KIRAN FINE JEWELLERS PRIVATE LIMITED,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2,, JAIPUR

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

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BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 648/JP/2024
fu/kZkj.k o"kZ@Assessment Year : 2017-18

M/s Kiran Fine Jewellers Private
Limited,
F-19, Gautam Marg, Vaishali
Central Circle-02,
Jaipur
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCK7512P vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. S. R. Sharma, CA &
Sh. R. K. Bhatra, CA jktLo dh vksj ls@ Revenue by : Sh. P. P. Meena, CIT-Th. V.H lquokbZ dh rkjh[k@ Date of Hearing

: 03/02/2025

mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 25/02/2025

vkns'k@ ORDER

PER: DR. S. SEETHALAKSHMI, J.M.

By way of the present appeal the above named assessee challenges the order of the Commissioner of Income Tax (Appeals)-4, Jaipur dated
02/02/2024 [here in after ld. CIT(A) ] for assessment year 2017-18. The said order of the ld. CIT(A) arises because the assessee challenged the order of the assessment dated 31.12.2019 passed under section 143(3)

2
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT r.w.s. 153A of the Income Tax Act, [ for short Act] by DCIT, Central Circle-
02, Jaipur [ for short AO].
2. In this appeal, the assessee has raised the following grounds: -
1. (a.) That on the facts and in the circumstances of the case the ld CIT(A) is wrong, unjust and has erred in law in confirming rejection of book of account of the appellant company by the ld AO who invoked provisions of sec. 145(3) of the IT Act, 1961 by allegedly holding that they are not reliable and sales during demonetization period was allegedly unverifiable.

(b). The ld CIT (A) is further wrong and has erred in law in upholding finding recorded by the ld AO that cash deposit to the extent of Rs. 220258445/- made by the appellant company in its bank account during demonetization period from 09-
11-2016 to 30-12-2016 on account of sale was allegedly fabricated and was allegedly its income from undisclosed sources. The ld CIT(A) is further wrong and erred in law in confirming addition of said Rs. 220258445/- made to the income of the appellant by ld AO u/s 68 of IT Act, 1961 as unexplained cash credit.

4
5. Now coming to the merits of the appeal. The brief facts of the case are that a survey u/s 133A of the IT. Act, 1961 at the business premises of the assessee company was carried out on 02.08.2017 which was subsequently converted into search and seizure action operation as per provision of section 132 of the Act on 03.08.2017. Based on that fact even the juri iction over the case was assigned to Central Circle - 2,
Jaipur by the Pr. Commissioner of Income Tax, Jaipur-1, Jaipur by means of an Order u/s 127 of the Act dated 16-10-2017. 5.1
Subsequent to that action notice under section 153A of the Act dated
13-12-2017 was issued and served upon the Assessee on 19-12-2017
requiring it to file a true and correct return of income as prescribed under Rule 12 of the Income Tax Rules, 1962 within 30 days of the service of the said notice. In response to the said notice(s), a return declaring an income

5
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT of Rs. 10,64,13,890/- was filed by the Assessee on 18-01-2018. In the return of income originally filed by the Assessee u/s 139(1) of the Act on 06-12-2017 an income of Rs. 10,64,13,890/- was declared. However, in the return of income filed in response to notice u/s 153A of the Act no undisclosed income pertaining to the relevant year has been declared by the Assessee. The proceedings of assessment of income commenced by issue of notice u/s 142(1) of the Act on 11.10.2018. 5.2
Ld. AO noted that the assessee has not co-operated during the assessment proceedings, which clearly shows that the assessee intentionally/willfully avoided the assessment proceedings.
While assessment proceeding the director of the company of the assessee company Shri Nagandrasingh Laxamn Singh Rathor filed an affidavit dated
01-08-2019 stating that assessee is filing an application before settlement commission and same will be filed before 30-09-2019. However, the assessee has not furnished any evidence of filing application before ITSC, New Delhi. The assessee company was also intimated in various notices that the assessment proceedings and filing application before Settlement are both separate proceedings and assessment proceeding cannot be kept on hold unless the proceeding is 6
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT abated u/s 245 of the I.T. Act and the assessee was requested to comply to the various notices by furnishing information and documents. However, assessee remains non-compliant and at the fag end of the time barring the assessee furnished its 1st reply on 20.12.2019. Hence, it is evident that the noncompliance was intentionally and knowingly so that no third party enquiry may be conducted in the case of the assessee. Ld. AO in the assessment proceeding noticed that assessee has deposited cash aggregating to Rs. 28,32,58,445/- during the demonetization period viz.
between 09.11.2016 to 30.12.2016 which was Specified Bank Notes
(SBNs).

(B) When the cash sales of corresponding months of previous years are compared, it was noticed that the cash sale during the month of November 2016 was Rs.
28,02,77,549/-, during November 2015 it stood at Rs. 3,43,35,825/- and November
2014 at Rs. 1,00,44,334/-. Therefore, during the year under consideration cash sales during November month increased by 8.16 times compared to November
2015 and increased 27.90 times compared to November 2014. (C) The cash sales made during November 2016 is 88.00% out of total cash sales made during the financial year 2016-17. The cash sales made in one month by the assessee is higher compared to cash sales in remaining 11 months of that year.
Further when the trend of cash sales is compared to previous years it was noticed that in November 2015 cash sales was just 25.63% of the total sales and in November 2014 it was 8.19% compared to total sales.

(D) Further, the assessee failed to furnish the detailed of the persons such as full name, address and PAN no. to whom cash sale was made during the demonetarization period.

In view of the above facts ld. AO observed that the assessee has fabricated the whole transaction to make it look real and cash so deposited was undisclosed income of the assessee. Based that observation he went on to issue a detailed show cause notice 21-12-2019 on that issue of cash deposited. The assessee submitted reply that show cause notice on 23.12.2019. 5.4
Ld. AO considered the reply of the show cause notice but not found acceptable on account of the following reasons:
(A) The assessee has justified the sale of Rs. 21,05,47,868/- in a single day.
However, contrary to the claim of the assessee on perusal of sale bills it is found that on dated 08.11.2016 on that particular day there were cash sales of Rs.
21,05,47,868/- just after announcement of demonetization. The assessee stating that sales in jewellery business always depend on turn up of customers in a 8
3,43,35,825/- and October 2014 at Rs. 1,00,44,334/-only.
Hence the assessee failed to explain why such sale was not happened in earlier years although festival is celebrated every year. Hence the claim of the assessee is after thought and not substantiated by facts or evidence. Since, the claim of the assessee is contrary to the fact which shows that the assessee has implanted cash sales invoices in its books of accounts just to cover up its undisclosed income.

(B) The claim of the assessee that sale of current year cannot be compare with earlier years also has no substance as a business activities are expended on the basis of result and trend of earlier years. In the case of the assessee a huge cash sale require a comparison with the sale of earlier years to justify whether the sale so claimed is with consistence to the sale of earlier years or the assessee has claimed a bogus claim of the sale to introduce his unaccounted income during the period of demonetarization as he could not kept the SBN notes of 500 and 1000. (C) Further, on examination of the sales bills it is found that bills were issued without complete details of the sold jewellery items as well as customers. The issued bills do not contains details of full description of the item sold like chain, Sat,
Topas etc. and the items so purported to be sold cannot be verified from stock register on the date of issuance of bills whether the items were part of stock register or not.

It is surprising that some of the bill having lower sale amount related to October and November have been issued with the detail of description of item sold for example bill no. 984 dated 02-11-2016 issued for amount Rs. 8350/- contains details of goods as 1 pair tops under 22/22 Kt gold jewellery. The said bill also contain mobile number of purchaser Namrta Ji Devatwal whereas the bill of higher amount issued in the month and date of demonetarization no such detail have been mentioned and no detail of mobile number has been found. This fact further strengthen that the bill issued without description of item sold are bogus bills issued in dummy names to bring back to his unaccounted money under grab of cash sale.

(D) The assessee has claimed that he was not bound to record detail of buyer such as complete address, PAN etc. on purchase below 2 lakhs. However as discussed in above para the claim of the assessee is contrary to the fact that in some of the bills issued at lower amount, the contact detail of the purchaser has been duly recorded. Some of such instance is tabulated as under:
It will be worthwhile mention here that a search action u/s 132 was carried out at the premises of the assessee wherein it is found that the assessee company engaged in out of books sales in cash and sales above Rs. 2,00,000/- were split in amounts below Rs. 2,00,000/- in order to avoid mandatory PAN compliance as also to conceal the real identity of the buyers. During the search statement of director of the company Shri Nagendra Singh Laxman Singh Rathore recorded u/s 132(4) of the I.T. Act on dated 04-08-2017 wherein in reply to the question no. 23
admitted that he has been indulged in splitting bill of more than Rs. 2,00,000/- into the bill of lower amount.

(E) Further, as per sale bills provided by assessee many details was not found noted in bills Jewellery sold by assessee was not specified like what item of jewellery and quality of diamond/stone and rate. Making charges was also not mentioned in all bilis although the assessee is manufacture. Payment mode also not mentioned in bills. These facts is clearly shown that these bills are fabricated and false bills and only made for adjustment of cash deposited by assessee during demonetization period.

(F) Further on perusal of VAT return filed by assessee it is found that first three quarters of VAT return was revised by assessee. The details. are as under:

Vat return filed by assessee for the financial year 2016-17
Original
Revised

Date of filing
Turnover
Date of Turnover
Difference
Time Period filing

Quarter
Retail sale in Original return
Retail sale in revised return
Difference
1st
1088052
11244864
10156812
2nd
16056082
9197204
-6858878
3rd
251409513
251396630
-12883

From the above it is evident that the assessee revised his quarterly VAT returns for the period 01-04-2016 to 31-12-2016 wherein the assessee significantly changed the sale turnover specially retail sale of 1st quarter by increasing the sale by Rs. 10156812/- which clearly shows that the assessee has manipulated and fabricated its sale book as well as cash book and issued a bogus sale bills by backdating.
The assessee has claimed that VAT was revised due to error notice during the finalization of the financial statement of the company. The admission of the assessee itself loudly speaks that the assessee has been indulged in booking bogus cash sale by issuing bogus sale bills to accumulated his unaccounted income under grab of cash sale and it was only reason which compelled the assessee to revised VAT return so that he can claimed that the sale is duly recorded in VAT return.

(G) The assessee has claimed that the Hon'ble Prime Minister announced demonetarization SBN note of 500 and 1000 currency and it was extra ordinary circumstances and people rushed to shop of jewelers including assessee to purchase the gold. The contention of the assessee is not acceptable for the reasons as discussed as under :
A search and seizure action u/s 132(1) of the Income Tax Act, 1961
("the Act") was carried out by the Income Tax Department on the premises of the assessee M/s Kiran Fine Jewellers wherein the plausibility of sale of gold jewellery to 1150 customers between 8 PM to 12 PM of 08.11.2016 was examined and statement of staff of the assessee company and director Shri
Nagendra Singh Laxman Singh Rathor was recorded u/s 131 of the Act. The copy of the same is also available with the assessee company.
In the statement staff person Shri Om Prakash Sharma admitted in the statement recorded on oath that at average time to prepare a bill was 5 to 7

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Kiran Fine Jewellers Pvt. Ltd. vs. DCIT minutes on dated 08.11.2016. Further, another staff Shri Shrikant Sharma also admitted on oath u/s 131 of the Act that a buyer takes average 5 to 8
minutes to choose any item on the date of delectation of demonetarization.
Hence, it is evident that in the given period between 9 PM to 12 PM of 08-11-
2016 average bills can be issued at maximum 40 to 50 bills whereas the assessee has shown 1175 bills during the same period which is not possible.
Further, the statement of above staff members were confronted to director of the assessee company, Shri Narendrasingh Laxmansingh Rathod vide his statement recorded u/s 132(4) dated 04-08-2017 wherein in reply to question no. 12 he vehemently admitted that he is agreed with the statement of Shri Om Prakash Sharma that the process of issuance of 1 bill takes about
5 minutes. He in reply to question number 15 further accepted that showroom was opened and billing of jewellery was done even after 12 PM of 08.11.2016. Further, another fact was revealed during the course of search proceeding that there was only one computer assigned/available at the showroom to issue the sale bills.
In view of these fact it is evident that a buyer takes average 5 minutes to choose any item and staff of the assessee company takes average 5 minutes to issue the bill. By this average time of 5 minutes per bill the assessee company, could have prepare maximum of 50 to 60 bills in the stipulated time of 4 hours whereas the assessee has shown 1175 bills on that day which clearly shows that the assessee has issued bogus bills under dummy names to accommodate his unaccounted income under grab of cash sales.
(H) Further, during the course of search proceeding at the business premises M/s
Mohit Jewellers, prop. concern of of Shri Narendrasingh Laxmansingh Rathod, who is also director of the company, at 958, 2nd Floor, Dhamani Street, Chaura Rasta,
Jaipur, certain incriminating documents were found and seized as page No.
40,42,43,44 and 45 of exhibit-1, Annexure-AS.

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09.11.2016, 10.11.2016 & 11.11.2016 after the demonetization and received the cash in old currency and deposited in bank accounts on 10.11.2016, 11.11.2016 & 12.11.2016 and shown this cash deposit against the sale of gold on 08.11.2016. 5.6
Further, during the post search investigation, Shri Narendrasingh
Laxmansingh Rathod has submitted that the Annexure-AS Exhibit-2 page
No. 40 is cash book and the same was written on 12.11.2017, hence the date mentioned on the page was 12.11.2017. He further noted that the above page details of date 10.11.2017 & 11.11.2017 are mentioned and the page was written on 12.11.2017. But Annexure-AS Exhibit-1 page No.42,
43, 44 & 45 are related to the booking of gold and the entry of any booking of the buyer cannot be made before or after the date of booking These bookings were made by the employees of Shri Narendrasingh Laxmansingh
Rathod at the office of M/s Mohit Jewellers, 958, 2nd Floor, Dhamani
Street, Chaura Rasta, Jaipur. Hence the entries made on Annexure-AS Exhibit-1 page No.42,43,44 & 45 were actually written on 09.11.2017,
10.11.2017 & 11.11.2017 at the time of booking of the buyers. Further, on the page No. 39, which is back side of Annexure-AS Exhibit-2 page No. 40,

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Kiran Fine Jewellers Pvt. Ltd. vs. DCIT the details of inward and outward quantities of the gold are mentioned, which shows that the booking and supply was made of Bullion not gold jewellery. Moreover, ld. AO further noted that there are two entries written as 3300-000 KFJ 2 and 100-000 KFJ 2 in the left side of the Annexure AS Exhibit-2 page No. 40. It is pertinent to mention here that KFJ is short form of Kiran Fine Jewellers Pvt.Ltd. During the post search investigation, Shri
Narendrasingh Laxmansingh Rathore in his statement dated 17 11 2017
accepted that this was his own money of showroom of Mis Kiran Fine
Jewellers Pvt. Ltd. Based on that he noted that bullion and supplied the same after 08.11.2017 and received the amount in cash in old currency.
The booking and supply of Bullion were made in Mis Mohit Jewellers and the cash was deposit in the accounts of Mis Kiran Fine Jewellers Pvt. Ltd.
under grab of cash sale by issuing bogus sale bills.
5.7
Further, to verify the genuineness of the purchaser as shown by the assessee company on dated 08-11-2016. A survey action u/s 133A of the Act was conducted on 04-08-2017 at premises of two such purchaser
Shree Jewellers and Bhagwati Jeweller. Further, statement of other purchasers as mentioned at page no. 40 of Exhibit-2, Annexure-AS where recorded u/s 131 during post search enquiry and all these purported purchaser denied of any purchase of jewellery or gold from the assessee

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Ld. AO went on to observe that these sales were fabricated and manipulated. Therefore, these entries are bogus & false and only made for generate cash in hand in books of account for adjustment of cash deposited by assessee during demonetization period. The cash so deposited is nothing but the undisclosed income of the assessee earned from undisclosed sources and shown by the assessee under the grab of cash sales, by tailoring sales to make an eye wash. The same is evident from seized document page no. 40 of Exhibit-2, Annexure-AS found and seized

