SHREE DURGA JEWELLERS,JAWAHAR NAGAR JAIPUR vs. AO CIRCLE 4 JAIPUR, CR BUILDING JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 33/JP/2025 fu/kZkj.k o"kZ@Assessment Year : 2017-18 cuke Shree Durga Jewellers ACIT Vs. 2-JHA-15, Jawahar Nagar, Circle-04, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACWFS8574P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Suhani Meharwal, CA jktLo dh vksj ls@ Revenue by : Shri Anup Singh, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 06/03/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 29/04/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

By way of present appeal, the assessee challenges the order of learned National Faceless Appeal Centre [ for short ld. CIT(A) ] dated 10.01.2025 for assessment year 2017-18. The said order of the ld. CIT(A) arises because the assessee has challenged the assessment order dated 30.11.2019 passed under section 143(3) of the Income Tax Act, 1961 [ for short “Act”] by the ACIT / DCIT, Circle-5, Jaipur [ for short AO].

“1. On the facts and in the circumnutates of the case as well as law ld AO erred in making addition u/s 68 of I.T. Act, 1961 amounting to Rs.700000/- and simultaneously Ld CIT(A) erred in sustaining the addition without (a). Assessee denies the liability to be assessed on addition of Rs. 7000000/-u/s 68 of IT Act 1961. (b). Acquiring valid justification (c). Without appreciating the facts that assessee maintenance regular book of accounts and day to day stock records (d). Without doubting opening stock, purchases and sales (e). On mistaken belief of quantum of cash deposits and cash sales made during demonetisation, Which is highly unjustified, illegal and liable to be quashed entirely.

2. Assessee deserves right to amend, alter, delete and modify any ground of appeal on or before the date of hearing of appeal.”

3.1 Ld. AO from the records noted that the assessee has deposited huge cash of Rs. 3,88,57,665/- in his bank account with ICICI Bank Limited and Bank of Baroda. The assessee was required to furnish the source of the cash deposited in the bank account including the cash of Rs. 70,00,000/- deposited during the demonetization period in his bank account with ICICI chart of cash and credit sale for FY 2015-16 and 2016-17 relevant to AY 2016-17 and 2017-18 which shows that during the AY 2016-17 the total sale was Rs. 1,30,83,627/- (cash sale Rs. 77,59,808+ credit sale of Rs. 53,23,819) and during the A.Y. 2017-18 under consideration he has shown the total sale of Rs. 1,98,99,241/- (cash sale of Rs. 1,23,88,953 + credit sale of Rs. 75,10,288). He also submitted that during the demonetization period total sales were Rs. 26,12,469/- only. Since, the total cash sales for the period from 01.04.2016 to 31.03.2017 has been declared at Rs. 1,23,88,953/- and during this period the assessee has deposited cash of Rs. 3,88,57,665/- in his bank accounts mentioned above, which does not match with the cash sales declared by him during the year hence, the assessee was required to explain the discrepancy of cash sale and cash deposited in his bank accounts. Ld. AO on going through the bills / invoices submitted by the assessee noted that most of the bills are unsigned by the seller. No address of the purchasers is mentioned on the sale bills.

Similarly the mobile number of the purchasers is also not mentioned on almost all bills. In absence of these details the identity and genuineness of the purchasers and as such the cash sale is unexplained hence, not acceptable. He also noted that in the sale bill there is no mention of the details the genuineness of the bills is doubtful and therefore appears to be self-made by the assessee. Record reveals that the assessee has given a list of 77 persons from whom he has claimed to received cash of Rs. 66,85,647/- against the cash sale made during the year. From the scrutiny of the list, ld. AO noted that the date of payment received against the sale is not mentioned and further the sale bills produced by him in support of the sale also does not support the sale to these persons. The list provided by the assessee is self-made without any basis or supporting evidence hence, unacceptable to ld. AO. Based on these discrepancy/mismatch in sale and the cash deposited in bank account and for the deficiencies pointed out the cash deposited was not considered as supported by cash sales declared by the assessee and therefore a show cause notice dated 05.07.2019 and 26.11.2019 were issued to the assessee requiring explanation as to why the unexplained cash of Rs. 3,88,57,665/- should not be added back in his income for taxation. The assessee furnished reply of the show cause notice on ITBA portal on 13.07.2019. The assessee contended that Rs 70,00,000/- were deposited just after demonetization on dated 11.11.2016.

Assessee was a registered firm doing retail trade in gold ornaments wherein most of the sales were made to customers in cash. Assessee presumptive taxation u/s 44AD. Although he was not required to maintain regular books of accounts but since he was also registered with RVAT Act 2003, he maintained cash book, ledger day to day stock register, invoices bills etc. Entire payments to suppliers were made through banking channel and sales were made to customer for which assessee issued bills.

Assessee stated in earlier reply that the invoices not signed as staff are not allowed to sign the invoices as prescribed in RVAT Act 2003. But the sales of assessee are fully vouched, proved and explained. Before the ld. AO the assessee has filed the proof of entire purchase by way of copies of bills.

Entire payments of supplies were made by cheques/electronic transfer.

Day to day Stock register is maintained [ copy of stock register was placed on record ]. Name and address of customer recorded in the invoices placed on record. Sales and purchase have been shown with RVAT Act. [Copies VAT returns were placed on record ]. Copy of cash book was filed. Based on these evidences the assessee stated that the cash is out of the sale proceedings. The assessee also submitted that the cash of Rs. 2,61,50,000/- were received from partners. Confirmations of all the partners were filed along with their copies of ITR V for the relevant period. Three partners had declared income in IDS-2016 for which the copies of assessee submitted that the deposit of cash by the assessee stands explained. The assessee also produced detailed list of cash sales and cash receipts from persons to whom credit sales were made. Copies of debtors from whom cash were received against credit sales made to them were also placed on record. After demonetization period the sales was seriously affected due to non availability of new currency. Further, just after one month the assessee firm was dissolved and dissolution deed was also placed on record. Based on the copy of cash book, cash flow statement, confirmations the assessee submitted that the excess cash deposited comparing sales be considered as explained and proved. The assessee was also given show cause notice as to why addition of Rs. 2,60,00,000/- in the total income u/s 68 being the receipts of cash into partner capital account namely Soniya Agarwal, Anandita Agarwal and Pallavi Agarwal amounting to Rs. 78,00,000, 91,00,000 and 91.00.000 respectively taxed.

In response the assessee explained that the amount of cash duly credited in the partners capital account and to explain the sources of cash it was stated that respective partners had declared this cash in Income Declaration Scheme 2016 (IDS 2016). Apart from cash as above, jewellery which has also been introduced by way of capital in the firm was also assessee has submitted copies of form no.4 (Certificate of IDS2016) of all the partners naming Soniya Agarwal, Anandita Agarwal and Pallavi Agarwal. Ld. AO considered that explanation and considered the Rs. 2,60,00,000/- as explained. As the assessee has also deposited cash of Rs. 70,00,000/- on 11.11.2016 in his bank account with ICICI Bank and the source of which has been stated to be the cash sale made by the assessee. However, on verification of the details ld. AO noted that the assessee has claimed to be received the cash on sale from 77 persons from whom claimed to made sale Rs. 66,85,647/- in November 2016 just before depositing the cash in the bank account on 11.11.2016 and which is the source of cash deposited in a single day of Rs. 70,00,000/- in his bank account with ICICI Bank. From the scrutiny of the list ld. AO noted that the date of payment received against the sale from these persons. Further, the sale bill produced by the assessee are incomplete and appears fabricated issued just to cover up the unaccounted cash deposited by the assessee in his bank account on 11.11.2016 for which the assessee has mischievously gone back and issued the sale bills to the persons whose identity is not verifiable as there is no mention of the complete name, address, mobile number, PAN and signature on receipts of the delivery of the purchasers.

Jewellery/ornaments on the sale bills which the assessee has issued just before the deposition of the cash amount in the bank account. In absence of these necessary requirements on the sale bills the ld. AO stated that he could not verify and genuineness of the purchasers and sale bills which is must for accepting the submission of the assessee satisfactory. He also noted that the assessee regularly depositing the cash received from the daily sale and therefore the accumulated cash sale of Rs. 70,00,000/- claimed by the assessee cannot be his regular sale for depositing in the bank account. In the facts in the circumstances the explanation and evidences submitted by the assessee are not satisfactory for the depositing of cash of Rs. 70,00,000/- during the period of demonetization on 11.11.2016 in his bank account with ICICI Bank and it is the undisclosed income of the assessee which has been deposited in the bank account with ICICI Bank on 11.11.2016 and accordingly was added as per provision of section 68 of the Act as initial onus on the assessee to explain the nature and source of the sum found credited in his books of accounts and the assessee must prove the documentary evidence for the satisfaction of the AO about the sum credited in his books regarding, the identity of the of the transaction.

