Loading judgment…

PEEYUSH AGARWAL,JAIPUR, RAJASTHAN vs ITO, WARD 1(5), JAIPUR, JAIPUR, RAJASTHAN | BharatTax

PEEYUSH AGARWAL,JAIPUR, RAJASTHAN vs. ITO, WARD 1(5), JAIPUR, JAIPUR, RAJASTHAN

ITA 488/JPR/2025Status: DisposedITAT Jaipur19 August 2025AY 2017-18Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI GAGAN GOYAL (Accountant Member)31 pages

AI SummaryAllowed

Facts

The assessee, a dealer in jewellery, deposited a significant amount of cash received from sales into his bank accounts during the demonetization period. The Assessing Officer (AO) treated these deposits as unexplained income and made additions under sections 68 and 115BBE of the Income Tax Act, alleging bogus sales and manipulation of books.

Held

The Tribunal held that the AO failed to provide concrete evidence to support the allegations of bogus sales and manipulation. The Tribunal noted that the assessee had maintained proper books of accounts, which were supported by sales bills, stock records, and VAT returns. The cash sales were a regular feature of the business and were duly recorded. Therefore, the additions made by the AO and sustained by the CIT(A) were not justified.

Key Issues

Whether cash deposits made during demonetization, arising from sales recorded in the books of account, can be treated as unexplained income and taxed at a higher rate without concrete evidence of bogus sales or manipulation.

Sections Cited

145, 143(3), 250, 68, 69A, 115BBE, 110, 143(2), 142(1), 133A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR

Before: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 488/JPR/2025

Hearing: 11/08/2025

vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M. By way of present appeal, the assessee challenges the finding of Ld. Commissioner of Income Tax, Jaipur-4, Jaipur [ for short CIT(A)] in the order dated 28.02.2025 passed u/s 250 of Income Tax Act for Assessment Year 2017-18 which in turn arises from the assessment order dated 28.12.2019 passed u/s 143(3) of the Act, by the Income Tax Officer, Ward 1(5), Jaipur.

“1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in rejecting the books of accounts u/s 145(3) of the Income Tax Act, 1961 whereas no specific finding in the assessment order by ld AO for invoking of provision section 145(3) of the Act.

2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in holding the sales of Rs. 6,76,59,000/- deposited in bank account in the demonetized currency as bogus sale and directed to reduce the same from total sales shown by the appellant and add the same under income from other sources by applying the provisions of section 68 and 69A of the Act and tax as per the provisions of section 115BBE of the Act.

3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in making the addition of Rs. 6,76,59,000/- on account of cash deposited in demonetized currency in bank by applying the provisions of section 68 and 69A of the Act more so when the books of account has been rejected and it is contended the entries of the rejected books of account cannot be considered for addition u/s 68 and 69A of the Act.

4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in applying Section 69A of the Income Tax Act, 1961.

5. The Appellate prays to leave, to add, to alter, amend, the aforesaid grounds of appeal at or before the time of hearing of appeal.”

3. The assessee in Ground No. 1 to 4 challenged the holding of Ld CIT(A) that the sales of Rs. 6,76,59,000/- deposited in bank account in the demonetized currency as bogus sale and directed to reduce the same from total sales shown by the appellant and add the same under income from other sources by applying the provisions of section 68/69A of the Act and tax as per the provisions of section 115BBE of the Act.

Brief facts of the case are that the assessee is an Individual and prop of M/s Kalakriti Jewellers situated at Shop No 197, Johari Bazar, Jaipur and carrying the business of trading of bullion, previous stones, diamond and jewellery. In the same premise the father of assessee Shri Mahendra Kumar Agarwal was also carrying the same business in the name of M/s Mohan Lal Mahendra Kumar. The assessee filed his Income Tax Return on 27.10.2017 declaring of total Income of Rs. 11,74,830/-. The assessee filed copy of acknowledgment of Income Tax return and Computation of Total Income at PB page 1 to 4. The books of account of business concern of the assessee are audited by Chartered Accountant. The assessee filed copy of audit report and audited Profit and Loss Account and Balance sheet at PB 5 to 34. The case of the assessee was taken up for complete scrutiny through CASS. The AO issued notices u/s 143(2) and 142(1) of the Act, from time to time which were served upon the assessee through e-mail. The assessee filed the copy of such notices at PB page 39 to 51. In compliance to notices and query letters issued, the assessee e-filed, the details/ information from time to time (Copy at PB page 52 to 64) along with copy of cash book, daily stock summary, copy of purchase register, copy of sales register, month-wise details of sales and purchases, copy of assessment order of VAT passed by Commercial Taxes Department and VAT returns at (Copy at PB page 65 to 302) . Further, the assessee filed before ld AO the copy of bank statement for the period 01-04-2016 Peeyush Agarwal, Jaipur. to 31-03-2017 along with letter dated 18-10-2019 annexed as page no 38-119 with the letter. During the year under consideration, the assessee deposited the amount of Rs. 7,09,50,000/- in demonetized currency i.e. Specified Bank Notes (herein after referred as "SBNs") in his bank accounts which was part of sales declared in the Trading Account. In the wake of high cash deposited in demonetization currency (SBNs), the income tax department conducted survey u/s 133A of the Act at the business premises of the assessee on 06.10.2017 and statement of the assessee was recorded u/s 133A copy of which placed by the assessee at PB page 382-387. No any incriminating material/document was found as the result of survey u/s 133A of the Act and assessment for survey year AY 2018-19 was completed at Returned Income. The assessee placed the copy of assessment order passed u/s 143(3) of the Act for Survey Year AY 2018-19 at PB page 301-302. The assessee also placed before us the copy of replies/explanation filed before the ld AO during the assessment proceedings of Survey Year AY 2018-19 at PB page 388-396.

Based on these observations the Ld. AO held that the assessee manipulated his books of accounts to adjust unaccounted cash or had parallel unaccounted sales or have any other unaccounted business. The Ld. AO further held that bogus sales were credited in the books of accounts. The concluding findings of Ld. AO are at page 5 to 7 of Assessment Order as under:- "Moreover, it is pertinent to mention here that the assessee could not explain the source of cash deposit being SBN's during the demonetization period. It is worthwhile to mention that in the ordinary course, it is human tendency that a person, who possesses a large amount of cash in hand, will deposit the same into the bank account immediately after Peeyush Agarwal, Jaipur. receiving the same and in the instant case, the assessee also have modus operandi, to deposit cash on the regular basis in the last year and upto September 2016 during this year. Looking to the view of principle of natural justice as well as " Human Probability Test", the assessee have average cash balance in the first six months at Rs 32,90,998/-(13,70,156 + 12,79,025 + 11,97,129 + 31,79,723 + 52,75,173 + 74,44,783 = 1,97,45,989/6). aggregate value of Rs 32,91,000/- are accepted as it is a human tendency that when the bank notes having denominational value of Rs 500- and Rs 1000/- were banned by the Government of India by invoking the Specified Bank Notes (Cessation of liabilities) Act, 2017 w.e.f. 09-11-2016, anyone deposited all bank notes, which kept under their ownership, in the bank accounts and no one deposits bank notes on several occasions. In the instant case, Rs 32,90,998/- is average cash balance during the first six months, in the year under consideration is normal and remaining cash deposits aggregating to Rs 6,76,59,000/- (7,09,50,000 - 32,91,000) are hereby treated as unexplained and proposed to be taxed u/s 68 of the Act as cash deposits amounting to Rs 7,09,50,000/- are accepted as explained looking to the view of principle of natural justice and human tendency.

(a) Ld. CIT(A) at page 44 of his order observed that cash sales of the assessee was abnormally increased and cash deposit in bank account from 09-11-2016 to 31-12-2016 increased abnormally. (b) Ld. CIT(A) at page 46 of his order observed that the assessee has not given PAN no. and address of the buyers of the goods and identity of the buyers of goods was disclosed. The Ld. CIT(A) observed that the assessee was making such high cash sales during the year and there is no genuine reason as to why the assessee has not deposited the cash sales in bank account and why he accumulated such huge cash. (c) At page 47- 48 he observed that during assessment proceedings it has been established that the assessee intentionally manipulated his books of accounts so as to adjust his unaccounted cash in his regular books of accounts like an accommodation entry and the assessee maintained parallel unaccounted cash sales or any other business which is running out of books and regularly not offered the same for taxation. Assessee brought the cash in books of accounts under the garb of bogus cash sales. Thus, the books of accounts are to be unreliable. Ld. CIT(A) observed that the AO has not mentioned formal decision of rejection of the books of accounts but at the same time he nowhere mentioned that the books of accounts has been accepted. The Ld. CIT(A) rejected the books of accounts Peeyush Agarwal, Jaipur. in the appeal order on the ground unreliable and unexplained very high cash holdings immediately before demonetization, abrupt and abnormal cash sales, without PAN details, identity of purchaser not established more so when the assessee is bullion trader not a retail jewellery trader. He further observed that the assessee withdrawn cash Rs 3,00,000/- on 06-08-2016 and Rs 5,00,000/- on 08-09-2016 whereas, the assessee has enough cash balance in cash book. Further, the assessee has not submitted the cash book with daily balances. The Ld. CIT(A) observed that upto June 2016 the assessee was regularly depositing the cash in bank, however from July 2016 the pattern has been changed and the assessee started accumulation of cash without any genuine reason. (d) At page 49 of his order held that books of accounts of assessee are cooked up later on and back dating of the sales invoices were made. (e) The Ld. CIT(A) at page 50 of his order mentioned that the assessee has not given any evidence to support increase in cash sales on Dhanteras and Diwali from 28-10-2016 to 30-10-2016 and sales after Diwali from 01-11-2016 to 08-11-2016. (f) The Ld. CIT(A) at page 51 of his order mentioned that the stock register and VAT returns filed by the assessee is prepared by the assessee himself. The Ld. CIT (A) not considered the VAT return as admissible evidence for the reason that the same was filed after the demonetization. He mentioned that VAT return for the quarter 01- 10-2016 to 31-12-2016 was filed after the demonetization and much late on 28-August-2017 and is after thought. VAT return for the Peeyush Agarwal, Jaipur. F.Y. 2016-17 has been filed with much delay on 27-03-2018 and VAT return for the first quarter has been filed in August 2017. He held that genuineness of the sales entry has not been examined by the VAT Department. All these facts shows that originally turnover of the assessee was below VAT limit thus, no VAT quarterly return was filed, and when the cash was deposited in demonetization and later on VAT returns were filed by showing increasing turnover in VAT return artificially to introduce the cash in books of account. (g) At page 52 of his order Ld. CIT(A) mentioned that the assessee has claimed that in the month of March 2016 and April 2016 there was strike of jewellers but the assessee has not filed any evidence to show how the strike affected the business of the assessee to increase the sales in subsequent months and also contradictory to the fact of the case as assessee himself has substantial sales during the period. The Ld. CIT(A) further mentioned that in Sales Register five entries Voucher No. 720 to 724 were found cancelled which shows tinkering in sales register. (h) The Ld. CIT(A) relied various case laws cited at page 52 to 70 of his order as under:- (i) CIT vs. RS Rathore (1995) 212 ITR 390 (Raj.) (ii) CIT vs. P.Mohanakala (2007) 291 ITR 278 (SC) (iii) Nemi Chand Kothari vs. CIT (2003) 264 ITR 254 (Gauhati) (iv) CIT vs. Precision Finance (P) Ltd. (1994) 208 ITR 465 (Calcutta)

The Ld. AR of the assessee filed detailed written submissions and Paper Book containing Page 1-396 and Case Laws Paper containing Page 1-577 and disputed the findings of lower authorities. The bald allegation of ld. AO that the cash deposited in demonetized currency had arisen from some undisclosed source not reflected in the books of account as against the accounted cash sales in books of account and alsowhich is regular feature of the trade of assessee. The conclusion of lower authorities is dehors of any credible evidence/material on record is unsustainable both in law and on facts. Addition so made by the lower authorities Peeyush Agarwal, Jaipur. by treating the impugned cash deposits (arising out of accounted cash sales) as unexplained cash credits/unexplained money merely on the basis surmises and conjectures. The cash so deposited was accumulated cash which was received against/for sales made by him over the period of the year prior to demonetization. As per audited books of account, the cash balance of Rs. 7,09,65,744/- was available with the assessee as on 08-11-2016 shown as under:- Particulars Amount (in Rs. ) Opening Balance as on 28.10.2016 1,54,45,945.73 Add:- Amount received against/for sales during the period from 2,00,48,463.00 28.10.2016 to 30.10.2016 (Dhanteras and Diwali Sales) Add: - Amount received against/for sales from 31.10.2016 to 5,47,76,015.28 08.11.2016 (After Diwali Sales) Less: - Cash Deposited in Bank during period from 28.10.2016 to 1,92,20,000.00 08.11.2016 Less: - Cash Expenses/payments during period from 28.10.2016 to 84,680.00 08.11.2016 Closing Balance as on 08.11.2016 7,09,65,744.01 During the course of assessment proceedings filed all the documents, books of account data and information whatever required by the ld AO. None of the notice of the AO remained as un-complied. The copy of replies submitted by the Assessee to ld AO are placed at PB page 52-64. During the assessment proceedings, the assessee submitted before the ld AO following documents in support of his replies and explanation. S.No Description Copy placed at PB Page No Peeyush Agarwal, Jaipur.