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Kiran Fine Jewellers Pvt. Ltd. vs. DCIT from 958, Dhamani Market, Chaura Rasta, Jaipur which reflect that huge amount of cash totaling to Rs. 28,32,58,445/- was received in post demonetarization and the person against whom same was shown to be received have denied any such payment to the assessee. Further, an amount of Rs. 6,30,00,000/-, which is part of above total of Rs.
28,32,58,445/- recorded in aforesaid page, has been disclosed by the assessee in profit and loss account as other business income. Therefore, balance amount of Rs. 22,02,58,445/- (Rs. 28,32,58,445/-minus Rs.
6,30,00,000/-) remains as undisclosed income of the assessee. Since, the assessee has deposited total cash of Rs. 22,18,29,000/-in his bank account in SBN notes but the assessee has also failed to explain the remaining amount of Rs. 1570555/- (Rs. 22,18,29,000/-minus Rs. 22,02,58,445/-) as cash receipt from genuine sale. Therefore, a sum of Rs. 22,18,29,000/- (Rs.
22,02,58,445/- plus Rs. 1570555/-) so deposited in the bank account is held unexplained cash credit u/s 68 of the Act which the assessee has induced in books under the grab of cash sales and resultantly addition of Rs.
22,18,29,000/- is being made and added to the total taxable income of the assessee and taxed at the rate of 60% as provision u/s 115BBE.
5.9
Since, in the instant case books of accounts are rejected as discussed above, and NP rate for the year is to be estimated and it will be 16
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT reasonable to estimate the at 14.50% considering the fact that the assessee himself declared NP at 14.32% for the year under consideration.
Therefore, N.P at 14.50% is applied for AY 2017-18 against the declared
NP at 14.32%. Further, looking to the fact during AY 2017-18 assessee has induced his undisclosed income in books under the grab of cash sale, cash advance, receipt from debtor as discussed in above Para, out of the total turnover of Rs. 48,46,90,040/- the bogus turnover to the extent of Rs.
22,18,29,000/- is deducted and on balance turnover of Rs. 26,28,61,040/-
Net profit is recomputed at estimated NP rate of 14.50% which computed at Rs. 3,81,14,850/- the same is considered for total income of the assessee.
5.10 During the search operation at the business premises M/s Mohit
Jewellers, prop. concern of Shri Narendrasingh Laxmansingh Rathod who is also director of the company, at 958, 2nd Floor, Dhamani Street, Chaura
Rasta, Jaipur, wherein certain incriminating documents were found and seized as page no. 40, 42, 43, 44 and 45 of exhibit-1, Annexure-AS. On perusal of above documents it is found that the right side of the page 40 of exhibit 2 it is written 6,30,00,000 Sangam Ji. During the search proceedings, when observed right side of the page 40 of exhibit 2 it is written 6,30,00,000 Sangam Ji which denotes M/s Sangam Handicraft Pvt.
Director of Sangam Handicraft Pvt. Ltd. and his son Sahil Gupta were also recorded u/s 131 of the Act on 04.08.17 at business premises of his proprietor concern M/S Mohit Jeweller, 958 Dhamani Street, Chaura Rasta,
Jaipur wherein he admitted that amount of Rs. 6,30,00,000/-represent the old currency which was deposited on 11-11-2016 in bank account of M/s
Sangam Handicraft Pvt. Ltd. held in Malviya Urban Cooperative Bank. He further admitted that the amount has been deposited by Shri
Nagendrasingh Laxmansingh Rathor. Hence it is evident that the aforesaid amount of Rs. 6,30,00,000/-found recorded in page no. 40 of exhibit-1,
Annexure-AS represent undisclosed income of the assessee which the assessee has shown as additional business income in the profit and loss account of the year under consideration. Since, the above undisclosed income found recorded in above page has been unearth during the course of search proceedings. Hence, the same is income from other source.
Accordingly, the assessee was asked to explain why the same should not consider as unexplained cash credit u/s 68 of the Act, vide note sheet entry.
In reply to the same, the assessee claimed that the sale amount noted on seized paper works out to Rs. 28,32,58,445/- out of which Rs.
22,18,29,000/- has been recorded in the regular books of account of the assessee and balance amount of Rs. 6,30,00,000/- have been declared as 18
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT additional business income received from sale proceeds of gold ornaments on 08-11-2016. Hence, same is additional business income. The reply of the assessee duly considered however not found acceptable as the amount of Rs. 6,30,00,000/- has been found recorded against the name of Sangam
Ji who has denied having any purchase from assessee company which is evident from the above statement also. The assessee has claimed that the said amount is profit of sale made on 08-11-2016. However, he failed to furnished details such as name, address and PAN of purchaser to whom the sale was made. In the absence of such evidence and denial of the person Sangam Ji (director of M/s Sangam Handicraft Pvt. Ltd.), the claim of the assessee remains unsubstantiated. Further, in the independent
Auditors reports, the auditor has opined the amount as 'other business receipt of Rs. 6,30,00,000/-recorded in books of accounts on 08-11-2016'.
Similarly at note no. 17.2 of financial statement the amount has been recorded as 'other business income'. Further, at para.2 of 3 of form no.
3CA, the same has been declared as 'other business income'. These fact clearly shows that the income of Rs. 6,30,00,000/- is not a business income of Jewellery but the income earned from business which has not been disclosed by the assessee in the regular books of accounts. In view of the above discussion a sum of Rs. 6,30,00,000/- found recorded in seized

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Kiran Fine Jewellers Pvt. Ltd. vs. DCIT paper is held unexplained money u/s 69A of the I.T. Act under head income from other sources against no expenditure, allowance or setoff loss is allowed and same is taxed at the rate of 60% as provision u/s 115BBE.
5.11 Based on that observations the total income of the assessee was computed as detailed here in below :
Income declared in Return of Income
10,64,13,890
Less: income from business & profession as declared by the assessee
10,60,65,547
Add: Income of business & profession as determined at para no. 9
3,81,14,850
Add: as per para 8 supra (taxable at the rate of 60% as provided u/s 115BBE)
2,21,82,9000
Add: As per para 10 (taxable at the rate of 60% as provided u/s 115BBE)
6,30,00,000
Total income
32,32,92,190
Rounded off
32,32,92,190

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The appellant has contended that appellant company has maintained correct &
complete books of accounts including Stock-Register which are audited by independent auditor of company appointed under Companies Act and Audit Report having no adverse remark or comment. The A.O. in assessment also had accepted op. stock, purchases, gross profit (applied N.P. rate) and closing stock as declared by assessee. The A.O. has accepted declared closing stock which implies that outgo from op. stock and purchases has been accepted which can be on account of sales made by assessee and thus out of declared sales some sales cannot be held as bogus or ingenuine sales. The rejection of declared sale by A.O. (reducing it by alleged bogus sale) while accepting all component of Trading Account is thus contradictory and only on that basis rejection of books of accounts cannot be held valid in law.
The appellant has countered the findings of Ld. A.O. that on examination of the sales bills it is found that bills were issued without complete details of the sold jewellery items as well as customers. The issued bills do not contains details of full description of the item sold like chain, Sat, Topas etc. and the items so purported to be sold cannot be verified from stock register on the date of issuance of bills whether the items were part of stock register or not. Appellant also submitted that mentioning of complete address & PAN of buyers on below Rs. 2 Lac sale bills is neither requirement nor there is any provision in the 1. T. Act, 1961 to ask IT PAN complete address and name proof etc. from the customers buying goods in cash upto the prescribed limit. In fact many customers do not inform the same and those inform their complete address and PAN that is noted on sale invoice by assessee.

Having perused the facts of the case, a survey u/s 133A of the I.T. Act, 1961 at the business premises of the appellant assessee company on dated 02-08-2017 which was subsequently converted into search and seizure action u/s 132(1) of the Income Tax Act, 1961 ("the Act") on 03-08-2017. It will be worthwhile to mention here that the appellant assessee has been non compliance to the statutory notices issued to him on various dates during the assessment proceedings as noted in para 6 of the assessment order. During the course of assessment proceeding the director of the company of the assessee company Shri Nagandrasingh Laxamn
Singh Rathor filed an affidavit dated 01-08-2019 stating that appellant assessee is filing application before settlement commission and same will be filed before 30-09-
2019. However, as per record the appellant assessee had not filed application before ITSC, New Delhi.

During the course of assessment proceedings it was noticed that, assessee has deposited cash aggregating to Rs. 28,32,58,445/- during the demonetization period viz. between 09.11.2016 to 30.12.2016. Further, it was noticed out of total cash deposited cash of Rs. 28,32,58,445/-in Specified Bank Notes (SBNs). The assessee has been not cooperative throughout the assessee proceeding and furnished his first submission on 20-12-2019 in compliance of various notices.
21,05,47,868/- in a single day. The cash sale of Rs. 21,05,47,868/-on a single day does not seems genuine following the past year's trends.

As further noted by the ld AO when the cash sales of corresponding months of previous years are compared, it was noticed that the cash sale during the month of November 2016 was Rs. 28,02,77,549/-, during November 2015 it stood at Rs.
3,43,35,825/- and November 2014 at Rs. 1,00,44,334/-. Therefore, during the year under consideration cash sales during November month increased by 8.16 times compared to November 2015 and increased 27.90 times compared to November
2014. The comparative data of cash sale during 1 November to 08 November of different years is not on record.

The cash sales made during November 2016 is 88.00% out of total cash sales made during the financial year 2016-17. The cash sales made in one month by the assessee is higher compared to cash sales in remaining 11 months of that year.
Further when the trend of cash sales is compared to previous years it was noticed that in November 2015 cash sales was just 25.63% of the total sales and in November 2014 it was 8.19% compared to total sales.
Further in the assessment order on page 10 onwards the statements recorded have been extracted wherein w.r.t. sale claimed on the date of 08-11-2016 i has been admitted that the sale bills were not made on this date. Furthe with respect to demonetization itself it has been admitted in the statements that the customer took time of average five to eight minutes when they come for purchasing the jewelry on the date when the demonetization was announced. The assessment order works out that appellant could have made 40 to 50 sales before the midnight whereas the appellant has shown 1175 bills during that period. The fact that on the date when the demonetization was announced after that announcement five to seven minutes were being taken in each sale has been admitted by the director of the company as well.
I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-
A survey u/s 133A of the IT Act, 1961 at the business premises of the appellant assessee company on dated 02.08.2017 which was subsequently converted into search and seizure action u/s 132(1) of the Income Tax Act, 1961 ("the Act") on 03-08-2017. It will be worthwhile to mention here that the appellant assessee has been non compliant to the statutory notices issued to him on various dates during the assessment proceedings as noted in para 6 of the assessment order. During the course of assessment proceeding the director of the company of the assessee company Shri Nagandrasingh Laxamn Singh Rathor filed an affidavit dated 01-08-
2019 stating that appellant assessee is filing application before settlement commission and same will be filed before 30-09-2019. However, as per record the appellant assessee had not filed application before ITSC, New Delhi. This shows that the affidavit was filed to delay the assessment proceedings and to avoid the scrutiny.

During the course of assessment proceedings it was noticed that, assessee has deposited cash aggregating to Rs. 28,32,58,445/- during the demonetization period viz. between 09.11.2016 to 30.12.2016. Further, it was noticed out of total cash deposited cash of Rs. 28,32,58,445/-in Specified Bank Notes (SBNs). The assessee has been non-cooperative throughout the assessee proceeding and furnished his first submission on 20-12-2019 in compliance of various notices.
During the appeal proceedings also the appellant has been mostly non responsive.

As noted by the Id AO the assessee has shown cash sales aggregating to Rs.
21,05,47,868/- in a single day. The cash sale of Rs. 21,05,47,868/-on a single day does not seems genuine following the past year's trends.

As further noted by the Id AO when the cash sales of corresponding months of previous years are compared, it was noticed that the cash sale during the month of November 2016 was Rs. 28,02,77,549/-, during November 2015 it stood at Rs.
3,43,35,825/- and November 2014 at Rs. 1,00,44,334/-. Therefore, during the year under consideration cash sales during November month increased by 8.16 times compared to November 2015 and increased 27.90 times compared to November
2014. The comparative data of cash sale during 1 November to 08 November of different years is not on record.
The cash sales made during November 2016 is 88.00% out of total cash sales made during the financial year 2016-17. The cash sales made in one month by the assessee is higher compared to cash sales in remaining 11 months of that year.
Further when the trend of cash sales is compared to previous years it was noticed

24
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT that in November 2015 cash sales was just 25.63% of the total sales and in November 2014 it was 8.19% compared to total sales.

The facts regarding the announcement of demonetization estate by the appellant are factual information and does not require further discussion. Further the claim of the appellant that after the announcement of demonetization there was a rush of customers with the jewelers till the midnight of 08-11-2016 is also not completely deniable as it is a matter of common knowledge. However these are all general facts. That cannot mean that any amount of sale can be claimed to have taken place between 8 pm to 12 midnight on 08-11-2016. The above contention is not acceptable as the Id. AO has held in the assessment order as under:

"A search and seizure action u/s 132(1) of the Income Tax Act, 1961 ("the Act") was carried out by the Income Tax Department on the premises of the assessee M/s Kiran Fine
Jewellers wherein the plausibility of sale of gold jewellery to 1150 customers between 8
PM to 12 PM of 08.11.2016 was examined and statement of staff of the assessee company and director Shri Nagendra Singh Laxman Singh Rathor was recorded u/s 131 of the Act. The copy of the same is also available with the assessee company. The relevant part of statement of these persons recorded u/s 131 of the I T Act on 02.08.17, at the showroom of Kiran Fine Jewellers Pvt. Ltd. is reproduced below:-
(a)
Shri Om Prakash Sharma u/s 131 on dated 02.08.2019 at showroom of the assessee.

25
(b) Shri Shrikant Sharma u/s 131 on dated 03.08.2019 at showroom of the assessee.

28
minutes on dated 08-11-2016. Further, another staff Shri Shrikant Sharma also admitted on oath u/s 131 of the Act that a buyer takes average 5 to 8 minutes to choose any item on the date of delectation of demonetarization. Hence, it is evident that in the given period between 9 PM to 12 PM of 08-11-2016 average bills can be issued at maximum 40 to 50 bills whereas the assessee has shown
1175 bills during the same period which is not possible.

(c) Further, the statement of above staff members were confronted to director of the assessee company, Shri Narendrasingh Laxmansingh Rathod vide his statement recorded u/s 132(4) dated 04-08-2017 wherein in reply to question no.
12 he vehemently admitted that he is agreed with the statement of Shri Om
Prakash Sharma that the process of issuance of 1 bill takes about 5 minutes. He in reply to question number 15 further accepted that showroom was opened and billing of jewellery was done even after 12 PM of 08.11.2016. The relevant part of the statement is as under:

29
Further, another fact was revealed during the course of search proceeding that there was only one computer assigned/available at the showroom to issue the sale bills.

In view of the above fact it is evident that a buyer takes average 5 minutes to choose any item and staff of the assessee company takes average 5 minutes to issue the bill. By this average time of 5 minutes per bill the assessee company, could have prepare maximum of 50 to 60 bills in the stipulated time of 4 hours whereas the assessee has shown 1175 bills on that day which clearly shows that the assessee has issued bogus bills under dummy names to accommodate his unaccounted income under grab of cash sales."

The appellant has further objected to the findings in the assessment order regarding the number of sales which could have been made on the date of announcement of demonetization after the announcement of the demonetization in a general manner and has not countered the detailed facts brought on record in the assessment order. The appellant has admitted and not countered the factual analysis regarding the billing as done in the assessment order and the statements

32
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT referred in the assessment order in this regard have also not been claimed to be retracted. As noted by the ld AO the assessee has shown cash sales aggregating to Rs. 21,05,47,868/- in a single day.

The appellant has made general submissions and has not placed on record evidences and documents to counter the statements of employees and director recorded which are referred and extracted in the assessment order.

The appellant has also claimed that even if actual cash in SBN was received after
08-11-2016 it was not prohibited in scheme of demonetization. The sale invoice or sales made by assessee cannot be held as bogus on non-genuine in proceedings under Income Tax on these grounds. This is an argument to reward the dishonesty and illegality.

In this regard reference is made to judgement of Hon'ble ITAT in the case of Vaishnavi Bullion (P.) Ltd. v. ACIT [2022] 145 taxmann.com 197 (Hyderabad Trib.)
[28-11-2022]. As per this judgement, the conduct of the assessee was incomprehensible and 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

The extract from the assessment order as noted in para 8 of the order of the Hon'ble ITAT is as under:-

“………..To sum up, the above provisions in relation to the discussion made above in the case of the assessee, every Sale transaction carried on by a trader is a contract of sale governed by the sale of Goods Act, 1930. As per sec.4 (1) of the said Act, the contract of sale was defined to mean 'a contract whereby the seller transfers-or agrees to transfer the property in goods to a buyer; for a price. As can be seen from the said definition, a contract of sale requires a seller, a buyer, transfer of property in the goods, and a price. 'Price' was further defined under section 2(10) of the Sale of Goods Act to mean 'money consideration for a sale ofgoods. Thus, in a contract of sale, payment of price in money is an essential part.
The word 'money' has not been defined under the said Act, but the most common definition of money as found from dictionaries is that money means an authorized medium of exchange especially coins or paper currency issued as legal tender by a Government. Hence, in a concluded and valid contract of sale, the 'price' for which the goods have been sold to the buyer has to be understood as money in legal tender only. In India such legal tender status to the paper currency is given by the Central Government in terms of the provisions of sec.26 of the RBI Act. Under the same section, the Central Government is also empowered to withdraw the 33
'legal tender status of the currency notes. Thus, the currency notes are a mere piece of paper unless the same are recognized by the Government of India as 'legal tender in terms of section 26 of the RBI Act.

On the night of 8-11-2016, the Hon'ble Prime Minister of India while addressing the Nation has announced the decision of the Central. Government to withdraw the legal tender status to the existing series of bank notes of the value of Rs. 500 and Rs. 1000 w.e.f. 9-11-2016. Accordingly, a Notification in S.O. No. 3407(E) dt. 8-11-2016 was also issued withdrawing the, legal tender status to the bank notes of the value of Rs. 500 and Rs. 1000 (referred to as specified bank notes or SBNs). However, in the said
Notification a facility was granted to the holders of SBNs for the deposit of such SBNs in their account maintained with any bank on or before 30-12-2016 по that the equivalent value of SBNs will be credited to such account. The Government has further announced that the SBNs will continue to be legal tender during demonetization period for the limited purpose of making payments at places like petrol bunks, gas agencies, etc. Thus, except where the SBNs were deposited in a bank, or exchanged for goods/services at designated places like petrol bunks etc., in all other cases such SBNs are no longer legal tender w.e.f. 9-11-2016. Coming to the present issue on hand, as discussed in para 5.3.2, it was proved that the assessee has carried on their trading operations, made cash sales during the demonetization period, paid sales tax (VAT) wherever required, and also reported such sales to the VAT Authorities. As already discussed above, in a concluded and valid Contract of Sale, price for the goods sold shall only be the receipt of money in legal tender. Once the assessee says that he has carried out sales, even during demonetization period, it ha 'to be understood thit he has received the money not in legal tender, because from 9-11-2016 onwards, the SBNs are no longer money but a mere piece of paper as between the seller and the buyer, and do not constitute money in legal tender. Thus, a valid contract of sale during demonetization period and SBNs are mutually exclusive, and the assessee cannot be permitted to club both of them.

The issue can also be tested from another angle. Since the sale of goods is also a contract, the relevant provisions of Indian Contract Act will also apply to such sale.
As per the provisions of sec.23 of the Contract Act, every contract, of which the consideration is 'unlawful', is void. The said section also enumerates various circumstances under which the consideration of a contract is said to be 'unlawful'.
Two such circumstances are, (i) the consideration of a contract is of such nature that, if permitted, it would defeat the provisions of any law, or (ii) the Court regards it as immoral or opposed to public policy. Hence, if any one says that he has received price in SBNs as a part of contract of sale, such contract itself is void and non-est in the eyes of law, because the claim of receipt of such price in SBNs as a part of contract of sale, if accepted, would defeat the provisions of sec.26(2) of RBI
Act, 1934 and the Notification in S.O.No.3407(E) dt. 8-11-2016 issued there under,

34
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT through which the Central Government has withdrawn the legal tender status of SBNs from 9-11-2016 onwards.