“8.1 I have carefully examined the submission made by the appellant. It is fact that if identity, creditworthiness and genuineness of transaction are not proved to the satisfaction of the Assessing Officer then it certainly comes under the purview of the provision of the section 68 of the Act. The ambit of section 68 is wide and inclusive. Provision of section 68 of the Act applies to all credit entries. The language of provision of section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they are entered in the Books. The section has applicability in the cases of search as well being section 68 is provision of general application and there is nothing in section 68 of the Act or elsewhere excludes the application of this general provision. Even the presumption under section 132(4A) of the Act does not override or exclude section 68 of the Act, i.e. it does not prevent the necessity to establish by independent evidence the genuineness of the cash credits u/s 68 of the Act nor does it do away with the burden which is on the appellant to establish the requisites of the cash credit. It is fact that the postal address and the identity are not provided by the appellant which could be substantiated the sales. 8.2 In Khandelwal Constructions v. CIT 227 ITR 900 (Gau.) it has been held by the Hon'ble Guwahati High Court that Section 68 of Act, empowers the Assessing officer to make enquiry regarding cash credit and If satisfied that these entries are not genuine, Assessing Officer has every right to add these as income from other sources. But before rejecting the assessee's explanation Assessing Officer must make proper enquiries and in the absence of proper enquiries, addition cannot be sustained. It has been observed that in this case proper enquiry during post search as well as during the assessment proceedings have been conducted by the Assessing Officer before making addition under Section 68 of the Act. 8.3 It is important to mention here in this connection that the Government of India had announced demonetization of the existing series of denomination of 500 rupees and 1000 rupees [referred as Specified Bank Notes (SBNs)] currency notes w.e.f. 09.11.2016. The Gazette Notification No. 2652 dated 8.11.2016 issued by Department of Economic Affairs Ministry of Finance, Government of India in Shree Durga Jewellers vs. ACIT S.O.3407(E), inter alia, stated as one of the reasons that it has been found that high denomination bank notes are used for storage of unaccounted wealth has been evident from the large cash recoveries made by law enforcement agencies. The press release of the RBI dated 8.11.2016 explaining the objective stated that this is necessitated to tackle counterfeiting Indian bank notes, to effectively nullify black money hoarded in cash and curb funding of terrorism with fake notes."

8.4 Considering the above discussion, when cash deposits during demonetization has not been explained properly, it is pertinent to quote here the provisions of section 68 of the Act that are squarely applicable in this case:

"Section68:Unexplained cash credit

"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 there of or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year

8.5 It is settled principal of law that under section 68, if any amount is found credited in the books of assessee then the burden lies upon the appellant to prove its nature and source. If it is not own money of appellant, then it should give the name and address of party from whom it has taken the money. While proving the facts that it is not their money but some other person are the owner of such money then appellant has to prove Identity of the person, Genuineness of transaction and Credit worthiness of person who has given the money. It is for the assessee to prove the genuineness of the creditors in the books of account. The assessee has to prove the identity of the creditors with complete address, his credit worthiness or capacity to pay the amount in question, PAN, Copy of his computation of income. Only when these things are proved prima facie by the appellant and only after this appellant has adduced evidence to establish the aforesaid facts then only the onus shift on to the Department. Merely proving identification and showing movement of money through banking channels was not sufficient to establish that transaction was genuine. In this case the appellant has taken the advance against the future sales, thus onus was on the appellant to prove the identity and creditworthiness of the persons who have made the advances and also genuineness of transactions but the appellant failed to prove all the three limbs of section 68 of the Act.

8.6 It is responsibility of person who has received the money provide the name of the lender, genuineness of transaction and creditworthiness of the lender. However in this case nothing has been provided by the appellant complete and fully.

8.7 As already discussed provision of section 68 of Income Tax Act 1961, as per provision 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 of the same or the explanation offered by him is not satisfactory in the Shree Durga Jewellers vs. ACIT opinion of A.O., the sum so credited may be charged to income tax as the income of the assessee of that previous year. The basic precondition for the Section 68 is that the assessee should file a valid confirmation which must include name, PAN, complete address and identity proof. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. The element of credit worthiness and satisfaction of AO thereafter is subjective and requires more efforts/inquiry on the part of the AO to give a finding in the order that lender is not credit worthy.

8.8 In the case of Devinder Singh v. ACIT [2006] 101 TTJ 505 (ITAT-Asr) it has been held that there is nothing in Section 68 that books of account must be rejected before making an addition under Section 68. This is an independent and deeming provision and will apply if the assessee fails to offer an explanation of the source of particular receipt/credit appearing in the books of account or if the explanation given by the assessee is found to be not satisfactory by the Assessing Officer.

8.9 In the case of Khandelwal Constructions v. CIT 227 ITR 900 (Gau.) it has been held that Section 68 of Income Tax Act, 1961, empowers the Assessing officer to make enquiry regarding cash credit. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee's explanation A.O. must make proper enquiries and in the absence of proper enquiries, addition cannot be sustained. In the present case, there is cash deposit of 5.67crore during the demonetization period and regarding the source it has been explained that the amount under question has been received on 08.11.2016 against the future sales for gold coins which was not in the stock at that time. The amount of advance received from each person was below Rs. 2,00,000/-. This plea of the assessee was not accepted and during the post search inquiry summons were issued and sent through registered post for verification of genuineness of transaction. Further certain inquiries have been made through Income Tax Inspectors, however letters were written by the postal authorities and the Inspectors were unable to locate the addresses of persons. Since amount which was received in cash against the future sale on 08.11.2016 were not verifiable, the Assessing Officer has added Rs. 5.66 crore as unexplained credit under section 68 of the Act.

8.10 In the cases where credit entry has been made in the books of the assessee, the ambit of Section 68 is wide and inclusive. Provision applies to all credit entries. In the case of Gumani Ram Siri Ram v. CIT [1975] 98 ITR 337 (Punj. &Har.), it was held that the language of Section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they may stand, that is, whether in the name of the assessee or a third party.

8.11 The Assessing Officer when starts enquiry, specifically to satisfy himself/ herself of the source of such credit, and if during the enquiry, he/she is satisfied that the entries are not genuine, then he/she has every right to add the said sum Shree Durga Jewellers vs. ACIT represented by such credit entry as income of the assessee. The satisfaction of the assessing officer is the basis of invocation of provisions of Section 68.

8.12 The enquiry envisaged under Section 68 is an enquiry which is reasonable and just. Under Section 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account and where the assessee fails to prove to the satisfaction of the Assessing Officer, the source and nature of the amount of cash credits, Assessing Officer is entitled to draw an inference that the credit entries represent income taxable in the hands of the assessee. It is not the duty of the Assessing Officer to locate the exact source of the cash credits. The burden to identify the source lies upon the assessee and he is required to explain the genuineness of the credit entry. Section 68 of the Act enacts a golden rule of evidence which is not in dispute, i.e., if any sum is found credited in the books of account of an assessee, the onus is on assessee to explain the said entry.

8.13 Even before the enactment of Section 68, this rule of evidence was applicable vide Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC). Section 68 does not absolve the responsibility of the Assessing Officer to prove that the cash credits constitute the income of the assessee. In the present case proper enquiries have been conducted by the Assessing Officer before making addition. Further appellant also failed to satisfy the Assessing Officer with its explanation/justification as well as during the appellate proceeding also failed to explain the credit entries.

8.14 In the case of Orient Trading Co. Ltd. v. Commissioner of Income-tax (1963) 49 ITR 723 (Bom.), one of the questions referred to the Bombay High Court was whether there was any material before the Tribunal to hold that a sum standing in the books of the assessee to the credit of a third party belonged to the assessee. The Bombay High Court discussed the nature and significance of cash credits in such cases and observed as follows:

"When cash credits appear in the accounts of an assessee, whether in his own name or in the name of third parties, the Income-tax Officer is entitled to satisfy himself as to the true nature and source of the amounts entered therein, and if after investigation or inquiry he is satisfied that there is no satisfactory explanation as to the said entries, he would be entitled to regard them as representing the undisclosed income of the assessee."

8.15 The expression "nature and source" in Section 68 has to be understood together as a requirement of identification of the source and the nature of the source, so that the genuineness or otherwise could be inferred. The Law on the subject has been illustrated in a number of decisions prior to 1968. Hon. Supreme Court, in Kale Khan Mohd. Hanif Vs. CIT (supra), pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. The law after Section 68 is not different.

Shree Durga Jewellers vs. ACIT 8.16 Even the particulars from assessment records, where the creditor is assessed, may not be sufficient as observed in CIT vs. Korlay Trading Co. Ltd. (1998) 238 ITR 820 (Cal). Further, in the case of Kamal Motors v. CIT [2003] 131 Taxman 155 (Raj.) it was held that the responsibility is on the assessee to discharge the onus that the cash creditor is a man of means to allow the cash credit. The burden to prove the source of receipt is in respect of each entry as held in the case of CIT v. R.S. Rathore [1995] 212 ITR 390 (Raj.), that while explaining the various credits and investments, it is possible that the assessee may be successful in explaining some of them, but that does not by itself mean that the entire investments has to be considered as explained.

8.17 Further, mere mention of income-tax file number of creditor will not suffice to discharge the onus as held in the case of CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), where in it was held that where, without filing confirmation letter from the creditor, the assessee merely mentioned the income-tax file number of the creditor (which was also not supported by any affidavit from the creditor), the genuineness of the cash credit cannot be said to have been proved by the assessee. In fact, the principle of onus, that the assessee is required to establish the identity. prove the genuineness of the transaction and establish the creditworthiness of the donor, has been reiterated in the decision of Hon. Delhi High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd., 333 ITR 119 (Delhi)(2011). In this case it was held by the Hon. Court that "The initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68. Those are: (i) identity of the investors; (ii) their creditworthiness/investments; and (iii) genuineness of the transaction. Only when these three ingredients are established prima facie, the department is required to undertake further exercise."

8.18 Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases such as Kale Khan Mohammad Hanif v CIT[1963] 50 ITR 1 (SC) and Roshan Di Hatti v CIT [1977] 107 ITR (SC) it has been held by the Apex Court that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the burden of proof is fluid for the purposes of Section 68. Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then Assessing Officer must do some inquiry to call for more details to invoke Section 68.

8.19 Merely proving the identity of the creditor does not discharge the onus of the assessee if the capacity or creditworthiness of the creditors is not proved. The assessee also has to prove the capacity to give credit of the creditor.

