RAJENDRA AGARWAL,JAIPUR vs. DCIT, CENTRAL CIRCLE-1, JAIPUR

2. The total cash deposit in the F.TY 2016-17 is also 3 times higher than the F.Y. 2015-16.

Sh. Rajendra Agarwal, Jaipur.

All the cash deposited is received from the Sale proceeds of the Business. All the sales have been duly recorded in the Books of Accounts. All the sale invoice is available with the assessee. Proper entries have been recorded in the stock records of the assessee showing the outward of stock due to sale. As a business trend of the assessee was dealing in the trading of bullions and silver items, he deposits the cash in the Bank to the extent he needs to make the payment etc. There is not security threat to the assessee as he has very high security Gaudrej vault whereby all the jewellery and cash is safe.

Sh. Rajendra Agarwal, Jaipur. Showroom of the assessee was opened on the day of Demonetization and good number of customers visited on the showroom to purchase the items. Cash balance is available with the assessee in Cash Ledger. It was festive season of Diwali in the month of October as well as wedding season from November onwards. We have good sale during festival and wedding season. Without prejudice to the above, further it is humbly submitted that complete cash deposited cannot be treated as undisclosed income. Total amount has already been booked by the assessee as Sales in the Books of Accounts. Correspondingly, stock of the assessee has also been reduced. At worst, extra profit can be added in the books of accounts on account of sale made on just one day before of demonetization."

Sh. Rajendra Agarwal, Jaipur. Whereas, in the next 2 month i.e., the month of November and December the cash deposit is 3,05,10,000. It is unreasonable to belive that the assessee was accumulating Crores of cash without any purpose only to deposit it into his bank account later.

Sh. Rajendra Agarwal, Jaipur.

Vide show cause notice dated 18.12.2019, the assessee was specifically directed to furnish copies of bills, details of mode of payments for purchase as well as sales.

In response, the assessee submitted copy of stock register, purchase register, and sale register.

As regards, the sale invoices, the assessee simply responded that the same were available with him. The question is, in case sale invoices were available with the assessee, why did he withhold the same from the Assessing Officer and subsequently from Learned CIT(A). There is no explanation, in this regard.

Sh. Rajendra Agarwal, Jaipur. As noticed above, appellant-assessee has not furnished any application seeking permission from the Appellate Tribunal to produce additional evidence in the form of copy of VAT invoices from justifying there non production earlier before the Assessing Officer and Learned CIT(A). Therefore, additional evidence, now sought to be produced before this Appellate Tribunal for the first time, and that too without any justification for their non production, same are not being taken on record.

As claimed by the assessee, he has been operating his bank account regularly. However, the appellant has failed to explain as to why he accumulated huge cash in hand, only for subsequently being deposited in the bank account.

In case the claim of the appellant regarding huge cash in hand is for the sake of arguments assumed to be correct, he has failed to explain as to what led him to withdraw the said amount of Rs. 16,31,000/- on 20.09.2016.

As per record, during the period from 01.04.2016 to 07.11.2016, the assessee claimed to have done cash sale transactions to the tune of Rs. 2,81,48,112/-.

Surprisingly, the assessee deposited in the bank account, in cash Rs. 50,000/- only. There is no explanation from the assessee as to why he did not deposit more amount from cash sales, as claimed by him, during the said period.

Another surprising fact is that in the subsequent months i.e. of November and December, the appellant deposited in his bank account a sum of Rs. 3,05,10,333/-.

Sh. Rajendra Agarwal, Jaipur. The appellant has failed to explain as to why he accumulated such huge cash even after Diwali festival, simply for subsequently being deposited in the bank.

In this situation, Learned CIT(A) was justified in placing reliance on the decision in CIT v. Durgaprasad More, 82 ITR 540 (SC) and the decision n Sumati Dayal v. CIT, 30 Taxman 39 (SC), wherein test of human probability was discussed and applied in the given facts and circumstances.

Here too, testing the given facts and circumstances on the touchstone of /test of human probability, it remains unexplained as to why the assessee, maintaining a regular bank account, kept such a huge cash.

It has been observed by both the Revenue authorities that the stock details could not be verified as the stock register was a composite one. In other words, the stock register did not reflect day to day movement of items, so as to verify as to the availability of stock with the assessee on day to day basis, and to verify the factum of huge sales.

Sh. Rajendra Agarwal, Jaipur. In CIT v. Devi Prasad Vishwanath, (1969) 72 ITR 194, Hon’ble Apex Court observed that where there is an unexplained cash credit, it is open to the ITO to hold that it is income of the assessee and no further burden lies on the ITO to show that the income is from any particular source; and further that it is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed.