As per the said Notification, the only way-out given to the persons holding SBNs as on 9-11-2016 to realize the equivalent value of such SBNs is to deposit the same into his bank account (please see Para 2(iii) and 2(iv) of the Notification). If the SBNs are claimed to have been dealt by the persons who held the SBNs as on 9-
11-2016, in a manner other than what was prescribed in the statutory Notification, like exchanging the same with unauthorized persons other than banks, and if such a claim is accepted, it would bring the said statutory Notification, which was issued as a measure to tackle black money, to ridicule and renders nugatory. Also, since the 'public policy' behind the withdrawal of legal tender status to the SBNs from 9-
11-2016 onwards was explained by the Central Government to be a measure to tackle the black money in the economy, to lower cash circulation which is directly linked to corruption, fake currency etc., any claim of acceptance of SBNs as a part of-contract of sale is opposed to the said 'public policy as announced by the Central Government and vitiates the whole exercise of demonetization. Hence, for these reasons, the contract of sale if it involves receipt of SBNs as price', is ab- initio void as per the provisions of sec.23of the Contracts Act, 1872 and thus non- est in the eyes of law. Hence, such SBNs cannot be treated as having arisen out of a contract for sale…….”

It is held by the Hon'ble ITAT as under:-

“70. From the reading of the above notification, it is abundantly clear that SB Notes may be exchanged at any issue Office of RBI and/or any branch of bank subject to the conditions laid down in the notification, as SBN ceases to be valid tender as per the powers conferred by subsection (2) of section 26 of the Reserve Bank of India Act, 1934 (2 of 1934) (hereinafter referred to as the said Act), with effect from the 9th November, 2016. However, no sale and purchase can be made either tendering or accepting SBN notes by any person after the cut off date of 8-11-
2016, save an asset, the services/product exempted from this. In any case, there was a total prohibition from the sale and purchase of gold in specified Bank Notes after 8-11-2016, as the SBNs ceases to be valid tender as per the said notification issued under the Act.

'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.
……………………

36
24. Even if Apex's contention were to be accepted that it did not indulge in any illegal activity by committing an offence, as there was no corresponding penal provision in the 2002 Regulations applicable to it-there is no doubt that its actions fell within the purview of "prohibited by law" in Explanation 1 to section 37(1).

26………………..

It is held by the Hon'ble Supreme Court in the case of Biharilal Jaiswal v.
Commissioner of Income-tax [1996] 84 Taxman 236 (SC)/[1996] 217 ITR 746
(SC)/[1996] 130 CTR 143 (SC)[16-11-1995] as under:-

"One arm of law cannot be utilised to defeat the other arm of law. Doing so would be opposed to public policy and bring the law into ridicule."

The above principle has been reiterated by the Hon'ble Supreme Court in the case of Apex Laboratories (P.) Ltd.v.Deputy Commissioner of Income-tax LTU [2022]
135 taxmann.com 286 (SC).

The appellant deposited cash aggregating to Rs. 28,32,58,445/- during the demonetization period viz. between 09.11.2016 to 30.12.2016. The Ld. A.O. made total addition of Rs. 22,18,29,000/- in the income of appellant i.e. Rs.
22,02,58,445/-deposited in Bank account during the period of demonetization viz.
9-11-2016 to 30-12-2016 in specified SBNs and balance Rs. 15,70,555/-deposited during the said period which is not in specified SNBs.
The appellant has relied on rely on recent decision dated 17-11-2020 of Delhi High
The appellant made contention that there was no provision in I. T. Act, 1961 which restricts in making cash sales by any business man. Further, there is neither requirement of law nor there is any provision in the I. T. Act, 1961 to ask IT PAN, complete address and name proof etc. from the customers buying goods in cash upto the prescribed limit. However in this regard, during the assessment proceedings the Id AO has held that that some of the bill having lower sale amount related to October and November have been issued with the detail of description of item sold whereas the bill of higher amount issued in the month and date of demonetarization no such detail have been mentioned and no detail of mobile number has been found. This fact further strengthen that the bill issued without description of item sold are bogus bills issued in dummy names to bring back to his unaccounted money under grab of cash sale. It is observed that the assessee changed his methodology of issuance of bills to accommodate his unaccounted income under grab of bogus sale issued in dummy names. The assessee company engaged in out of books sales in cash and sales above Rs. 2,00,000/- were split in amounts below Rs. 2,00,000/- in order to avoid mandatory PAN compliance as also to conceal the real identity of the buyers. During the search statement of director of the company Shri Nagendra Singh Laxman Singh Rathore recorded on dated 04-08-2017 wherein in reply to the question no. 23 admitted that he has been indulged in splitting bill of more than Rs. 2,00,000/- into the bill of lower amount. This further shows that the sale bills are non-genuine and bogus.

The assessee revised his quarterly VAT returns for the period 01-04-2016 to 31-
12-2016 wherein the assessee significantly changed the sale turnover specially retail sale of 1st quarter by increasing the sale by Rs. 10156812/- which along with other facts and evidences brought on record by the Id. AO clearly shows that the assessee has manipulated and fabricated its sale book as well as cash book and issued a bogus sale bills by backdating.

The appellant has submitted that the findings and conclusions of A.O. regarding booking and supply of bullion were made in M/s Mohit Jewellers and the cash was deposited in the accounts of M/s Kiran Fine Jewellers P. Ltd. under grab of cash sale by issuing bogus sale bills are based only on suspicions and not based on any material on record or evidence found in case of assessee company. The sale

40
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT invoices issued by assessee company in respect to jewellery/ornaments items are sold were out of stock held by assessee company which is evidenced from books of accounts and Stock Register of assessee company.

As noted from the assessment order that during the course of search proceeding at the business premises M/s Mohit Jewellers, prop. concern of of Shri Narendrasingh
Laxmansingh Rathod, who is also director of the appellant company, certain incriminating documents were found and seized as page no. 40, 42, 43, 44 and 45
of exhibit-1, Annexure-AS. Further, during the search proceedings the above seized papers were confronted to the director of the company Shri Nagendrasingh
Laxmansingh Rathore and he explained that the page no.42,43,44 &45 of Annexure-AS Exhibit-1 are written in red ink and all entries written in red ink are bookings of buyer. Further he explained that page no 40 of Annexure-AS Exhibit-2
is written in pencil and all entries written in pencil are related to cash book of that particular day and on the back side of the page inward and outward quantities of the gold are mentioned.

On perusal of table mentioned on page no 22-23 in the assessment order the Ld.
AO has established after matching the transaction mentioned on page no 40 of Annexure-AS Exhibit-2 with the pages No.42, 43, 44 & 45 inventorized as Annexure-AS Exhibit-1 that Shri Narendrasingh Laxmansingh Rathod has booked the gold bullion against the demand of customers on dates 09.11.2016, 10.11.2016
& 11.11.2016 after the demonetization and received the cash in old currency and deposited in bank accounts on 10.11.2016, 11.11.2016 & 12.11.2016 and shown this cash deposit against the sale of gold on 08.11.2016. Further, during the post search investigation, Shri Narendrasingh Laxmansingh Rathod has submitted that the Annexure-AS Exhibit-2 page No 40 is cash book. Further, noted from the page
No 39, which is back side of Annexure-AS Exhibit-2 page No 40, the details of inward and outward quantities of the gold are mentioned, which shows that the booking and supply was made of Bullion not gold jewellery. It is also worthwhile to mention here that there are two entries written as 3300-000 KFJ 2 and 100-000
KFJ 2 in the left side of the Annexure-AS Exhibit-2 page No 40 It is pertinent to mention here that KFJ is short form of Kiran Fine Jewellers Pvt.Ltd. During the post search investigation, Shri Narendrasingh Laxmansingh Rathore in his statement dated 17.11.2017 accepted that this was his own money of showroom of M/s Kiran
Fine Jewellers Pvt.Ltd On the basis of above discussion, it is very clear that Shri
Narendrasingh Laxmansingh Rathod had booked the bullion and supplied the same after 08.11.2016 and received the amount in cash in old currency The booking and supply of Bullion were made in M/s Mohit Jewellers and the cash was deposit in the accounts of M/s Kiran Fine Jewellers Pvt. Ltd. under grab of cash sale by issuing bogus sale bills.
21,05,47,868/ in a single day. From the above discussion it is clear that appellant indulged into:-

The manipulation of the books of accounts and the sale bills to increase the cash sale in the period before the period of announcement of demonetization to increase the cash holding in hand.

Fictitious sale bills which are claimed to have been issued after the announcement of demonetization by which 1175 bills are claimed to have been issued to the customers after 8:00 PM on the date of announcement of demonetization are found to be bogus bills as almost maximum only 50 sales could have been effected.

Sale by the appellant after the date of 8th November 2016, when the demonetization had come into full operation by accepting the SBNs in violation of law. No prudent person would sell the precious item by violating the law and thus indulge into illegal transaction. Further such sale bills have been back dated by the appellant and such sale bills are bogus bills. The illegality of the transaction itself makes such sales as illegal and such sale bills as bogus. Such sales are also bogus as held by Hon'ble ITAT in the case of Vaishnavi Bullion (P.) Ltd. v. ACIT
[2022] 145 taxmann.com 197 (Hyderabad Trib.)[28-11-2022].

Therefore, these entries are bogus & false and only made for generate cash in hand in books of account for adjustment of cash deposited by assessee during demonetization period. The cash so deposited is nothing but the undisclosed income of the assessee earned from undisclosed sources and shown by the assessee under the grab of cash sales, by tailoring sales to make an eye wash.

Regarding applicability of section 68/69A of the Act on the issue, further discussion is done in the adjudication of ground of appeal no. 6. The same is referred to and not repeated for the sake of brevity.

Accordingly, this ground of appeal is hereby dismissed.”

Ground No. 3

42
The Ld. A.O. has made addition of Rs. 15,70,555/- as cash receipt and held that assessee has failed to explained the amount received from genuine sales.

The appellant has submitted that the said amount of cash which was not in SBNs but was of new currency issued by RBI after 09-11-2016 and so it can only be held to have been received on sales made by assessee after 09-11-2016 to 31-12-2016
and for that sale invoices have been issued. The A.O. without any material or evidence and without stating how the said new currency not being in SBNs could have been received without any sale and arbitrarily held it that assessee failed to explain the said cash receipt from genuine sale.

I agree with the submissions of the appellant as the assessment order itself highlights some genuine bills and further that the motive behind depositing new currency in the bank through bogus sales has not been explained by the learned assessing officer. Whereas the motive in case of the SBNs is very much clear as such notes went out of circulation and validity and were to be deposited in the bank within the time allowed and that the appellant was having unaccounted SBN cash currency which he routed through bogus sales in the books of company and deposited such cash in the bank account. Accordingly the deposit of cash in SBN and deposit of cash in the new currency cannot be equated in terms of motive of the depositor appellant as well as in terms of the other surrounding factors. The ld.
AO has not brought on record any negative findings and evidences in this regard.

Accordingly, this ground of appeal is hereby allowed.

Ground No. 4

The Ld. AO has rejected books of account and estimate the net profit @ 14.50%
instead of 14.32% which was declared by the appellant for the year under consideration. out of the total turnover of Rs. 48,46,90,040/ the bogus turnover to the extent of Rs. 22,18,29,000/- is deducted and on balance turnover of Rs.
26,28,61,040/- Net profit is recomputed at estimated NP rate of 14.50% which computed at Rs. 3,81,14,850/-.

The appellant made contention that The A.O. had accepted declared op. stock, purchases, gross profit and closing stock. In these facts of the case the application of N.P. rate of 14.50% in place of 14.32% on sales means that expenses claimed in P & L A/c have been disallowed to the extent of addition. The claimed expenses cannot be disallowed unless it is held that the same are not for the purposes of carrying on business or these are not supported with bills/vouchers etc. or expenses claimed are contrary to law.

43
In such a scenario the only question which remains to be decided is that what should be the profitability on the genuine turnover of the appellant. The Assessment order has adopted the net profit profitability of 14.50%. The same is restored to 14.32% (after giving effect to all cash and non-cash expenditure) on the genuine sale, which is reasonable as well as the same is not countered factually by the appellant.

This would mean and imply that expenditure has been incurred by the appellant also with respect to the activities of indulging in bogus billing and illegal activity as discussed in this order in the paragraphs above and such expenses cannot be allowed as deduction from the genuine part of the business.

The appellant has not maintained the details of expenses spent in the activity of bogus billing, making sale in exchange of SBNs after the date of 08-11-2016, revision of VAT returns, legal advice expenses etc. which would also include proportionate building related expenses, director and employees related expenses, finance expenses w.r.t. assets used in such activity and other expenses directly or indirectly pertaining fully or partly to such activities. The expenses of the nature of employees expenses involved in decision making process, monitoring, of administrative expenses etc, cannot be ruled out. Since these expenses are relatable to above unexplained activity, apportionment of these expenses ought to be made as such apportioned expenses cannot be claimed under the head of "Profits and gains from Business or Profession".

It is relevant here to refer to the judgements of Hon'ble ITAT in the case of Coal
India [I.T.A No. 1032/Kol/2012 decided on 13-5-2015] for the purpose of taking guidance with respect to expenditure that are related to such activities. In the context of section 14A, the Hon'ble Tribunal agreed with the argument that the term
'expenditure' as per section 14A would include expenditures that are related to the investment made i.e. administration, capital expenditure, travelling expenses, operating expenses, etc. That such investment decisions are highly strategic in nature and are required to be made highly qualified and experienced professionals, require research and analysis, need to attend board meetings and make policy decisions. By no stretch of imagination, it can be assumed that such activities are done without incurring any expenditure.

44
As discussed in paragraphs above, net profit ratio for taxability is restored to 14.32% (after giving effect to all cash and non-cash expenditure) however the same would be on the genuine sale.

Accordingly, this ground of appeal is hereby partly allowed.”

Ground No. 5

I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The fact remains that during the course of search proceeding at the business premises M/s Mohit Jewellers, prop. concern of of Shri Narendrasingh
Laxmansingh Rathod, who is also director of the appellant company, certain incriminating documents were found and seized as page no. 40, 42, 43, 44 and 45
of exhibit-1, Annexure-AS. During the course of the Search, statement of Shri
Subhash Gupta Director of Sangam Handicraft Pvt Ltd and his son Sahil Gupta were also recorded u/s 131 of the Act. on 04.08.17 at business premises of his proprietor concern M/S Mohit Jeweller, 958 Dhamani Street, Chaura Rasta, Jaipur wherein he admitted that amount of Rs. 6,30,00,000/- represent the old currency which was deposited on 11-11-2016 in bank account of M/s Sangam Handicraft
Pvt. Ltd. held in Malviya Urban Cooperative Bank. He further admitted that the amount has been deposited by Shri Nagendrasingh Laxmansingh Rathor.

Further, in the independent Auditors reports, the auditor has opined the amount as 'other business receipt of Rs. 6,30,00,000/- recorded in books of accounts on 08-
11-2016. Similarly at note no. 17.2 of financial statement the amount has been recorded as other business income'. Further, at para.2 of 3 of form no. 3CA, the same has been declared as 'other business income'. These fact clearly shows that the income of Rs. 6,30,00,000/- is not a business income of Jewellery but the income earned from sources which has not been disclosed by the assessee in the regular books of accounts.

The appellant made contention that the assessing officer without any material on record and without establishing it held that it is not business income of jewellery but the income earned from business which has not been disclosed by assessee in regular books of accounts. Further he stated that the A.O. himself treated it as income from business of assessee which assessee disclosed in course of search.

The amount of Rs. 6,30,00,000/-, which is part of total cash desposit of Rs.
28,32,58,445/-has been disclosed by the assessee in profit and loss account as other business income. As per assessment order, balance amount of Rs.
22,02,58,445/- (Rs. 28,32,58,445/- minus Rs. 6,30,00,000/-) remain as undisclosed income of the asessee.

45
As per the own submissions of the appellant this amount of rupees six crore thirty lakhs is not from the sales of the appellant as even as per the books prepared by the appellant sales with respect to these amount are not recorded in the books of accounts and when the stock in hand is valid as per the appellant's own submissions then such amount can not represent sales or business income. Such amount represent income from some other source which the appellant has not disclosed and thus taxable as per section 115BBE of the Act.

Further this is a large sum end neither does appellant has shown the source nor the appellant has shown the identity of source nor the manner and nor the nature of source of earning of such income. This amount is clearly separately identifiable.

It is case of unexplained money which the appellant has not been able to explain.
The source of money is unexplained. There is no identification at all by the appellant whereas there is complete onus on him. The same is taxable as per section 69A of the Act. Regarding applicability of section 69A of the Act on the issue, further discussion is done in the adjudication of ground of appeal no. 6. The same is referred to and not repeated for the sake of brevity.

Accordingly, this ground of appeal is dismissed.

Ground No. 6

The present issue involves two aspects firstly the taxability under section 68 over
69A of the act and secondly the applicability of section 115BBE of the Act.

Once the income is as per section 68/69/69/69C etc. of the Act there remains no further issue regarding the applicability of the section 115BBE of the Act as that is a specific provision with respect to the taxation of incomes falling under sections
68/69/69/69C etc.

In the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938
(SC)[08-03-1977] it is held by the Hon'ble Supreme Court as under:-

"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. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v. Commisioner of Income-tax [1958] 34 ITR
807, 810 (SC) that:

46
"There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature."

In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963]
50 ITR 1 (SC)[08-02-1963] it is held by the Hon'ble Supreme Court as under:-

"It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. 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 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 Income-tax Officer is entitled to treat it as taxable income: see A. Govindarajulu
Mudaliar v. Commissioner of Income-tax [1958] 34 ITR 807 (SC)".