4. Copies of following documents of FY 2016-17, filed along with submission dated 27.12.2019: - A) Assessment order of VAT passed by Commercial Taxes 267 to 272 Department B) Form VAT-10A (Annual return of VAT) 273 to 276 C) Form VAT-10 (Quarterly return of VAT) 277 to 300 The ld AO has not pointed out any defect in the above documents. The ld CIT(A) mentioned that cash book was not filed showing daily balance. Such query was neither raised by ld AO during the Assessment Proceedings nor by CIT(A) during the appeal proceedings. The cash book showing daily cash balance was not filed as it would be very bulky but the fact remains that the assessee maintained books of account on computer and cash book showing daily cash balance could be filed easily if demanded by any lower authorities. The ld CIT(A) mentioned that 5 entries of Invoice No 720-724 found cancelled in sales register which shows tinkering in the sales register. In this regard we submit that the CIT(A) never asked the assessee to explain the reason of cancelled entries. This cancelled entries (PB page 260) are due to genuine human error but the fact remains that all the invoices are serially number and tinkering in sales register was not possible. Rather, the 5 Peeyush Agarwal, Jaipur. cancelled entries show that the assessee is maintaining the books of account in regular course of the business. If the accounts were fabricated then no such cancelled entries would arise in sales register which were prepared on computer. As regard the stock register at PB page 123-242, these are maintained on daily basis and showing daily balance. All the inward entries in the stock register are supported by Invoices/bills and outward entries are supported by sales invoices. No any defect has been pointed out by lower authorities. The assessee has sufficient stock for sale the goods. Therefore, the sales cannot be bogus. If bogus sale is recorded then entry for outgoing of stock would be fictitious and on one hand, it would result the availability of physical stock and on other hand there would no book stock to the extent fictitious entries of outward stock in stock register resulting excess physical stock on physical verification. In the wake of high cash deposited in demonetization currency, the department carried out survey u/s 133A of I.T.Act at business place of assessee just after 6 months from the close of this Financial Year i.e. on 06-10-2017, but no any excess stock was found. No any incriminating material/document was found as the result of survey u/s 133A of the Act to show discrepancy in stock, cash, sales, purchases, and expenses. The assessment of survey year i.e. AY 2018-19 was completed u/s 143(3) of the Act on 15-04-21 at returned income. (Copy of assessment order at PB page 301-302). The copy of replies/explanation filed before Peeyush Agarwal, Jaipur. the ld AO during the assessment proceedings of Survey Year AY 2018-19 is placed at PB page 388-396. During the survey proceedings the department did not find any positive material/evidence to show that the assessee was having any source of undisclosed income or sales of the assessee was not genuine. The department did not find any unaccounted qty. of stock or excess cash in hand which shows that the assessee was carrying any unaccounted business activities. Had the fictitious sales were recorded in stock register i.e. outgoing of stock recorded wihout actual outgoing of stock then the excess stock would be found in the survey but no excess stock was found as the result of survey, which proved that no bogus sales were recorded. In the assessment order of AY 2018-19 (i.e. survey year) no addition was made and on examination of the assessment order for Survey Year your honour will find that actually no excess or short qty. of stock and no excess cash from the business premises of the assessee was found to survey party and this shows that the assessee was not carrying out any unaccounted business activities. During the course of survey, no any positive material/evidence was found to prove that the cash deposited in demonetized currency was not from sales of goods but the same was from some other source. Had, the source of cash deposit in demonetized currency would be the undisclosed income of the assessee and not the sales made by assessee, then obviously during the course of survey the department must had found major discrepancies in to physical stock & cash but Peeyush Agarwal, Jaipur. which was not found. This also shows that the cash deposited in bank in demonetized currency is actually accumulated with assessee from the sales of previous period and the same was duly recorded in his books of accounts. The allegation that that the assessee maintained parallel unaccounted cash sales or any other business, which is running out of the books and regularly not offered the same for taxation is without any basis and in hypothetical manner. In the assessee order/CIT(A) order the AO/CIT(A) could not adduced any single evidence or even a single instance to prove this allegation to be correct. It is worth to point out that the assessment proceeding was made after being carrying out the survey proceeding at the business premises of the assessee and despite of not finding any evidence this hypothetical allegation is posed. All the allegation such as unaccounted cash, bogus recording of sales, unaccounted sales from parallel business, back dating of sales, fabrication of books of account etc proved to be fallacious on physical verification of business place of the assessee by conducting survey u/s 133A of I.Tax Act, Surprisingly, the department conducted survey much before the completion of assessment. The assessment was completed on 28- 12-2019 and whereas the survey u/s 133A was conducted on 06-10-2017 and despite of not finding any evidence these hypothetical allegations were posed without any basis -rather survey proved by evidence that the assessee is maintaining regular books of account.

Peeyush Agarwal, Jaipur. The assessee submitted to the AO and CIT(A) the purchase register copy of which placed at PB page No 243-245. The purchases are from regular and established parties. There are no cash sales except for very minor amount that too also occasionally. No any defect has been pointed out in the purchase register by lower authorities. The assessee filed Copy of the Vat Returns and Assessment Order passed under VAT by Commercial Taxes Department, copy of which is placed at PB page 267 to 300. The ld AO has not pointed out any defect in the VAT returns. The sales declared by the assessee in VAT return was accepted by Commercial Taxes Department. Cash sale is regular feature of the business of the assessee and also general trend of this kind of business and cannot be in same trend year to year or month to month basis. It is a fact that the sales of assessee cannot be same every year and each month and same is subject to various factors such as festival like Diwali, Marriage ceremonies, price of gold, demand of designs. Fashion, etc. of the product of the assessee. During the year the Diwali festival was in October Month and just after the Diwali marriage season/ceremonies took places. Therefore, the monthly sales of the business cannot be predicted and cannot be compared. For justification of higher sales in Oct 2016 and November-2016 (till 07.11.2016) the assessee submitted explanation before the lower authorities that in the month of March-2016 and April-2016 there was strike of Jewellers for 42 days Peeyush Agarwal, Jaipur. and during that period all manufacturing and trading work was temporary shutdown. Thereafter when the strike opened the marriage season was almost passed over, therefore the sales during first six month of the year effectedbadly. Further also when the business operations started after the strike due to increase in the gold prices the sale was not at good figure. Thereafter in the month of October- 2016 the gold price was at lower side in comparison to previous three months and due to Diwali festival and marriage occasions the sale again boosted in this month, therefore the sales of October-2016 was comparatively at higher side. Thus, this is the basic reason of sudden increase in the sales of this month in comparison to sales of same month in previous year. As in the month of October-2016 the price of gold decreased in comparison to previous few months and in the same month the sales of festive season and marriage occasions started, therefore this resulted the dual benefit to the assessee and resulted the huge increase in sale. Therefore, persons who want to purchase gold coins and Jewellery for their marriage ceremonies also purchased the Jewellery in the October month looking to the lower prices of gold. The assessee maintains regular books of account, which are audited by independent and reputed Auditor. The cash sales and the corresponding cash deposits in banks are duly reflected in books of the assessee in the respective years. The assessee maintains the stock register and the sales of the assessee is duly Peeyush Agarwal, Jaipur. supported by sufficient quantity of stock in hands. All the purchases of the assessee are genuine and verifiable. The assessee has filed copy of the stock register before the ld AO and no any defect has been pointed out by the lower authorities in entries in the stock register. It is also relevant to mention here that each deposit in bank comprise the source and once the source has been duly shown in trading a/c, then there remains no reason to treat such deposit as undisclosed income of the assessee. It is not the case of the revenue that assessee was not having the source of cash before depositing in bank account or not having the sufficient stock for making the sales. The ld. AO/CIT(A) did not make any enquiry on the material submitted by the assessee. He merely proceeded on presumption and assumption and make the addition on account of cash deposits without any reason based on material or evidence. Further the allegation that the assessee has intentionally manipulated his books of accounts is not supported by any evidence and merely a blind allegation was made on presumption and assumption. The assessee during the course of assessment proceeding have produced complete audited books of accounts and in such books of accounts no specific defect was pointed out by the ld. AO/CIT(A)- purchases found genuine, expenses founded genuine, stock found genuine openings and closing stock found genuine. The lower authorities neither found any concrete and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of bogus purchases, evidence of non-existing of Peeyush Agarwal, Jaipur. stock as on the date of sales and non-existing cash in the books of account. The sales of the assessee are supported by the sales bills issued to customers and such sales bills are serially numbered. Many bills were already issued to reputed party. If bogus sale is entered by raising fresh bill in back date, how the serial number of previously issued bill can be maintained. The assessee has already issued serially numbered sales invoices to the customers for the sales prior to announcement of demonetisation in regular course of business and the assessee cannot manipulate the sales without changing the sale bills of the previous dates. Therefore, it cannot be alleged that the assessee have manipulated his books of account considering the facts and circumstances of the case of the assessee. Therefore, suspicion on the source of corresponding cash in hand available with assessee, which deposited in bank in demonetize currency is merely on assumption, presumption and without any material and all the allegations were proved fallacious from physical verification of business of the assessee by department by conducting survey u/s 133A on 06-10-2017. Therefore, the suspicion however strong cannot take place of proof. The Ld. AO has no material against the contention of the assessee except presumption and assumption. The human probability cannot supersede the evidence found as the result of survey. The Ld. CIT (A) rejected the books of accounts by ignoring the fact that there is no finding in the assessment order rejecting the books of accounts. The Ld.