At this stage, reference may be made to the following analysis of the sales and purchases as available in the impugned order. Same reads as under:-

“Analysis of the Sales:- The appellant had deposited only 250,000 in the bank account in the first seven months of the financial year. If this cash is from the sales, this indicates that the cash sales made during this period were nearly of the same amount. However the appellant has claimed cash sales of rupees crores during this period. As per the details furnished by the appellant says of the appellant for the months of April to June 2016 are nil or zero. The total sales of the appellant as shown in claim are above 263 lakhs for the month of July, above 1 crore 13 lakhs for the month of August, above ₹ 77 lakhs of the month of September, above 48 lakhs the month of October, above 1 crore 46 lakhs for the month of November 2016. After the announcement of demonetisation the appellant has shown nil or zero sales for the months of December, January and February. From the sales account ledger furnished by the appellant it is seen that there are no sales during the year till 30th of June 2016. Further for the period 1st of July Sh. Rajendra Agarwal, Jaipur. 2016 to 8th of November 2016 the appellant has claimed only cash sales except two entry of credit sale on 1st of July 2016 and 5th of August 2016. Further from the sales account ledger it is also seen that for the period 1st of July 2016 to 6th of August, there is only one sale on the respective day whenever the cash sale is reflected and each such cash sale is less than rupees two lakhs and is above 1 lakhs 70,000. Further in the subsequent period the appellant has shown either two sales on each day or one sale on each day and hardly on any day there are more than two sales for the days on which Cash sale has been reflected. Again cach such cash sale is shown as less than rupees 2 lakhs and almost in all cases above 1 lakh 50,000. During the so claim the festive period of October 2016 appellant has only shown one such cash sale per day and only on three days of the month the appellant has shown 2 cash sales, on the days when ever cash sale has been claimed. Thus the argument of the appellant that the cash deposited in the period of demonetisation was out of sale made in the festival period of the Diwali is baseless and self-serving statement. In the year 2016 the Festival of Diwali was celebrated on 30th of October. The appellant has not shown any cash sale till the end of the financial year after the announcement of the date of the demonetisation which is another abnormality and is not as per human probabilities considering huge cash sales claimed in the earlier period. Analysis of the purchases:- The appellant has purchases of Rs. 74,54,670 from S S Impex on 25th of July 2016 however from the ledger account it is seen that the payment is shown to have been done to them through banking channel on 11 November 2016 of Rs. 500,000 and on 7 December 2016 of Rs. 23 lakhs. The payment was done in small part after the announcement of demonetisation. At the same time as in the bullion trade such a long period of credit can lead to implied interest cost for the seller at the market rate of average 12% per year whereas the profit ratio in the bullion trade is generally seen below 1%. No seller would incur or lose such high opportunity cost of interest interest only for earning meagre profit. Thus this purchase is not verified and is unreliable.