As per judgements of Hon'ble Supreme Court in the case of CIT v. M.Ganapathi
Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR
807 (SC), where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assessee, it is not necessary for the department to locate its exact source.

Referring to the above judgements of Hon'ble Supreme Court, it is held by the Hon'ble ITAT in the case of Navin Shantilal Mehta v. Income-tax Officer, Ward-32
(2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai Trib.) as under:-

"3.2. As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material
(Oceanic Products Exporting Co. v. CIT [2000] 241 TTR 497 (Ker.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex
Court in CII v. P. Mohankala [2007] 291 ITR 278/161 Taxman 169. A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is wellsettled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in CIT v. M.
Ganpati Mudaliar [1964] 53 ITR 623 (SC)A. Govinda Rajulu Mudaliar v. CIT [1958] 34 ITR
807 (SC) and also CIT v. Durga Prasad More [1969] 72 ITR 807 (SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in CII v. Daulat Ram Rawatmal [1973] 87 ITR 349 (SC) further throws light on the issue. In the case of a cash entry, it is necessary for the assessee to prove not only the identity of 47
Co. Ltd. [1998] 232 IIR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assesseeCIT v. R.S.
Rathaore [1995] 212 ITR 390/86 Taxman 20 (Raj.). The Hon'ble Guwahati High Court in Nemi Chandra Kothari v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213 held that transaction by cheques may not be always sacrosanct……”

In the following cases the excess stock was upheld as taxable in the context of section 69B of the Act:-

Neeraj Agrawal v. Deputy Commissioner of Income-tax [2023] 152 taxmann.com
632 (Allahabad - Trib.)

Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138
taxmann.com
19
(Madhya
Pradesh)/[2022]
286
Taxman
680
(Madhya
Pradesh)/[2022] 446 ITR 539 (Madhya Pradesh) [18-02-2022]

Headnote:-

Section 69B of the Income-tax Act, 1961 Undisclosed investments. (Stock) Assessment year 2005-06 Assessee was engaged in manufacturing and trading of edible oils and grains Assessing Officer having found that value of stock shown by assessee in stock statement as on 28-3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 and difference was to extent of Rs. 2.71 crores and assessee despite opportunity afforded could not either reconcile difference or explain reasons therefor, treated difference amount as unexplained investment in stock from undisclosed sources and added same to total income of assessee under section 69B
Commissioner (Appeals) deleted impugned addition by referring to a chart indicating stock position as on 28-3-2005 submitted to bank with stock position as per stock register on 28-
3-2005 Tribunal held that assessee was bound to explain difference either before
Assessing Officer or before Commissioner (Appeals) or before Tribunal and same was not done it taking view that excess stock represented income of assessee from undisclosed sources, set aside order of Commissioner (Appeals) and upheld order of Assessing Officer
It was noted that once it was found by Assessing Officer that there was excess stock, in absence of explanation by assessce, conclusion was inescapable that excess stock, if any, was from undisclosed sources Further once assessee's explanation, if any, had not been accepted, resultant position was that there was excess stock undisclosed in books of account and non disclosure was only with a view to suppress income Whether order of Assessing Officer and that of Tribunal deserved to be affirmed Held, yes [Para 10] [In favour of revenue]
(emphasis supplied)

SLP against the above judgement Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022] 138 taxmann.com 19 (Madhya Pradesh) was dismissed by 48
Hon'ble Supreme Court. Reported at [2022] 141 taxmann.com 477 (SC)/[2022] 288
Taxman 635 (SC)[25-07-2022]

Headnote

Section 69B of the Income-tax Act, 1961 Undisclosed investments (Stock) Assessment year 2005-06 Assessee was engaged in manufacturing and trading of edible oils and grains Assessing Officer found that value of stock shown by assessee in stock statement as on 28-3-2005 submitted to bank was far in excess to value of stock shown in audit report for period ending 31-3-2005 and despite opportunity afforded assessee could not either reconcile difference or explain reasons therefor -Hence, Assessing Officer treated difference amount as unexplained investment in stock from undisclosed sources and added same to total income of assessee under section 69B Commissioner (Appeals) deleted impugned addition by referring to a chart indicating stock position as on 28-3-2005
submitted to bank with stock position as per stock register on 28-3-2005 Tribunal observed that assessee was bound to explain difference either before Assessing Officer or before
Commissioner (Appeals) or before Tribunal and since same was not done, Tribunal set aside order of Commissioner (Appeals) and remanded matter back to Assessing Officer for adjudication afresh High Court by impugned order upheld order of Assessing Officer and that of Tribunal taking view that excess stock represented income of assessee from undisclosed sources -Assessee filed Special Leave Petition against above impugned order, however, after arguing for sometime sought permission to withdraw SLP -Whether therefore, SLP was to be dismissed as withdrawn Held, yes [Para 3] [In favour of revenue]

Principal Commissioner of Income-tax v. Deccan Tobacco Company [2022] 137
taxmann.com 470 (SC)/(2022] 286 Taxman 558 (SC)[11-03-2022] [Hon'ble
Supreme Court]

Headnote:-

Section 69, read with section 263, of the Income-tax Act, 1961 Unexplained investments
(Stock) Assessee was engaged in business of gold and diamond jewellery and silver articles Search and seizure operation under section 132 was conducted in case of assessee and group concern and excess stock was found to be declared and assessee submitted that excess stock was result of suppression of profit from business over years and had not been kept identifiable separately and, therefore, investment in excess stock had to be treated as business income Assessing Officer duly considered and accepted such explanation and taxed additional income as 'business income' at rate of 30 per cent, which was approved by Joint Commissioner However, Principal Commissioner invoked revisional powers under section 263 purportedly on ground that decision of Assessing
Officer was erroneous and prejudicial to interest of revenue High Court by impugned order held that in view of consistent view of various judicial authorities that where excess stock found in course of search is neither separately identifiable nor has independent physical existence, it cannot be treated as 'undisclosed investment under section 69 and since explanations offered by assessee were fortifiable by said consistent view, no case of perversity or lack of enquiry on part of Assessing Officer was made out so as to render his decision erroneous under Explanation 2 to section 263 Whether notice was to be issued in SLP filed by revenue against impugned order of High Court Held, yes [Para 3] [In favour of revenue]

49
SVS Oil Mills v. Assistant Commissioner of Income-tax, Non Corporate Circle-6(1),
Chennai [2020] 113 taxmann.com 388 (Madras)/[2020] 269 Taxman 508
(Madras)/[2019] 418 ITR 442 (Madras) [26-03-2019]

Accordingly, in case of unexplained credits and unexplained money, the following legal position emerges:-

50
[As per principles laid down in Roshan Di Hatti v. Commissioner of Income-tax
[1977] 107 ITR 938 (SC) [08-03-1977), Kale Khan Mohammad Hanif v.
Commissioner of Income-tax [1963] 50 ITR 1 (SC)[08-02-1963), CIT v.
M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT
[1958] 34 ITR 807 (SC)].

(ii) If the burden is not discharged satisfactorily, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. [As per principle laid down in CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v.
CIT [1958] 34 ITR 807 (SC)].

(iii) Unexplained credit and unexplained money cannot be presumed to be business income. If the assesse claims so, the assesse is required to prove the same. [Ratio of Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] as per judgement in the Principal Commissioner of Income-tax v. Bajargan Traders, the "source of investment/expenditure is clearly identifiable" i.c. the source must be clearly identifiable.

In this regard, as per provisions of the Act, not only the source but the year of earning of income also needs to be shown for taxing in the current year under assessment/appeal as the law provides that income for each year be taxed in the ITR/assessment of that year only. This also has ramifications on the interest payable by the taxpayer because if the income was earned in earlier year and the same is being offered to tax now in that case the taxpayer is liable to pay interest for the intervening period. Sections 68/69/69A etc. also provides for year of taxation irrespective of the year of earning of income.

However in case the subject matter of addition is not expressly falling under the four chapters of income heads and for the year under assessment/appeal (before application of provisions of section 68/69/69A etc.) in that case applicability of section 68/69/69A etc. is to be seen. If the sources, genuineness etc. are explained satisfactorily Le. sources are out of genuine disclosed/taxed income in that case and section 68/69/69A etc. are not applicable and in that case section 115BBE will not have application.

However if the asset/credit/expenditure is treated as income because of the applicability of section 68/69/69A etc. in that case section 115BBE will have application. The incomes mentioned under these sections are not specific to any head of income.

51
Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand / loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature.

(iv) Once it was found by Assessing Officer that there was unexplained credits and unexplained money, in absence of explanation by assessee, conclusion was inescapable that the same was from undisclosed sources -

No double taxation

Such Additions do not amount to double taxation as contended. [SVS Oil Mills v.
Assistant Commissioner of Income-tax, Non Corporate Circle-6(1), Chennai [2020]
113 taxmann.com 388 (Madras)]

Head of Income

Regarding the contention of the appellant regarding applicability of charge to tax under a particular head, the question arises whether the income subject matter of addition is chargeable to tax as per provisions of chapters on salary, profits and gains of business and profession Or capital gain Or income from house property Or income from other sources. If the same is chargeable to tax under these chapters as per specific provisions contained therein (even before application of provisions of section 68/69/69A etc.) then section 115BBE will not have application.

Section 28 is not an inclusive definition as the opening sentence of the section 28
reads as under:-

"The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession","

Accordingly, in case the appellant claims that the income is chargeable under the head business income and nowhere else, the onus is on the appellant to show under which clause of section 28 the claimed income gets covered. Even of revenue income. However when these are unexplained in terms of sections
68/69/69A etc. these become income and become taxable.

Section 14 of the Income-tax Act, 1961 Heads of income Assessment year 1984-
85 Whether opening words of section 14, 'save as otherwise provided by this Act, clearly leave scope for 'deemed income of nature covered under scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' Held, yes. [Fakir
Mohmed Haji Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11
(Gujarat)/[2001] 247 ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat) [10-08-2000]|

52
68/69/69A etc.
also provides for year of taxation of asset/credit/expenditure irrespective of the year of earning of the source revenue income (if any).

Year of earning:
If the undisclosed income earned and accumulated over the years is taxed in the year in which it is detected by the Revenue and the same is merely taxed as per normal provisions of the law such an interpretation will place a premium on dishonesty i.e. it tantamounts to rewarding the dishonesty. There is no interest burden on such taxpayer even if the income was earned over past years and there is no extra tax rate and deduction of expenses/losses will also be claimed by taxpayer if the same is taxed as per normal provisions of section 28 and onwards.

No Presumption in favor of business income. Onus to prove is on assessee:

The Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi
Prasad Vishwanath [1969] 72 ITR 194 (SC)[01-08-1968] has held as under:-

"There is nothing in law which prevents the Income-tax Officer in an appropriate case in taxing both the cash credit, the source and nature of which is not satisfactorily explained, and the business income estimated by him under section 13 of the Income-tax Act, after rejecting the books of account of the assessee as unreliable. This was so decided in Kale
Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 TTR 1 (SC). Whether in a given case the Income-tax Officer may tax the cash credit entered in the books of account of the business, and at the same time estimate the profit must, however, depend upon the facts of each case.
………………
………………
The High Court, in disposing of the application under section 66(2), expressed the view that because the amount of Rs. 20,000 was entered in the books of account of the business. there was some material to hold that the amount was income of the assessee from the business and not from some other source. But it was not open to the High Court to direct the Tribunal to state a case on a question which was never raised before or decided by the Tribunal at the hearing of the appeal. The question again assumes that it was for the Income-tax Officer to indicate the source of the income before the income could be held taxable and unless he did so, the assessee was entitled to succeed. That is not, in our judgment, the correct legal position. Where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed".

As per the headnotes "Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income tax Act, 1922 Method of accounting System of 53
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT accounting Assessment year 1946-47- Whether where there is an unexplained cash credit it is open to ITO to hold that it is income of assessee and no further burden lies on ITO to show that income is from any particular source Held, yes".

As per the above judgement, the observations of the Hon'ble Allahabad High Court that because the amount was entered in the books of account of the business, there was some material to hold that the amount was income of the assessee from the business and not from some other source, were not approved by the Hon'ble
Supreme Court and was reversed, as it was held by the Hon'ble Supreme Court that it assumed it was for the Income-tax Officer to indicate the source of the income which was not the correct legal position and that where there is an explained cash credit, it is open to the Income-tax Officer to hold that it is income of the assessee and no further burden lies on the Income-tax Officer to show that that income is from any particular source. It is for the assessee to prove that even if the cash credit represents income it is income from a source which has already been taxed.

Complete code:

The opening words of section 14 'Save as otherwise provided by this Act' clearly leave scope for 'deemed income' of the nature covered under the scheme of sections 69, 69A, 69B and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from 'other sources' because the provisions of sections 69, 69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained.

Section 69C even clearly mentions that such unexplained expenditure will not be deductible under any head of income. Loans given / stock in hand/loan received etc. are otherwise not taxable as these are in the nature of asset/liability/capital nature in the hands of the taxpayer and not in the nature of revenue income.
However when these are unexplained in terms of sections 68/69/69A etc. these become income and become taxable.

These are the special provisions dealing with the situation and the incomes which are the subject matter of the contention in the appeal and being the specific provisions they are preferred and override the general provisions. Once the income is as per these sections, there cannot be any dispute regarding the applicability of section 155BBE of the Act. These sections are in the nature of complete code in itself. In this regard it is held by Hon'ble Gujarat High Court in Fakir Mohmed Haji
Hasan v. Commissioner of Income-tax [2002] 120 Taxman 11 (Gujarat)/[2001] 247
ITR 290 (Gujarat)/[2001] 165 CTR 111 (Gujarat)[10-08-2000] that "6.2 The opening words of section 14 'Save as otherwise provided by this Act clearly leave scope for 'deemed income of the nature covered under the scheme of sections 69, 69A, 698

54
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT and 69C being treated separately, because such deemed income is not income from salary, house property, profits and gains of business or profession, or capital gains, nor is it income from other sources' because the provisions of sections 69,
69A, 69B, and 69C treat unexplained investments, unexplained money, bullion, etc., and unexplained expenditure as deemed income where the nature and source of investment, acquisition or expenditure, as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income will not fall even under the head, 'Income from other sources'. Therefore, the corresponding deductions, which are applicable to the incomes under any of these various heads, will not be attracted in case of deemed incomes which are covered under the provisions of sections 69, 69A, 69B and 69C in view of the scheme of those provisions.

Conclusion:

The appellant has not been able to explain the source of unexplained credits and unexplained money. In case it is claimed that it is from business income the appellant is required to show how the same is from business sources and not from any other sources. The Revenue is not to find out the source and the assesse is required to explain the source with supportings.

Unexplained entries cannot be presumed to be business income. If the assesse claims so, the assesse is required to prove the same. [Hon'ble Supreme Court in the case of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR
194 (SC)[01-08-1968]

It has also not been shown with sources details that it is only the earlier earned
(during the same year) business income (manner of earning and source of earning of such income) which has been invested unexplained entries.

Respectfully following the judgements of Hon'ble Supreme Court in the cases of Commissioner of Income-tax v. Devi Prasad Vishwanath [1969] 72 ITR 194 (SC)
[01-08-1968] Suraj Bhan Oil (P.) Ltd. v. Deputy Commissioner of Income-tax [2022]
141 taxmann.com 477 (SC)/[2022] 288 Taxman 635 (SC)[25-07-2022) and Principal Commissioner of Income-tax v. Deccan Tobacco Company [2022] 137
taxmann.com 470 (SC)/[2022] 286 Taxman 558 (SC)[11-03-2022] and other judgements as referred in the discussion above, there can be no dispute in the facts of the present case regarding the applicability of sections 68/69A etc.
10. Ground of Appeal No. 7 relates to charging interest of Rs. 6,66,39,737/-u/s 234B of the Act.