Peeyush Agarwal, Jaipur. CIT(A) has not satisfied the condition as required as per provision of section 145(3) of the Act and that too without pointing out any defects in the books of accounts. The ld. CIT(A) merely rejected the book results because the assessee deposited cash in demonetized currency, and that was the reasons to reject the book results which is not a valid reason to invoke the provision of 145(3). Section 145(3) can be invoked when the AO is not satisfied about the correctness or completeness of the accounts of the assessee, when the method of accounting provided in Section 145 (1) has not been regularly followed by the assessee and when the accounting standards notified u/s 145 (2) have not been regularly followed by the assessee. From the observations recorded in the order of the lower authority none of the conditions are satisfied and thus same is not evident from the finding of the lower authority. Not only that the bench also observed that when the provision of section 145(3) is to be invoked the assessment is to be completed as per the manner provided in section 144 and the proper opportunity is required to be given by pointing out the defects in the books of account which we observe that the same is not followed and the order is passed u/s.143(3) of the Act which is also not correct. We get strength to support our view based on the provision of the Act and decision of the Hon’ble Jurisdiction Rajasthan high court in the case of CIT Vs. Pink City Developers [2017 (11) TMI 1082 - RAJASTHAN HIGH COURT] Here we note that out of the sales of wort partial amount was not considered as genuine because the assessee out of those sales deposited the amount in the specified bank notes. Thus, on the same set of records revenue was satisfied for sales hold a view that the assessee has not maintained proper sales records and therefore invoked the provision of section 145(3) of the Act is not correct. Ld. AO or that of ld. CIT(A) has not considered it fit to make the verification of the contention at the place of business / site to verify the contention and thereby tried to collect the corroborative evidence and without doing so part sales is accepted and part not is not correct reasons to reject the books of accounts. Based on these observations ground no. 1 raised by the assessee is allowed. (v) Motisons Jewellers Ltd Vs ACIT order dated 29/09/2022. Hon’ble ITAT at page 123 of its order held that (Copy at Case laws PB Page No 121-173)

The cash deposited in the demonetized currency added as income of the assessee by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in P&L account, therefore there is no occasion to again consider the same as income of the assessee by applying the provisions of section 68 of the Act. It is further relevant to mention here that if the intention of the legislature would be to apply the provisions of section 68 of the Act on the sale transactions also than it such case as per law it would be mandatory to have the identity, genuineness and creditworthiness of each buyer. But the law is not so and in case of sale below to certain limit the assessee was not required to prove all these ingredients of section 68 of the Act and even also in case of sale exceeding to certain limit the assessee is not required to prove the creditworthiness of buyer. Thus, this also strengthen the contention of the assessee that the provisions of section 68 are not applicable on the transaction which are already credited in the P&L and the same can only made applicable on the cash credits such as loans, Peeyush Agarwal, Jaipur. share application etc. It is an admitted fact that in the case of transactions of sales/purchases of goods/investments/assets the creditworthiness of the payee is not relevant for the receiver as the amount was received against the something sold to him, therefore such transactions cannot be examined with point of view of cash credits. Hon’ble Rajasthan High Court in the case of Smt. Harshila Chordia vs Income-tax Officer APPEAL NO. 4 OF 2002 NOVEMBER 7, 2006 [2008] 298 ITR 349 (Rajasthan) (Copy at Case laws PB Page No 26-30) held that no addition could be made in respect of the amount standing in the books of the assessee, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them.

As regarding to finding of the lower authorities that the identity of the customers such as name, address and PAN etc. to whom cash sales was made is not furnished, it is submitted that it is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. It is voluntary to the customer to provide their personal information to the assessee while goods being sold. The assessee cannot enforce or compel to their customer to give their personal information and if the assessee do it without authority of law, this would ruin the business of the assessee. Further in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. Therefore, due to non-furnishing of address and PAN of the customer, the sale made by the assessee cannot be doubted. The cash sales of the previous months, previous years and next month or years was also made on the same trend with Section 69A was not applied by AO, therefore, the CIT(A) cannot apply it even on alternative basis. It is relevant to mention here that as per section 251 (1)(a) of Income Tax Act, 1961 the CIT (A) shall have the power “in an appeal against an order of assessment he may confirm, reduce, enhance or annual the assessment”. As regard applicability of section 69A of I. Tax Act by CIT(A) we submit that the ld AO has made addition u/s 68 of the Income Tax Act, 1961. The assessee has also submitted his submission for Section 68 of the Act. The ld AO being not satisfied with the submission of assessee on section 68, has applied section 68 of Income Tax Act for the addition. The provisions of section 69A specify the authority mentioned as “Assessing Officer”. For the sake of clarity, we are reproducing the provisions of section 69A of I.Tax Act as stood for AY 2017-18 as under:- “69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income 51, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income 51 of the assessee for such financial year.” Therefore, addition under section 69A of Income Tax Act can be made only if the explanation of the assessee is not satisfactory in the opinion of “Assessing Officer”.

Peeyush Agarwal, Jaipur. The Assessing Officer has been defined u/s 2(7A) of Income Tax act as under:- Commissioner 31[or “(7A) Assessing Officer" means the Assistant Deputy Commissioner] 32[or Assistant Director] 31[or Deputy Director] or the Incometax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under subsection (1) or subsection (2) of section 120 or any other provision of this Act, and the 33[Additional Commissioner or] 34[Additional Director or] 35[Joint Commissioner or Joint Director] who is directed under clause (b) of subsection (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;]” Therefore, CIT(A) is not “Assessing Officer” so he cannot change the section 69A from 68 applied by the AO. Section 68 is prescribed for different set of circumstances and section 69A is prescribed for different circumstances of the case. The jurisdiction of CIT (A) in limited to deciding the matter whether the addition u/s 68 is correct or not. In the appellate proceeding the addition cannot be confirmed by applying altogether different section by invoking a section for which satisfaction is required to be by “Assessing Officer”. Reliance placed on the following decision:- a) ITAT Jaipur in the case of Laxmikant Biyani Vs ACIT to 1423/JPR/2024 order dated 26/02/2025 “xxxxx The AO assessed the income as business income utilized in giving the loans after considering the admission of the assessee during post search proceedings, notings of seized records and facts & circumstances of the evidences gathered as a result of search and contra to the findings of the AO, ld CIT(A) held that loans are taxable u/s 69A of the Act and provisions of section 115BBE are applicable over the addition so made by the ld AO. However, the ld CIT(A) has not brought on record any inquiry made by him to support his findings. For the sake of clarity, we are reproducing the provisions of section 69A of I. Tax Act as under: Peeyush Agarwal, Jaipur. “69A Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

In view of the specific definition of assessing officer in section 2(7A) of I.T. Act, ld. CIT(A) is not assessing officer so he cannot invoke the provisions of section 69A for making the addition particularly when the Assessing Officer has satisfied about the Peeyush Agarwal, Jaipur. ingredients of section 69A of Income Tax Act. In the case of the assessee the AO has not framed an opinion that the explanation given by the assessee was not satisfactory but he framed an opinion after examining the facts, documents and explanation that the additions cannot be made u/s 69A but it should have been made as business income of the assessee. On the contrary, ld CIT(A) has not brought on record any inquiry made by him in the appellant proceedings to justify his findings in this regard. In the appellate proceeding the addition cannot be confirmed by applying altogether different section by invoking a section for which satisfaction is required to be by “Assessing Officer” and the assessing officer after considering the detailed reply and documents was satisfied about the ingredients of section 69A. The Income Tax Appellate Tribunal Delhi Bench 'D': New Delhi in (Assessment Year: 201213) Smt. Tripat Kaur (Date of pronouncement 09/10/2018 ) held that: '…If authority is given expressly by affirmative words upon a defined condition, the expression of that condition excludes the doing of the Act authorized under other circumstances than those as defined. It is also established principle of law that if a particular authority has been designated to perform an action on any particular issue, then it is that authority alone who should do that action. We draw support from various decision of Honorable High courts in Ghanshyam K. Khabrani v. ACIT [2012] 346 ITR 443 (Bom), CIT v. SPL'S Siddhartha Ltd. [2012] 345 ITR 223 (delhi )and also of the Honourable supreme court Anirudhsinhji Karansinhji Jadeja v. State of Gujarat [1995] 5 SCC 302 where in hon. Supreme court held as under :— 13. It has been stated by Wade and Forsyth in 'Administrative Law', 7th Edition at pages 358 and 359 under the heading 'SURRENDER, ABDICATION, DICTATION' and Peeyush Agarwal, Jaipur. subheading "Power in the wrong hands" as below: "Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with someone else, or may allow someone else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by parliament is exercised, at least in part, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them ". "Ministers and their departments have several times fallen foul of the same rule, no doubt equally to their surprise....":' Similar issue was dealt by ITAT Chennai Bench in the case of Smt. Sekar Jayalakshmi vs Income Tax Officer [2023] 150 taxmann.com 120 (Chennai Trib.) held that CIT(A) is not empowered to change section under which AO made an addition during assessment. The relevant finding is reproduced as under: “In this case, the Assessing Officer made addition of Rs. 6,00,000/ as unexplained credit. However, the Assessing Officer has not mentioned the relevant section under which, the addition was made, but "unexplained credit" comes under section 68 of the Act. In the appellate order, in page No. 7, para (v), the ld. CIT(A) has noted that "However, I am also in agreement with the appellant that the provisions of section 68 are not applicable to the appellant". Therefore, the ld. CIT(A) treated the addition of Rs. 6,00,000/ as unexplained money under section 69A of the Act and confirmed the addition. Section 68 of the Act deals with "unexplained Credit" in the books of the assessee and section 69A of the Act deals with Peeyush Agarwal, Jaipur. "unexplained money, bullion, jewellery or other valuable article". Both are entirely different. Though the Assessing Officer has not mentioned the section 68 in his order, the very fact that he calls it "unexplained credit" and not "unexplained money" as done by the ld. CIT(A), while he invoked section 69A of the Act, it proves that the Assessing Officer invoked section 68 of the Act. I find merit into the contention of the ld. Counsel for the assessee that there is no power conferred upon the ld. CIT(A) to assess a particular item under different provision of the Act what the Assessing Officer had done without giving a specific notice to the assessee regarding such action. I am of the considered view that law does not permit for such change of provision of law. As per section 250 of the Act, the ld. CIT(A) is empowered to make further inquiry as he thinks fit or may direct the Assessing Officer to make further inquiry and report to the ld. CIT(A). As per section 251(1)(a) of the Act, in appeal against an order of assessment, he may confirm, reduce, enhance or annul the assessment, but there is no such power provided by the law that ld. CIT(A) could change the provision of law qua the item of which assessment was made. Therefore, in the absence of such power, learned CIT(Appeals) could not have treated the addition made under section 69A of the Act. Therefore, the addition made by the ld. CIT(A) under section 69A of the Act is liable to be deleted.”

It is pertinent to mention here that the similar issue has been dealt with and decided by this Bench of ITAT in the case of Motisons Buildtech Pvt. Ltd vs ACIT, Central Circle2, Jaipur vide its order dated 30102017 in (Assessee's appeal) for the Assessment Year 201213 by observing as under: ‘’8.4 We have heard the rival contentions and perused the materials available on record. In this ground, it is noted that the AO made the addition of Rs.3,68,27,500/ out of which the Peeyush Agarwal, Jaipur. ld CIT(A) deleted the addition of Rs. 2,86,27,500/ and sustained the addition of Rs.82.00 lacs as mentioned at para 3.2.2. and 2.1.4.6 & 2.1.4.7 of the ld. CIT(A)’s order (supra). The question arises as to whether the ld CIT(A) can make the addition u/s 68 of the Act or not. For this purpose, the definition of Section 68 of the Act is as under: ‘’Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to incometax as the income of the assessee of that previous year.’ From the above definition, it is noted that Section 68 of the Act does not empower the ld. CIT(A) to make addition under this Act. Thus the addition u/s 68 can only be made by the Assessing Officer. The definition of the Assessing Officer has been provided in Section 2(7A) of the Act which reads as under: [(7A) “Assessing Officer” means the Assistant Commissioner [or Deputy Commissioner] [or Assistant Director] [or Deputy Director] or the Incometax Officer who is vested with the relevant jurisdiction by virtue of directions or orders issued under subsection (1) or subsection (2) of section 120 or any other provision of this Act, and the [Additional Commissioner or] [Additional Director or] [Joint Commissioner or Joint Director] who is directed under clause (b) of subsection (4) of that section to exercise or perform all or any of the powers and functions conferred on, or assigned to, an Assessing Officer under this Act ;] Thus the ld. CIT(A) is not the Assessing Officer as per Income Tax Act. Therefore, the ld. CIT(A) does not have any legal sanction to make the addition u/s 68 of the Act. “ To attract deeming provision of sections 69A of the Act the foremost requirements that is to be followed is that the income should be from any other source rather than from its regular source of earning. Further, ld CIT(A) has not issued notice u/s 251(2) of I.Tax Act as this finding is amount to enhancement of assessment/tax liability. The provisions of section 251(2) as stood for the assessment years under consideration is as under: “2) The Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction.”