Sh. Rajendra Agarwal, Jaipur. Similarly in the case of purchase shown by the appellant from the Rajendra Kumar Naveen Kumar, the purchases shown on 15th of August 2016 of rupees more than 69 lakhs. This date is a national holiday on which the markets remain close. Further no payment has been done by the appellant to the party till the end of the financial year. As discussed above the opportunity cost of the interest and the meagre profitability renders this purchase of the appellant also as unverified and unreliable. On the one hand the seller to the appellant did not bother about interest and the same time the appellant has claimed that the huge cash was lying with him and was getting increased regularly and not deposited in the bank and this show that even the appellant was not bothered about the interest income. The combined corollary is that both the purchases and sales are not reliable. The above finding is supported by the purchases shown by the appellant from another party which is Lawat Jewellers Private Limited. In case of purchases from this party purchases shown on 10% of November and the same amount of t 49 lakhs has been paid to the party on the same date. Further the purchase of rupees more than 1,50,00,000 has been shown on 11th of November 20to and the same amount has been paid on the same date without any single day of credit. Further with respect to purchase of more than 30 lakhs from the same party on 16th of November 2016 the payment is shown by the appellant one day in advance on 15th of November 2016. The Assessing Officer is not required to show the source of the money deposite in the bank account. There can be several possibilities. Such details are only in the possession of the assesse and onus lies on him. Where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assesse, it is not necessary for the department to locate its exact source CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC), A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC). The explanation of the assessee is to be seen in totality and as a whole and the same can either be found satisfactory or not satisfactory as a whole. The story or the explanation of the assessee cannot be modified by the Ld. AO or appellate authority. It is possible that a single material fact or single material part of the explanation may render the entire explanation dis-believable or unsatisfactory. That is to be seen as per the facts and circumstances of the case and of the explanation. Explanation is to be examined for the availability of such exact Sh. Rajendra Agarwal, Jaipur. amount of physical cash/money with the assesse which was deposited in bank in demonetization period. The Hon'ble Supreme Court in the case of Sreelekha Banerjee v. CIT [1963] 49 ITR 112 has observed as under: "If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked what the source of that money is and to prove that it does not bear the nature of income. The department is not at this stage required to prove anything. It can ask the assessee to produce any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shines that the receipt was not of an income nature, the department cannot act unreasonably and reject that explanation to hold that it was income. If, however, the explanation is unconvincing and one which deserves to be rejected, the department can reject and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The department does not then proceed on no evidence, because the fact that there was receipt of money is itself evidence against the assessee, There is thus, prima facie, evidence against the assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was a receipt of an income nature. The very words 'an undisclosed source' show that the disclosure must come from the assessee and not from the department." (emphasis supplied) It is further observed in this case by the Hon'ble Supreme Court as under:- In the present case, the assessee claimed that the high denomination notes were a part of the cash balance at the head-office. The Income-tax Office found that at first the cash on hand was said to be Rs. 1,62,022, but on scrutiny, it was found to be wrong Indeed, the assessee himself corrected it before the Appellate Assistant Commissioner and stated there that the balance was Re 1.21,875. Ordinarily, this would have prima facte proved that the assessee might have kept a portion of this balance in high denomination notes. But the assessee failed to prove this balance. as books of the assessee did not contain entries in respect of banks. Though cash used to be received from banks and sent to the various places where works were carried on and vice versa. no central account of such transfers was disclosed. There was also no account of personal expenses of the Sh. Rajendra Agarwal, Jaipur. assessee and he had failed to prove why such large sums were kept on hand in one place when at each of the places where work was carried on, there were banks with which he had accounts. The Appellate Assistant Commissioner also went into the question and found that on the same day when the high denomination notes were encashed, a sum of Rs. 45,000 was drawn by cheque. The next remittance immediately afterwards was of Rs. 16.000 to Bokaro, but Rs. 17,000 were withdrawn a few days before to meet this expense. A withdrawal of Rs. 8,000 way made a day later and Rs. 20,000 were withdrawn ten days later to finance the business. It appears that the money on hand (Rs. 45,000) was not touched at all, but on January 30, 1946, α further sum of Rs. 6,005 was withdrawn and not utilised, which made up the sum of Rs. 51,000 for which the high denomination notes were encashed. On these facts, the Tribunal came to the conclusion that the high denomination notes represented not the cash balance but some other money which remained unexplained, and the Tribunal treated it as income from some undisclosed source. The High Court held on the above facts and circumstances that there were materials to show that Rs. 51,000 did not form part of the cash balance, and the source of money not having been satisfactorily proved, the department was justified in holding it to be the assessable income of the assessee from some undisclosed course. In this conclusion, the High Court was justified, regard being had to the principles we have explained above." (Emphasis Supplied) Some of the important factual-legal relevant questions emerging from the above judgement are as under:- Question of justification of keeping large sums on hand whereas the facility of withdrawing cash was available at the time and place it was required. The above is from the observation "failed to prove why such large sums were kept on hand in one place when at each of the places where work was carried on, there were banks with which he had accounts" Question of justification of withdrawing further sums when the earlier withdrawn sums were claimed by the assessee to be available in hand. The above is from the observation "on the same day when the high denomination notes were encashed, a sum of Rs. 45,000 was drawn by cheque. The next remittance immediately afterwards was of Rs. 16,000 to Bokaro, but Rs. 17,000 Sh. Rajendra Agarwal, Jaipur. were withdrawn a few days before to meet this expense. A withdrawal of Rs. 8,000 was made a day later and Rs. 20,000 were withdrawn ten days later to finance the business. It appears that the money on hand (Rs. 45,000) was not touched at all, but on January 30, 1946, a further sum of Rs. 6,005 was withdrawn and not utilised. which made up the sum of Rs. 51,000 for which the high denomination notes were encashed". Learned CIT(A) having discussed the books of accounts of the appellant, rejected the same under section 145(3) of the Act, the reason being that purchases and the sales composite stock register as well as the cash book were found to be unreliable.

As a result, Learned CIT(A) was justified in reducing an amount of Rs.3,05,10,000/-from the sales reflected by the appellant and adding the same in the closing stock.

The Assessing Officer and Learned CIT(A) were in consonance with each other as regards the above facts, which remained unexplained on record.

Sh. Rajendra Agarwal, Jaipur. Result 20. As a result, in view of the discussion and findings, this appeal is hereby dismissed. File be consigned to the record room after the needful is done by the office. Order pronounced in the open court on 30/07/2025. Sd/- Sd/- ¼xxu xks;y½ ¼ujsUnz dqekj½ (GAGAN GOYAL) (NARINDER KUMAR) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 30/07/2025 *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू The Appellant- Sh. Rajendra Agarwal, Jaipur. 1. 2. izR;FkhZ@ The Respondent- DCIT, Central Circle-1, Jaipur. 3. vk;dj vk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File vkns'kkuqlkj@ By order,

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