56
2. That on the facts and in the circumstances of the case the ld CIT(A) is wrong, unjust and has erred in law in confirming rejection by the ld AO of submission of the appellant that income of Rs. 6,30,00,000/- offered to tax by the appellant during course of search was its additional business income from sale of gold ornaments assessable under the heed income from Business and instead upholding finding recorded by the ld AO that the said income is allegedly appellants undisclosed income liable to tax as unexplained money u/s 69A of the IT Act, 1961. 3. That the ld CIT(A) is also wrong and has erred in law in upholding charge of tax by the ld AO on addition made to the income of the appellant vide ground
No. (1) & (2) above @ 60% u/s 115BBE of the IT Act, 1961. 4. The appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.
I. FACTS OF THE CASE
The assessee is a private limited company engaged in business of Bullion and jewellery. A survey u/s 133A of I. T. Act, 1961 was carried out at business premises of assessee company on 02-08-2017 which was subsequently converted into search u/s 132 (1) on 03-08-2017. Thereafter A.O. issued notice u/s 153A on 13-12-2017 which assessee complied by filing return of income for the year declaring an income of Rs. 10,64,13,890/- which included additional business income of Rs. 6,30,00,000/- surrendered by assessee in statement recorded in course of search. The Ld. A.O. thereafter issued notice u/s 143 (2) / 142 (1) from time to time which assessee could not comply fully but filed reply thereto on 20-12-
2019. The learned AO in course of assessment proceedings noticed that assessee has deposited cash aggregating to Rs. 28,32,58,445/- in its Bank A/c during the demonetization period viz. 09-11-2016 to 31-12-2016 which was in Specified Bank
Notes (SBNs), and were sale proceeds of Bullion / jewellery sold by assessee on 08.11.2016. Out of supra amount, an amount of Rs. 6,30,00,000/- was surrendered by the assessee in course of search as additional business income on account of as extra sale consideration received over and above the prevailing bullion rate on 08.11.2016 in P & L A/c. The balance Rs. 22,18,29,000/- recorded as trading receipts under the head sales in trading account. The said transactions are recorded in regular audited books of the assessee, are supported by the sale bills and day-to-day stock register of Bullion / Jewellery dealt by the appellant.
II.
ACTION OF THE LEARNED AO
The learned AO did not accept the sales made by the appellant on 08.11.2016 and he further held that the additional business income of Rs. 6,30,00,000/- offered to tax is not a business income and treated the same as unexplained money u/s 69A of the IT Act, 1961 under the head income from other sources. The learned AO also gave a finding that on the said income, provisions of section 115BBE are applicable. The learned AO also rejected the audited books of accounts and invoked section 145(3) of the IT Act, 1961 to compute the assessable income of 57
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT the appellant. The learned AO recalculated the business income of the appellant company by reducing an amount of Rs. 22,18,29,000/- from the declared total sales of Rs. 48,46,90,040/- and on the balance sales of Rs. 26,28,61,040/- considering the same as genuine sales and applied NP rate of 14.5% as against the declared NP rate of the appellant 14.32%. As per this method, the learned AO computed the business income of the appellant company at Rs. 3,81,14,850/-

The Ld. A.O. further rejected claim of assessee and in assessment held that the surrendered additional business income of Rs. 6,30,00,000/- is not jewellery business income. But, the same is income earned from business which has not been disclosed by the assessee in regular books of accounts. The learned AO further held that the said additional business income is taxable as unexplained money u/s 69A of the I. T. Act, 1961 under the head income from other sources liable to be taxed at the rate of 60% under provisions of section 115BBE. The balance Rs. 22,18,29,000/- deposited in Bank A/c [Rs. 28,32,58,445/- minus Rs.
6,30,00,000/-] have been considered by the learned AO as unexplained cash credit u/s 68 of the Act alleging that assessee has introduced its undisclosed income in its books of accounts. Further, after invoking provisions of section 145
(3) of the Act the learned AO reduced the said amount of Rs. 22,18,29,000/- from declared total sales of Rs. 48,46,90,040/-. The learned AO further held that the sales of Rs. 26,28,61,040/- are only genuine sales, applied a N.P. rate of 14.5%
thereon instead of N.P. rate of 14.32% declared by assessee and recomputed income from business of assessee at Rs. 3,81,14,850/-.
III.
ACTION OF THE LEARNED CIT(A)
The learned CIT (A) upheld the action of the learned AO vide para No. 4.2, 5.2,
7.2, 8.2 and 9.2 of the appellant order. The learned CIT (A) has further relied upon various judgments. However, as submitted / explained in subsequent paras of this written submissions that the ratios decided in the said cases are distinguishable on facts of the appellant’s case.
IV.
GROUND WISE SUBMISSION :
1(A)
GROUND (A) OF FIRST GROUND OF APPEAL
(A)
That on the facts and in the circumstances of the case the ld CIT(A) is wrong, unjust and has erred in law in confirming rejection of books of accounts of the appellant company by the ld AO who invoked provisions of sec. 145(3) of the IT Act, 1961 by allegedly holding that they are not reliable and sales during demonetization period was allegedly unverifiable.
SUBMISSIONS :
A(i)
The Ld. A.O. in assessment order in para (I) on page – 25 held that “in view of the above discussion and evidence brought on record it is evident that the assessee has been indulged in issuances of bogus sale bills and gold items shown to be sold in the sales invoices do not have any description and cannot be verified from stock register whether the items shown to be sold on particular date was part

58
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT of stock in trade or not. Therefore, the cash book, sale book and stock register so furnished by the assessee is prepared afterthought and does not disclosed true income of the assessee. Accordingly, same cannot be relied upon and the item shown to be sold in sale bill during the course of demonetarization could not be verified and the same are rejected in terms of the provisions of section 145 (3) of the Act.”
A(ii)
In this connection it is submitted that assessee company has maintained correct & complete books of accounts including a day-to-day Stock-Register which are audited by independent auditor of company appointed under Companies Act and audit report having no adverse remark or comment. The independent auditor further audited books u/s 44AB of I. T. Act, 1961 and Tax Audit Report has also been filed which also do not report any adverse remark on accounts kept by assessee. Thus, it cannot be held that assessee has not maintained correct and complete books of accounts. Further, the said books of accounts purchase expenses and sales bills vouchers and invoices are lying seized with the learned
AO in the tally datas seized during the course of survey / search proceedings u/s 132 of the IT Act, 1961. It is evident from the assessment order that the A.O. in assessment also had accepted opening stock, purchases, gross profit (applied
N.P. rate) and closing stock in quantity as declared by assessee. The A.O. has further accepted the declared closing stock which implies that outgo from op. stock and purchases has been accepted which can only be on account of sales made by assessee. Thus, out of declared sales some sales cannot be held as bogus or in genuine sales on presumption basis. This action of the learned AO is also against the settled position of law that he has accepted the one part i.e. sales of jewellery and Bullion in quantity whereas he did not accept the sales in amount. This action of the learned AO is in contradiction to the principle of accounting and natural justice. Further, the rejection of declared sale by A.O. (reducing it by alleged bogus sale) while accepting all other components of Trading Account is thus contradictory and only on that basis rejection of books of accounts cannot be held valid in law. As regards to findings of Ld. A.O. that “on examination of the sales bills it is found that bills were issued without complete details of the sold jewellery items as well as customers. The bills do not contains details of full description of the item sold like chain, Sat, Topas etc. and the items so purported to be sold cannot be verified from stock register on the date of issuance of bills whether the items were part of stock register or not”. It is submitted that mentioning of complete address & PAN of buyers on below Rs. 2 Lac sale bills is neither requirement nor there is any provision in the I. T. Act, 1961 to ask IT PAN, complete address and name proof etc. from the customers buying goods in cash upto the prescribed limit.
(315 ITR 185), It was held by Hon’ble Punjab & Haryana High Court that there was no legal obligation on the part of the assessee to maintain such a record and the audited accounts could not have been rejected without pointing out any specific defect or deficiencies in the books of account maintained by the assessee.
A(iii)
There is no dispute to the well settled legal proposition that the books of account regularly maintained by the assessee in the normal course of business, which are subject to audit as per the provisions of I T Act should be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. Added to this, it is placed on record that the learned AO has rejected the books of accounts only for the reason that the assessee deposited cash in its bank account during demonetization period. Except this, he noticed no discrepancy / mistake in maintaining of books of accounts and method of accounting regularly followed and accepted by the IT Department in all past and subsequent years to the assessment year under appeal.
A(iv)
It is thus submitted that there is no justification to invoke provisions of section 145 (3) of I.T. Act and reject books of accounts and the Ld. A.O. as well as the learned CIT(A) are wrong and has erred in law in invoking provisions of section 145 (3) and rejecting books of accounts of appellant company.
1(B)
GROUND (B) OF FIRST GROUND OF APPEAL
(B)
The ld CIT(A) is further wrong and has erred in law in upholding finding recorded by the ld AO that cash deposit to the extent of Rs. 22,02,58,445/- made by the appellant company in its bank account during demonetization period from 09-11-2016 to 30-12-2016 on account of sale was allegedly fabricated and was allegedly its income from undisclosed sources. The ld CIT(A) is further wrong and erred in law in confirming addition of said Rs. 22,02,58,445/- made to the income of the appellant by ld AO u/s 68 of IT Act, 1961 as unexplained cash credit.
SUBMISSIONS :
B(i)
That the learned CIT (A) is wrong and has erred in law in upholding the action of the learned AO that out of total cash deposit of Rs. 28,32,58,445/- in bank account during the period of demonetization from 9-11-2016 to 30-12-2016 in specified bank notes (SBNs), deposit of Rs. 22,02,58,445/- (after deducting Rs.
6,30,00,000/- surrendered during the course of search) was out of sales which were allegedly fabricated and manipulated to generate cash for its income earned from undisclosed sources and thereby making addition of said Rs.22,02,58,445/- to the income of the appellant as unexplained cash credit under section 68 of the I.T. Act, 1961. The impugned addition after arbitrarily rejecting submissions and explanations of the appellant is wrong, unwarranted, based on mere surmises and conjectures and bad in law.
B(ii)
The Ld. A.O. made total addition of Rs. 22,18,29,000/- in the income of appellant i.e. Rs. 22,02,58,445/- deposited in Bank account during the period of demonetization viz. 9-11-2016 to 30-12-2016 in specified SBNs. The appellant during assessment and appellate proceedings claimed that said deposit of cash

60
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT was out of cash sales of business and said sales as well as said cash deposit in Bank A/c are recorded in books of accounts. In support thereof produced the books of accounts along with sales invoices, bills, Bank statements & VAT Returns and also demonstrated correlation of such cash sales with purchases and stock of business and filed explanation thereon on 21-12-2019. Further the said books of accounts, bills vouchers and sales invoices maintained in computer –tally accounting program have been sized during the course of search u/s 132(1) of the IT Act, 1961. The said record is still lying seized with the learned AO.
B(iii)
The Ld. A.O. states in assessment order that the details, documents &
explanation so furnished by assessee were pursued thoroughly and following observations were made:
“(a)
On perusal of the submission it is found that, the assessee made cash sales aggregating to Rs. 21,05,47,868/- in a single day through invoice no. 1051 to invoice no. 1649. The cash sale of Rs. 21,05,47,868/-/- on a single day does not seems genuine following the past year’s trends.
(b)
When the cash sales of corresponding months of previous years are compared, it was noticed that the cash sale during the month of November 2016
was Rs. 28,02,77,549/-, during November 2015 it stood at Rs. 3,43,35,825/- and November 2014 at Rs. 1,00,44,334/-. Therefore, during the year under consideration cash sales during November month increased by 8.16 times compared to November 2015 and increased 27.90 times compared to November
2014. (c)
The cash sales made during November 2016 is 88.00% out of total cash sales made during the financial year 2016-17. The cash sales made in one month by the assessee is higher compared to cash sales in remaining 11 months of that year. Further when the trend of cash sales is compared to previous years it was noticed that in November, 2015 cash sales was just 25.63% of the total sales and in November 2014 it was 8.19% compared to total sales.
(d)
Further, the assessee failed to furnish the detail of the persons such as full name, address and PAN no. to whom cash sale was made during the demonetarization period.
In view of the above facts it is evident that assessee has fabricated whole transaction to make it look real and cash so deposited as discussed above is undisclosed income of the assessee.”

B(iv)
The above said findings of the learned AO has been held / confirmed by the learned CIT(A) vide para No. 5.2 at page No. 17 of the Appellate Order. It is evident and verifiable from the impugned Appellate Order that the learned CIT(A) has repeated / accepted as it is the findings of the learned AO in his own words.
Further the learned CIT(A) has summarily rejected the following submissions made with the help of supporting documentary evidences, which are already lying seized with the learned AO / IT Department. The learned CIT(A) has also placed reliance on some case laws to support / give strength to his version in deciding the 61
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT issue against the appellant. However, as submitted in subsequent part of this written submission, the said case laws are distinguishable on the facts of the appellant’s case.
B(v)
The appellant submitted that the learned AO did not found the reply of the appellant for the reasons stated in the impugned assessment order vide para No.
8.2 and 8.4 and at the cost of repetition, it is placed on record that the learned CIT
(A) has followed the said verbatim findings of the learned AO. In this connection, it is submitted that the appellant explained / submitted before the learned CIT(A) that the findings of the learned AO are wrong and against the facts with the help of documentary evidences lying seized with the IT Department as follows : -
B(vi)
The reasons given by A.O. did not point out any mistake of assessee in books of accounts, sales invoices / bills issued as per law but are only comparison of cash sales of the year with earlier years and also on a particular day 8th
November, 2016. As it is well known worldwide fact that on 8th November, 2016
the Hon’ble Prime Minister of India announced demonetization of 500 and 1000
currency notes and mostly every Indian citizen rushed / walked to jewellery shops to convert their cash in hand in jewellery / bullions. Thus, the cash sales of the said day / date are increasable non-comparable with the cash sales of other days and /
or preceding years / days as did by the learned AO. Thus, these reasons on cash sales are only own perception of learned A.O. and are on surmises without any support or basis thereto.
B(vii)
It is submitted that complete regular books of accounts, bills, vouchers and a day to day stock register having complete quantitative details have been maintained by assessee and has also been accepted by the learned AO. The said books of accounts are audited and copy of audited statement of accounts along with complete quantitative details have been submitted along with the return of income. The assessee maintained item wise Stock – Register and the same has been accepted by the learned AO without pointing out any mistake or defect therein. Thus, the cash sales transaction is recorded in regular books of accounts and sales are made out of the stock-in-trade of the appellant. In this connection, the assessee relies on recent decision dated 17-11-2020 of Delhi High Court in case of PCIT Vs. Akshit Kumar (2021) 277 Taxmann 423 wherein it was held that where opening stock, sales and closing stock of assessee was accepted during assessment of previous year during scrutiny assessment, receipts made by assessee out of its opening stock, purchases could not be treated as unexplained income to be taxed as income from other sources.
B(viii)
It is further submitted that demonetization was announced in the evening of 8th November, 2016 viz. Indian Currencies of the denomination of Rs. 500
and of Rs. 1000 were withdrawn vide the Hon'ble Prime Minister announcement through television channels effective after midnight i.e. from 9th November, 2016
and vide Gazette Notification 2653 dated 8th November, 2016 declared that from 9th November, 2016 Rs. 500 and Rs. 1000 (specified Bank Notes) ceased to be legal tender. The persons were advised to deposit the demonetized currencies
(called as SBNs) into their bank account without any limit or exchange them

62
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT across the counter in their banks up to a maximum of Rs. 4,000/- (with attendant conditions). Besides this, usage of demonetized currencies in purchase of medicines, in petrol pumps, hospitals and with specified government departments etc. were also permitted along with attendant conditions and guidelines. The express legislative provisions as contained in “the Specified Bank
Notes (Cessation of Liabilities) Act, 2017”, implemented pursuant to the Demonetization exercise.
These legislative provisions are as under:
(a)
Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017
provides that “On and from the appointed day, no person shall, knowingly or voluntarily, hold, transfer or receive any specified bank note.”
(b)
Section 2 (1) (a) in Specified Bank Notes (Cessation of Liabilities) Act,
2017 provides that “appointed day” means the 31st day of December, 2016. (c)
Further Section 3 of Specified Bank Notes (Cessation of Liabilities) Act,
2017 states that “On and from the appointed day, notwithstanding anything contained in the Reserve Bank of India Act, 1934 or any other law for the time being in force, the specified bank notes which have ceased to be legal tender, in view of the notification of the Government of India in the Ministry of Finance, number S.O. 3407 (E), dated the 8th November, 2016, issued under sub-section (2) of section 26 of the Reserve Bank of India Act, 1934, shall cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the guarantee of the Central Government under sub-section (1) of section 26 of the said Act.”

From the above, it is clear that use of Specified Bank Notes (SBN) pursuant to 8th
November, 2016 upto 31st December, 2016 was allowed and the Banks were directed under demonetization law to deposit SBNs of any amount from persons in their respective Bank A/c(s) upto 31-12-2016. Thus, the Specified Bank Notes
(Cessation of Liabilities) Act, 2017 clearly provides that the specified bank notes shall cease to be liabilities of the Reserve Bank under section 34 and shall cease to have the guarantee of the Central Government under sub-section (1) of section 26 of the said Act from the appointed date, i.e. 31st December, 2016. B(ix)
It is a known fact to everyone in India that various persons after hearing the news of demonetization on television channels flooded to the shops of jewellers for the purpose of buying jewellery and bullions and dispensing with such SBN’s. There was certain euphoria immediately after the announcement as the people having sums of money rushed to the jewellers to buy gold and other precious items. During such period gold worth crores of rupees was sold in few hours across the country and the jewellers have to do their business until midnight.
November, 2016 increased as compared to November, 2015 as that of other jewellers in the country. The assessee otherwise cannot put a condition that no cash sales shall be made to it’s customer as there is no provision in I. T. Act, 1961
which restricts in making cash sales by any business man. It is also a practice that on festive occasions & wedding etc. the customer prefers to buy gold jewellery in cash. As for not mentioning complete address PAN on sale invoices it is submitted that there is neither requirement of law nor there is any provision in the I. T. Act,
1961 to ask IT PAN. complete address and name proof etc. from the customers buying goods in cash upto the prescribed limit and so many customers do not inform the same and those inform their complete address and PAN is noted on sale invoice. However as evident and verifiable from the copy of sales invoices that name of the buyer, quantity and amount is mentioned on the said sales invoices.
B(x)
The Ld. A.O. gave further finding that in course of search proceedings in the business premises of Mohit Jewellers Prop. concern of director of company
Shri Narendra Singh Laxman Singh Rathod certain documents were found and seized as Page No. 40, 42, 43, 44 and 45 of Ex-1, Ann – AS and which are scanned on Page – 17 to 21 of assessment order and concluded that entries mentioned in Page No. 42, 43, 44 & 45 matched with Page No. 40 and summarized in table on Page 22 & 23 of assessment order.
B(xi)
The Ld. A.O. further held that on Page No. 39 which is back side of Ann.
AS Exhibit – 1 Page No. 40 the detail of inward and outward quantities of gold are mentioned, which shows that the booking and supply was made of bullion not gold jewellery (in discussion in assessment order some dates mentioned as of 2017 but it is of 2016 which are mistakes of A.O. in assessment order) and received the amount in cash in old currency. The booking and supply of Bullion were made in M/s Mohit Jewellers and the cash was deposited in the accounts of M/s Kiran Fine
Jewellers P. Ltd. under grab of cash sale by issuing bogus sale bills.
B(xii)
In this connection, it is submitted that the supra referred papers and notings thereon are deaf and dump. The cash deposit in bank transactions noted on page No. 40 are duly recorded in the books of accounts of the assessee. Thus, the above findings and conclusions of A.O. are based only on suspicions and not based on any material on record or evidence found in case of assessee company.
The sale invoices issued by assessee company in respect to jewellery / ornaments items are sold were out of stock held by assessee company which is evidenced from books of accounts and Stock Register of assessee company. The other observations of A.O. that such large No. of sales invoices and sale to customers is not possible to make in the time available with assessee company on 08-11-2016
also has no legal force and sales made by assessee cannot be held as bogus on non-genuine in proceedings under Income Tax where as the said sales have been accepted genuine sales under VAT Act by the VAT authorities.
B(xiii)
Further, from the assessment orders of learned AO and appellate order of learned CIT(A), it is evident and verifiable that sales of the assessee have not been accepted mainly for the reason that the cash sales during the demonetizing