We also find that the Department has raised the solitary ground for deletion of addition of Rs.1,03,00,000/ made by the AO by applying the provisions of Section 68 and taxed as per provisions of Section 115BBE of the Act. We found that all the points or allegation noted by the AO is duly considered and discussed by the ld. CIT(A) while dealing with the appeal of the assessee. The revenue did not pin point which of the findings of the ld. CIT(A) is incorrect or against the facts placed on record by the assessee. We noticed that the AO has given details of cash deposited in bank at Page 3 of the assessment order. We found that the cash amounting to Rs, 91,00,000/ was only deposited in demonetization currency and cash Rs. 12,00,000/ was deposited in nondemonetized currency on 28.03.2017, and this amount Rs. 12,00,000/ was offered for Income under “Pradhanmantri Garib Kalyan Yojna2016”. The assessee has filed copy of Form 1 and Form 2 at APB Page 91 to 93 to support his contention. Therefore, the addition of Rs. 12,00,000/ in patiently wrong, tantamount to double taxation and deserves to be deleted. We noticed that during the course of assessment proceedings, the AO examined the books of account and she has not rejected the books of account of the assessee and provisions of section 145(3) were not applied. During the year under consideration the assessee deposited Rs. 91,00,000/ in Peeyush Agarwal, Jaipur. demonetized currency. The cash so deposited was accumulated cash which was received against/for sales made in the proprietorship concerns of assessee M/s Dinanath Raj Kumar, Kanpur and M/s D. N. Diamonds, Jaipur by it over the period of the year prior to demonetization, majorly during the period from 28.10.16 and 29.10.16 and such sales was part of total sales credited in trading a/c and the assessee has already offered income on such sales in Trading Account by reducing the cost of sales from sales. The AO herself accepted the sales shown in trading a/c and has not disturbed the cash sales so declared by Assessee and the sales of assessee duly supported by the sale bill and invoice and duly verifiable form books of accounts including stock register and considering availability of stock on hand, it proved that the sales made by the assessee are genuine sales recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. The assessee has filed sufficient evidence to substantiate his sales. He has filed (1) Copy Cash book (Copy at APB Page 39 to 45) and sales bills along with submission dated 10.12.2017 (2)Copy of stock register for the FY 201516 and 201617 (Copy of the same is at APB Page 50 to 72 which shows that before making the sale the sufficient stock was available with assessee (3) Copy of VAT Returns APB Page 80 to 85 and VAT assessment order of proprietorship concern M/s Dinannath Raj Kumar, Jaipur at APB Page 88 to 90. The VAT department accepted the sale of the assessee. Thus the assessee substantiated its claim from the documentary evidence and also with the facts. In letter dated 06.06.2019 Copy at APB Page 46 to 47 the assessee submitted to AO that “There was increase of cash sale in month of Oct. and Nov.2016 was due to Karva Chouth, Dhanteras and Diwali sales (Festival Season). Further the assessee has explained the AO that, the firm Dinanath Raj Kumar has been started in the year 2015 itself and during the FY 201516 the mother of the assessee has expired and hence the assessee was not able to setup his business at Kanpur and hence the sale was low in the year FY 201516 as compared to sales in 201617. The assessee is engaged in the business of Jewellery and gold. The higher cash sales on festival season Karva Chouth, Dhanteras and Diwali is general feature in the trade of the assessee and such sales is also apparent from the cash book submitted during the course of assessment proceedings. Looking to the above facts and circumstances of the case the sale made by the assessee is genuine which is executed after giving the goods to the customer, duly reflected in the invoice issued, assessee having sufficient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT and the revenue has not brought any positive material to prove it as bogus sales. It is not the case of the A.O. that the assessee did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. As regard to not providing the name, address and PAN of the customers to whom cash sales was made the assessee explained that the sales were below the prescribed limit so it is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of Peeyush Agarwal, Jaipur. business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. We find the explanation of the assessee is genuine and the sales cannot be doubted on surmises and conjectures merely due to nonfurnishing of address and PAN of the customer. The AO did not make any enquiry on the material submitted by the appellant. She merely proceeded on statistical analysis to make the addition on account of cash deposits. 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 sale, evidence of bogus sales, evidence of bogus purchases, and nonexisting cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstance of the case is not accepted and we see no reason to find any fault in the detailed reasoned finding in the order of the ld. CIT(A). Thus, we sustain the order of the ld. CIT(A) and based on these observations the appeal of the revenue in stands dismissed. (iv) Hon’ble ITAT Jaipur Bench Jaipur in the case of ACIT V/s Mahendra Kumar Agarwal (ITA No. 172/JP/2022) dated 22.11.2022 it is held that: - (Copy at Case laws PB Page No 174-230) it is apparent that the assessee had cash balance of Rs. 1,41,70,921.45 as on 0811 2016 which was generated from cash sales and such sales was part of total sales credited in trading a/c and the assessee has already offered income on such sales in Trading Account by reducing the cost of sales from sales. The AO has not pointed out any defect in the cash books and other books of account produced before her. The AO herself accepted the sales shown in trading a/c and has not disturbed the cash sales so declared by assessee and the sales of assessee duly supported by the sale bills and invoices and duly verifiable from books of accounts including stock register and considering availability of stock in hand, it proved that the sales made by the assessee are genuine sales duly recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. The assessee has filed sufficient evidence to substantiate his sales. He has filed (1) Copy Cash book (Copy at APB Page 93 to 107) and sales Register APB at page 4769 comprising the date wise Peeyush Agarwal, Jaipur. transaction of sales and cash receipts (2) Monthly summary of stock register (Copy of the same is at APB Page 108 to 120 which shows that before making the sale the sufficient stock was available with assessee (3) Copy of Assessment Order of VAT APB Page 121 to 127. The VAT department accepted the sales of the assessee. Thus the assessee substantiated his cash receipts from sales from the documentary evidence and also with the facts. The assessee explained the AO that the assessee’s contention of cash sales is duly supported with own previous history and trend that cash sales & corresponding cash in hand have been a regular feature of the assessee’s business since the past several years. The cash receipts against sales in FY 201516 was of Rs. 2,45,73,510/ while in the FY 201617 the year under consideration the same was of Rs. 2,57,31,459/ which is more or less similar to the previous year cash sales. The month to month sales varies due to demand in market, festival seasons, fluctuation in gold prices and for several other factors. Further in previous year also during the period 09.11.2015 to 31.12.2015 the assessee deposited total cash of Rs. 1,23,00,000/ in his bank accounts and in comparison to that during the period 09.11.2016 to 31.12.2016 the assessee deposited total cash of Rs. 1,41,32,000/ which shows increase by 14.89% over the previous year which is quite reasonable looking to the fact that overall sales of the assessee in comparison to previous year have increased by Rs.6,63,12,037/ which is 59% as explained by the assessee to AO vide letter dated 26/12/2019 copy at APB page 4044. The assessee has justified higher sales in Oct 2016 by submitting letter dated 28/12/2019 to AO copy place at APB page 4546. The assessee submitted that on 06.10.2017 the income tax department conducted survey u/s 133A of the Act at the business premises of the assessee. During the survey proceedings the department did not find any positive material/evidence to show that the assessee was having any source of undisclosed income or sales of the assessee was not genuine. The assessee is engaged in the business of Jewellery and gold. The higher cash sale on festival season Karva Chouth, Dhanteras and Diwali and marriage season is general feature in the trade of the assessee and such sales is also apparent from the cash book submitted during the course of assessment proceedings wherein the AO has not found any defect. Looking to the above facts and circumstances of the case the sales made by the assessee is genuine which is executed after giving the goods to the customer, duly reflected in the invoice issued, assessee having sufficient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT and the revenue has not brought any positive material to prove it as bogus sales. It is not the case of the A.O. that the assessee did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. As regards not providing the name, address and PAN of the customers to whom cash sales was made, the assessee has explained that the sales were below the prescribed limit so it is not compulsory or mandatory under the Income Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. The assessee Peeyush Agarwal, Jaipur. further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee and such practice was accepted by the AO. We find the explanation of the assessee is genuine and the sales cannot be doubted merely on surmises and conjectures on the ground of non furnishing of address and PAN of the customer. The AO did not make any enquiry on the material submitted by the appellant. She merely proceeded on statistical analysis to make the addition on account of cash deposits. 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. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstances of the case is not accepted and we see no reason to interfere in the order of the ld. CIT(A). Thus, we sustain the order of the ld. CIT (A) with the observations above. The appeal of the revenue stands dismissed.

(xii) Deepak Sharma v/s ACIT Circle 43(1) in held as under:-(Copy at Case laws PB Page No 575-577) We have heard both the parties and perused the records. At the time of hearing, Ld. Counsel for the assessee submitted that once the purchases declared in the books of account were accepted, there is no basis to treat the sales made out of such purchases as unexplained cash credits taxable under section 68 of the Act. It was further submitted that the cash deposits which has already declared in the return of income as part of total sales and that it amounts to double taxation of the same amount. It was further submitted that even assuming that the additions were warranted under section 68 of the Act, the Ld. CIT(A) has erred both on facts and in law in confirming the demand computed in accordance with rate specified in section 115BBE of the Act as amended by Taxation Laws (Second Amendment) Act, 2016. Ld. DR relied upon the orders of the authorities below. We find that Ld. CIT(A) has not disputed the sales made which were duly disclosed in VAT return and also in books of accounts maintained by the assessee audited and also under section 44AB of the Act, no adverse inference could be drawn in respect of the declared sales by the assessee. We further note that once the purchases declared in the books of accounts were duly accepted then no subjective assumption and presumption could be made a basis to assume, allege and conclude that sales made out of such purchases were unexplained cash credits taxable under section 68 of the Act. It is settled law that once the books of accounts, sales have been accepted, the same could not be regarded as unexplained credits. It is also noted that aforesaid sales as made by the assessee were supported by the availability of stock in the books of accounts whose availability is not disputed and is otherwise too supported by Peeyush Agarwal, Jaipur. genuineness of creditors and also sales bills maintained. In view of the aforesaid peculiar facts and circumstances of the case, we are of the considered view that addition in dispute confirmed by the Ld. CIT(A) deserve to be deleted. We hold and direct accordingly. So far as assessee's assessment u/s. 115 BBE of the Act is concerned, Hon'ble Madras High Court in SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) has already settled the issue against the department that the law applies to the transaction on or after 01.04.2017 only. Ordered accordingly.

1) “Under the existing provisions of the Incometax Act, certain unexplained amounts are deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate applicable to the assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption limit. Therefore, in these cases, no tax can be levied on these deemed income if the amount of such Peeyush Agarwal, Jaipur. deemed income is less than the amount of basic exemption limit and even if it is higher, it is levied at the lower slab rate. 2) In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed to tax the unexplained credits, money, investment, expenditure, etc.,which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed to provide that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing deemed income under the said sections. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 201314 and subsequent assessment years.” Thus, the intention of the Legislature behind introduction of section 115BBE was not to bring to tax genuine receipts already offered to tax as income by the Assessee at higher tax rates. Such an interpretation would lead to recurring attempts on the part of the revenue authorities to reject genuine explanations offered by the assessee with respect to sums credited/offered as income in its books as unsatisfactory solely to extort higher rates of taxes thereon u/s 115BBE of the Act. The lower authorities in exercising his powers u/s 68/69A of the Act is not vested with unfettered powers to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjecture. The tax authorities are bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by the taxpayer. From the facts of the case at hand, it is clear that the lower authorities have acted unreasonably and capriciously in rejecting the genuine explanations offered by the Assessee in respect of the impugned cash deposits as unsatisfactory solely with the aim of fastening exorbitant tax liability on the assesseeunder the garb of section 68/69A of the Act.

On the other hand, the ld. CIT- DR vehemently argued and supported the order of the ld. CIT(A). She submitted that the assessee has not submitted all the details and evidences to justify the genuineness of cash sales. The assessee has not revealed the identity of buyers, their PAN and address and therefore, the same has been considered as unexplained credit. The sales pattern as observed by the AO is very much abnormal in the year under consideration and more particular in the Month Oct 2016 and from 01-11-2016 to 08-11-2016. She submitted that the ld AO has pointed out that the cash deposit in bank account by the assessee from 01- 04-2016 to 08-11-2016 was Rs. 3,64,95,000/- which was almost similar to cash deposited by the assessee in previous year from 01-04-2015 to 08-11-2016 Rs. 3,67,24,500/- but it suddenly abruptly increased in the period 09-11-2016 to 31-12- 2016 in comparison to Cash deposit in bank in the same period in previous year. The cash deposit in bank by the assessee during the period 09-11-2016 to 31-12- 2016 was Rs. 7,09,50,000 which is abnormally high in comparison cash deposit in bank by the assessee Rs. 1,46,66,800/- from 09-11-2015 to 31-12-2015. As regards the strike in the month of March and April 2016 by jewellers, how it affected the sales of subsequent months, this has not been explained by the assessee with Peeyush Agarwal, Jaipur. evidence. The contention of lowering of gold price in Oct 2016 is not supported by evidence. The turnover of the previous year also does not justify the huge cash sales recorded during this year. It is the very much clear finding of the lower authority that there is abnormal pattern of cash sales in the period immediately before the demonetization and therefore, that sale has not been considered as explained. The assessee has not given any plausible reason for accumulation of cash. The assessee did not justify what prevented him to deposit the cash in bank on regular basis. The ratio laid down in the cases cited by ld CIT(A) clearly applicable to the case of the assessee.