8.20 In the case of Shankar Ghosh v ITO [1985] 23 TTJ (Cal.), the assessee failed to prove the capacity of the person from whom he had allegedly taken loan. Further the assessee could not explain the need for the loan and the manner in which the loan amount was spent. The creditor issued two letters demanding repayment but did nothing on non-compliance therewith; such letters did not therefore carry any conviction about the explanation of the assessee. Loan amount was rightly held as assessee's own undisclosed income.

8.21 In the cases of Shankar Industries Vs CIT (Cal) 114 ITR 689, Hari Chand Virender Paul Vs CIT (P&H) 140 ITR 148, CIT Vs Biju Patnaik (SC) 160 ITR 674 CIT Vs Precision Finance P. Ltd. (Cal) 208 ITR 465 Dhanalakshmi Steel Re-rolling Mills Vs CIT (AP) 228 ITR 780 and in the case of Sanil K.M.P. Vs CIT (Ker) 177 Taxman 481, the assessee failed to prove the genuineness of credit-mere proof of identity of creditor or that transaction was by cheque, is not sufficient - Addition under Section 68 upheld.

8.22 There is nothing in law which prevents Assessing Officer in taxing both unexplained cash credit and business income estimated. It is for the assessee to prove that even if the cash credit represents income, it is from a source which has already been taxed. Sec. 68 does not confine to cash entries in books If the liability shown in the account is found to be bogus and there is no plausible and reasonable explanation of the assessee, the amount can certainly be added towards the income of the assessee.

8.23 In the case of M/s Shankar Industries Vs. Commissioner of Income Tax, 114 ITR 489 (CAL) (1978), the Hon'ble High Court of Calcutta held that in respect of transaction which results in cash credit in books of account of assessee, it is necessary for assessee to prove identity of his creditors, capacity of such creditor to advance money and also genuineness of transaction. But in this case, these limbs of section-68 of the Act remain unproved.

8.24 In the case of M/s Precision Finance (P) Ltd. Vs. Commissioner of Income- tax, 208 ITR 465 (Cal) (1994), the Hon'ble High Court of Calcutta held that "It is for the assessee to prove the identity of the creditors, their creditor worthiness and the genuineness of the transaction. In our view, on the facts of this case, the Tribunal did not take into account all these ingredients which have to be satisfied by the assessee. Mere furnishing the particulars is not enough. The Tribunal did not apply its mind to the facts of the particular case and proceeded on the footing that since the transaction were through the bank account, accordingly, it is to be presumed that the transaction were genuine. It was not for the ITO to find out by making investigation from the bank accounts unless the assessees provide the identity of the creditors and their credit worthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine."

8.25 In the case of B.R. Petrochem (P) Ltd. Vs. ITO-Ward-1(1), Chennai, 407 ITR 87 (Madras) (2018), the Hon'ble High Court of Madras held that-"In the present case, the finding of fact is to the effect the neither the credit worthiness nor the genuineness of the parties has been established by the assessee. The detailed investigation carried out by the Assessing Officer establish the position that the contributions to share capital were persons of insignificant means and their credit worthiness to have made the contributions has not established. The assessing authority had put the result of his enquiries to the assessee granting him opportunity to after its explanations. The appellant however failed to establish the genuineness of the cash contributions as well as the capacity of the persons to have made such contribution in the first place."

8.26 In the case of Commissioner of Income Tax Vs. N.R. Portfolio (P)Ltd, (Delhi) (2014), the Hon'ble High Court of Delhi held that, "what we perceive and regard as correct position of law is that the court or Tribunal should be convinced about the identity, credit worthiness and convinced about the identify, credit worthiness and genuineness of transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee knowledge. Mere production of incorporation details, PAN Nos. or the fact that third person or company had filed income tax details in case of a private Itd. company may not be sufficient when surroundings and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, credit-worthiness, identify are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soul less and are dependent upon the individuals behind them who run and manage the said companies." The Hon'ble Court relied upon decision on the case of Nova Promoters and Finlease (P) Ltd, wherein decision is the case of Lovely Exports Ltd was considered.

8.27 In this case the appellant failed to explain conclusively that money belongs to some other person and their identity, creditworthiness & genuineness of transaction. Thus the onus which was upon the appellant has not been discharged neither during the assessment proceeding nor during the appellate proceeding. Therefore, the appellant failed to establish all the three limbs of the section 68 of Act.

8.28 In the case of Pr. CIT(Central)-1 Vs NRA Iran & Steel (P) Ltd. 412 ITR 161 (SC) (2019), the Hon'ble Apex Court allowed the Revenue Appeal. On the facts of the present case, clearly the assessee company failed to discharge the onus required under section 68 of the Act, the assessing officer was justified in adding the amounts to the assessee's income. ME TAX DEPAR

In the above case the Hon'ble Apex Court discussed the following case law

Shree Durga Jewellers vs. ACIT 3. Roshan Di Hatti Vs CIT, 107 ITR 938 (SC) (1977) 4. CIT Vs Oasis Hospitalities (P) Ltd, 333 ITR 119 (Delhi) (2011) 5. ShankerGhosh Vs ITO, 13 ITD 440 (Cal.) (1985) 6. CIT Vs Kamdhenu Steel & Alloys Limited 361 ITR 220 (Delhi)(2014) 7. SumatiDayal Vs CIT, 214 ITR 80 (SC) (1995) 8. CIT Vs P. Mohankala, 291 ITR 278 (Sc) (2007) 9. Pr. CIT Vs. NDR Promoter (P) Ltd. 410 ITR 379 (Delhi)(2019) 10. Nemi Chand Kothari Vs. CIT 264 ITR 254 (Gawahati) (2004) 11. CIT Vs. N.R. Portfolio Pvt. Ltd. (Delhi) (2014)

8.29 The position of law in this respect has been explained by the Hon'ble Apex Court in the following decisions:

In the case of CIT v. P. Mohanakala 291 ITR 278 (SC), it was held that-

"A bare reading of section 68 suggests that there has to be credit of amounts in the books maintained by assessee; that such credit has to be of a sum during the previous year; and that the assessee offer no explanation about the nature and source of such credit found in the books or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory. It is only then the sum so credited may be charged to income-tax as the income of the assessee of that previous year. The expression 'the assessee offer no explanation' means where the assessee offer no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee.

....Section 68 itself provides that where any sum is found credited in the books of the assessee for any previous year, the same may be charged to income tax as the income of the assessee of the previous year, if the explanation offered by the assessee, about the nature and source of such sums found credited in the books of the assessee, is in the opinion of the Assessing Officer not satisfactory. Such opinion formed itself constitutes a prima facie evidence against the assessee, viz., the receipt of money, and if the assessee fail to rebut the said evidence, the same can be used against the assessee by holding that it was a receipt of an income nature."

8.30 In the case of Kale Khan Mohammad Hanif v. CIT [1963] 50 ITR1(SC), the Hon'ble Apex Court observed as under:

"It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that there receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the ITO is entitled to treat it as taxable income"

8.31 In another case of Roshan Di Hatti v. CIT[1977] 107 ITR 938 (SC), the Hon'ble Supreme Court observed that:

"Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income.

To put it differently, where the nature and source of a receipt whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that that income is from any particular source."

8.32 In appellant's case, it has not been able to prove the source of cash credits in its books of accounts to the extent of cash deposited in its bank account by a cogent reasoning supported by documentary evidences. The contention that these cash deposits are cash in hand available on account of cash advances received against future sale on 08-11-2016 and duly reflected in books of account was not supported with cogent reply & explanation. It is in the above backdrop that the series of events leading to deposit of SBNs in the bank account of the assessee needs to be seen to assess the actual nature of the cash deposit in SBNs.

Demonetization was announced on 8.11.2016.

The assessee deposited SBNs worth Rs.5.67crores in its bank account as mentioned above and declared in return of income.

To explain the source of the said cash, the assessee has furnished receipts for advance. However, when required to produce the persons who made advances, it has failed to do so. Even, no written submission was filed explaining the source supported by evidences.

Never such cash has been deposited in bank accounts prior to demonetization period.

The appellant has never deposited the substantial cash during the year except demonetization period.

8.33 It is in this context that the issue of circumstantial evidences and preponderance of probabilities as emphasized for the purposes of Income Tax Act, 1961 by various courts gain importance. In this regard, the following observations of the Hon'ble Apex Court in the case of Sumati Dayal vs CIT214ITR801(SC), are worth noting:

"This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket Shree Durga Jewellers vs. ACIT which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance; because if the appellant had purchased the winning ticket after the event she would behaving the winning ticket with her which she could surrender to the Race Club.

The observation by the Chairman of the Settlement Commission that" fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice that was noticed by the District Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act, 1972whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc., was withdrawn. Similarly, the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said and has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence."

8.33 In the case of Commissioner of Income-tax vs. Durga Prasad More 82 ITR 540 (SC), the Hon'ble SC observed as under:

"...It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax.A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents."