64
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT period and the cash sales in preceding years were much more / in disproportionate to the cash sale made during the demonetizing period and there was no addresses of the buyers, etc. etc. In this regard, it is submitted that the cash deposits made by the assessee were duly recorded in books of accounts, which were audited under various laws applicable and supported by following creditable evidence
(a)
Purchase Bills (which are not doubted by the learned AO)
(b)
Stock Register – maintain day-to-day basis accepted by the learned AO
(c)
Sales Invoices- VAT returns filed from time to time and (d)
Order of VAT authorities accepting sales made by the appellant during the year under consideration.
The appellant also explained the reasons of revising the VAT returns during the demonetizing period before the lower authorities.
B(xiv)
In this regard, the appellant also submits that the learned AO has accepted the sales made in quantity but denied for the realization of the said quantity i.e. cash which is against the basic principle of accountancy. A copy of day-to-day stock register was submitted before the lower authority and also lying seized with the learned AO till date. In this connection, it is further submitted that the closing stock in terms of quantity was brought forward as on 01.04.2017 as opening stock and the said quantity has been accepted by the Income Tax
Department during the course of search proceedings u/s 132(1) of the IT Act in determining / working out the excess and / or short quantity of stock in trade as on the date of the search. Thus, the learned AO as well as learned CIT(A) has accepted one part of the transactions but denied for the another. Now, the various
Hon’ble High Courts and Hon’ble ITAT Benches of all over India have decided the issue on account of cash deposit made on account of cash sales made at the demonetizing period. The appellant relies on the following case laws :-
(a)
Mohammad Ashraf War Vs ITO [2024] 161 taxmann.com 293 (Amritsar –
Trib.) held notes - “Unexplained moneys (Cash deposit during demonetization period) – Assessment year 2017-18 – During assessment proceedings, Assessing
Officer noticed that assessee had deposited cash in different accounts in bank during demonetization – He made an addition under section 69A. Commissioner
(Appeals) affirmed order of Assessing Officer – It was observed that assessee was registered dealer under VAT Act – Turnover declared by assessee was much higher turnover than determined by Assessing Officer in assessment – Whether since cash deposit was part of turnover, addition made by Assessing Officer under section 69A was to be deleted and calculation of net profits was to be restricted to at rate of 3 per cent of turnover amount – Held, yes.”
(b)
Shobha Tomar Vs DCIT [2024] 164 taxmann.com 61 (Jaipur-Trib.) – held notes – “Section 68 of the Income-tax Act, 1961 – Cash credit (Demonetization period) – Assessment year 2017-18 – Assessee was a medical practitioner –
Assessee’s case was selected for scrutiny for verification of cash deposit – During assessment, Assessing Officer noted that assessee had deposited substantial amount of cash in bank which was in form of specified bank notes (SBN) during demonetization – On perusal of cash book, Assessing Officer noted that assessee had not mentioned any narration regarding patients from whom consultation fees

65
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT had been furnished nor there was any explanation with respect to sudden spike in cash deposit – Assessing Officer thus, considered deposits as unexplained income of assessee and made additions under section 68 – Whether, since cash was already considered as professional income, same could not be a base while making addition of income that had already been offered and substantiated with evidence and reflected in returned income by assessee – Held, yes – Whether thus, additions were to be deleted – held, yes.”
(c)
ITO vs Sahana Jewellery Exports (P.) Ltd. [2023] 157 taxmann.com 680
(Chennai – Trib.) Held that – Section 68, read with section 115BBE, of the Income-tax Act, 1961 and rule 114B of the Income-tax Rules, 1962 – Cash credit
(Demonetization deposits) – Assessment Year 2017-18 – Assessee was engaged in business of trading in gold and jewellery – During demonetization, assessee had deposited substantial amount of cash in his bank accounts – Assessee claimed that source for cash deposits was out of advance received from customers for gold scheme – Assessing Officer treated cash receipts as unexplained cash credit under section 68 on ground that assessee had failed to prove genuineness of credits found in his bank account – It was noted that assessee had filed necessary books of account, including cash book, sales register, sale bills, purchase details along with bills and stock details to prove that there was no discrepancy in books of account –Whether since assessee received trade advances in cash and same had been subsequently converted into sales by issuing sale bills, then, said trade advance could not be examined in light of provisions of section 68 – Held, yes.
(d)
Hinima Atul Shah Vs ITO [2024] 164 taxmann.com 439 (Ahmedabad –
Trib.) – head notes – “Section 68 of the Income-tax Act, 1961 – Cash credit (Cash deposit) – Assessment year 2017-18 – Assessee had made cash deposit during demonetization period in her bank account – Assessing Officer held that cash sales shown by assessee during period of 10 days just before demonetization was not genuine but fabricated and after thought being colourable device used to show unaccounted cash as accounted one – Thus, Assessing Officer made addition of said amount under section 68 - It was noted that Assessing Officer had accepted transactions about purchase and sale of jewellery in gold and silver without raising any doubt regarding books of account, purchase and sale stock registers and bills produced by assessee – Further, cash transaction before demonetization period was also revealed by assessee as period before demonetization was also period of Diwali and that itself showed that why cash transaction took place in that particular period – Whether since stock register as well as family evidences produced by assessee were found to be genuine and cash transaction had also been proved by assessee being genuine transaction, impugned addition made by Assessing Officer was to be deleted – Held, yes.”
(e)
ITO Vs. J.K. Wood India (P.) Ltd. [2024], 158 taxmann.com 208 (Delhi-
Trib.) head notes – “Section 69A of the Income-tax Act, 1961 – Unexplained moneys (Cash deposits) - Assessment year 2017-18 – Assessee was engaged in business of sawing and wholesale trading of timber – During course of scrutiny assessment, Assessing Officer noticed that assessee had made cash deposits of certain amount in its bank account during demonetization period and asked

66
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT assessee to explain source of such cash deposits – Assessee submitted that it had sold timber to various parties in cash and cash deposits were out of sale proceeds – In support of its claim, assessee filed copy of bills, sale / VAT return, stock register and VAT assessment order – Assessing Officer, however, rejected explanation of assessee and made addition of such cash deposits to income of assessee under section 69A – It was noted that cash deposits made by assessee were duly recorded in books of account which were audited under various laws applicable and were supported by credible evidence like copies of invoices, stock register maintained on a day to day basis, VAT returns filed from time to time and order of VAT authorities accepting sales made by assessee during year under consideration – Whether, on facts, impugned addition made by Assessing Officer was to be deleted – Held yes.”
(f)
Sobha Devi Dilipkumar Vs. ITO [2024] 160 taxmann.com 1249
(Visakhapatnam – Trib.) – Head Notes – “ Section 69A, read with section 115BBE, of the Income-tax Act, 1961 – Unexplained moneys (Cash deposit during –
Demonetization period) – Assessment year 2017-18 – Assessee’s case was selected for limited scrutiny to verify cash deposits during demonetization period –
Assessing Officer noted that assessee had deposited substantial amount in bank account during demonetization period – He further noted that closing cash balance as on 9-11-2016 as per books of account of assessee was much less than cash deposited by assessee in bank account – Assessing Officer thus treated said cash deposit as unexplained and added same to income of assessee under section 69A
– Assessee contended that it was involved in money lending business and it received interest income and principal amount on loans which was disclosed in books of account – It was noted that assessee had disclosed investment in his books of account and also shown same in computation of income which was offered for taxation – Whether thus, provisions of section 69A would not be applicable and addition made under section 69A was to be deleted – Held, yes”
(g)
Dipak Balubhai Patel (HUF) Vs. ITO [2024] 165 taxmann.com 684
(Ahmedabad – Trib.) – Head Notes – “Section 69A, read with section 115BBE, of the Income-tax Act, 1961 – Unexplained Moneys (Cash) – Assessment year 2017-
18 – Assessee was Karta of HUF – During demonetization period, assessee deposited cash of Rs. 10.75 lakhs in bank account and offered it for tax –
Assessing Officer made addition as unexplained money under section 69A and taxed same under section 115BBE – Whether since assessee had recorded cash deposits in his books of account and source of cash deposits during demonetization period was also maintained by assessee, Assessing Officer was not correct in invoking provisions of section 69A and charging tax under section 115BBE – Held yes.”
(h)
CIT Vs Jeet Construction Company [2021] 124 taxmann.com 527 (SC) –
Head Notes – “Section 69A, read with sections 158BC and 158BD, of the Income- tax Act, 1961 – Unexplained money (Search) – Block period 1997-98 to 2003-04 –
Assessee was a partnership firm engaged in business of civil construction –
Pursuant to search at residential premises of working partner of firm and at business premises of firm Assessing Officer made additions to income of assessee – Tribunal had recorded a finding in regard to additions made by 67
Assessing Officer which was confirmed by Commissioner (Appeals), which was based only on mere assumption and not on any material recovered during search and seizure – High Court by impugned order held that in absence of supporting evidence, additions based merely on presumption that assessee had earned undisclosed income and incurred expenses outside books of account would not be sustainable – Whether Special leave Petition against said impugned order was to be dismissed – Held, yes.”
(i)
Thus, it is submitted that allegations made by learned A.O. regarding fabrication of cash sales transactions on the assessee are completely without any basis, documents or any supporting legal evidence in the eyes of law and, therefore addition of Rs. 22,02,58,445/- to the income of appellant as unexplained cash credit u/s 68 of I. T. Act, 1961 is wrong and bad in law.
B(xv)
The case laws relied by the learned CIT(A) are distinguishable on the fact of the appellant’s case as explained below :-
[2022] 145
taxmann.com 197
(Hyderabad – Trib.)
In this case, the sales bills have been proved as bogus and accordingly an addition on account of cash deposit at the time of demonetizing was confirmed.
There is no such finding in appellant company’s case.
2. Roshan Di Hatti Vs
CIT [1977] 107 ITR
938 (SC)
The issue in this case has been decided relying on the judgment of the Hon’ble Supreme Court 34 ITR
807 and it was held by the Hon’ble
Supreme Court where an assessee fails to prove satisfactorily sources and nature of the certain amount of cash receipts during the accounting year. The Income Tax Officer is entitled to draw the inference that the receipts are of an excessively nature.
As evident in assessee’s case, the assessee has proved the cash receipt with the help of books of accounts.
3. Kale Khan
In all the said case laws, Hon’ble
Courts have decided the issue on the basis of facts that the cash receipts had not been satisfactorily
The facts of the appellant’s case are distinguishable from the facts of the said

68
Mills Vs ACIT explained. The learned CIT(A) has mentioned complete facts of said cash in his impugned order and it is apparent from said facts that the same are different from the appellant’s facts.
case laws. The appellant has explained the source of money received on cash sales of jewellery with the help of the documentary evidences.

In view of the above facts, the ratio decided in the said cases are inapplicable in appellant’s case whereas the ratio decided by the case laws relied upon by the appellant are squarely applicable.
2. SECOND GROUND OF APPEAL
That on the facts and in the circumstances of the case the ld CIT(A) is wrong, unjust and has erred in law in confirming rejection by the ld AO of submission of the appellant that income of Rs. 6,30,00,000/- offered to tax by the appellant during course of search was its additional business income from sale of gold ornaments assessable under the heed income from Business and instead upholding finding recorded by the ld AO that the said income is allegedly appellants undisclosed income liable to tax as unexplained money u/s 69A of the IT Act, 1961. 2(i)
The income of Rs. 6,30,00,000/- was declared by assessee in course of search in statement on oath u/s 132 (4) as additional business income of the year which was not controverted in search proceedings and accepted. The assessee in accordance with his said statement declared the said income of Rs. 6,30,00,000/- in return of income filed for the year. The assessing officer without any material on record and without establishing it held that ‘it is not business income of jewellery but the income earned from business which has not been disclosed by assessee in regular books of accounts’ and held the same as unexplained money u/s 69A of I. T. Act, 1961. 2(ii)
The assessee has disclosed the ‘additional business income’ in course of search in statement u/s 132 (4) and so obviously it was not disclosed in books of accounts and so disclosed in course of search in statement recorded. The business of assessee company is only of Bullion and jewellery and the additional business income is from said business. The A.O. also accepts in assessment order that it is the income earned from business which has not been disclosed in regular books of accounts. Thus still the A.O. himself treated it as income from business of assessee which assessee disclosed in course of search. In view of these facts of the case the A.O. is wrong and has erred in law in treating the said income as unexplained money u/s 69A of the Act which is wrong and unsustainable in law. It is prayed that the said amount of income of Rs.

69
6,30,00,000/- be held as income from business as surrendered by assessee in course of search and declared in return of income filed for the year.
2(iii)
It is evident from the assessment order itself and the statement recorded by the appellant during the course of search u/s 132(4) of the IT Act, 1961 that the said income was earned from jewellery business and the learned AO has considered the same as other income without any supporting documentary evidences. It is worthwhile to submit here that a comprehensive search and seizure action for about more than 5 days have been carried out by the Income
Tax Department and as evident from the impugned assessment order that no other sources of Income was found and / or deducted by the search team during the course of said proceedings. In view of the above fact, it is crystal clear that the income Rs. 6,30,00,000/- was the jewellery business income, correctly declared as an additional business income and assessable as such. It is accordingly requested that the impugned action of the learned AO to assess the said income as other income is grossly wrong and against the facts of the case and bad in law.
THIRD GROUND OF APPEAL
3. That the ld CIT(A) is also wrong and has erred in law in upholding charge of tax by the ld AO on addition made to the income of the appellant vide ground
No. (1) & (2) above @ 60% u/s 115BBE of the IT Act, 1961. 3(i)
The learned AO in the assessment order vide para No. 5, page No. 26
and para No. 2 at page No. 30 have simply mentioned as under :
Para No. 5, Page No. 26 : “ Therefore, a sum of Rs. 22,18,29,000/- (Rs.
22,02,58,445/- plus Rs. 15,70,555/-) so deposited in the bank account is held unexplained cash credit u/s 68 of the Act which the assessee has induced in books under the grab of cash sales and resultantly addition of Rs. 22,18,29,000/- is being made and added to the total taxable income of the assessee and taxed at the rate of 60% as provision u/s 115BBE.”
Para No. 2 at Page No. 30 : “ In view of the above discussion a sum of Rs.
6,30,00,000/- found recorded in seized paper is held unexplained money u/s 69A of the IT Act under head income from other sources against no expenditure, allowance or setoff loss is allowed and same is taxed at the rate of 60% as per provision u/s 115BBE.”
3(ii)
It is apparent from the said findings of the learned AO that no evidence and / or other material tenable in the eyes of law has been brought on record that the sales and additional business income are unaccounted in books of accounts. It is worthwhile to submit here that the sale of jewellery which have been recorded in regular books of accounts has been accepted by the learned AO in terms of quantity but he did not accept in amount. The submissions are verifiable from the assessment record as well as documentary evidences maintained and also lying seized with the IT Department. Copy of the said records are submitted. Thus, the impugned finding / exercise of the learned AO is based on suspicion. In this regard, it is further submitted that although the suspicion may be strong, however

70
As section 115BBE is charging of tax at the higher rate and it cannot be applied directly without giving any show cause notice when the issue are disputed that whether the higher rate of tax applicable or not on the alleged income or the nature of income falls u/s 68/69 and 115BBE. Hence, it was mandatory on the part of the ld. AO to issue show cause before invoking the provisions u/s115BBE, in absence of the same the rate cannot be charged more than to normal rate of tax, if the addition if any sustained. As now, it is a settled legal position that a person
(assessee) is entitled to opportunity to show cause as to why not the income of the assessee is determined and charged or taxed in the manner as proposed by the Assessing Officer but in the instant case no such type of opportunity had been provided hence the addition so made may kindly be deleted. But the learned AO has failed to do so, which is against the principal of natural justice and against the law. Thus, how the learned AO can taxed the income under u/s 115BBE. Hence, the entire addition is liable to be deleted in full kindly refer Sanghi Brothers (Indore)
The submissions of the assessee are also drawing support from the Hon’ble Coordinate Jodhpur ITAT Bench, Jodhpur ITA No. 50/Jodh/2021
consisting Hon’ble Vice President Shri N.K. Saini and Hon’ble Judicial Member
Shri Sandeep Gosain. The Hon’ble Bench held that “ the AO has not issued any show cause notice before invoking the provision of Sec. 115BBE for taxing the income on higher rate. It was mandatory on the part of the AO to issue the specific show cause notice to this effect asking to the assessee as to why the income should not be taxed under sec. 115BBE before doing so. It is very settled legal position that a person (assessee) is entitled to opportunity to show cause as to why not the income of the assessee is determined and charged or taxed in the manner as proposed by the A.O but in the instant case no such type of opportunity had been provided but the AO has failed to do so, which is against the principal of natural justice and against the law. This sect. 115BBE is charging of tax at the higher rate and it cannot be applied directly without giving any show cause notice when the issue are disputed that whether the higher rate of tax applicable or not on the alleged income or the nature of income falls u/s 68/69 and 115BBE. Hence, it was mandatory on the part of the AO to issue show cause before invoking the provisions u/s 115BBE, in absence of the same the rate cannot be charged more than to normal rate of tax, if the addition if any sustained”.

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It is further submitted that section 115BBE of the IT Act, 1961 was inserted by the Financial Act, 2012 and thereafter, the amendment has been made by the Taxation Laws (Second amendment) Act 2016 w.e.f. 01.04.2017 by which rate of Income Tax and surcharges were enhanced. In this connection, it is submitted that in case of a business concern who is engaged in carry on the business activities as per partnership deed and / or as per Memorandum and Article of Association. Since, it is not open for the business concern or the partners
/ Directors to do other any business other than permitted (specified in the legal documents). As such, it is a basic principle and known fact that the receipts, excess inventory and excess cash, etc. found during the course of survey / search are part of the business activities of the assessee. Further, if any amount is surrendered / offered to tax on account of excess stock, cash, unrecorded sales are related to the regular business of the assessee and it is spared from the rigorous of Section 115BBE. Reference –
(i)
Veer Enterprises Vs Deputy Commissioner of Income Tax [2024] 158
taxmann.com 655 (Chandigarh-Trib.) – In this case, the Hon’ble Bench constituted
Vice President and Accountant Member. In this case, during the course of survey, assessee surrendered excess stock, cash and receivable stating that the same was to be taxed as business income. Assessing Officer, however, treated said amount as an unexplained investment u/s 69A and 69B and charged same to tax as per provisions of Section 115BBE – held that since during survey proceedings, assessee was confronted not only with discrepancies found but also with nature and source thereof and it had emerged that source of income of assessee was from its business operations, income surrendered by assessee during survey could not be brought to tax under deeming provisions of section 69A and 69B and same had been rightly offered to tax by assessee under head of business income
– Held, yes [Paras 29 and 30] [In favour of assessee].
(ii)
Dipak Balubhai Patel (HUF) Vs. Income-tax Officer [ 2024] 165
taxmann.com 684 (Ahmedabad – Trib.) - In this case, the Hon’ble Bench held that during demonetization period, assessee deposited cash of Rs. 10.75 lakhs in bank account and offered it for tax – Assessing Officer made addition as unexplained money under section 69A and taxed same under section 115BBE – Whether since assessee had recorded cash deposits in his books of account and source of cash deposits during demonetization period was also maintained by assessee,
Assessing Officer was not correct in invoking provisions of section 69A and charging tax under section 115BBE – Held, yes – Whether, therefore, impugned addition was to be deleted – Held, yes [Para6.3] [In favour of assessee]
As per above settled position of law, it is submitted that the provision of Section 115BBE invoked by the learned AO on account of additional business income amount to Rs. 6,30,00,000/- offered to tax and duly declared in its P & L A/c and paid due tax thereon, the provision of Section 115BBE are inapplicable. Further, the learned AO invoked the provision on the sales made during the demonetization period which are recorded in regular book and as such the provision of Section 115BBE are in applicable and the action of the learned AO is wrong and bad in law.

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In view of the above facts and submissions duly supported by the various decisions of Hon’ble Courts and ITAT Bench, the invoking the provision of section 115BBE to charge the tax on the additions made amounting to Rs. 28,32,58,445/- to the declared total income of the assessee is legally inapplicable wrong and bad in law deserves to be cancelled / set aside.
FOURTH GROUND OF APPEAL
4. The appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them.
This ground of the appeal is a general ground and no adjudication is required.

The appellant prays for relief accordingly.”

73
•
Case laws relied upon:
S.
No.
Name of Cases/Statement
Commissioner of Income-tax,
Vs.
Jeet
Construction Company
Supreme Court of India
20-11-2020
1-4
2
Omar Salay Mohamed Sait Vs. Commissioner of Income-tax
Supreme Court of India
05-03-1959
5-19
3
Malik Packaging Vs. Commissioner of Income- tax
High Court of Allahabad
29-04-2005
20-22
4
04-06-2024
23-25
5
01-07-2024
26-43
6
Ward-2(2), Udaipur
ITAT Jodhpur Bench
23-11-2021
44-68
7
03-01-2024
69-71
8
02-04-2024
72-78
9
Commissioner of Income-tax, Vs. Smt. Nandini
Nopany
High Court of Calcutta
17-12-1997
79-81
10
20-12-2023
82-95
11
31-01-2024
96-98
12
22-08-2024
99-104
13
23-01-2024
105-122
14
24-07-1973
123-125

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12. The brief facts related to the issue on that are that a survey u/s 133A of the IT. Act, 1961 at the business premises of the assessee company was carried out on 02.08.2017 which was subsequently converted into search and seizure action operation as per provision of section 132 of the Act on 03.08.2017. Subsequent to that action notice under section 153A of the Act dated 13-12-2017 was issued and served upon the Assessee on 19-12-
2017 requiring it to file a true and correct return of income as prescribed under Rule 12 of the Income Tax Rules, 1962 within 30 days of the service of the said notice. In response to the said notice(s), a return declaring an income of Rs. 10,64,13,890/- was filed by the Assessee on 18-01-2018. In the return of income originally filed by the Assessee u/s 139(1) of the Act on 06-12-2017 an income of Rs. 10,64,13,890/- was declared. However, in the return of income filed in response to notice u/s 153A of the Act no undisclosed income pertaining to the relevant year has been declared by the Assessee. Ld. AO noted that the assessee has not co-operated during the assessment proceedings, which clearly shows that the assessee intentionally/willfully avoided the assessment proceedings. On that aspect of the matter the bench noted that the reason for delayed compliance before the ld. AO was that some of the taxpayer out of the group went

80
28,32,58,445/- during the demonetization period viz. between 09.11.2016 to 30.12.2016 which was Specified Bank Notes (SBNs). Out of that a sum of Rs. 6,30,00,000/- was claimed to be received from Sangam Handicraft P. Ltd. (PAN
AACCS5806K) and was duly recorded in the books of account as other income and thus, balance amount of Rs. 22,02,58,445/- was cash receipt of the sales made on the day of demonetization. Thus, ground no. 1(a) and 1(b) challenges the addition of Rs. 22,02,58,445/- and ground no. 2
challenges the addition of Rs. 6,30,00,000/-.
14. To verify the source of cash deposited, the assessee was asked to explain the source along with documentary evidence. The assessee was also asked to furnish various details and comparison of cash sales and cash deposits of preceding two years vide notice dated 21-12-2019. In connection with the same assessee furnished various details and documents. The details, documents and explanations furnished by the assessee were perused by ld. AO and based on the submission he observed that the assessee made cash sales aggregating to Rs.

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21,05,47,868/- in a single day through invoice no. 1051 to invoice no. 1649. The cash sale of Rs. 21,05,47,868/-on a single day does not seem genuine following the past year's trends. Ld. AO compering this year sales with that of sales of corresponding months of previous years he noticed that that the cash sale during the month of November 2016 was Rs. 28,02,77,549/-, during November 2015 it stood at Rs. 3,43,35,825/- and November 2014 at Rs. 1,00,44,334/-. Therefore, during the year under consideration cash sales during November month increased by 8.16 times compared to November 2015 and increased 27.90 times compared to November 2014. With that information he further noted that cash sales made during
November 2016 is 88.00% out of total cash sales made during the financial year 2016-17. The cash sales made in one month by the assessee were higher compared to cash sales in remaining 11 months of that year. Further when the trend of cash sales is compared to previous years it was noticed that in November 2015 cash sales was just 25.63% of the total sales and in November 2014 it was 8.19% compared to total sales. On that aspect of the sales ld. AO noted that the assessee failed to furnish the details of the persons such as full name, address and PAN no. to whom cash sale was made during the demonetarization period. Based on that observations ld.
With that observation so made he issued a detailed show cause notice dated 21-12-2019 asking the assessee to justify the source of cash deposited into the bank account. The assessee submitted reply that show cause notice on 23.12.2019. 15. Ld. AO noted that the reply of the assessee cannot be considered as the assessee submits that they made sales of Rs. 21,05,47,868/- just after the announcement of demonetization. The assessee states that sales in jewellery business always depend on turn up of customers in a particular month, festivals and in addition it was the annulment of high denomination notes. However, on examination of the sale on festival season in earlier years no such single day sale was found and contrary to the claim of the assessee the cash sale during the whole month of November 2015 stood at Rs. 3,43,35,825/- and October 2014 at Rs. 1,00,44,334/-only. Ld. AO thereby noted that the assessee failed to explain why such sale was not happened in earlier years although festival is celebrated every year. Hence the claim of the assessee was considered as afterthought, and it was considered as implanted cash sales invoices in its books of accounts just to cover up its undisclosed income of the assessee. The assessee submitted that the cash sales of the current year cannot be compared with earlier

83
He further from those sales bills noted that some of the bill having lower sale amount related to October and November have been issued with the detail of description of item sold for example bill no. 984 dated 02-11-2016
issued for amount Rs. 8350/- contains details of goods as 1 pair tops under 22/22 Kt gold jewellery. The said bill also contains mobile number of purchaser Namrta Ji Devatwal whereas the bill of higher amount issued in the month and date of demonetarization no such detail have been mentioned and no detail of mobile number has been found. This fact further

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Therefore, he holds a view that the assessee company has intentionally not recorded such details on the invoices which can be used to verify the genuineness of the purchasers. The purchasers shown in bills are not subject to the verification which clearly shows that the assessee changed his methodology of issuance of bills to accommodate his unaccounted income under grab of bogus sale issued in dummy names. The ld. AO also makes an observation that a search action u/s 132 was carried out at the premises of the assessee wherein it is found that the assessee company engaged in out of books sales in cash and sales above Rs. 2,00,000/- were split in amounts below Rs. 2,00,000/- to avoid mandatory PAN compliance as also to conceal the real identity of the buyers. During the search statement of director of the company Shri Nagendra Singh Laxman Singh
Rathore recorded u/s 132(4) of the I.T. Act on dated 04-08-2017 wherein in 85
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT reply to question no. 23 admitted that he has been indulged in splitting bill of more than Rs. 2,00,000/- into the bill of lower amount. He also noted that as per sale bills provided by assessee many details was not found noted in bills Jewellery sold by assessee was not specified like what item of jewellery and quality of diamond/stone and rate. Making charges was also not mentioned in all bills although the assessee is manufacturer. Payment mode also not mentioned in bills. These facts are clearly shown that these bills are fabricated and false bills and only made for adjustment of cash deposited by assessee during demonetization period.
16. When the matter carried before the ld. CIT(A) he confirmed the rejection of the books results on the reasons that the cash book, sales book stock records produced were after thought and does not disclose true income of the assessee on the same observation which ld. AO noted in his order and confirmed the rejection of the book results.
17. Since on the issue of rejection of the books done by the AO and were also confirmed by the ld. CIT(A) and there is specific ground taken by the assessee before us we would like to deal that ground first. Thus, before we deal with that ground of the assessee, we would like to deal with the provision of section 145(3) of the Act, as the same was made basis for making the addition. The provision of section 145(3) reads as under :

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145. (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall, subject to the provisions of sub- section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee.
(2) The Central Government may notify in the Official Gazette from time to time income computation and disclosure standards to be followed by any class of assessees or in respect of any class of income.
(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144. 13. Thus, as it is clear from the above provision of the act that the ld. AO or that of the ld. CIT(A) may proceed under Section 145(3) under any of the following circumstances:
• Where he is not satisfied about the correctness or completeness of the accounts; or • Where method of accounting cash or mercantile has not been regularly followed by the assessee; or • Accounting Standards as notified by the Central Government have not been regularly followed by the assessee.
For the sake of clarity, the relevant submission made by the assessee is extracted in the order of the ld. CIT(A) is reproduced herein below for the sake of convenience:

Ground No. (1)
That on the facts and in the circumstances of the case the Ld. Assessing Officer is wrong, unjust and has erred in law in rejecting books of accounts of the appellant by invoking provisions of sec. 145(3) Income-tax Act, 1961 by allegedly holding that they are not reliable and also because items shown in sales bills during the period of demonetization are allegedly not verifiable. The finding as recorded by the assessing officer after rejecting submission and explanation of the appellant is wrong, unwarranted and based on misappreciation of facts.
1.1 The Ld. A.O. in assessment order in para (1) on page - 25 held that "in view of the above discussion and evidence brought on record it is evident that the assessee has been indulged in issuances of bogus sale bills and gold items shown to be sold in the sales invoices do not have any description and cannot be verified from stock register whether the items shown to be sold on particular date was part of stock in trade or not. Therefore, the cash book, sale book and stock register so furnished by the assessee is prepared afterthought and does not disclosed true income of the assessee. Accordingly, same cannot be relied upon and the item shown to be sold in sale bill during the course of demonetarization could not be verified and the same are rejected in terms of the provisions of section 145 (3) of the Act."
In this connection it is submitted that assessee company has maintained correct &
complete books of accounts including Stock-Register which are audited by independent auditor of company appointed under Companies Act and Audit Report having no adverse remark or comment and further Audited u/s 44AB of I. T. Act,
1961 and Tax Audit Report has also been filed which also do not report any adverse remark on accounts kept by assessee. Thus it cannot be held that assessee has not maintained correct and complete books of accounts. The A.O. in assessment also had accepted op. stock, purchases, gross profit (applied N.P.
The issued bills do not contains details of full description of the item sold like chain. Sat, Topas etc. and the items so purported to be sold cannot be verified from stock register on the date of issuance of bills whether the items were part of stock register or not" It is submitted that mentioning of complete address & PAN of buyers on below Rs. 2 Lac sale bills is neither requirement nor there is any provision in the I. T. Act, 1961 to ask IT PAN complete address and name proof etc. from the customers buying goods in cash upto the prescribed limit. In fact many customers do not inform the same and those inform their complete address and PAN that is noted on sale invoice by assessee. However as evident and verifiable from the copy of sales invoices that name of the buyer, quantity and amount is mentioned on the said sales invoices from which entries made in Stock
Register is verifiable. In view of the above facts and provisions of I. T. Act, 1961
the assessee company not noted the complete address and PAN of customers on each and every cash sales invoices as the same is not required in law. In the case of CIT Vs Om Overseas (315 ITR 185), It was held by Hon'ble Punjab & Haryana
High Court that there was no legal obligation on the part of the assessee to maintain such a record and the audited accounts could not have been rejected without pointing out any specific defect or deficiencies in the books of account maintained by the assessee. There is no dispute to the well settled legal proposition that the books of account regularly maintained by the assessee in the normal course of business, which are subject to audit as per the provisions of IT Act should be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable.
It is thus submitted that there is no justification in the case to invoke provisions of section 15 (3) of I.T. Act and reject books of accounts. The Ld. A.O. is wrong and has erred in law in invoking provisions of section 145(3) and rejecting books of accounts of assessee company.
As is evident that the assessee contended before the ld. CIT(A) that the claim of the ld. AO was that “the assessee has been indulged in issuance of bogus sales bills and gold items shown to be sold in the sales invoice do not any description and cannot be verified from stock register whether the items shown to be sold on particular date was part of the stock in trade or not. Therefore, the cash book, sale book, and stock register so 89
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT furnished by the assessee is prepared afterthought and does not disclosed true income of the assessee”(sic). Against that allegation the assessee submitted that assessee company has maintained correct and complete books of accounts including stock register which are audited by an independent chartered accountant and there has been no adverse observation in those reports issued under the companies Act and that of under Income Tax Act and ld. AO had not whispered that there were adverse comment on that issue. So the contentions raised by the ld. AO and that of the ld. CIT(A) are without any merits. Not only that all the invoices were with the ld. AO he has not pointed out any of the error on the part of the assessee in maintaining the stock records and thus we do not find any merits on the reasons that the assessee has not maintained proper records and the same cannot be rejected on a general observations when the same are audited under two law i.e. one under the companies Act and other under the Income Tax Act. We get strength to support our view from the decision of our Juri ictional High Court in the case of Commissioner of Income Tax Vs. Sulabh marbles (P) Ltd. [ 165 Taxman 258 (Raj) ] wherein the Hon’ble Court held as under:
3. This appeal is directed against the order of Tribunal, Jodhpur Bench, Jodhpur, dated 14-9-2004. The revenue seeks to raise following substantial question of law arising for consideration in this appeal :

90
"Whether on the facts and in the circumstances of the case and in law, the learned Tribunal was justified in upholding the order of learned CIT(A) deleting the addition of Rs. 13,53,310 by holding that there was no specific finding recorded by the Assessing Officer for rejection of the book results and in the absence of any defects in the books of account, the CIT(A) was justified in deleting the impugned addition ?"
4. The Assessing Officer has rejected the books of account of assessee.
The books of account were rejected not on the ground that any of the details of sale and purchase were found to be wrong but on the basis of amount paid for power and fuel consumption to the Electricity Department. The Assessing Officer assumed that looking to the bills of RSEB, the actual production should be generated more than whatsoever have been disclosed and to that extent sales must have also been more.
On this account, the books of account were rejected and the Assessing Officer resorted to best judgment assessment by adopting the GP rate of 52 per cent and total income was computed as nil by rejecting the claim of assessee for carrying forward loss of Rs.
11,89,487. On appeal, the CIT(A) found that the rejection of the books of account was not warranted on the basis of the expenses shown on the power consumption. It was noticed that during the assessment period, the assessee was required to pay minimum charge rather than actual electricity consumption, which the assessee has contested before the Court successfully and ultimately the assessee was made to only actual consumption. Thus, the books of account have been rejected on non-existing grounds and merely on surmises in a very casual manner. Consequently, the result shown in the books was accepted and the additions made by Assessing Officer were deleted.
The Tribunal on second appeal recorded the finding as under :
"We have heard both the parties and given our thoughtful consideration to the rival submissions with reference to facts, evidence and material on record. From the facts discussed above, it is obvious that the assessee had started production in the middle of accounting year relevant to the assessment year under reference.
The Assessing
Officer has not given any specific finding for rejection of book results. He has also not pointed out any defects in the books of account maintained or the method of accounting followed. There is no material placed on record to show any instance of suppression of sales or inflation of purchases or expenses. The Assessing Officer was wrong in drawing adverse inference against the assessee by only referring to the electricity expenses. The Electricity Department had charged the assessee at the minimum rate rather than actual consumption. This is precisely for this reason that the assessee contested the account of the Electricity Department in the Court of law and the matter was decided by the Court in its favour. In any case, the revenue has not placed any material on record to controvert the finding of the CIT(A) that the assessee was charged electricity not at the minimum rate but on actual consumption. Thus, there being no specific finding recorded by the Assessing
Officer for rejection of the book results and in the absence of any defects in the books of account, we are of the considered opinion that the CIT(A) was 91
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT justified in deleting the impugned addition. We confirm his order and dismiss both the grounds of appeal of the revenue."
5. A bare perusal of the impugned order goes to show that the finding of the Tribunal, confirming the order of CIT(A) was finding of fact based upon the relevant material and no question of law much less substantial question arises for consideration in this appeal.
The appeal fails and is hereby dismissed.

Here also the ld. AO did not find any specific defect and the observation on the invoice and no specific defects were observed and therefore, respectfully following the binding precedent and the discussion so recorded here in above ground no. 1(a) raised by the assessee is allowed.

Now we come to the contention of the revenue treating the sales recorded in the books of account as chargeable to tax as per provision of 92
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT section 68 of the Act. While holding so ld. AO contended that as regards sales the assessee complied late and that is why he could not make the third-party enquiries. On that aspect of the fact, we agree with the contention of ld. AR of the assessee that the plea of the revenue is not correct once the revenue conducted search all the information of sales and books of account were in their possession they could have done the day when the search was conducted. It was not the case of the revenue that the assessee has not co-operated in the search proceeding. Therefore, the conclusion that the assessee introduced his unaccounted cash as cash sales without making any inquiries was not correct when the revenue after conducting search on 03.08.2017 and conclude that the assessee has not given the details. When the revenue themselves could not contradict the contention of the assessee from 03.08.2017 to the completion of the assessment on 31.12.2019 that the sales recorded in the books were not genuine. Merely the sales were recorded on the date of demonetization, the same cannot be considered as unexplained income of the assessee as the assessee has recorded the sales after giving the delivery of the goods lying in the stock of the assessee company. On this aspect of the matter, we get support from the decision of the our juri ictional High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 in which it was held that 93
“Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them”. Thus, the sales recorded in the books of account of the assessee company cannot be considered as unexplained and thereby we direct the ld. AO to delete that addition. When before us the ld. AO could not prove otherwise that the items sold were not stock and were shown to have been sold by the assessee even though the search team seized the records. It was the compelling circumstance of the rush the assessee must see the rush and hurry of the customer and thereby writing of the all the details based on the situation was not possible by the assessee-appellant. How can a cash receipt coupled with the delivery of goods recorded in the bill can be considered as bogus as bogus as it did not contain the name in full, PAN and address of the buyers, when the law does not enforce such compliance on the part of the assessee-appellant.
Even the plea of the ld. AO was that a search action u/s 132 was carried out at the premises of the assessee wherein it is found that the assessee company engaged in out of books sales in cash and sales above Rs.
2,00,000/- were split in amounts below Rs. 2,00,000/- to avoid mandatory
Nagendra Singh Laxman Singh Rathore recorded u/s 132(4) of the I.T. Act on 04-08-2017 cannot be read in isolation and that of splitting bill were of the requirement of the customer and on that aspect of the matter no adverse material found and therefore, when the law does not enforce to mention the details of PAN and address the same of more than Rs.
2,00,000/- into the bill of lower amount then how can be that be considered to reject the sales.
15. As regards the contention that the assessee revised the VAT return to justify the turnover reported by the assessee. On that aspect of the matter we note from the order of the assessment the assessee – appellant rectified the turnover in fact if we look for the 1st and 2nd quarter return the assessee has offered the more sales and that period was not demonetization thus, in fact the revision of VAT support the correctness of the record and thereby the assessee has considered more retail sales even in the period other then that of the demonetization 3rd quarter and in that there is no such allegation of the revenue.

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16. Thereafter as regards the contention that the number of bills generated by the assessee were beyond permissible logic because a buyer takes an average of 5 minutes to choose any item and staff of the assessee company takes an average of 5 minutes to issue the bill. By this average time of 5 minutes per bill the assessee company could have prepared a maximum of 50 to 60 bills in the stipulated time of 4 hours whereas the assessee has shown 1175 bills on that day which clearly shows that the assessee has issued bogus bills under dummy names to accommodate his unaccounted income under grab of cash sales. Here also the ld. AO should have considered that on that night the country was in rush to convert their savings into the precious money. As regards the contention of the ld. AO that “ It is surprising that some of the bill having lower sale amount related to October and November have been issued with the detail of description of item sold for example bill no. 984 dated 02-11-2016 issued for amount Rs.
8350/- contains details of goods as 1 pair tops under 22/22 Kt gold jewellery. The said bill also contain mobile number of purchaser Namrta Ji
Devatwal whereas the bill of higher amount issued in the month and date of demonetarization no such detail have been mentioned and no detail of mobile number has been found” (SIC). This observation in fact supports that there were reasons of the rush and that why show that the sales were 96
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT made on that and it was not the case of the revenue that even though the rush was that but those details were maintained. Thus, these sales invoices that were prepared on that day support the contention and that plea of the revenue in a positive sense. As regards the contention of the ld. AO that why such sales did not happen in earlier years as festivals and marriage seasons come every year. Here he did not take into consideration the sudden announcement of the demonetization of the high value currency and due to panic people were in a hurry to convert their savings into precious gold and diamond ornaments. This contention of the assessee- appellant support the news article of “The Economic Times” dated 08-12-
2016, wherein the secretary of the India Bullion & Jewellers
Association mentioned that the jewellers had sold 15 tonnes of Gold ornaments and bars worth around Rs. 5000 crores on the intervening night of November 8 and 9, 2016 after the government demonetized the Rs. 500
and Rs. 1000 currency notes and the assessee also grabbed that opportunity, which is not a magic but an opportunity for the assessee and thus sales recorded on the very night of the demonetization cannot be looked as compared to the other previous years. As regards the sales accounted for by the assessee, they were supported by bills were already in possession of the revenue and the proceeds of the same were duly

97
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT recorded in the books of account. Thus, this fact supports the contention that the sale is completed by the assessee-appellant by handling over the item of precious jewellery available in stock. It was not the case of the revenue that the assessee does not carry out the stock to the extent of the sales accounted for by the assessee-appellant. Therefore, considering the decision of our own High Court in the case of Smt. Harshila Chordia v.
ITO [2008] 298 ITR 349 (supra) the receipt on the sales is out of the scope of provision of section 68 of the Act.
17. We also take note that ld. AO recorded his finding that that in course of search proceedings in the business premises of Mohit Jewellers Prop.
concern of director of company Shri Narendra Singh Laxman Singh Rathod certain documents were found and seized as Page No. 40, 42, 43, 44 and 45 of Ex-1, Ann – AS and which are scanned on Page – 17 to 21 of assessment order and concluded that entries mentioned in Page No. 42,
43, 44 & 45 matched with Page No. 40 and summarized in table on Page
22 & 23 of assessment order. Ld. A.O. further held that on Page No. 39
which is back side of Ann. AS Exhibit – 1 Page No. 40 the detail of inward and outward quantities of gold are mentioned, which shows that the booking and supply was made of bullion not gold jewellery (in discussion in assessment order some dates mentioned as of 2017 but it is of 2016 which 98
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT are mistakes of A.O. in assessment order) and received the amount in cash in old currency. The booking and supply of Bullion were made in M/s Mohit
Jewellers and the cash was deposited in the accounts of M/s Kiran Fine
Jewellers P. Ltd. under grab of cash sale by issuing bogus sale bills. This fact is not correct the as the director of the assessee company vide answering to the question no. 18 explained the page and the content of the reply given is reproduced here in below:

99
As is evident that KFJ means Kiran Fine Jewellers and that deposit of cash is duly recorded in the books of the assessee as cash sales and thus in fact the assessee has correctly recorded sales in their books of account and therefore, no adverse inference of that page be drawn because cash deposit in bank transactions noted on page No. 40 are duly recorded in the books of accounts of the assessee. Thus, the above findings and conclusions of AO are based only on suspicions and not based on any material on record or evidence found in case of assessee company. The sale invoices issued by assessee company in respect to jewellery /
ornaments items are sold were out of stock held by assessee company which is evidenced from books of accounts and Stock Register of assessee company. The other observations of A.O. that such large No. of sales invoices and sale to customers is not possible to make in the time available with assessee company on 08-11-2016 also has no legal force and sales made by assessee cannot be held as bogus on non-genuine in proceedings under Income Tax where as the said sales have been accepted genuine sales under VAT Act by the VAT authorities. Further, from the assessment orders of learned AO and appellate order of learned CIT(A), it is evident and verifiable that sales of the assessee have not been accepted mainly for the reason that the cash sales during the demonetizing period and the cash

103
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT sales in preceding years were much more / in disproportionate to the cash sale made during the demonetizing period and there was no addresses of the buyers, etc. etc. In this regard, it is submitted that the cash deposits made by the assessee were duly recorded in books of accounts, which were audited under various laws applicable and supported by creditable evidence such as Purchase Bills (which are not doubted by the learned
AO), Stock Register – maintain day-to-day basis accepted by the learned
AO, Sales Invoices- VAT returns filed from time to time and order of VAT authorities accepting sales made by the appellant during the year under consideration. As discussed herein above the assessee-appellant also explained the reasons of revising the VAT returns during the demonetizing period before the lower authorities which also not suggest that the assessee has revised those returns to inflate the cash on hand of the SBN.
Thus, when the cash sales is established and not doubted without bringing any contrary material the cash deposited out of that cash sales again cannot be added u/s. 68 of the Act without disproving the sales recorded in the books coupled with the delivery of goods by the assessee-appellant. A similar view was taken by the co-ordinate bench in ITA No.161/JP/2022 in the case of ACIT CC- Jaipur Vs. M/s Motisons Jewellers Limited. The relevant finding in that case is reiterated here in below:

104
14. 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. The assessee is a limited company and deriving income from manufacturing and trading of jewellery. The books of assessee’s are audited by the independent Chartered Accountant and copy of audit report and statement of profit and loss account is filed by the assessee company. It is noted from the record that the case of the assessee was taken up for scrutiny assessment u/s 143(3) on the basis of CASS and desired information by the AO were submitted by the assessee from time to time. After completion of assessment the AO vide his order dated 29-12-2019 assessed the income of the assessee at Rs.16,45,24,988/- as against return income of Rs.5,37,53,418/- . During the course of assessment proceedings, the AO rejected the books of account of the assessee by applying the provisions of Section 145(3) and estimated the net profit rate of 2.59% being average Net
Profit of last three years and applied the same on the sales of Rs.1,96,92,45,899/- i.e. to say Rs.2,09,09,94,399 – Sales as per books and Rs.12,17,48,500 – Cash deposited in Bank. It is further noted that the AO reduced the amount of Rs.12,17,48,500/- deposited in the demonetization currency which was against sales, realization from debtors and advances against sales, out of total sales of Rs.2,09,09,94,399- declared by the assessee.
Hence, the AO computed the net profit of the assessee at Rs.5,10,03,468/- as against Rs.5,19,80,398/- declared by the assessee. It is also noted that the assessee had deposited the amount of Rs.12,17,48,500/- in the demonetized currency which was out of cash balance available with the assessee from sales made by it, amount realized from sundry debtors and advance received against sales which the AO treated as unexplained cash credit of the assessee u/s 68 of the Act and added the same to the income of the assessee and thus taxed it as per the provisions of Section 115BBE of the Act. In first appeal, ,the ld. CIT(A) vide para 6.2 of his order partly deleted the addition made by the AO by observing as under:- i) deleted the addition of Rs. 12,17,48,500/- made by ld. AO under section 68 of the Act alleging the cash deposited in bank a/c in demonetized currency as unexplained cash credit.
ii)
Upheld the rejection of books of accounts and also upheld the estimation of NP rate of 2.59% as against NP rate of 2.36% declared by the assessee.
iii)
Initially in the original order dated 04.02.2022 the ld. CIT (A) confirmed the addition of Rs. 31,53,287/-, which by passing the rectification/corrigendum order dated 11.07.2022 modified and sustained Rs. 47,72,297/- by estimating the net profit of Rs. 5,41,56,755/- (by applying the NP rate 2.59% on declared turnover of Rs. 2,09,09,94,399/-) as against Net profit of Rs. 4,93,84,458/- declared by the assessee.

We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them.

On being consistent we hold that once the sales amount recorded in the books of account was not proved wrong the separate addition was not warranted considering the consequent to the sales cash deposited into the assessee’s bank account stands explained and cannot be taxed as per

106
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT provision of section 68 of the Act. Based on these observations we vacate the addition of Rs. 22,02,58,445/- and thereby allow ground no. 1(b) raised by the assessee.
18. Now coming to ground no. 2 raised by the assessee wherein the assessee-appellant challenges the finding of the lower authority confirming the addition of Rs. 6,30,00,000/- offered to tax by the appellant during course of search was its additional business income from sale of gold ornaments assessable under the heed income from Business and instead upholding finding recorded by the ld AO that the said income is allegedly appellants undisclosed income liable to tax as unexplained money u/s 69A of the IT Act, 1961. Since the addition is made under section 69A of the Act it would be appropriate to deal with the provision of that Act which reads as under :
Unexplained money, etc.
69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.

As we note from the facts of the case that while in the search operation at the business premises M/s Mohit Jewellers, Prop. concern of Shri

107
and 45 of exhibit-1, Annexure-AS. On perusal of the above documents it is found that the right side of the page 40 of exhibit 2 it is written 6,30,00,000
Sangam Ji. During the search proceedings, when observed right side of the page 40 of exhibit 2 it is written 6,30,00,000 Sangam Ji which denotes M/s
Sangam Handicraft Pvt. Ltd. While the Search was going on statement of Shri Subhash Gupta Director of Sangam Handicraft Pvt. Ltd. and his son
Sahil Gupta were also recorded u/s 131 of the Act on 04.08.17 at business premises of his proprietor concern M/S Mohit Jeweller, 958 Dhamani Street,
Chaura Rasta, Jaipur wherein he admitted that amount of Rs. 6,30,00,000/- represent the old currency which was deposited on 11-11-2016 in bank account of M/s Sangam Handicraft Pvt. Ltd. held in Malviya Urban
Cooperative Bank. He admitted that the amount has been deposited by Shri
Nagendrasingh Laxmansingh Rathor. Hence it is evident that the aforesaid amount of Rs. 6,30,00,000/-found recorded in page no. 40 of exhibit-1,
Annexure-AS represent undisclosed income of the assessee which the assessee has shown as additional business income in the profit and loss account of the year under consideration as income from the sale of 108
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT ornaments in addition to what has been disclosed in sales. Since the above undisclosed income found recorded in above page has been unearth during the course of search proceedings and when the assessee was asked to explain why the same should not consider as unexplained cash credit u/s 68 of the Act, vide note sheet entry. In reply to the same, the assessee claimed that the sale amount noted on seized paper works out to Rs.
28,32,58,445/- out of which Rs. 22,18,29,000/- has been recorded in the regular books of account of the assessee and balance amount of Rs.
6,30,00,000/- have been declared as additional business income received from sale proceeds of gold ornaments on 08-11-2016 which is found recorded in that seized material and same being the income generated from the business same cannot be considered as unexplained but it is general out of the business of the assessee. Ld. AO did not considered this explanation of the assessee which was found recorded against the name of Sangam Ji as income in the audited accounts. The assessee has claimed that the said amount is the additional profit on sale made on 08-11-2016. However, he failed to furnish details such as name, address and PAN of purchaser to whom the sale was made. In the absence of such evidence and denial of the person Sangam Ji (director of M/s Sangam Handicraft Pvt.
Ltd.), the claim of the assessee was not considered. Further, in the 109
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT independent Auditors reports, the auditor has opined the amount as 'other business receipt of Rs. 6,30,00,000/-recorded in books of accounts on 08-
11-2016'. Similarly at note no. 17.2 of financial statement the amount has been recorded as 'other business income'. Further, at para.2 of 3 of form no. 3CA, the same has been declared as 'other business income'. This fact clearly shows that the income of Rs. 6,30,00,000/- is not a business income of Jewellery but the income earned from business which has not been disclosed by the assessee in the regular books of accounts. In view of the above discussion a sum of Rs. 6,30,00,000/- found in seized paper is held unexplained money u/s 69A of the Act under head income from other sources.

On this aspect of the matter the bench noted the seized material be read as whole when the assessee categorically stated that that page contains details of the sales and deposit of cash in to the bank account of the assessee as well as of the person named Sangamji who also stated that the cash in their companies account the money was deposited which was out of the sale proceeds recorded on the said seized papers. Since we have already taken a view that the sales recorded in the books cannot be added u/s. 68 of the Act and thereby again that sourced money cannot be taxed u/s. 69A of the Act when the facts are clear that the money was 110
Kiran Fine Jewellers Pvt. Ltd. vs. DCIT deposited into the bank account of the Sangam Handicraft P. Ltd. Even the bench was provided the copy of the assessment order in the case of Sangam Handicraft wherein ld. AO made an addition of Rs. 10,52,20,000/- which includes Rs. 6,30,00,000/- therefore, even the money (cash proceeds of sales made by the assessee ) after depositing into the bank account of Sangam Handicraft P. Ltd., credited by the assessee additional amount of sales collected on the eve of demonetization as unexplained as the said page records the whole cash received and thereby the account of the deposit into the bank account. Even otherwise, when the cash deposit of Rs. 6,30,00,000/- already considered as unexplained in the case of Sangam Handicraft P. Ltd., and that company transferred the money after depositing into the account of the assessee and the assessee offer that income that cannot be considered as unexplained money in the hands of the assessee and therefore, we direct the ld. AO to delete that addition. In the result ground no 2 raised by the assessee is allowed.
19. Vide ground no. 3 assessee challenges the charge of income as per provision of section 115BBE of the Act which they disputed vide ground no.
1 & 2. Since we have allowed ground no. 1 & 2 raised by the assessee in favour of the assessee holding it as income under the head profit and gains

111
Order pronounced in the open court on 25/02/2025. ¼jkBksM deys'k t;UrHkkbZ ½

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(RATHOD KAMLESH JAYANTBHAI)

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

Tk;iqj@Jaipur fnukad@Dated:- 25/02/2025
*Ganesh Kumar, Sr. PS
आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू
1. The Appellant- Kiran Fine Jewellers Private Ltd., Jaipur
2. izR;FkhZ@ The Respondent- DCIT, Central Circle-02, Jaipur
3. vk;dj vk;qDr@ The ld CIT
4. vk;dj vk;qDr¼vihy½@The ld CIT(A)
5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत
6. xkMZ QkbZy@ Guard File (ITA No. 648/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत