 Hon’ble Madras High Court in the case of S.M.I.L.E Microfinance Limited Vs ACIT [W.P.(MD)No. 2078 of 2020], dated 19.11.2024, held as under: “17. In the aforesaid objects and reasons nowhere it is stated that due to “demonetization” the unaccounted money ought to be charged 60% rate of tax. It only states that step had been taken to curb black money by withdrawing Specified Bank Notes of denomination of Rs.500 and Rs.1000. And also states the people may find illegal ways of converting their black money into black again, hence as per experts Ashish Bhargava, Jaipur. advice heavy penalty ought to be levied. From the language of the object “that instead of allowing people to find illegal ways of converting their black money into black again”, it is evident that the government is intended to impose the same for future transactions. Especially the use of word “again” in the object would clearly indicate it is for future transactions i.e. from 01.04.2017. Therefore this Court is of the considered opinion that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. And for prior transaction the revenue is empowered to impose only 30% rate of tax.” Ground of Appeal

No. 7 That the appellant craves your indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing.”

7. On the contrary, the ld. DR supported the orders of the lower authorities.

8. We have heard both the parties and perused the materials available on record. The bench noted from the order of ld. AO that the Ld. AO added Rs. 1,26,72,500/- as unexplained cash credit under Section 68, citing that there is un- precedent and abnormal increase in sales in the month of October and November (upto 8th November) which is not justifiable looking at the past cash deposit history, sales in the other months of the same financial year and absence of seasonal factor. We also note from the order of ld. AO that the ld. AO stated that neither any documentary evidence to support cash sales was submitted nor identity, genuineness and creditworthiness of customers were submitted. Further, we also note that the ld. CIT(A) upheld the order of the ld. AO by observing that the assessee has not submitted any valid reason for accumulation of such huge cash,

11. The total sales incorporating cash sales are duly recorded in assessee books of accounts and the ld. AO has neither doubted the audited books of accounts nor point out any defects in the books of accounts nor the books of accounts were rejected. The said books of accounts are also audited u/s 44AB of the Act. Further, the ld. AO had also neither doubted the availability of stock with the assessee prior to cash sales nor there is any allegation of any bogus purchases which means the ld. AO was satisfied that the assessee was having sufficient stock in hand for making the impugned sales during the demonetization period. Therefore, it is evident that the ld. AO has not doubted the books of accounts of the assessee and did not find any defect in sales, purchase, stock and profit recorded/declared therein and have also not produced any documentary evidence of any possibility of back dating of cash sales or cash sales being bogus. On the contrary the assessee has submitted complete details with documentary evidences and thus discharges his onus. Therefore, it appears that the entire assessment is based on presumptions and it is unjustified, on the part of the ld. AO and CIT(A), to treat the cash deposit Ashish Bhargava, Jaipur. as unexplained without bringing, on record, any corroborative evidence to support the allegation that unexplained cash was deposited during demonetization and without disputing the purchases, sales, opening stock, closing stock, and without pointing out any defects in the books of accounts of the assessee.

Reliance is placed on the following case laws :- 1) Hon’ble ITAT, Visakhapatnam held that in the case of ACIT vs. M/s Hirapanna Jewellers [ITA No. 253/Viz/2020] held as under:- “Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/ stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& L account in page No.7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed to disprove the condition of the assessee. Suspicion however strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence” 2) Hon'ble ITAT Delhi in ITO V. M/s J.K. Wood India Pvt Ltd, 2024 (1) TMI 1262, held as under:- “14. We have given thoughtful consideration to the factual matrix discussed hereinabove The undisputed fact is that there is not even a whisper of any defect, error or infirmity in the books of account maintained by the assessee which were audited both under the Companies Act and under the Income tax Act. The books of account have been maintained in the regular course of business and cash deposits in the books of account are duly reflected in the books of account Ashish Bhargava, Jaipur.

Reliance is placed on the following case laws:- 1) Hon'ble Supreme Court in the case of CIT vs. Devi Prasad Vishwnath Prasad (1969) 72 ITR 194(SC)held that “It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed."

Ashish Bhargava, Jaipur. The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again." 2) Hon'ble ITAT Delhi in the matter of Kishore Jeram Bhai Khaniya v. ITO [ITA. No. 980, 1220/Del./2011 dated 13.05.2014 ITAT- Delhi) held as under: "There is another dimension to this issue. The Assessing Officer made addition of Rs. 22.06 lacs u/s 68 of the Act, which contemplates the making of addition where any sum found credited in the books of the Assessee is not proved to the satisfaction of the A.O. It is only when such a sum is not proved that the Assessing Officer proceeds to make addition u/s 68 of the Act. We are dealing with a situation in which the Assessee has himself offered the amount of cash sales as his income by duly including it in his total sales. Once a particular amount is already offered for taxation, the same cannot be again considered u/s 68 of the Act. In fact, such addition has resulted into double addition."

Thus, in view of the detailed facts narrated above and respectfully following the judgments cited above, the addition made u/s 68 and taxed u/s 115BBE by the lower authorities deserves to be deleted. In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 08/09/2025.