8.34 It is therefore obligatory on the part of the appellant that it explains the nature and source of cash credits to its books of accounts. However, in the instant case,

8.35 The reliance is being placed in the case of Vaishnavi Bullion (P.) Ltd. v. ACIT, the Hon'ble ITAT HYDERABAD BENCH 'B', [2022] 145 taxmann.com 197 (Hyderabad Trib.) A.Y. 2017-18 vide order dated November 28,2022wherein it has held that-

"Section 68 of the Income-tax Act, 1961 Cash credit (Demonetization deposits) - Assessment year 2017-18-Assessee-company was engaged in business of trading in gold, diamond jewellery etc. - During search and survey conducted on premises of assessee, huge deposits were found in its bank account after demonetization was announced Initially MD of assessee claimed that said amount was received as advances of less than Rs. 2 lakhs from 2153 customers for purchase of gold bullion on date of announcement of demonetization of Rs. 500 and Rs. 1000 notes - Assessee initially accepted such income and agreed to deposit taxes as per Scheme Pradhan Mantri Garib Kalyan Yojana, 2016 However, later on it contradicted with earlier statement and contended that amount so deposited was received from NS, owner of ALG, and invoices were issued in names supplied by a third party It was noted that invoices issued by assessee were bogus and even 12 customers whose documents were given by assessee to prove their identity, had denied to have given their advances for purchase of gold from assessee It was further noted that assessee had no/negligible 'stock-in-trade' of gold as on 8-11- 2016 and no orders were place on 8-11-2016 and 9-1-2016 after announcement of demonetization As per report of CFSL and Forensic Analysis of Computers and Software installed therein it could be cleary seen that system was shut down on 8- 11-2016 at 18:45:34 and it was again logged on 9-11-2016 at 09:20:32 However, receipts recovered from premises of assessee clearly showed that they were issued/printed after demonetization notification and more particularly, after 9-11- 2016, indicating that demonetized notes (SBNs) were accepted contrary to RBI notification - Thus, in absence of availability of gold with assessee, it was difficult to infer that there was a sale agreement between assessee and anonymous buyers - It was further noted that bank account of assessee in which alleged amount was deposited was only opened on 10-11-2016 and as per notification assessee could not deposit more than Rs. 50,000 in its account till KYC was completed - Therefore, disability of assessee to deposit more than Rs. 50,000 as per notification would entail disability of its delegate/agent and thus its contention that deposits were made by third party could not be accepted Whether any unexplained amount credited in books of assessee shall be deemed to be of assessee if explanation of assessee was not satisfactory or was against preponderance of probabilty and evidence on record and hence, Assessing Officer was justified in making additions under section 68 treatings deposits of SBNs found in its bank account as unexplained credit in hands of assessee Held, yes [Paras 70 to 77] [In favour of revenue]"

The relevant paras from the order are as under:-

Shree Durga Jewellers vs. ACIT "72. Furthermore, the conduct of the assessee was abnormal and it had caused immense harm to well intention notification and the Act. The withdrawal of legal tender character was one of the significant steps in weeding out the fake currency and to curb the black money in the country. The persons like assessee have given a setback to well-intended and well-thought policy of Government of India and they have used this as an opportunity to convert their or others' ill-gotten money into bullions. In the present case the bank account. The above said act of the assessee is not only against the law but also against the interests of the nation. In the present case, the bank account with the AXIS Bank was only opened on 10-11- 2016. As per the notification, the assessee cannot deposit more than the amount of Rs. 50,000/- in its account till KYC is completed. It is not the case of the assessee that the KYC had been completed on the date of opening of its account. It is not understandable how the bank permitted the deposit of huge amounts in the newly opened account, on the date of its opening itself. The concerned agency must look into the role of the bank employees in this regard. When the assessee itself cannot deposit more than Rs. 50,000/-as per notification, then how a third party can be authorized to deposit more than the specified limits in the bank account of the assessee. The disability of the assessee would entail the disability of its delegate/agent.

"12. When did you receive the names of the parties in whose name the cash receipts have to be generate' and when did you generate the cash receipts?

Ans: On 8th night I have received the names on which the cash receipts have to be generated. The cash receipts were generated starting from night of 8-11-2016 to 9- 11-2016.

Ans: I could not remember the exact time of completion of generation of receipts. But I can say that the work was started on 8th night and completed on 9-1-2016. Please refer to answer 4 of your statement recorded on 7-12-2016 wherein it was Ans. After generation of cash receipts on 8th and 9th of Nov.2016 simultaneously the cash receipts were issued to the respective seven customers.

20. To sum up, you are confirming that you have received cash advances of Rs. 57,75,35,000/- from six customers (against 3100 customers stated earlier m the statement recorded on 01 12 2016) in the case of M/s MGJPL on 8-11-2016 after 9.00 PM, entered the cash advances. In your books on the same day, generated. cash receipts on the same day from the systems available in your premises in tally software and issued to all the customers.

Likewise, in the case of M/s VBPL, you have received Rs. 40,11,50,000/-as cash advances from one customer (2100 customers earlier) and followed the same procedure as was done in the case of M/s MGJPL?

Ans. Yes. I confirm that in M/s MGJPL, I have received approximately Rs. 57 crores from six customers and Rs. 40 crores from one customer in M/s VBPL. Entered the details of cash advances bifurcating all below Rs. 2 lakhs in the name of various persons (as provided by six and one customer respectively) started generating cash receipts on 8th Nov. 2016 to 09th Nov. 2016, from the systems available in our premises in Tally software and handed over the receipts to the respective seven customers.

Ans. I exactly do not remember the number and models of the systems. However, certain systems were impounded from our premises when the survey was conducted as per the above impounding order.

Ans. From the said report, I have understood that the timings of operation of our systems, which were impounded from our premises, four systems were not operated on 8-11-2016 and one system was operated and closed at 18:45:34 on 8- 11-2016. In this regard, I would submit that the office of the above said two Shree Durga Jewellers vs. ACIT 'companies is in the B-Block of the compound. Our residence is in the A-Block of the compound. As you know, today is computer is necessity of life to us and to our children and we are having systems even in our residence and during that time, lot of shuffling of systems had happened. I may not be aware of the timing of opening and closing of a system."

'22. This Court is of the opinion that such a narrow interpretation of Explanation 1 to section 37(1) defeats the purpose for which it was inserted, i.e., to disallow an assessee from claiming a tax benefit for its participation in an illegal activity. Though the memorandum to the Finance Bill, 1998 elucidated the ambit of Explanation 1 to include "protection money, extortion, hafta, bribes, etc.", yet, ipso facto, by no means is the embargo envisaged restricted to those examples. It is but logical that when acceptance of freebies is punishable by the MCI (the range of penalties and sanction extending to ban imposed on the medical practitioner), pharmaceutical companies cannot be granted the tax benefit for providing such freebies, and thereby (actively and with full knowledge) enabling the commission of the act which attracts such opprobrium. ……………………

"This object will be defeated if the licencee is permitted to bring in strangers into the business, which would mean that instead of the licencee carrying on the business, it would be carried on by others - a situation not conducive to effective implementation of the excise law and consequently deleterious to public interest. It is for this very reason that transfer or subletting of licence is uniformly prohibited by several State Excise enactments. It, therefore, follows that any agreement whereunder the licence is transferred, sub-let or a partnership is entered into with respect to the privilege/business under the said licence, contrary to the prohibition contained in the relevant excise enactment, is an agreement prohibited by law. The object of such an agreement must be held to be of such a nature that if permitted it would defeat the provisions of the excise law within the meaning of section 23 of Shree Durga Jewellers vs. ACIT the Contract Act. Such an agreement is declared by section 23 to be unlawful and void. The question is whether such an unlawful or void partnership can be treated as a genuine partnership within the meaning of section 185(1) and whether registration can be granted to such a partnership under the provisions of the Income-tax Act and the Rules made thereunder. We think not. When the law prohibits the entering into a particular partnership agreement, there can be in law no partnership agreement of that nature. The question of such an agreement being genuine cannot, therefore, arise."

It is also a known principle that what cannot be done directly, cannot be achieved indirectly. As was said in Fox v. Bishop of Chester [1824] 2 BFC 635 Jagir Singh v. Raubir Singh [1999] 2 SCR 282 that it is a:

"Well-known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance"

And that:

"To carry out effectually the object of a Statute, it must be construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined"

This Court, in an appeal arising from an action for specific performance, in G. T. Girish v. Y. Subba Raju 2022 SCC Online SC 60, held that giving the relief would imply doing something prohibited by law (bar against conveyance, for a specific period) it had the effect of defeating the provisions of the law. It was held that:

"Taking the agreement as it is, it necessarily would be in the teeth of the obligation in law of the first Respondent to put up the construction. The agreement to sell involved clearly terms which are impliedly prohibited by law in that the first Defendant was there under to deliver title to the site and prevented from acting upon the clear obligation under law. This is a clear case at any rate wherein enforcing the agreement unambiguously results in defeating the dictate of the law. The 'sublime' object of the law, the very soul of it stood sacrificed at the altar of the bargain which appears to be a real estate transaction. It would, in other words, in allowing the agreement to fructify, even at the end of ten-year period of non- alienation, be a case of an agreement, which completely defeats the law for the reasons already mentioned."

78. Going by the recital in the agreement entered into between the Plaintiff and the first Defendant, possession is handed over by the first Defendant to the Plaintiff. The original Possession Certificate is also said to be handed over to the Plaintiff. The agreement, even according to the Plaintiff, contemplated that within three months of conveyance of the site in favour of the first Defendant, the first Defendant was to convey her rights in the site to the Plaintiff. It is quite clear that the parties contemplated a state of affairs which is completely inconsistent with and

and ITA 59/Hyd/2021 (Musaddilal Gems and Jewels Private Ltd)

79. To sum up, captioned appeals of both the assessees are dismissed and the appeals of Revenue are allowed"

8.36 The appellant has placed its reliance in the case of Shri Sanad Textiles Industries Limited v/s DCIT (Ahmedabad ITAT), wherein it has been held that-

"9.6. We also note that the provisions of section 68 cannot be appliedin relation to the sales receipt shown by the assessee in its books ofaccounts. It is because the Shree Durga Jewellers vs. ACIT sales receipt has already been shown in thebooks of accounts as income at the time of sale only. 9.7. We are also aware of the fact that there is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence / finding. In view of the above we are not convinced with the finding of the learned CIT(A) and accordingly we set aside the same with the direction to the AO to delete the addition made by him." 8.37 The appellant has placed its reliance in the case of Smt. Harshil Chordia v. ITO(Rajasthan High Court) 2008 298 ITR349 Raj wherein it has been held that- "23. So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payrnent on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract Section 68 because the cash deposits become self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise." 8.38 The above cited cases pertain to period prior to demonetization; therefore due to factum of the time ratio of these case laws are not applicable to the present case. The facts of cited cases cannot be compared with the facts of present case and therefore the ratio of these case laws cannot be applied. 8.39 In effect, the ground No. 1of the appeal is hereby dismissed. 9.1 Ground No.

is as under:-

1. On the facts and in the circumnutates of the case as well as law ld AO erred in making addition u/s 68 of I.T. Act,1961 amounting to Rs.700000/- and simultaneously Ld CIT(A) erred in sustaining the addition without (a). Assesee denies the liablity to be assessed on addition of Rs. 7000000/- u/s 68 of I.T Act 1961. (b). Acquiring valid justification (c). Without appreciating the facts that assessee maintenance regular book of accounts and day to day stock records (d). Without doubting opening stock, purchases and sales (e). On mistaken belief of quantum of cash deposits and cash sales made during demonetisation, Which is highly unjustified, illegal and liable to be quashed entirely.

2. Assessee deserves right to amend, alter, delete and modify any ground of appeal on or before the date of hearing of appeal. Assessee, during the course of hearing, advanced all the facts and submission, which are as under :- 1.1 Assessee was a partnership firm doing trading, manufacturing of gold jewellary and ornaments. During the year under consideration the income was declared under presumptive scheme of taxation u/s 44AD of the Income Tax Act, Shree Durga Jewellers vs. ACIT 1961. Return was filed u/s 139(1), which was picked for scrutiny assessment u/s 143(3) for limited purpose to verify the source of cash deposited after demonetization. During the course of assessment proceeding, it was stated that in spite of opting for presumptive taxation u/s 44AD still, regular books of accounts was being made. All the details i.e., financials, purchase bills, bank statements, sales invoices, details of buyers with name and complete addresses, comparative charts of sales made in cash and credit for the year with preceding years. However, Ld AO made the addition of Rs.

70. Lakhs by invoking the provision of section 68 of the I.T.Act, 1961. (Copies of Computation of Total Income and ITR V are enclosed at page no 9-12 of PB)

1.2 Assessee proved the trading results by stating, filing and proving all the ingredient of the Trading Account. Opening Stock of Rs 20443015.52 Value of opening stock is proved with books of accounts and stock register filed before AO during scrutiny proceeding. AO did not dispute the value and quantity. (Day to day commodity-wise stock register is enclosed) (Copies of Profit & Loss A/c and stock records are enclosed at page no 13-28 of PB) Purchases of Rs 43863380.55 Detail of purchase was produced along with copies of purchase bills. Purchases were accounted for in purchase register and stock register. Entire payments were made through banking channels. AO accepted being did not dispute any fact. Stock purchased from partners were declared under IDS-2016 for which the certificates were filed before AO. ( Copies of purchase register, bills of purchases, stock register and IDS certificates are enclosed are enclosed at page no 29-53 of PB) Job work of Rs. 2042590.00 Job work is done by registered dealer to whom payment is made through bank after deducting tax at source as per law. Bill of job work was produced. No adverse comment was made by AO. Sales amounting to Rs. 19696770.35 1 Entire sales are supported by invoices. 2 Copies of invoices were also filed. 3 Detailed names and addresses to whom cash sales made are available to AO (Copy is enclosed at page no 54-56 of PB) 4 Comparative chart showing month-wise cash and credit sales for the year and preceding year was given, (Copy is enclosed at page no 57 of PB) 5 Sales were duly accounted for in regular books of accounts for which entire detail were placed on record of AO Shree Durga Jewellers vs. ACIT 6 Sales were duly accounted for in day to day stock records, which were available with AO. 7 Assessee is having show room, where customers visit for purchases regularly. 8 Assessee was registered under R VAT Act, 2003 and liable to file quarterly returns of sales and purchases. Copies of all quarterly returns were filed before AO. VAT returns are fully reconciled with books of accounts and financial declared before AO. (Copies of quarterly VAT returns are placed at page no 58 to 74 of PB) 9 Book results were not rejected by AO. Closing Stock of Rs. 49885580.96 Inventory of closing stock available with AO with quantity and vale and was accepted by Ld AO. Thereafter, Ld AO issued show cause notices for which compliances were made. Assessee explained with factual evidences, all the defects pointed out by Ld AO, which I reproduce hereunder:- 2 Show cause 2.1 In your reply submitted on ITBA you have furnished the comparative chart of cash and credit sale for FY 2015-16 and 2016-17 relevant to AY 2016-17 and 2017-18. On verification of the chart it is noted that during the AY 2016-17 your total sale was Rs. 1,30,83,627/- (cash sale Rs. 77,59,808 + credit sale of Rs. 53,23,819) and during the AY 2017-18 under consideration you have shown the total sale of Rs. 1,98,99,241/- (cash sale of Rs. 1,23,88,953 + credit sale of Rs. 75,10,288). Further, in your reply you have also submitted that during the demonetization period total sales were Rs. 26,12,469/- only. 2.2 Since, your total cash sales for the period from 01.04.2016 to 31.03.2017 has been declared at Rs. 1,23,88,953/- and during this period you have deposited cash of Rs. 3,88,57,665/- in your bank accounts mentioned above, which does not match with the cash sales declared by you during the year hence, it is the cash deposited from the undisclosed sources. 2.3 On going through the bills/invoices submitted by you it is noted that most of the bills are unsigned by the seller. 2.4 No address of the purchasers is mentioned on the sale bills. Similarly the mobile number of the purchasers is also not mentioned on almost all bills. In absence of these details the identity and genuineness of the purchasers and as such the cash sale is unexplained hence, not acceptable. 2.5 In the sale bill there is no mention of the quantity, weight and rate of the gold and diamond and in absence of these details the genuineness of the bills is doubtful and therefore appears self made by the assessee. 2.6 In the reply you have given a list of 77 persons from whom you have claimed to received cash of Rs. 66,85,647/- against the cash sale made during the Shree Durga Jewellers vs. ACIT year. From the scrutiny of the list it is noted that the date of payment received against the sale is not mentioned and further the sale bills produced by you in support of the sale also does not support the sale to these persons. The list provided by you is self made without any basis or supporting evidence hence, unacceptable. 2.7 Your reply submitted in this regard on ITBA portal is found unconvincing, without any basis/evidence and therefore unacceptable. On verification of the sale ledger account and the details of sale and bank accounts submitted by you during the assessment proceedings, the discrepancies found in the cash sales shown by you month wise and the cash deposited for the same period in your bank accounts is as under: - 2.8 In your reply submitted on ITBA you have furnished the comparative chart of cash and credit sale for FY 2015-16 and 2016-17 relevant to AY 2016-17 and 2017-18. On verification of the chart it is noted that during the AY 2016-17 your total sale was Rs. 1,30,83,627/- (cash sale Rs. 77,59,808 + credit sale of Rs. 53,23,819) and during the AY 2017-18 under consideration you have shown the total sale of Rs. 1,98,99,241/- (cash sale of Rs. 1,23,88,953 + credit sale of Rs. 75,10,288). Further, in your reply you have also submitted that during the demonetization period total sales were Rs. 26,12,469/- only. 3.1 Since, your total cash sales for the period from 01.04.2016 to 31.03.2017 has been declared at Rs. 1,23,88,953/- and during this period you have deposited cash of Rs. 3,88,57,665/- in your bank accounts mentioned above, which does not match with the cash sales declared by you during the year hence, it is the cash deposited from the undisclosed sources. Assessee filed reply to this show cause notice on dated 13.07.2019 in which assessee dealt with each and every issue of show cause notice. Important aspect of the reply of show cause notice is as under:- Submission filed before AO 3.1 Assessee is asked to explain the sources of cash deposits amounting to Rs 38857665.00 into bank account held with ICICI Bank and Bank of Baroda. As I have submitted earlier that Rs 7000000.00 were deposited just after demonetisation on dated 11.11.2016. Assessee was a registered firm doing retail trade in gold ornaments; most of the sales were made to customers in cash. Assessee being in the eligible business and had turnover below Rs 2 crore opted for presumption taxation U/s 44AD.Although he was not required to maintain regular books of accounts but since was also registered with RVAT Act 2003, he maintained cash book, ledger day to day stock register, invoices bills etc. Entire payments to suppliers were made through banking channel and sales were made to customer for which assessee issued bills. 3.2 As I stated in earlier reply that the invoices were not signed as staff are not allowed to sign the invoices as prescribed in RVAT Act 2003. But the sales of assessee are fully vouched, proved and explained being- (i) Assessee has filed Shree Durga Jewellers vs. ACIT the proof of entire purchase by way of copies of bills. (ii) Entire payments of supplies were made by cheques/electronic transfer (Bank Statement has been filed earlier). (iii) Day to day Stock register is maintained (copy of stock register is enclosed). (iv) Name and address of customer are in your record. (v) Sales and purchase have been shown with RVAT Act. (Copies VAT returns are enclosed) (vi) Copy of Cash Book is enclosed. (Copy of cash book is placed on page no 75 to 100 of PB)By filing of all these evidences assessee has been duly discharged the onus lay upon him. b) Apart from cash deposited just after demonetization assessee has been depositing cash of Rs. out of cash sales made during that year. Copy of cash flow statement is enclosed. c) Cash of Rs26150000.00were received from partners. Confirmations of all the partners are attached herewith along 101 -106 of paper book with their copies of ITR V for the relevant period. Three partners had declared income in IDS-2016 for which the copies of certificate is enclosed. d) By filing of cash flow statement, cash book, confirmation along with ITR V and IDS certificates the cash deposits are well explained. It is emphasize to note that all the partners were in highest tax bracket. 3.3 I have already produced detailed list of cash sales and cash receipts from persons to whom credit sales were made. Copies of debtors from whom cash were received against credit sales made to them are also enclosed. After demonatisation period the sales was seriously affected due to non- availability of new currency. Further, just after one month the assessee firm was dissolved. Copy of dissolution deed is enclosed. (Copy of dissolution deed is enclosed at page no 107 to 109 of PB) 3.4 From the copy of cash book, cash flow statement, confirmations the excess cash deposited comparing sales are explained and proved. 3.5 We have already submitted that most of customers are well known to the assessee and he maintains names and address details of customers separately. Generally, invoices contain only name. However, we have submitted complete list of customers name and addresses. 4 Apart from this, the assessee vehemently tried to explain the nature of credits and sources thereof by filing of proof of sales and credits appeared in the name of partners by filing of their declaration under IDS-2016, ITR V and Computation of Total Income. But, Ld AO invoked the provision of section 68 of the Income tax Act, 1961 on the amount of cash deposited on 11.11.2016 of Rs. 70 lakhs instead of the credits on account of particular sales. In the appeal order, Ld CIT (A) observed various allegations and advanced the bunch of case laws. But, I can humbly and safely say that the observations are made without considering the submission and facts put forth by assessee and even without going through the assessment order. Cases relied upon by Ld CIT (A) are either irrelevant, not applicable on the facts of assessment or even favour to assessee. Now, I deal with the Ld. CIT (A) order :- Observation of CIT (A)