We have heard both the parties and perused the materials available on record. It is noticed from the records that the assessee is engaged in the trading of gold jewellery and bullion items in name of M/s Kalakriti Jewellers and the place of business (Showroom) of the assessee is situated at 197, Johari Bazar, Jaipur, which is considered a hub for bullion and jewellery trading. The assessee filed his Income Tax Return on 27.10.2017 declaring of total Income of Rs. 11,74,830/-. The books of account of business concern of the assessee M/s Kalakriti Jewellers are audited by Chartered Accountant. The assessee filed copy of audit report and audited Profit and Loss Account and Balance sheet at Paper Book page 5 to 34. It is noticed from the records that the case of the assessee was taken up for scrutiny u/s 143(3) of the Income Tax Act 1961 based on computer assisted selection for scrutiny (CASS) and accordingly notice U/s 143(2) dated 13.08.2018 was issued through ITBA to the appellant (Copy at PB page 35-38). Thereafter, the Notice u/s 142(1) dated 28-08-2019 with query letter was issued (Copy at PB page 39-43). In compliance with the said notice the assessee submitted all the required details/Information through e-proceeding vide letter dated 18-10-2019 (Copy at PB Peeyush Agarwal, Jaipur. page 52-54). A further notice u/s 142(1) dated was issued on 14-11-2019 with a letter seeking comparative chart of cash deposit, month wise chart of cash sales and cash deposits and other details prescribed in the letter (Copy at PB page 44- 48). In compliance with the said notice the assessee submitted all the required details/Information through e-proceeding vide letter dated 18-10-2019 (Copy at PB page 55-59). A further notice dated 07-12-2019 u/s 142(1) was issued with an Annexure seeking month wise details of sales and purchases (Copy at PB page 49- 51). In compliance with the said notice the assessee submitted details vide letter dated 10-12-2019. (Copy placed at PB page 60). The assessee made further submission to ld AO vide letter dated 27-12-2019 (Copy placed at PB page 61-62) giving justification of Cash sales and also bringing to the notice of the ld AO that the department has carried out survey u/s 133A over the business premise of the assessee and has not found any incriminating material or evidence. The relevant para of the letter of the assessee is reproduced as below:-

The assessee further filed a letter before the ld AO dated 28-12-2019 (Copy placed at PB page 63-64) explaining the reasons of high sales. Thus, in compliance to notices and query letters issued by the ld AO, the assessee filed all the details/ information from time to time (Copy at PB page 52 to 64) along with copy of cash book (01-04-2016 to 31-03-2017), daily stock summary (01-04-2016 to 31-03- 2017), copy of purchase register (01-04-2016 to 31-03-2017), copy of sales register (01-04-2016 to 31-03-2017), month-wise details of sales and purchases, copy of assessment order of VAT passed by Commercial Taxes Department and VAT returns at (Copy at PB page 65 to 302) . Further, the assessee filed before ld AO the copy of bank statement for the period 01-04-2016 to 31-03-2017 alongwith letter dated 18-10-2019 annexed as page no 38-119 with this letter. During the Peeyush Agarwal, Jaipur. year under consideration, the assessee deposited the amount of Rs. 7,09,50,000/- in demonetized currency i.e Specified Bank Notes (herein after referred as "SBNs") in his bank accounts which was part of sales declared in the Trading Account. The ld AO held that the cash sales of the assessee has increased abnormally and exceptionally more particularly in the month of Oct 2016 and from 01-11-2016 to 08-11-2016 and cash deposit in bank accounts in SBNs after demonetization of currency has increased abnormally which is not possible in normal course of the business and the assessee was engaged in the parallel unaccounted cash sales or any other business and has deposited his unaccounted cash in bank accounts in the garb of bogus sales. On the basis of average cash sales, the ld AO treated Rs. 32,91,000/- as explained money and balance Rs. 6,76,59,000/- (7,09,50,000- 32,91,000) were held as unexplained u/s 68 of the Act taxed as provisions of section 115BBE of I.Tax Act. We noticed that the ld AO at one hand held that balance Rs. 6,76,59,000/- (7,09,50,000-32,91,000) as unexplained u/s 68 and on other hand in same para he held cash deposit amounting to Rs. 7,09,50,000/- are accepted as explained looking to the view of principle of natural justice and human tendency. When Rs. 7,09,50,000/- is held as explained than how Rs. 6,76,59,000/- can be held as unexplained.

As part of the business practice, appellant does both cash sales and sale through account payee cheque/online transfer. However, dealing in cheque is done only with customers known to the appellant as with unknown customers risk of non-realisation of money is usually high. Thus, considering the nature of trade and the inherent risk involved the appellant inevitably has to indulge in transactions of cash sale. It is noticed that in support of the addition made by ld AO and sustained by ld CIT(A) allegations against the assessee were made by ld AO that the assessee has manipulated books of account to adjust unaccounted cash, the assessee has unaccounted sales or have any other business, bogus sales were credited in books of account. The ld CIT(A) sustained the addition by alleging that the sales through which cash of Rs. 6,76,59,000 was introduced in the books of accounts are unexplained and there is back-dated sales billing. We noticed that in the wake of high cash deposited in demonetization currency, the department carried out survey u/s 133A of I.T.Act at business place of assessee just after 6 months from the Peeyush Agarwal, Jaipur. close of this Financial Year i.e on 06-10-2017, but no any incriminating material/document was found as the result of survey u/s 133A of the Act to show discrepancy in stock, cash, sales, purchases, and expenses and books of account. The assessment of survey year i.e. AY 2018-19 was completed u/s 143(3) of the Act on 15-04-2021 at returned income. (Copy of assessment order at PB page 301- 302). The copy of replies/explanation filed before the ld AO during the assessment proceedings of Survey Year AY 2018-19 is placed at PB page 388-396. The copy of the statements of the assessee recorded u/s 133A is placed at PB page 382-387. During the survey proceedings the department did not find any positive material/evidence to show that the assessee was having any source of undisclosed income or sales of the assessee was not genuine. The department did not find any unaccounted qty. of stock or excess cash in hand which shows that the assessee was carrying any unaccounted business activities. Had the fictitious sales were recorded in stock register i.e. outgoing of stock recorded wihout actual outgoing of stock then the excess stock would have been found in the survey but no excess stock was found as the result of survey, which proved that no bogus sales were recorded. For example if the assessee purchases 1kg gold and entered as inward in stock register. The stock register would show the balance of Gold in hand 1 kg. If fictitious sale of 1 kg is recorded in stock register by making entry of 1 kg in outward side of stock register, the stock register would show NIL Balance. Since the sales recorded is fictitious, the physical stock of 1 kg gold would be lying in the business place of the assessee against NIL stock in stock register,and if physical verification of the stock is made an excess stock by 1 kg would be found. In the assessment order of AY 2018-19 (i.e. survey year) no addition was made and returned income was accepted passed u/s 143(3) of the Act. Had the source of cash deposit in demonetized currency would be the undisclosed income of the assessee Peeyush Agarwal, Jaipur. and not the sales made by assessee, then obviously during the course of survey the department must had found major discrepancies in to physical stock, cash and documents but the same was not found. This also shows that the cash deposited in bank in demonetized currency is actually accumulated Cash with assessee from the sales of previous period and the same was duly recorded in his books of accounts. The allegation that that the assessee maintained parallel unaccounted cash sales or any other business, bogus sales, back-dating of sales is without any basis and in hypothetical manner, proved to fallacious by the outcome of the Survey u/s 133A of the Act. In the assessment order/CIT(A) order the ld AO/ Ld CIT(A) could not adduced any single evidence or even a single instance to prove this allegation to be correct. It is worth to point out that the assessment proceeding was made after being carrying out the survey proceeding at the business premises of the assessee and despite of not finding any evidence in Survey u/s 133A this hypothetical allegation was posed. All the allegation such as unaccounted cash, bogus recording of sales, unaccounted sales from parallel business, back dating of sales, fabrication of books of account etc proved to be fallacious on physical verification of business place of the assessee by department by conducting survey u/s 133A of I.Tax Act. The department conducted survey much before the completion of assessment. The assessment was completed on 28-12-2019 and whereas the survey u/s 133A was conducted on 06-10-2017 and despite of not finding any evidence on physical verification of business premises, these hypothetical allegations were posed without any basis -rather survey proved by evidence that the assessee is maintaining regular books of account and does not have any source of generation of cash from undisclosed income. Moreover, the assessee has regularly made cash sales during the preceding years also which is sufficient to prove that the accounts of the assessee are not Peeyush Agarwal, Jaipur. fabricated. Merely because there is significant cash deposition during the demonetization period cannot be the ground for rejecting such cash sales more than when the sufficient stock was available with the assessee and purchases of the assessee are not in doubt. From the stock records, purchase register, and sales register it is beyond doubt that the assessee-appellant had sufficient stock to conduct such cash sales. There is no reason for drawing such presumption that the appellant under the garb of such cash sales had attempted to convert his undisclosed income to disclosed income when the same is supported by delivery of goods, availability of stock, purchases is genuine and no discrepancy in stock, cash and documents was found as the result of survey u/s 133A of the Act. Further, the assessee’s books of account are audited by Chartered Accountant, who has certified the correctness of the books of account. The cash balance of Rs. 7,09,65,744/- as on 08-11-2016 was available in the audited books of account. The assessee has produced Copy of the cash book before the AO and CIT(A) for the period 01-04-2016 to 31-03-2017. The lower authorities have not pointed out any defect in the cash book except observing by ld CIT(A) that cash book showing daily balance was not produced but the fact remains that lower authorities never demanded to furnish the copy of the cash book showing daily cash balance. We noted from the copy of the cash books produced before the lower authorities that it is computer generated and if asked to produce the cash book showing daily cash balance, the same could be easily submitted to Ld AO/Ld CIT(A). The assessee submitted the copy of sales register for the period 01-04-2016 to 31-03-2017. The CIT(A) on the basis of 5 cancelled entries on 08-11-2016 against Invoice No 720 to 724 concluded that the assessee was tinkering the sales register. The A/R of the assessee has explained that the ld CIT(A) drawn the adverse conclusion without providing opportunity to explain the matter. The ld CIT(A) never raised any query Peeyush Agarwal, Jaipur. to the assessee in this regard. We noticed that except these five cancelled entries on 08-11-2016, there is no any alternation/modification in the Sales Register. The sales invoices are serially numbered and properly entered in the sales register. We agree with the explanation of A/R of the assessee that the cancelled entries are due to genuine human error but the fact remains that all the invoices are serially numbered and tinkering in sales register was not possible without changing the serial number of sales invoices which have already issued to the various parties also. Rather, the 5 cancelled entries show that the assessee is maintaining the books of account in regular course of the business. If the accounts were fabricated then no such cancelled entries would found in sales register which were prepared on computer. The submitted the daily stock summary for the period 01-04-2016 to 31- 03-2017 before the ld AO and CIT(A), both the lower authorities have not pointed out any specific defect in the stock summary submitted by the assessee. However, the ld CIT(A) held that the stock register was prepared by assessee himself and found to be incorrect and not reliable in view of the fact that bogus sales were recorded in the stock register. We held that this is not a valid ground to reject the stock register without pointing out any specific defect. The department has carried out physical verification of stock by conducting survey u/s 133A of the assessee on 06-10-2017 and on physical verification no discrepancy in stock was found. If the fictitious entries against the sales of the goods were made in the stock register, than excess stock (i.e physical stock more than the book stock) would be found as the result of survey u/s 133A of the Act but no such excess stock was found on physical verification of stock made by the department by entering into the business premises of the assessee. The allegation of ld CIT(A) as regard the recording of bogus sales is not based on material or evidence but on presumption and assumption. The daily stock summary clearly shows that the sales of the goods Peeyush Agarwal, Jaipur. were made out of the stock in hand available in stock register. The assessee has produced purchase register before the lower authorities. The ld AR submitted that all the purchases are from regular and established parties and supported by the bills and invoices and there is no cash purchase except in few cases that too for minor amount. We notice that the lower authorities have not pointed out any defect in the purchase register and has not doubted on the genuineness of the purchases recorded in the books of account. We further note that once the purchases declared in the books of account were duly accepted then no subjective assumption and presumption could be made a basis to assume, allege and conclude that sales made out of such purchases were unexplained cash credit under section 68 of the Act. We further notice that the assessee has filed copy of Vat Assessment Order (PB page 267-272), Annual Vat returns for the period 01-04-2016-31-03-2017 (PB page 273-276) and quarterly return from 01-04-2016 to 30-06-2016 (PB page 277- 282), from 01-07-2016 to 30-09-2016 (PB page 283-288), from 01-10-2016 to 31- 12-2016 (PB page 289-294) and 01-01-2017 to 31-03-2017 (PB page 295 to 300). Lower authorities have not disputed the turnover declared in the Quarterly and Annual Vat Returns. However, the ld CIT(A) held that Vat Return for Oct 2016 to Dec 2016 (3rd Quarter) was filed after demonetization and was filed on 28/08/2017, Vat Return of Ist Quarter 01-04-2016 to 30-06-2016 was filed in August 2017 and Annual Return for FY 2016-17 was filed on 27-03-18. On the basis of late filing of the Vat returns he held that originally the turnover of the appellant was below VAT limit and later on VAT return was filed showing increased turnover to artificially introduce the cash in the books of account. We noticed that the Ld CIT(A) has ignored the actual date of filing of Vat Returns as mentioned in Vat Assessment Order (PB 267). In the VAT assessment order, the date of filing of Vat Returns is mentioned as under:-

The addition under section 68 on account of cash deposits could not be made simply on the reason that during the demonetization period, cash deposits vis-à-vis cash sales ratio was higher. If customers purchased jewellery in cash which has been duly recorded in the books of account of the Appellant and also tallying with the availability of stock, then simply because there were huge cash sales in that particular period cannot be the reason for treating it as undisclosed income from undisclosed sources. To this effect we get support from the decision of our own Jurisdictional Hon’ble Rajasthan High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Raj) wherein it has been held that “Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them”. The bench also noticed that ld. CIT (A) contentions are only based on conjectures and surmises and are devoid of any merit of the case of the assessee-appellant. Further, Peeyush Agarwal, Jaipur. the income of the assessee has to be computed by the AO based on available material on record and it is very important to have direct evidence to make an addition rather than circumstantial evidence, probabilities or possibilities. It is duty of the AO to examine the same in the light of the available evidence. In the instant case, the AO and the ld. CIT(A) concluded the findings based on conjectures and surmises even ignored the outcome of survey conducted by the department u/s 133A on 06-10-2017. There cannot be better evidence more than the outcome/result of physical verification of business premises by the department. The AO has to establish the link between the evidence collected by him and the addition to be made. The entire case has to be depend on the rule of evidence, the assessee in this case explained the source of bank deposits is from cash sales and the same cannot be added u/s. 68 as held in the case of Smt. Harshila Chordia v. ITO (Supra). The allegation made by Ld. CIT (A) and Ld. AO regarding the fabrication of cash sales transactions on the assessee is without any basis, documents or any supporting evidence. The finding of A.O. that assessee could not substantiate an increase in cash sales with documentary evidence is based only on suspicion, guesswork and surmises which cannot be sustained in law. Merely because there was a variation in the cash sales during the alleged period compared to the previous year would not mean that the Assessee has inflated his cash sales to cover up his undisclosed income. The another contention of the department is that the total turnover of the assessee has increased substantially as compared to the previous year and the majority of the turnover is from cash sales during the year and that too during the Month Oct 2016 and 01-11-2016 to 08-11-2016 and that the assessee has not submitted any details like the name, address PAN No. of the buyer to establish the genuineness of high cash sales during the year under consideration and cash sales shown by the assessee during the year is unrealistic as Peeyush Agarwal, Jaipur. corresponding amounts of cash deposits were not found in earlier years is not tenable. The appellant did not collect the details of the customers such as PAN No., name and address in respect of the cash sales below Rs. 2 lakhs as it was not required as per law. The appellant assessee, during the festive season of Diwali from 28.10.2016 to 30.10.2016, had made significant cash sales of Rs.2,00,48, 463/-and after Diwali (from 31-10-2016 to 08-11-2016) Rs. 5,47,76,015.28. The assessee explained that on 08-11-2016 i.e. on the day of demonetization there was no sales as his shop remained closed because of the ceiling of shop was fallen down in the night of 07-11-2016, and this fact is also evident from the sales register wherein no sale is recorded for the date 08-11-2016 to 15-11-2016 (PB page 260) and cash sales was also not recorded from 08-11-2016 to 03-01-2017 as the Sale Counter of the show room was not in operation. The sale of assessee from 28-10-2016 to 07-11-2016 were before demonetization and that too out of genuine stock available with the assessee so the same cannot be doubted on presumption and assumption without having any evidence. The another contention of the Ld. CIT (A) that the assessee has not given the PAN No , address and identity of the buyers were not disclosed to the ld AO. There is no prohibition under the law to make sale transactions not exceeding Rs. 2 lakhs without PAN, address and identity. The assessee by selling the goods in cash did not violate any of the provisions of the Income-tax Act, 1961 and Ld. CIT (A) has not mentioned any provisions of the Act/Rules which having been violated by the assessee while undertaking such cash sales without PAN and address. Moreover, cash sales made by the Appellant were duly supported by valid invoices, out of the genuine purchases and stock available and the books of accounts were duly audited by the Chartered Accountant. Therefore, due to non-furnishing of address and PAN of the customer, the sale made by the assessee cannot be doubted.

Peeyush Agarwal, Jaipur. The cash sales of the previous months, previous years and next month or years was also made on the same set of particulars, documents and records. The lower authorities have doubted only the sales made and utilized for depositing the demonetized currency (SBNs). We noted that during the FY 2016-17, the total cash sales of the assessee were Rs. 11,51,99,917/- and total cash deposits in bank were Rs. 11,67,95,000/-. The lower authorities treated the cash deposit in bank account to the extent Rs. 4,91,36,000/- as explained and Rs. 6,76,59,000/- as unexplained. The assessee is maintaining same set of records on entire cash sales. On the same set of documents, on the same facts and circumstances sales of the previous year was accepted as genuine and part of the cash sales of during the FY 2016-17 of Rs. 4,91,36,000/- were also treated as genuine sales and taxed at normal rate of taxation as business receipts and part of the cash sales Rs. 6,76,59,000/- was treated as unexplained cash credit u/s 68 of ld AO and CIT(A) and alternatively unexplained money etc u/s 69A as held by the ld CIT(A) and taxed as special rate of taxation u/s 115BBE. The only basis of different treatment by lower authorities was nature of currency i.e. SBNs deposited in bank. Whatever deposit was made in bank accounts in legal tendered currency was treated as explained and whatever deposit was made in demonetized currency (SBNs) was treated as unexplained. Thus, the lower authorities are blowing hot and cold in same stream accepting and rejecting the explanations offered by the assessee with respect to the transactions of identical nature at their sheer convenience merely on the basis of surmises and conjecture without any evidence or material on record and also ignoring the outcome of survey u/s 133A conducted by the department. The ld CIT(A) noticed the cash withdrawal by the assessee from bank Rs 3,00,000/- on 06-08-2016 and Rs 5,00,000/- on 08-09-2016 and held that the cash withdrawal by the assessee inspite of cash in hand in cash book which shows that Peeyush Agarwal, Jaipur. the assessee actually did not have cash balance as shown by cash book. We agree with the contention of ld AR that the ld CIT(A) has not provided even an opportunity to explain the reason of cash withdrawal on these two dates by the assessee and without providing an opportunity to explain the matter, an adverse inference drawn against the assessee which is against the principle of natural justice. The AR of the assessee submitted that the assessee has specific reasons for non-depositing the cash immediately in his bank accounts, which was that the assessee had huge unsecured loans from several parties and some of them were pressurizing to the assessee for repayment of loans prior to their agreed due date. The assessee is under apprehension that if he deposits the cash in bank account and maintains the balance in bank account, the loan creditors may lodge the undated cheque, which given to them as a security of loan, and may withdraw the funds from bank account. This would lead to disturb the entire liquidity of the business and planning of the assessee. Therefore, the assessee deposited the cash in bank account as and when he required in the bank account for getting clear the cheques issued or to be issued towards purchases of Gold, Gold Jewellery and expenses. This fact is well apparent from the books of accounts of the assessee on examination of which its reveals that mostly cash deposited in the bank account was utilized for making the payment towards purchases of Gold & Gold Jewellery and some minor towards payment of expenses etc. This was also a reason of cash withdrawal by the assessee from bank Rs 3,00,000/- on 06-08-2016 and Rs 5,00,000/- on 08-09-2016 as he do not want to maintain balance in bank account. We find that the reasons advanced by the ld AR is a plausible explanation and decision to keep the cash in hand or to deposit on bank is decision of the person who is dealing to such affairs and the department cannot put its step into the decision of businessman and each transaction should be analysed with the point of Peeyush Agarwal, Jaipur. view of the businessman, generally prevailing practice in the trade and its acceptability in the eye of law. A transaction cannot be treated as non-genuine for wants of the details which are not required to obtain and keep as per the law.

We noticed that the Ld. AO mentioned that the assessee manipulated the books of account to adjust his unaccounted cash and he made such findings without having any material and evidence. However, he has not made any specific finding for rejection of books of account. However, the ld CIT(A) rejected the books of account of the assessee on the ground unreliable and unexplained very high cash holding immediately before demonetization, abrupt abnormal cash sales and all such cash sales without PAN details in small amounts. The books of account cannot be rejected on these grounds. Further provisions of section 145(3) cannot be applied as no finding of Ld. A.O. as well as of CIT(A) on the ingredients of section 145(3) of I. Tax Act and no specific defect was pointed out by lower authorities. To apply the provisions of section 145(3) of Income Tax Act, there must be finding on the ingredients of section 145(3) of I. Tax Act that : - a) books of account are not correct or incomplete or b) the assessee is not following the proper method of accounting regularly or c) not following the accounting standards notified by Central Government. In the case of the assessee, there is no such finding of the Ld. A.O. as well of Ld. CIT(A). It is also pertinent to mention here that except to raising some suspicious and doubt on the correctness of the sales recorded in books of accounts Peeyush Agarwal, Jaipur. no any specific defect was pointed out. The assessee submitted complete audited books of account with vouchers and stock register. The lower authorities have not pointed out any unverifiable purchases or unvouched expenses or unaccounted receipts. They have also not pointed out any defect in method of accounting/accounting standards followed by the assessee. There no plausible and cogent defects have been pointed out in the books of accounts, which may conclusively lead to doubt regarding the genuineness and correctness of books of accounts and all the findings is based merely on guess, probabilities or possibilities and on these grounds the books of account of assessee cannot be rejected that too without considering the outcome of Survey u/s 133A of the Act. Further in case where the books of account are rejected than the assessment order has to be passed u/s 144 of the Act but in the case of the assessee assessment order was passed u/s 143(3) of the Act. The ld CIT(A) so far has not been able to give any reasons why the entries in the books of account should be disbelieved. The assessee maintains proper books of account on mercantile basis. The books of account are audited by Chartered Accountants under Income Tax Act. The auditors have certified that proper books of account as required by law have been kept by the assessee and books of account give a true and fair view of profit. Therefore, the rejection of the books of account by ld CIT(A) cannot be upheld. Verification of cash sale cannot be a valid ground to reject the books of account. We find supports from the following decisions:- i) Hon’bleHigh Court of Bombay in the case of R.B. Jessaram Fatehchand (Sugar Dept.)v/s Commissioner of Income Tax [1970] 75 ITR 33 (Bombay) held that (Copy at Case laws PB Page No 75-78) :-

144. Ld. CIT(A) has done so based on the mere surmise and conjecture as noted herein above. As is also evident from the orders of the lower authority that the assessee has produced all the details that has been required by the AO and they have not found the records defective. Merely the AO and the ld. CIT(A) made suspicions on the records of sales of stone that too on account of rocky land excavated and thereby sold stone so excavated. Relevant receipt is reflected in the books of accounts. Out of the sum of received part of the amount considered as explained and part of the same as not genuine for the same set of records. We note that the CIT(A) has not advanced single a reason or basis of rejection of the book results which are otherwise verified, and no defects were found by the ld. AO and ld. CIT(A) and that when ld. AO and CIT(A) has already considered the part of the amount deposited into the bank account as business receipt and the part of the same was not considered. CIT(A) has not satisfied the condition as required as per provision of section 145(3) of the Act and that too without pointing out any defects in the books of accounts. The ld. CIT(A) merely rejected the book results because the assessee deposited cash in demonetized currency, and that was the reasons to reject the book results which is not a valid reason to invoke the provision of 145(3). Section 145(3) can be invoked when the AO is not satisfied about the correctness or completeness of the accounts of the assessee, when the method of accounting provided in Section 145 (1) has not been regularly Peeyush Agarwal, Jaipur. followed by the assessee and when the accounting standards notified u/s 145 (2) have not been regularly followed by the assessee. From the observations recorded in the order of the lower authority none of the conditions are satisfied and thus same is not evident from the finding of the lower authority. Not only that the bench also observed that when the provision of section 145(3) is to be invoked the assessment is to be completed as per the manner provided in section 144 and the proper opportunity is required to be given by pointing out the defects in the books of account which we observe that the same is not followed and the order is passed u/s.143(3) of the Act which is also not correct. We get strength to support our view based on the provision of the Act and decision of the Hon’ble Jurisdiction Rajasthan high court in the case of CIT Vs. Pink City Developers [2017 (11) TMI 1082 RAJASTHAN HIGH COURT] Here we note that out of the sales of wort partial amount was not considered as genuine because the assessee out of those sales deposited the amount in the specified bank notes. Thus, on the same set of records revenue was satisfied for sales hold a view that the assessee has not maintained proper sales records and therefore invoked the provision of section 145(3) of the Act is not correct. Ld. AO or that of ld. CIT(A) has not considered it fit to make the verification of the contention at the place of business / site to verify the contention and thereby tried to collect the corroborative evidence and without doing so part sales is accepted and part not is not correct reasons to reject the books of accounts. Based on these observations ground no. 1 raised by the assessee is allowed.

Peeyush Agarwal, Jaipur. (iv) Motisons Jewellers Ltd Vs ACIT order dated 29/09/2022. Hon’ble ITAT at page 123 of its order held that (Copy at Case laws PB Page No 121-173) “Hence, looking into the entirety of the facts, circumstances of the case and the case laws cited by the AR of the assessee (supra), we allow the appeal of the assessee by holding that the rejection of books of account on the basis of insignificant defects in all respect, is not justified and books of account deserves to be accepted. Before invoking the provisions of Section 145(3) of the Act, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed by it. In the instant case, it was not the case that the assessee had not followed either cash or mercantile system of accounting. It was also not the case that the Central Government had notified any particular accounting standard not followed by assessee. Further the assessee maintains proper books of account audited by Chartered Accountant and the profit may be derived from the audited books of account therefore there is no justification in estimation of income by applying NP rate and accordingly the lower authorities are directed to delete the addition of Rs. 47,72,297/ sustained by ld CIT(A).” We noticed that the ld CIT(A) has held that the assessee has recorded bogus sales to the extent Rs. 6,76,59,000/- which shall be reduced from sales shown by the appellant for the year. At the same time, he has accepted all the other entries of books of account such as purchases, expenses, stock etc. We agree with the contention of ld AR that if on the basis of this finding, the trading account of the assessee is re-casted, it will result trading loss of Rs. (-) 5,39,05,239.88 which will give GP rate of (-) 36.10%. Considering the facts and circumstances of the case and trade practice, we hold that the recalculated trading result on the basis of The genuineness of the sales was doubted by lower authorities merely on the basis of presumption, assumption, suspicious but it is a credential principal of law that such presumption, assumption and suspicious cannot supersede to valid documentary evidences more so when in the case of the appellant, the department has entered in the business premises of the assessee on 06-10-2017 by conducting survey u/s 133A of the Act just after the 6 months from close of the year and physical verification of cash, stock and documents were made and found nothing incriminating against the assessee. It may be noted that the judgements relied upon by the ld CIT(A) in the impugned order are clearly distinguishable and not applicable considering the facts of present case, The ld AR of the assessee distinguished the case laws cited by CIT(A) in the table below which we have gone through. Detail of case law relied Facts of the case decided by Differentiation of facts of the by CIT (A) CIT (A) case of assessee CIT v. P.

2. Further, the addition was made in the light that the 2. In the case of the sum so received were not assessee the sale was already shown as income and thus such declared by the assessee as receipts were examined with income and the same was part the view point of section 68 of of the sales declared in the the Act. trading A/c, therefore Peeyush Agarwal, Jaipur. provisions of section 68 are not applicable on sales transaction. Nemi Chand Kothari v. In this case the assessee took In this case the impugned CIT [2004] the unsecured loans and the transaction is regarding the 136 Taxman 213 additions has been made u/s 68 sale. Thus, the nature of (Gauhati)/[2003] of the Act. Thus, the entire transaction is all together, 264 ITR 254 finding of the case it was given therefore finding given in the (Gauhati)/[2003] 185 by keeping in mind the case dealing with the loan CTR 635 (Gauhati)[02- applicability of provisions of transaction cannot be made 09- 2003] section 68 of the Act on the applicable in this case loan transaction. because the nature of both the transaction is entirely different. Further, the provisions of section 68 are not applicable on sales transaction. CIT v. Precision Finance In this case the assessee took In this case the impugned (P.) Ltd. [1995] 82 the unsecured loans and the transaction is regarding the Taxman 31 additions has been made u/s 68 sale. Thus, the nature of (Calcutta)/[1994] 208 of the Act. Thus, the entire transaction is all together, ITR 465 finding of the case it was given therefore finding given in the (Calcutta)/[1994] 121 by keeping in mind the case dealing with the loan CTR 20 (Calcutta)[14- applicability of provisions of transaction cannot be made 06-1993] section 68 of the Act on the applicable in this case loan transaction. because the nature of both the transaction is entirely different. Further, the provisions of section 68 are not applicable on sales transaction. CIT v. M. Ganapathi In this cases, certain amounts The assessee submitted the Mudaliar [1964] were received by the assessee ample documents as well 53 ITR 623 (SC), and in support of explanation audited books of accounts, of source of such receipts the which shows that cash assessee could not produce any received by the assessee was accounts and evidence. Thus, actually sale proceeds also the explanation given by the supported by availability of assessee was not subject to stock at the time of sale. No verification from the defects were pointed out in documents/evidence and on such documents. account of this failure on part of the assessee the addition was made. A. Govindarajulu In this cases, certain amounts The assessee submitted the Peeyush Agarwal, Jaipur. Mudaliar v. CIT [1958] were received by the assessee ample documents as well 34 ITR 807 (SC). and in support of explanation audited books of accounts, of source of such receipts the which shows that cash assessee could not produce any received by the assessee was documents and evidence. Thus, actually sale proceeds. No the explanation given by the defects were pointed out in assessee was not subject to such documents. Thus, the verification from the explanation of the assesses is documents/evidence and on well supported by the account of this failure on part documents and books of of the assessee the addition accounts and further the was made. assessee was in the capacity to made the sales. Hon’ble Supreme Court In this case the ITO pointed out In the case of assessee, the in the case of Sreelekha that although the business of complete books of accounts Banerjee v. CIT [1963] the assessee was large and the and documents were 49 ITR 112 withdrawals from the various produced before Ld. A.O., banks were large and frequent, wherein no defect has been he had not maintained a central pointed out and solely on the account showing withdrawals basis of presumption and from the banks and remittances assumption, unreasonably the made to his various businesses, genuine sales of the assessee and that none of the books were treated as bogus. maintained by the assessee, and produced by him, contained a bank account. The ITO found a discrepancy in the statements filed by the assessee. Renu T Tharani vs Dy In this case the assessee was In the case of assessee, the Commissioner of Income having an overseas bank a/c complete books of accounts Tax in and she did not submit any and documents were regarding the produced before Ld. A.O., 2333/Mum/2018 source of deposit in such bank wherein no defect has been a/c and the entire finding was pointed out and solely on the given by the Tribunal on this basis of presumption and background. assumption, unreasonably the genuine sales of the assessee were treated as bogus. Durai Murugan Kathir In this case, a third person This is not the case of the Anand v. made a sworn statement and assessee and the assessee own Additional owned up the cash found in the up the cash and explained the Commissioner of premises of petitioner. Such source of the same with Income-tax [2022] 136 third person also filed an documentary evidence, which taxmann.com 70 application before the has not been conclusively Peeyush Agarwal, Jaipur. (Madras)/[2022] 443 ITR Settlement Commission. disprove by the lower 423 (Madras)[25-02- However, such sworn authorities. Thus, the 2022] statement was rejected by the explanation of the assesses is Hon’ble High Court as per well supported by the Preponderance of Probability documents and books of and for the reason that such accounts and further the person was not a person of assessee was in the capacity sufficient mean and also to made the sales. produced any records to substantiate that cash belonged to him. Moreover, documents pertaining to college/trust of assessee found along with seized cash indicated that cash belonged to assessee which was not disclosed by assessee in his regular return. Vivek N. Jajodia v.

In the case of the assessee the sale was already declared by the assessee as income and the same was part of the sales declared in the trading A/c, therefore provisions of section 68 are not applicable on sales transaction. Konathala Nooku Naidu In this case the source of cash In the case of assessee, the v. Income-tax Officer, deposited by the assessee is complete books of accounts Ward-1 explained that he earlier and documents were [2024] 160 taxmann.com withdrawn the same from his produced before Ld. A.O., 758 (Visakhapatnam - bank account out of the funds wherein no defect has been Trib.)[18-03-2024] received by him as a loan. pointed out and solely on the [I.T.A. However, the assessee has not basis of presumption and Peeyush Agarwal, Jaipur. No.269/Viz/2023] properly explained as to why assumption, unreasonably the the loan was availed by the genuine sales of the assessee assessee and for what purpose were treated as bogus. he has withdrawn the same. Thus, in absence of this plausible explanation the addition was made in this case. Kailash Swaroop This case relates to acceptance The case of the assessee is Agarwal vs of loan in cash and the entire related to cash sales from the Commissioner of Income finding has been given in such stock in hand, which has not Tax, background. been proved as bogus and Ajmer in D.B. Income also such sale is declared in Tax Appeal No. 175 / the trading a/c. 2012 in order dated 03/10/2017 CIT v. Devi Prasad The case law was decided in The case of the assessee is Vishwanath [1969] 72 the light of unexplained cash related to cash sales from the ITR 194 credit, which was not part of stock in hand, which has not (SC)[01-08-1968, the trading results declared by been proved as bogus and the assessee. also such sale is declared in the trading a/c. Roshan Di Hatti v. In this case the question was The case of the assessee is Commissioner of with court to decide whether related to genuineness of the Income-tax [1977] 107 stock in trade etc. introduced in cash sales from the stock in ITR 938 (SC)[08-03- the books of account of its hand, which has not been 1977] business, the assessee was still proved as bogus and also required to “to prove such sale is declared in the satisfactorily the nature and trading a/c. source of these assets” and in the event of failure to prove these, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee Kale Khan Mohammad The case law was decided in The case of the assessee is Hanif v. CIT [1963] 50 the light of unexplained cash related to cash sales from the ITR 1 (SC)[08-02-1963] credit, which was not part of stock in hand, which has not the trading results declared by been proved as bogus and the assessee. also such sale is declared in the trading a/c. Navin Shantilal Mehta v. In the case pursuant to survey This is not the case of the Income-tax Officer, operation carried out at assessee and the assessee Ward-32 (2) (4), Mumbai premises of assessee, it was completely explained the [2018] 90 taxmann.com found that assessee had made source of cash with Peeyush Agarwal, Jaipur. 16 (Mumbai - Trib.) cash deposits in his bank documentary evidence, which account - On examination of has not been conclusively cash summary provided by disprove by the lower assessee negative cash balance authorities. Thus, the was found, which was not explanation of the assesses is explained by assessee and, well supported by the thus, was added to income of documents and books of assessee under section 68 - accounts and further the since assessee failed to prove assessee was in the capacity satisfactorily source and nature to made the sales. of such credit. Sumati Dayal v/s In this case the addition was In the case of assessee, there Commissioner of made and upheld because the is no finding that the business Income-tax [1995] 80 appellant lacked any operations of the assessee Taxman 89 (SC)/[1995] knowledge of race techniques were not genuine. The 214 ITR 801 (SC)/[1995] and the theory of probabilities purchases and stock of the 125 CTR 124 (SC)[28- precluded any systematic and assessee was treated as 03- 1995] continuous winnings at races genuine and only the sale of a on as many as 16 occasions particular period was held as during a period of less than two bogus. The sales is supported years. In his report, the by documents and the Commissioner also submitted assessee was under the that the books of account did position to make such sales. not indicate the expenditure on travel and other incidental expenses which had been incurred by the appellant for attending the races at Bangalore and Hyderabad. So it was held that the winning tickets were purchased by the appellant after the event. Test of probabilities and possibilities was applied.

We also find support from the several case laws cited by ld AR of the assessee (supra) wherein it has been held that the addition on account of cash deposition in bank account in demonetized currency (SBNs) after the demonetarization of currency cannot be made where cash sales of goods are out of the genuine stock available with the assessee. The father of assessee Shri Peeyush Agarwal, Jaipur. Mahendra Kumar Agarwal is also engaged in the same trade from same place of business. In the assessment of father of assessee for AY 2017-18, the AO made addition on account of cash deposited in bank account in demonetized currency (SBNs), which accumulated with him from sales of goods by holding that the same as earned from undisclosed source. The CIT (A)-4, Jaipur, after considering the sales made by him as genuine, deleted the entire addition and on further appeal by department Hon’ble ITAT, Jaipur Bench, Jaipur confirmed the order of CIT (A) and sustained the deletion of addition. Jaipur Bench of ITAT in the case of ACIT V/s Mahendra Kumar Agarwal (ITA No. 172/JP/2022) dated 22.11.2022 held that: - “4. We have heard the rival contentions and perused the material available on record and gone through the orders of the lower authorities. The assessee is an individual and deriving income from business of jewellery. The books of assessee’s are audited by the independent Chartered Accountant and copy of audit report and statement of profit and loss account are filed by the assessee. It is noted from the record that the case of the assessee was taken up for scrutiny for assessment u/s 143(3) under CASS and desired information as sought by the AO were submitted by the assessee from time to time. The AO noticed that, assessee has deposited cash aggregating to Rs. 1,41,32,000/ during the demonetization period i.e. between 09.11.2016 to 30.12.2016 in the form of Specified Bank Notes (SBNs). The assessee justified the cash deposits during demonetization period by submitting that cash sales boosted during Diwali period and the cash generated from that time was deposited during demonetization. However, the AO did not accept the contention of assessee by mentioning that if the sales were high during Diwali then corresponding cash deposits must also be available in the bank account but the cash was deposited much after Diwali and there was no justification as to why the assessee was holding such high cash in hand after Diwali, only to deposit it in his bank account on demonetization. The AO further justified the addition by mentioning that the assessee has not submitted any details like the name, address, PAN No. of the buyer to establish the genuineness of high cash sales during the course of the year under consideration. The AO held that the cash deposited during the demonetization period is nothing but undisclosed income of the assessee which was deposited in his bank account during demonetization and in order to evade the tax liability on this unexplained cash deposit the assessee has tried to explain it under the grab of cash sales. The AO made the addition of Rs. 1,41,32,000/ under section 68 “4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under: (i) Brief facts related to the issue are that the AO noticed that the appellant has deposited cash of Rs. 1,41,32,000/ in its bank account during demonetization period viz. between 09.11.2016 to 30.12.2016 whereas a cash of Rs. 87,29,000/ was deposited during the period 01.04.2016 to 07.11.2016 i.e. during predemonetized period. Further during the months of November and December 2016, the sales were 1.5 times more than the remaining part of the year. The appellant has explained it to be out of cash sales made by him. However, the AO tried to analyze the cash deposit in the previous year visàvis the current year and has observed that the cash deposited during the demonetization period is high visàvis cash deposited in the same period in the FY 201516, however the AO also observed that the total cash deposited for the entire year has decreased substantially in the current FY when compared with the previous year. Further, the AO observed that the sales were high during Diwali than corresponding cash deposit should have also been available in bank account which was on the contrary deposited much after Diwali. Accordingly, the AO observed that there is no justification for the sales made during the month of November and December 2016 being 1.5 times more than the remaining months of the year and therefore these cash sales are not real sales and the assessee has tried to introduce his own unaccounted money in the garb of cash sales and therefore made addition of aforesaid amount of Rs. 1,41,32,000/.

(xiii) 2021 (5) TMI 447 – The Hon’ble ITAT Visakhapatnam in the case of Asst. Commissioner of Income Tax, Central Circle1 Visakhapatnam versus M/s Hirapanna Jewellers and (viceversa)) (Copy at Case Law PB Page No. 181184 ) held that Peeyush Agarwal, Jaipur. Addition u/s 68 r.w.s 115BBE Assessee had deposited the sum in high denominations of specified bank notes (SBNs) post demonetization CITA deleted the addition HELD THAT: The assessee produced the newspaper clippings of The Hindu, The Tribune and demonstrated that there was huge rush of buying the jewellery in the cities consequent to declaration of demonetization of ₹ 1000 and ₹ 500 notes on 08.11.2016. As 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 [2010 (4) TMI 1070 Delhi High Court] and Vishal Exports Overseas Ltd. [2012 (7) TMI 1110 Ahmedabad High Court] (xiv) The case of CIT v/s. Kailash Jewellery House was decided by the Hon’ble Delhi High Court on 09.04.2010(Copy at Case Law PB Page No. 239) wherein it was held that “In the facts of above case, cash of Rs.24,58,400/ was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not established with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs.24,58,400/ was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department”.

We also find that the Department has raised the solitary ground for deletion of addition of Rs.1,41,32,000/ made by the AO by applying the provisions of Section 68 and taxed as per provisions of Section 115BBE of the Act. We found that all the points or allegation mentioned by the AO are duly considered and discussed by the ld. CIT(A) while dealing with the appeal of the assessee. The revenue did not pin point which of the findings of the ld. CIT(A) is incorrect or against the facts placed on record by the assessee. We noticed that during the course of assessment proceedings, the AO examined the books of account and she has not rejected the books of account of the assessee and provisions of section 145(3) were not applied. During the year under consideration the assessee deposited Rs. 1,41,32,000/ in demonetized currency. The cash so deposited was accumulated cash which was received against/for sales made in the proprietorship concern of assessee M/s Peeyush Agarwal, Jaipur. Mohan Lal Mahendra Kumar Jewellers. The assessee submitted the summary of cash book as under: “The summary of cash book of the assessee for the period from 03.11.2016 to 08.11.2016 is as under: Particulars Amount (In Rs.) Opening Balance as on 01.09.2016 20,98,024.45 Add: Amount received against/for sales during month 17,22,424.00 of September2016 Add: Amount received against/for sales during month 1,14,43,282.00 of October2016 Add: Amount received against/for sales during period 14,37,830.00 01.11.2016 to 08.11.2016 Less: Cash Deposited in bank (Net) during month of 20,79,000.00 September2016, October2016 and during period 01.11.2016 to 08.11.2016 Less: Cash Expenses/payments during month of 4,51,639.00 September2016, October2016 and during period 01.11.2016 to 08.11.2016 Closing Balance as on 08.11.2016 1,41,70,921.45 Out of closing cash balance as on 08.11.2016 the amount of Rs. 38,921/ was in nondemonetized currency i.e. notes of 50, 100 etc. and the amount of Rs. 1,41,32,000/ was in demonetized currency.

From the above summary, it is apparent that the assessee had cash balance of Rs. 1,41,70,921.45 as on 08112016 which was generated from cash sales and such sales was part of total sales credited in trading a/c and the assessee has already offered income on such sales in Trading Account by reducing the cost of sales from sales. The AO has not pointed out any defect in the cash books and other books of account produced before her. The AO herself accepted the sales shown in trading a/c and has not disturbed the cash sales so declared by assessee and the sales of assessee duly supported by the sale bills and invoices and duly verifiable from books of accounts including stock register and considering availability of stock in hand, it proved that the sales made by the assessee are genuine sales duly recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. The assessee has filed sufficient evidence to substantiate his Peeyush Agarwal, Jaipur. sales. He has filed (1) Copy Cash book (Copy at APB Page 93 to 107) and sales Register APB at page 4769 comprising the date wise transaction of sales and cash receipts (2) Monthly summary of stock register (Copy of the same is at APB Page 108 to 120 which shows that before making the sale the sufficient stock was available with assessee (3) Copy of Assessment Order of VAT APB Page 121 to 127. The VAT department accepted the sales of the assessee. Thus the assessee substantiated his cash receipts from sales from the documentary evidence and also with the facts. The assessee explained the AO that the assessee’s contention of cash sales is duly supported with own previous history and trend that cash sales & corresponding cash in hand have been a regular feature of the assessee’s business since the past several years. The cash receipts against sales in FY 201516 was of Rs. 2,45,73,510/ while in the FY 201617 the year under consideration the same was of Rs. 2,57,31,459/ which is more or less similar to the previous year cash sales. The month to month sales varies due to demand in market, festival seasons, fluctuation in gold prices and for several other factors. Further in previous year also during the period 09.11.2015 to 31.12.2015 the assessee deposited total cash of Rs. 1,23,00,000/ in his bank accounts and in comparison to that during the period 09.11.2016 to 31.12.2016 the assessee deposited total cash of Rs. 1,41,32,000/ which shows increase by 14.89% over the previous year which is quite reasonable looking to the fact that overall sales of the assessee in comparison to previous year have increased by Rs.6,63,12,037/ which is 59% as explained by the assessee to AO vide letter dated 26/12/2019 copy at APB page 4044. The assessee has justified higher sales in Oct 2016 by submitting letter dated 28/12/2019 to AO copy place at APB page 4546. The assessee submitted that on 06.10.2017 the income tax department conducted survey u/s 133A of the Act at the business premises of the assessee. During the survey proceedings the department did not find any positive material/evidence to show that the assessee was having any source of undisclosed income or sales of the assessee was not genuine. The assessee is engaged in the business of Jewellery and gold. The higher cash sale on festival season Karva Chouth, Dhanteras and Diwali and marriage season is general feature in the trade of the assessee and such sales is also apparent from the cash book submitted during the course of assessment proceedings wherein the AO has not found any defect. Looking to the above facts and circumstances of the case the sales made by the assessee is genuine which is executed after giving the goods to the customer, duly reflected in the invoice issued, assessee having sufficient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT and the revenue has not brought any positive material to prove it as bogus sales. It is not the case of the A.O. that the assessee did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. As regards not providing the name, address and PAN of the customers to whom cash sales was made, the assessee has explained that the sales were below the prescribed limit so it is not Peeyush Agarwal, Jaipur. compulsory or mandatory under the Income Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. The assessee further explained that in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee and such practice was accepted by the AO. We find the explanation of the assessee is genuine and the sales cannot be doubted merely on surmises and conjectures on the ground of non furnishing of address and PAN of the customer. The AO did not make any enquiry on the material submitted by the appellant. She merely proceeded on statistical analysis to make the addition on account of cash deposits. 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. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstances of the case is not accepted and we see no reason to interfere in the order of the ld. CIT(A). Thus, we sustain the order of the ld. CIT (A) with the observations above. The appeal of the revenue stands dismissed.”