Under para 7.1 That the Sales include the Cash and Credit Sales made during the year and also include the Sales which were made on the evening of Demonetization, the amounts were received till midnight of 08/11/2016 only and not thereafter. During the assessment proceedings Assessing Officer noted that the assessee has deposited cash of Rs. 70,00,000/- during the demonetization period on 11.11.2016. The appellant also submitted that during the demonetization period total sales is Rs. 26,12,469/- only. Further, the Assessing Officer has noted peculiar thing that during the year under consideration from 01.04.2016 to 31.03.2017 total cash sales has been disclosed at Rs. 1,23,88,953/- whereas during the said period assessee has deposited Rs. 3,88,57,665/- in his bank account which certainly does not match with the cash sales declared by the appellant during the year under consideration. During the year A.Y. 2016-17 total sales was declared at Rs. 1,30,83,627/- including cash sales of Rs. 77,59,808/- and credit sales of Rs. 53,23,819/- and during the A.Y. 2017-18 year under consideration total sales has been disclosed at Rs. 1,98,99,241/- including cash sales of Rs. 1,23,88,953/- and credit sales of Rs. 75,10,288/-. As per Assessing Officer the assessee could not explain such discrepancy in sales and deposit in bank account. The A.O. further noted that most of the bills are unsigned by seller and sale bill does not contain the address of the purchaser and mobile no. In the sale bill there is nothing mention of quantity, rate and weight of the gold and diamond. In these circumstances, the Assessing Officer held that sales bills are remain unexplained and identity, creditworthiness of purchaser and genuineness of transaction remains unexplained. Therefore, he held that cash sales are unexplained and therefore, he has not accepted the sale. Further, A.O. observed that in none of the sale bill there is no mention of date when cash payment has been received. The Assessing Officer held that the sales bill produced is self made being no details has been mentioned in the sale bill. Accordingly, he held that cash deposited in bank account is not supported by cash sales declared by the assessee.

Submission Your honours, observation of Ld CIT (A) is the result of copy and paste from the show cause notice issued by Ld. AO for which, assessee has fully explained all the points raised by Ld AO. AO was even satisfied and did not repeat the allegations in assessment order. The CIT (A) main allegation was that how assessee was able to deposit cash in banks during whole of the year amounting to Rs. 38857865/- when the sales turnover was only Rs. 19899241/-.

Assessee explained the sources of cash deposits with the help of cash book and cash flow statements that during the year partners had introduces cash in their capital account amounting to Rs. 2.60 crores. To explain the sources in the hand of partners, assessee filed their declaration of income under Income Disclosure Shree Durga Jewellers vs. ACIT Scheme (IDS-2016) for which certificate issued by the CIT for this effect were filed. Confirmations and ITR V and Computation of Total; income of respective partners had also been filed.

Certainly, Ld AO was satisfied and that’s why the addition of this cash deposit over and above cash sales and realisation from trade debts were not added into income u/s 69. Also, Ld CIT (A) did not choose to make enhancement of this amount of Rs. 38857865-19899241 minus Rs, 70 lacs made by AO. The allegation was for the sake of allegation only with casual manner and without going through entire order of assessment.

It was further explained that the pattern of cash sales and credit sales are almost same with immediately preceding year. Sales after demonetisation period is also not comparable, since the business of assessee was closed on dated 15.12.2016 for which copy of dissolution deed was filed before both the lower authorities. (Copies of certificates under IDS-2016, comparative chart of sales, deed of partnership are placed on paper book )

Under CIT (A) para 7.6.4, 7.6.5 & 7.6.6 CIT (A) observed that during the year total cash deposit in the SBN in its bank account amounts to Rs. 70,00,000/- during the demonetization period between 10.11.2016 to 29-11-2016. It has been observed that during the year various no. of customers came down in the span of four hours and made the cash purchases on 08.11.2016 i.e. on the date of declaration of demonetization by the Hon’ble Prime Minister. On perusal of Tables as produced above in vide Para. No. 7.2 & 7.3 it can be easily understood the appellant mens ria that since starting day from month of April to October 2016, the cash has been deposited in regularly in piece meal in the amount of Rs. 20,000/- to Rs. 9,00,000/- and till 29.10.2016 has been regularly deposited but suddenly on 11.11.2016 the appellant had deposited Rs. 70,00,000/- which under no stretch of imagination can be said to be justifiable vis- à-vis sales.

Submission Your honours, all these observations are wrong on facts. Assessee sales stood only for Rs. 2931605.00 on the date of demonetisation. This sale pertains to whole of the day. Total invoices made on the day were only 35, which was quite normal. Further, from the announcement of demonetisation, the old currency notes of denomination of Rs. 500/- and 1000/- were declared non legal tender. Entire Indian public were empty of legal tenders. Banks and ATMs were also lack of new currency. Further, the business of assessee was closed on dated 15.12.20216. That’s why, the assessee could not make normal sale after demonetization.

Ld CIT (A), relied upon various judgements of ITATs and upper courts. All the judgement have no applicability on the assessee’s case.

Shree Durga Jewellers vs. ACIT Khandelwal Constructions v. CIT 227 ITR 900 (Gau.) (Para 8.2 & 8.9 of CIT (A) order In the case of Khandelwal Constructions v. CIT 227 ITR 900 (Gau.) it has been held that Section 68 of Income Tax Act, 1961, empowers the Assessing officer to make enquiry regarding cash credit. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee’s explanation A.O. must make proper enquiries and in the absence of proper enquiries, addition cannot be sustained. In the present case, there is cash deposit of 5.67crore during the demonetization period and regarding the source it has been explained that the amount under question has been received on 08.11.2016 against the future sales for gold coins which was not in the stock at that time. The amount of advance received from each person was below Rs. 2,00,000/-. This plea of the assessee was not accepted and during the post search inquiry summons were issued and sent through registered post for verification of genuineness of transaction. Further certain inquiries have been made through Income Tax Inspectors, however letters were written by the postal authorities and the Inspectors were unable to locate the addresses of persons. Since amount which was received in cash against the future sale on 08.11.2016 were not verifiable, the Assessing Officer has added Rs. 5.66 crore as unexplained credit under section 68 of the Act.

Assessee declared the advances against future sales. Required stock was not available. Summons issued to depositors returned unserved. Case is not applicable as the AO did not make any inquiry, Opening stock, purchases, production and closing stock were undisputed. which proves the sales realisation bogus or which disprove the identities, genuineness and creditworthiness of payers when the onus had been transferred upon him.

Para 8.13 Even before the enactment of Section 68, this rule of evidence was applicable vide Kale Khan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC). Section 68 does not absolve the responsibility of the Assessing Officer to prove that the cash credits constitute the income of the assessee. In the present case proper enquiries have been conducted by the Assessing Officer before making addition. Further appellant also failed to satisfy the Assessing Officer with its explanation/justification as well as during the appellate proceeding also failed to explain the credit entries.

No inquiry was made by AO in the case of assessee. The addition was based on assumptions and presumptions.

Under para 8.17 & 8.18 CIT (A) relied upon Further, mere mention of income-tax file number of creditor will not suffice to discharge the onus as held in the case of CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), where in it was held that where, without filing confirmation letter from the creditor, the assessee merely mentioned the income-tax file number Shree Durga Jewellers vs. ACIT of the creditor (which was also not supported by any affidavit from the creditor), the genuineness of the cash credit cannot be said to have been proved by the assessee. In fact, the principle of onus, that the assessee is required to establish the identity, prove the genuineness of the transaction and establish the creditworthiness of the donor, has been reiterated in the decision of Hon. Delhi High Court in the case of CIT vs. Oasis Hospitalities Pvt. Ltd., 333 ITR 119 (Delhi)(2011). In this case it was held by the Hon. Court that “The initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68. Those are: (i) identity of the investors; (ii) their reditworthiness/investments; and (iii) genuineness of the transaction. Only when these three ingredients are established prima facie, the department is required to undertake further exercise.”

Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases such as Kale Khan Mohammad Hanif v CIT[1963] 50 ITR 1 (SC) and Roshan Di Hatti v CIT [1977] 107 ITR (SC) it has been held by the Apex Court that the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the burden of proof is fluid for the purposes of Section 68. Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then Assessing Officer must do some inquiry to call for more details to invoke Section 68.

Assessee explained the nature receipts that the receipts were sales. Name and address are on record. Sales was proved from invoices, VAT returns, purchases, stock register. Onus was shifted to revenue to disprove. No inquiries were taken place by AO

Under para 8.20 In the case of Shankar Ghosh v ITO [1985] 23 TTJ (Cal.), the assessee failed to prove the capacity of the person from whom he had allegedly taken loan. Further the assessee could not explain the need for the loan and the manner in which the loan amount was spent. The creditor issued two letters demanding repayment but did nothing on noncompliance therewith; such letters did not therefore carry any conviction about the explanation of the assessee. Loan amount was rightly held as Assessee’s own undisclosed income.

This is the case of sales not the loan, where higher onus is lay upon assessee. Sales has already been offered as income.

Under para 8.25 Shree Durga Jewellers vs. ACIT In the case of B.R. Petrochem (P) Ltd. Vs. ITO-Ward-1(1), Chennai407 ITR 87 (Madras)(2018), the Hon’ble High Court of Madras held that- “In the present case, the finding of fact is to the effect the neither the credit worthiness nor the genuineness of the parties has been established by the assessee. The detailed investigation carried out by the Assessing Officer establish the position that the contributions to share capital were persons of insignificant means and their credit worthiness to have made the contributions has not established. The assessing authority had put the result of his enquiries to the assessee granting him opportunity to after its explanations. The appellant however failed to establish the genuineness of the cash contributions as well as the capacity of the persons to have made such contribution in the first place.”

This was the case of share capital, where contributors were found with no means.

Under para 8.28 In the case of Pr. CIT(Central)-1 Vs NRA Iran & Steel (P) Ltd. 412 ITR 161 (SC)(2019), the Hon’ble Apex Court allowed the Revenue Appeal. On the facts of the present case, clearly the assessee company failed to discharge the onus required under section 68 of the Act, the assessing officer was justified in adding the amounts to the assessee’s income.

In this case, the matter relates to bogus penny stocks. The brokers, mediators and companies whose shares were dealt with found non-existent on inquiries. The summons was unserved and offices were closed. Assessee could not satisfy the burden lay upon him

8.33 to 8.35 It is in this context that the issue of circumstantial evidences and preponderance of probabilities as emphasized for the purposes of Income Tax Act,1961 by various courts gain importance. In this regard, the following observations of the Hon’ble Apex Court in the case of Sumati Dayal vs CIT214ITR801(SC), are worth noting:

“This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasized that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance; because if the appellant had purchased the winning ticket after the event she would behaving the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that" fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice" ignores the prevalent malpractice that was noticed by the District Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act, 1972whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc., was withdrawn. Similarly, the observation by the Chairman that if it is alleged Shree Durga Jewellers vs. ACIT that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot besaidthattheexplanationofferedbytheappellantinrespectofthesaidamounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence.”

In the case of Commissioner of Income-tax vs. Durga Prasad More 82 ITR 540 (SC), the Hon’ble SC observed as under:

“...It is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.”

It is therefore obligatory on the part of the appellant that it explains the nature and source of cash credits to its books of accounts. However, in the instant case, the appellant has failed to discharge its legal obligation by furnishing any explanation, which is found satisfactory.

Both the above case relied upon by the Ld CIT (A) even favour to assessee. The sales are made against the stock available with assessee. Purchases are fully vouched, undisputed and supported by books of accounts and stock records. Names and address of buyers are available The sale is apparent and pre- pondrence of probabilities are in assessee’s favour.

Under para 8.35 The reliance is being placed in the case of Vaishnavi Bullion (P.) Ltd. v. ACIT, the Hon’ble ITAT HYDERABAD BENCH 'B', [2022] 145 taxmann.com 197

Further, cases relied upon by assessee before Ld CIT (A) were said to be pertaining the pre-demonetisation period and brushed aside without considering contents.

5.1 Apart from above, Ld AO wrongly invoked the provision of section 68. Ld AO added Rs. 7000000.00 on account of cash deposits on 11.11.20216. When the books are maintained and cash deposits are the part of regular books of accounts, the same cannot be added u/s 68 of the I.T. Act, 1961. In case of books of accounts, the credit side of books may be added u/s 68 of the Income Tac Act, 1961. Cash deposits represent the debit side of books of accounts. 5.2 Provisions of section 68 of the Income Tax Act, 1961 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 of the same or the explanation offered by him is not satisfactory in the opinion of A.O., the sum so credited may be charged to income tax as the income of the assessee of that previous year.

Your honours, the provision of section 68 above, are not meant for cash deposits. This is only for cash credit appeared in books of accounts. Ld AO should have added credits appeared in cash book for which assessee offers no explanations about nature and sources of the credit or explanations offered by assessee is not found satisfactory in the opinion of AO.

The sales made in the year up to the demonetisation are as under:-

Period Sales April to September 7732288 October 2642692 Nov 1 to 7 3561772 Nov 8 2931605

Your honours, the above sales and credit appeared in partners capital accounts were the cash credit. Ld AO should have disallowed out of above instead of invoking the section 68 on cash deposits into banking account. Thus ld AO exceeded his jurisdiction.

5.3 Assessee is required to prove the nature and sources of cash credit. Nature of credit Assessee is a retailer of gold and silver ornaments. He maintains a showroom. He is having opening stock and purchases which are accounted for value-wise and Shree Durga Jewellers vs. ACIT quantity-wise. He is registered dealer under state VAT law and Central VAT Law. He filed his returns under both VAT and Income tax law. From the entire evidences available with AO the nature of credit is proved as sales beyond doubt. Sources of Credit Making of sales and corresponding cash receipts is reconciled with outgoing of stock. Sales cannot be doubted unless corresponding purchases, opening stock or closing stock are proved to be bogus. However, Ld AO nowhere doubted about sources of credit. He only questioned the identification of buyers. Your honour, this cash receipt is not the borrowing. In case of borrowing a higher onus is lay upon assessee to prove that the receipt is not the income. This is the case where receipt has come against release of assets. Both incoming and outgoing are happened. Sales declared by assessee are the income of assessee. Addition of sales u/s 68 is the double taxation of income. This was held by the Hon’ble Income Tax Appellate Tribunal (Ahmedabad) in the case of Shree Sanand Textiles Industries Ltd Vs The Dy.CIT (OSD), Circle-8, Ahmedabad (ITA 995 / AHD / 2014) dated 06/01/2020 where the Hon’ble ITAT that the amount of sale as claimed by the assessee was already offered to tax by the assessee by reflecting the same in its trading and profit and loss account. This fact had not been doubted by the authorities below. The Tribunal further noted that the impugned amount had been taxed twice firstly the same was treated as sales and secondly the same was treated as unexplained cash credit under section 68 of the Act. The Tribunal observed that the provisions of section 68 of the Act can be attracted where there is a credit found in the books of accounts and the assessee failed to offer any explanation or the offer made by the assessee is not satisfactory in the opinion of the assessing officer. Whereas in the instant case, the assessee had explained that the impugned amount represented the sale which had not been doubted by the authorities below. Therefore, the impugned amount could not be treated as unexplained cash credit under section 68 of the Act merely on the ground that the assessee failed to furnish the details of the existence of the parties. The Tribunal also opined that the provisions of section 68 could not be applied in relation to the sales receipt shown by the assessee in its books of accounts. It was because the sales receipt had already been shown in the books of accounts as income at the time of sale only and once the purchases had been accepted by the authorities, then the corresponding sales could not be disturbed without giving any conclusive evidence/finding. I may place reliance on the decision of Hon’ble Rajasthan High Court (Jurisdictional High Court) in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 in which it was 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 Shree Durga Jewellers vs. ACIT delivery of goods was made to them”. (Copy of judgment is enclosed page no 110 -115 pb) Reliance can also be placed on the decision of Hon’ble M.P. High Court in the case of Addl. CIT v. Ghai Lime Stone Co. [1983] 144 ITR 140. It is evident from these judicial rulings that trade advances or cash received against which goods is supplied subsequently is not a cash credit as contemplated by section 68. Identification of buyers So far as identification of buyers are concerned, assessee has furnished full detail of names and addresses along with their PIN code numbers. (Copy is placed here also) Since, assessee discharged his onus lay upon him by filing of the detail, AO observation that the details are incomplete and invoices are bogus was on account of surmises, whimsical, fanciful and should not be warranted. Without making any inquiry the remark of AO is casual. Genuineness of transaction Since, cash were receipts against sales after outgoing of stock, which have been proved from invoices, detail of customers, from books of accounts and stock records, the genuineness is proved beyond doubt. In view of above submission and documents produced before AO, the identification of payer, genuineness of transaction and capacity of payer is proved. Further, section 68 can be applied only where credit is found in books of accounts. As stated earlier, assessee offered tax under presumptive scheme of taxation u/s 44AD. Books of accounts are not required to be made in view of section 44AD. However, he was registered under VAT Law and hence the books ware maintained. But he is not in duty bound to explain each and every entry of receipts. I relied upon a decision of Punjab & Haryana High Court in case of CIT vs Surinder Pal Anand appeal of 2010 dated 29.06.2010.

Some direct decisions are also available on this issue pertaining to demonetization period of jurisdictional bench of ITAT in dated 29.07.2022 in case of ACIT Central Circle vs Moti Sons Jewellers Limited in which bench held that :-

We have considered the rival contention and perused the orders of the authorities and the material available on record arguments advanced by both the parties and also gone through the judicial decision relied upon by both the parties to drive home to their contentions. We find from the records that show cause notice so as to rejection of books of account u/s 145(3) of the Act was not given by the AO and the assessment completed in the manner provided u/s 144 of the Act. It is also noteworthy to mention that that the AO has not given any show cause notices as required u/s 144/145 of the Act before estimation of income by applying the N.P. Rate. It is also ridiculous to note that AO had rejected the books of account u/s 145(3) of the Act which has been confirmed by the ld. CIT(A) but assessment has Shree Durga Jewellers vs. ACIT been framed u/s 143(3) and not u/s 144 as required u/s 145(3) of the Act. indicates that the assessment is bad in the eyes of law. From the order of the ld. CIT(A) it is seen that the ld. CIT(A) had examined the genuineness of purchases from M/s. Paras Gems and Jewellers, M/s. Girdhar Jewellers (P) Ltd. and M/s. Girdhar Jewellers and held the same as genuine on the basis of her detailed findings in para 6.2 (x) for which the Department has not challenged the findings of the ld. CIT(A) as to the issue of genuineness of the purchases and thus the books of account cannot be rejected on the ground of genuineness of purchases. It is essential to indicate that when all the purchases are genuine and correctly recorded in the books of account as well as stock register then the books of account should not be rejected u/s 145(3) of the Act. It is further noted from the record that the assessee claimed that out of total claim of Rs.12,17,48,500/- deposited into bank account in demonetized currency, the amount of Rs.25,96,480/-was realized from its debtors and Rs.11,86,250/- was received as advance from the customers and the ld. CIT(A) in her order treated the entire cash sales and corresponding cash deposit as genuine. Thus the amount received from debtors/ advance from customers cannot be treated as unverifiable and this cannot be a ground for rejection of books of account. We noted from PB Page 163 of the paper book i.e. the list of debtors where total sales to such debtors was amounting to Rs.41,75,995/- against which Rs.13,30,000/- was received at the time of sales and balance Rs.28,45,995/- was outstanding which was receivable from the debtors. It is also observed from the records that lower authorities considered the sale of Rs.41,75,955/- made to the parties as genuine and while computing the total sales of the assessee and even for estimating the net profit, the lower authorities had considered these sales as part of turnover and thus treated the cash received from the debtors immediately at the time of Sales of Rs.13,30,000/- and Rs.2,49,515/- received after 8-11-2016 as genuine and verified.

We feel that out of total amount of Rs.12,17,48,500/- deposited into bank account, the cash realized from debtors was of Rs.25,96,480/- which is a meager amount looking to the quantum of sales of the assessee and this cannot be treated as non- genuine. It is also noted from the record that the AO made the telephonic enquiry / verification from the debtors on test check basis for 6 cases only where the list contains more then 250 names, however, in case of discrepancy the opportunity of cross examination was required to be made by the assessee but it was not made by the AO. Therefore, it can be said that the assessee was deprived of cross examining the parties due to lapse on the part of the AO. As regards the genuineness of advance from customers, the assessee received advance of Rs.11,86,250/- from the customers which the lower authorities considered the corresponding sales made to these customers as genuine and it happens in such business that receiving of advance from customer is regular feature and the same was also prior and after the period 03-11-2016 to 8-11-2016 and advances made during this period cannot be treated as non-genuine. Such advances are adjusted against sales made to the parties. It is also noted that the ld. CIT(A) sustained the addition of Rs.47,72,297/- on account of N.P and ground against such addition is Shree Durga Jewellers vs. ACIT unverifiable amount of Rs.37,82,730/- (i.e. on account of realization Rs.25,96,480/- from debtors and Rs.11,86,250/- from advances). It is apparent from records that all the amounts realized from debtors and received as advance from customers during the period 03-11-2016 to 8-11- 2016 was genuine and verifiable from the accounts then there is no cogent reason by the lower authorities to treat the same as non-genuine. 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).

In the result, the appeal of the revenue is dismissed and the appeal of the assessee is allowed.

Jaipur ITAT in case of Nitin Vijay vs ITO in appeal no. 12/JP/2024 dated 10.10.2024 held that section 68 is not to be invoked even on cash advances against future sales if the nature is proved for the credit relied upon the SC in case of Durga Prasad More and Rajasthan High court Harshila Choradia.

In case of Suwalka and Suwalka Properties vs ACIT appeal No 302/JP/2024 dated 03.10.2024 held that no addition u/s 68 can be made for the sales already declared as per ration laid down by Rajasthan High Court in case of harshila Chordia.

Prayer

Your honour, assessee deserves the relief being :- a) Cash deposits of Rs. 70 Lakhs on dated 11.11.2016 stands explained from the sales affected during October, 2016 and thereafter up to 08.11.2016. b) No further cash was deposited during demonetisation period demonstrate bonafide of assessee. c) Sales were supported by VAT returns, which were never revised. e) Purchases are verified from the facts and evidences. f) Day to day stock registers are available. g) Production records are available. h) Names and addresses of buyers are available with AO. i) Sales already shown as income. j) Sales for the year and immediately preceding year are almost comparable. k) Assessee maintained a show room for retail sales. l) Binding decision of Rajasthan High Court in case of Harshila Choradia that sales declared as income cannot be exposed to section 68. m) Provisions of section 68 was wrongly invoked on cash deposits in bank instead of cash credit.”

Sno Particulars Page no 1. Original Order of appeal 1-8 2. Computation and ITR 9-12 3. Profit and loss 13 4. Stock Details 14-28 5. Purchase register 29-30 6. Purchase bills 31-44 7. Income Declaration 45-53 8. Details of cash sales 54-56 9. Comparative chart of sales 57 10. VAT Returns 58-74 11. Cash book 75-100 12. Partners ITR 101-106 13. Partnership Deed 107-109 14. Harshila Chordia case law 110-115

The assessee furnished the comparative chart of cash and credit sale for FY 2015-16 and 2016-17 relevant to AY 2016-17 and 2017-18 which shows that during the AY 2016-17 the total sale was Rs. 1,30,83,627/- (cash sale Rs. 77,59,808+ credit sale of Rs. 53,23,819) and during the A.Y.

2017-18 under consideration he has shown the total sale of Rs. 1,98,99,241/- (cash sale of Rs. 1,23,88,953 + credit sale of Rs. 75,10,288).

He also submitted that during the demonetization period total sales were Rs. 26,12,469/- only. Since, the total cash sales for the period from 01.04.2016 to 31.03.2017 has been declared at Rs. 1,23,88,953/- and during this period the assessee has deposited cash of Rs. 3,88,57,665/- in sales declared by him during the year hence, the assessee was required to explain the discrepancy of cash sale and cash deposited in his bank accounts. The assessee also submitted that the cash of Rs. 2,61,50,000/- were received from partners. Confirmations of all the partners were filed along with their copies of ITR V for the relevant period. Three partners had declared income in IDS-2016 for which the copies of certificate were also placed on record. Based on those submission the assessee submitted that the deposit of cash by the assessee stands explained. Thus, effectively cash of Rs. 1,27,07,665/- remained to be explained out of that cash Rs. 70,00,000/- was deposited in the bank account on 11.11.2016 that on the 3rd day of demonetization. The bench noted that the assessee vide his profit and loss account stated to have made sales for an amount of Rs. 1,96,96770.35. The assessee furnished the comparative chart of cash and credit sale for FY 2015-16 and 2016-17 relevant to AY 2016-17 and 2017- 18 which shows that during the AY 2016-17 the total sale was Rs. 1,30,83,627/- (cash sale Rs. 77,59,808+ credit sale of Rs. 53,23,819) and during the A.Y. 2017-18 under consideration he has shown the total sale of Rs. 1,98,99,241/- (cash sale of Rs. 1,23,88,953 + credit sale of Rs. 75,10,288). He also submitted that during the demonetization period total AR of the assessee invited our attention from page 116 to 373 showing all the invoices of sales made by the assessee. Out of those invoices on the date of demonetization shows receipt from cheque [ page 117 of the paper book]. In that invoice address and mobile number both were mentioned.

This shows that it was not that the assessee prompted cash sales by introducing the sale which has not been taken place. Majority of the sales invoices shows the mobile number or the address. Ld. AO has not issued any single letter u/s. 133(6) to the buyer when the assessee stated that on the date of demonetization sales was only for Rs. 26,12,469/-. The period were demonetization announced was of the festival and marriage seasons therefore, when the cash sales is not disputed how the cash sales be disputed with out bringing anything contrary on record. The sales is duly recorded in the books and in the records of the state value added tax records. When the cash is duly recorded in the cash book as proceeds of the sale the same again cannot be added as unexplained and that too without reduced that receipt from the turnover as the ld. AO has already taxed the income generated from the sales. The ld. AR of the assessee serviced the decision of our jurisdictional High Court in the case of Smt.

Harshila Chordia v. ITO [2008] 298 ITR 349 in which it was held that found to be cash receipts from the customers against which delivery of goods was made to them”. Thus, the sales recorded in the books of account of the assessee firm cannot be considered as unexplained and thereby we direct the ld. AO to delete that addition as the assessee has duly supported the source of cash deposited immediately on 3rd day of demonstration which was the proceedings of the sale made by the assessee. The bench noted that it was not the cash of the revenue that the assessee has accounted the sales in cash on the date of demonetization but we note that sales invoice no. 540, 541 dated 08.11.2016 [ page 117- 118 ] was by cheque. Even out of cash deposit of Rs. 70,00,000/- the sale after the demonetization was for Rs. 26,12,469/- which was also supported by the delivery of goods and having details of the items sold to customer.

Considering the overall facts and material placed on record we see no reason to sustain the addition of Rs. 70,00,000/- and therefore, the same is directed to be deleted.

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

Order pronounced in the open court on 29/04/2025.

Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 29/04/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shree Durga Jewellers, Jaipur izR;FkhZ@ The Respondent- ACIT, Circle-04, Jaipur 2. 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 33/JP/2025) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत