INCME TAX OFFICER 2(1), BHOPAL, BHOPAL vs. SWARNA SUKH, BHOPAL

आदेश / O R D E R

Per Paresh M Joshi, J.M.:

Page 1 of 67 of the Act which is hereinafter referred to as the “Impugned order”. The relevant Assessment Year is 2017-18 and the corresponding previous year period is from 01.04.2016 to 31.03.2017.

2. FACTUAL MATRIX 2.1 That the assessee is a jeweller and deals in trading of the gold and the diamond jewellery. The assessee is a partnership firm.

2.2 The return of income for the Assessment Year 2017-18 was filed by the assessee on 06.11.2017 through e-filing declaring total income at Rs.14,26,761/-.

2.3 That the case of the assessee was selected for scrutiny by the Computer Assisted Scrutiny Selection (CASS), as such the assessment proceedings were initiated by issue of statutory notice u/s 143(2) of the Act on 13.08.2018 which was duly served on the assessee electronically. Notice u/s 142(1) of the Act along with the questionnaire was issued on 07.01.2019, 13.06.2019, 23.07.2019, 08.05.2019, 18.12.2019 & 20.12.2019 requiring the assessee to submit e-reply along with the relevant documents. The notices so issued were in order and Page 2 of 67 served upon the assessee electronically well in time and copy of the same placed on record. Assessee attended and reply/submissions were placed on record.

2.4 That during the course of the assessment proceedings the assessee was asked to substantiate the cash deposit made by them during the year under consideration and particularly so during the demonetization period and with the relevant supporting documents. It was submitted by the assessee that the cash deposits in the current account aggregating to Rs.3,60,00,000/- during the Financial Year 2016-17 were out of the cash sales only which spurted during the demonetization period. The assessee also submitted the details of “monthly cash sales” and “total sales” made during the relevant year and the preceding years. That the assessee also submitted that “mostly the cash sales” were below the threshold of Rs. 2 lakhs to a particular person hence they were not required to obtain the identity as per law. However it was also submitted by them that all the sales were genuine and properly recorded in the books of account. The assessee also submitted the details of purchases made during the year and the stock details.

Page 3 of 67 2.5 That the Ld. A.O duly considered the submissions of the assessee and upon analyzing the sales it was observed by him that during the relevant year, percentage increase in sales was more than earlier year. That growth in terms of sales compared to earlier two years showed inconsistent trends.

2.6 That as per the details submitted by the assessee, the following month wise break up of “sales” for the months of October and November 2016 and for the month of October & November 2015 were extracted which are as under:-

FINANCIAL YEAR 2016-17 2015-16 MONTH TOTAL CASH MONTH TOTAL CASH SALES (RS.) SALES (RS.) CASH SALES SALES (RS.) (RS.) October 2,42,81,404 2,08,12,028 October 21,13,630 5,25,615 2016 2015 November 1,61,33,133 1,51,03,603 November 47,70,684 15,67,655 2016 2015 Total 4,04,14,537 3,59,15,631 68,84,314 20,93,270 2.7 It was noticed after analyzing the above table (supra) that during October 2016 & November, 2016 with the earlier year i.e.

October-November, 2015 there was a higher booking of sales.

The total increase in cash sales was of Rs.3,38,22,361/- as compared to the previous year. In terms of percentage the increase in jump in cash sales was of 1616%. However in Page 4 of 67 subsequent months i.e. in the month of December, 2016, January, 2017, February 2017 and March 2017 the sales of the assessee went down and was on similar trend as compared to the preceding year.

2.8 Therefore the assessee was asked to explain this peculiar trend with the relevant documents but the assessee failed to produce any creditable documents of cash sales made by them. They failed to produce name and complete address of the customers to whom the cash sales was made neither they were able to explain the sudden increase/spurt in the sales volume in the month of October 2016 and November 2016 and the drop in the sales in the subsequent months.

2.9 That the total turnover of the assessee during the relevant year is of Rs.5,87,51,837/- and for the preceding assessment year 2015-16 is of Rs.2,69,21,273/-. Therefore the increase in total turnover was of Rs.3,18,30,102/- in cash sales during October 2016 and November 2016.

2.10 That the assessee in order to justify the quantitative sales has shown purchases made by him during the year, but on verification it was found that the major purchases was made on Page 5 of 67 27th October 2016 of Rs.38,13,862/- from Preeti Jain and on 28th October 2016 of Rs.42,22,530/- from Rakesh Agrawal (HUF) who is related to Rakesh Agrawal, partner of the firm.

Such purchases appear to be an after thought in order to justify the cash deposits made in bank account during the demonetization period in the name of cash sales.

2.11 That during the course of the assessment proceedings for the Assessment Year 2017-18, the bank accounts of the assessee was called for u/s 133(6) of the Act from the bank in which the assessee held their accounts which were received and placed on record after perusal and verification by the Ld. A.O.

2.12 That during the course of the assessment proceedings the assessee also submitted few affidavits of persons to whom cash sales was made during the period of demonetization amounting to Rs.12,06,886/-.

2.13 Hence out of total cash sales during the demonetization period of Rs.3,59,15,631/-, cash sales amounting to Rs.12,06,886/- only was verified/verifiable one.

2.14 That the Ld. A.O records that as per his analysis of “sales” it is found that the sudden increase in cash sales was not as per

Page 6 of 67 business trend of the assessee. That the opportunity was given to the assessee to provide the necessary documentary evidences of cash sales but the assessee failed to do so during the course of the assessment proceedings.

2.15 That the assessee declared Rs.20 lakhs in the Pradhan Mantri Garib Kalyan Yojna (PMGKY) Scheme on 31st March 2017 on account of cash deposits made in the bank account which indicates that the assessee himself has accepted that he had undisclosed income during the year under consideration which has been deposited in the bank. That the Ld. A.O has recorded that the declaration of Rs.20 lakhs was made by the assessee, out of total demonetized cash deposited and the explanation to the extent of such amount of Rs.20 lakh was accepted by the Ld. A.O.

2.16 That the Ld. A.O in the assessment order has recorded that the assessee in the present case has just not explained the source of cash deposited in the bank but has also failed to substantiate the same by the documentary evidence, in respect which the assessee has completely failed.

Page 7 of 67 2.17 That the purchases of Rs.38,13,862/- from Preeti Jain and of Rs.42,22,530/- from Rakesh Agrawal (HUF) totaling to Rs.80,36,392/- were also found to be unverifiable and was a after thought to justify the cash sales.

2.18 That from the cash book of the assessee it is observed that cash was deposited almost every single day by the assessee in the bank account. The assessee is in the jewellery trading business and therefore, for purchases, the sales have to be regularly deposited in the bank account for making payments for the purchases. Even on 8th November, 2016 the assessee deposited cash of Rs.9,50,000/- in the bank account.

2.19 The Ld. A.O has also highlighted “therefore why the assessee was carrying such cash in its hands when it was regularly depositing cash in bank account is not established”.

2.20 That the Ld. A.O has placed reliance on the judgment of Hon’ble Supreme Court of India in case of Sumati Dayal v/s CIT reported in 1995 AIR 2019, wherein it was held as under:-

“The Hon'ble Supreme Court in Sumati Dayal vs. Commissioner of Income Tax in 1995 AIR 2109 has held that "This raises the question whether the apparent can be considered as real. As laid down by this Court, apparent must be considered real until

Page 8 of 67 it is shown that there are reasons to believe that apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities."

2.21 The Ld. A.O therefore has held that what is apparent is not real. The assessee has not been able to establish the reason for carrying such large demonetized cash in his hands when he was regularly depositing the cash on account of sales in the bank account almost every single day just before demonetization period.

2.22 That the Ld. A.O simultaneously has observed that the explanation given by the assessee is not genuine as the assessee is trying to introduce such unexplained cash in the books of account through sales in course of business and trying to explain the same as source of demonetized cash deposited during demonetization period. It was therefore concluded that the assessee has not established the source of cash deposited during demonetization period amounting to Rs.3,43,59,000/- (out of total demonetized cash deposit of Rs.3,63,59,000/- source of Rs.20,00,000/- of such deposit which was offered under PMGKY 2016 is/was accepted) [Rs.3,63,59,000/- (-) Rs.20,00,000/- =

Page 9 of 67 Rs.3,43,59,000/-]. The addition of Rs.3,43,59,000/- thus was made to the total income of the assessee on account of unexplained credit u/s 68 of the Act on the ground that source of such cash credit in the bank account of the assessee has not been explained properly and the explanation offered is unsatisfactory.

2.23 The total income of the assessee was computed and assessed u/s 143(3) r.w.s. 68 of the Act as under:-

Return of income Rs. 14,26,761/- Add: Addition u/s 68 on account of Unexplained cash credit Rs.3,43,59,000/- Assessed income Rs.3,57,85,761/-

Assessed income U/s 288A Rs.3,57,85,761/- 2.24 That the aforesaid assessment order of Ld. A.O bears Number ITBA/AST/S/143(3)/2019-20/1023414962(1) and that the same is dated 30.12.2019 which is hereinafter referred to as the “impugned assessment order”.

2.25 That the assessee being aggrieved by the “impugned assessment order” prefers first appeal u/s 246A of the Act before

Page 10 of 67 Ld. CIT(A) who by the “impugned order” has allowed the appeal of the assessee on grounds and reasons stated therein.

2.26 That the Revenue being aggrieved by the “impugned order” has preferred the instant appeal before this Tribunal and has raised following ground against the “impugned order” which are as under:-

“1. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in deleting the addition of Rs. 3,43,59,000/- made by the Assessing Officer on account of unexplained cash credit u/s 68 of the I.T.Act, 1961 and Ld. CIT(A) has ignored the test of human probabilities as laid down by the Apex Court in the case of Sumati Dayal vs CIT in 1995 AIR 2109, as the cash sales during the demonetization period jumped by almost 1616% compared to the cash sales during the same period of the preceding year i.e. 2015 and fails the test of human probabilities”.

3. Record of Hearing 3.1 The hearing in the matter took place before this Tribunal on 25.06.2025 and on 08.07.2025 when the Ld. DR for and on behalf of the Revenue appeared before us and interalia stated that the “impugned order” is illegal, bad in law and not proper.

It thus deserves to be set aside by this Tribunal in exercise of its appellate jurisdiction conferred upon it by the Act. The “impugned assessment order” of the Ld. A.O is required to be restored back by this Tribunal as the “impugned order” of Ld.

Page 11 of 67 CIT(A) is illegal and cannot be sustained in the eyes of law. There is a total non-application of mind by the Ld. CIT(A) in passing the “impugned order” and that there is total in-correct appreciation of the “impugned assessment order” of the Ld.

A.O which is not a wrong order in law. The order of Ld. A.O is a well reasoned and a speaking order basis records of the case including the adversial facts/evidence/material and that the Ld. CIT(A) ought not to have disturbed the said “impugned assessment order” as it was based on material/evidence on record which were adverse to the assessee including the trends.

The facts and circumstances of the case were well analyzed by him in a proper manner wherein he noticed and he held that there was a huge surge in the cash deposit in the bank account of the assessee during the period of demonetization in November & December, 2016 in comparison with the previous year and the attending circumstances, trends, pattern etc. adversial in nature.

An empirical analysis was done by the Ld. A.O basis which he concluded that there were indeed huge cash deposit to the tune of Rs.3,63,59,000/- in respect of which no suitable explanation coupled with any documentary evidence was provided to the Page 12 of 67 revenue. In brief Ld. CIT-DR contended that the sources of the cash deposit of staggering amount to Rs.3,63,59,000/- are not explained as and by way of details of the material particulars by the assessee who is in the business of jewellery. It was stated that the Ld. A.O has rightly deducted sum of Rs.20,00,000/- which was offered under PMGKY (Pradhan Mantri Garib Kalyan Yojana) which was a part of undisclosed income and has finally computed Rs.3,43,59,000/- as unexplainable amount as no creditable sources are provided for in the support of such a huge cash deposit. It was contended that burden of proof with regard to the “sources of cash deposit” is on the assessee and that the assessee herein, has failed to discharge the burden of proof u/s 68 of the Act. The Ld. CIT-DR categorically asserted and submitted that during the period of demonetization there is indeed a huge surge in cash deposit made by the assessee in the bank account and it is up to the assessee to explain its nature and source with all the material particulars. There is absolutely no material particulars/ supportings to justify such a huge cash deposit. The Ld. CIT-DR laid emphasis on the judgment of Sumati Dayal case of the Hon’ble Supreme Court of India relied

Page 13 of 67 upon by the Ld. A.O too in his “impugned assessment order” and stated that real picture must be looked into and so also human probability. What is apparent is not true. Sources of cash must be justified and if they are not justified properly with the explanation duly supported by the material/supportings then such a huge cash deposit can be treated as unexplained and added to the income of the assessee u/s 68 of the Act. Since there were lack of supportings along with suitable explanation the addition at the original stage of proceeding was rightly done so. While it is true that the huge amount of cash was deposited by the assessee during the period of demonetization and since assessee is in the business of jewellery it becomes incumbent upon them to justify the sales by tangible material by bringing the same on record as law contemplates that exercise only. Since law contemplates such an exercise to be done by the assessee then such an exercise is incumbent upon the assessee to justify the sales of jewellery to its customers and upon failure by the assessee as has happened in the instant case the addition u/s 68 of the Act is a must. The “impugned order” of Ld. CIT(A) is erroneous and bad in law. It is erroneously held that sales done

Page 14 of 67 by the assessee are all genuine and so also purchases. The Ld.

CIT(A) has wrongly allowed the appeal of the assessee, as there is no material on record in support of the sales made by the assessee. The “impugned order” is passed without appreciating the adversial evidence/trends against the assessee, therefore bad in law/ illegal/not proper. The Ld. CIT-DR placed reliance on the judgment of Kishorilal Ajmera case of Apex Court.

3.2 Per contra Ld. AR appearing for and on behalf of the assessee contended that the recorded sales are accepted. He placed reliance on page 69 of the paper book Volume-I that sales up to 07.11.2016 was of Rs.2,54,06,246/- of the gold ornaments.

The Ld. AR then relied upon pages 62 to 70 of paper book Vol.I which has details of cash sales from 1st October to 8th November, 2016. Basis this it was stated that opening daily balance was Rs.4,70,987/- as on 01.10.2016 whereas cash sales up to 08.11.2016 was Rs.3,65,17,043/-. Thus cash sales from 01.10.2016 to 08.11.2016 was Rs.3,60,46,056/-.[ Rs.3,65,17,043.00 (-)Rs.4,70,987/- = Rs.3,60,46,056/-]. The Ld. AR for and on behalf of the assessee then submitted that about to 11 to 12 affidavits were filed and placed on record which Page 15 of 67 are at pages 23 to 45 of paper book Vol.I which are of certain customers of the assessee along with KYC documents wherein they have deposed that during October-November, 2016 they had purchased gold jewellery from the assessee. The Ld. A.O was requested to summon them. Our attention was then invited to page 46 of paper book Vol.I which a copy of e-mail requested dated 28.12.2019 to the Ld. A.O to call those customers whose affidavits have been filed u/s 131 of the Act so that they the customers can confirm before the Ld. A.O that they had in fact purchased the gold jewellery in cash from the assessee. It was then contended by the Ld. AR that the cash sales are recorded properly and are assessed by the department. Our attention was then invited to the audited account page 73 to 96 of paper book Vol.I wherein all are recorded with regard to the business activity of the assessee. [The Bench requested the Ld. AR to produce quarterly return and VAT documents/Returns etc. filed and assessed if any by VAT authorities including the stock register details of the assessee was sought].

3.3 The Ld. AR for the assessee contended that books of accounts of the assessee are not rejected by the department and Page 16 of 67 stock position of the assessee is not rejected too expessly. If the period of November & December 2016 is taken into consideration on stand alone basis there is an increase of 1616% in two months period. It was fairly stated by the Ld. AR that the assessee does not have names and address of their customers apart from few affidavit of customers. Upon a query by the bench why the sale bills of the assessee are missing as Ld. A.O has said that the names of buyers are not on record. The Ld. AR replied that only few affidavits are placed on record with the KYC details.

However no cash book is filed in the entirety. Our attention was then invited to page 125 to 136 of paper book Volume-II which was “sales register” for the period 1st October 2016 to 31.10.2016 (Entry passed in books in sales voucher mode) and so also sales register for the period 1st November 2016 to 30th November 2016 (Entry passed in books in sales voucher mode) page 137 to 142 of paper book Vol.II. Then upon request by Bench to tally the same with few affidavits of the customers which are placed on record a short exercise was done on test check basis by the bench there upon page 26 of Vol.I of paper book which was an affidavit of one Mr. Manoj Sharma who had Page 17 of 67 deposed that he had purchased the gold jewellery in October 2016 worth Rs.81,840/- the same was correlated with page 130 of paper book Vo.II wherein cash sales of Rs.81,840/- was recorded and got tallied properly. Again on page 23 of paper book Vol.I which has an affidavit one Mohan Singh who had deposed that he had purchased gold jewellery worth Rs.1,38,000/- in November, 2016 the same was correlated with page 139 of paper book Vol.II wherein the cash sales of Rs.1,38,000/- was recorded and got tallied. On page 28 of Vol.I of paper book an affidavit of Aarti is placed on record who has deposed that she had purchased gold jewellery worth Rs.1,80,000/- in the month of November, 2016 and that same was correlated with page 140 of paper book vol.II wherein cash sales of Rs.1,80,000/- was recorded and got tallied.

3.4 The Ld. AR then pleaded that the Ld. A.O has accepted the books of the assessee. The Ld. A.O has not rejected the purchase and the stock. The purchase details(Amount wise list of purchasers) and stock details (Quantitative details of stock) were placed on record and are not rejected. [page 93 to 96 of paper book Vol.I].

Page 18 of 67 3.5 The Ld. CIT-DR in the rejoinder arguments stated that the Ld. A.O in the “impugned assessment order” has given requisite set off by (-) minuing the amount of Rs.20 lakh (PMGKY) from the total cash deposit of Rs.3,63,59,000/- and has arrived at a figure of Rs.3,43,59,000/- once this cash is not questioned then the assessee is duty bound to explain the sources of remainder amount of Rs.3,43,59,000/- at least, which too is not done so and so also the fact that why there are high sales. It was emphatically contended that against a whopping amount of Rs.3,43,59,000/- the assessee has filed only 12 affidavits where total amount involved is about 12 lakh only hence limited verification of affidavit amounts, does not lead to proper explanation to the whopping amount of Rs,3,43,59,000/- for which till date before this Tribunal which is a final fact finding authority there is no explanation by the assessee with any supportings whatsoever. Cash deposit details/basis/sources are not furnished till date despite opportunity. With regard to confirmation of affidavits no reliance can be placed as amount being miniscule is not a representative lot of huge cash deposit of Rs.3,43,59,000/-. The assessee has attempted to justify the Page 19 of 67 purchases made from Preeti Jain and Rakesh Agrawal (HUF) and which entity is related to the assessee. Assessee is just and simply showing “old stock” which are not commensurate with the deposit of Rs.3,43,59,000/- during the demonetization, a huge amount which has gone unexplained fully. Reliance was once again placed on judgments of Supreme Court in case of Sumati Dayal [ 1995 AIR 2019 ] Durga Prasad More case (1971)

82 ITR 540 and Sreelekha case (1963) 49 ITR 112. It was stated that in the fiscal statute there is no requirement of law to make out a water tight case which is required in the criminal law.

Herein the circumstances and trends do not support the assessee’s case, what is apparent is not real. The arrangement is sham and make belief exercise.

4. Observations,findings & conclusions.

4.1 We now have to adjudge and adjudicate the present appeal filed by the revenue on basis of the records of the case and contentions canvassed before us during the course of hearing. In brief we have to decide the legality, validity and the proprietary of the “impugned order”.

Page 20 of 67 4.2 We have carefully perused the records of the case as presented to this tribunal by both the Ld. DR and the Ld. AR to determine the legality, validity of the “Impugned Order” basis law and by following due process of law.

4.3 We basis records of the case, after hearing and upon examining the contentions are of the considered opinion that in respect of the “impugned order” and paper books and so also other papers so filed before this Tribunal we observe and note following which are as under:-

(1) VAT details have been perused by us which are at pages 102 to 121 of paper book Vol.II.

(2) That on page 71 of paper book Vol.I which is a letter dated 27.08.2019 by the assessee to the Ld. A.O wherein as

per direction of the assessee firm the Ld. AR of the assessee

firm has brought to his notice that from Preeti Jain ornaments were purchased of Rs.38,13,862/- on 27.10.2016 and from Rakesh Agrawal (HUF) ornaments worth Rs.42,22,530/- were purchased on 28.10.2016 [ A related transaction as Rakesh Agrawal is partner of assessee firm] [IDS 2016 + ROI with C.G enclosed). Further during

Page 21 of 67 the course of the second hearing held on 08.07.2025 before this Tribunal stock register details for the period 01.10.2016 to 30.11.2016 was placed on record by virtue of our observation in the 1st hearing held on 25.06.2025. We had not noticed any purchase/stock of these ornaments which was described as “Old gold purchases”. However we notice on page 36 entry of inward/purchases dated 30.10.2016 of 3929.400 gms @2351.57 aggregating to Rs.92,40,275.91/- from Preeti Jain and Rakesh Agrawal (HUF). [A hand written calculation cum purchase sheet of old gold (supra) was too tendered to Tribunal showing total quantity as 3929.40 gms with value of Rs.92,40,276/-].

(3) When we analyze the above with TAR [page 73 to 92 of paper book Vol.I] and other papers on record we observe as under:-

(i) On Page 73 of paper book Vol.I Auditor Report u/s 44AB of the Act para 3(a)(1) states that “The cash in Page 22 of 67 hand and stock in trade having been taken as correct as valued and certified by the management”. In addition there are other remarks and comments too i.e. proper books of accounts are kept and accounts are true and fair view is taken etc.

(ii) On page 75 of paper book Vol.I Part-B Colum 11(a) which seeks answer to “whether books of accounts are prescribed under Section 44AA if yes, list of book so prescribed the answer given against column 11(a) is list of books of accounts cash book, ledger, bank book, journals. In 11(b) the answer given is computerized – cash book, bank book, ledger, journal. Against 11(c) answer given is list of books of accounts cash, ledger, bank book, journal.

(iii) On page 93 to 96 of paper book Vol.I the assessee has shown amount wise list of purchases with complete address (Note complete postal address missing) for Assessment Year 2017-18 where grand total is of Rs.4,90,36,805/- and purchases from Preeti Jain &

Rakesh Agrawal (HUF) are reflected on page 94 to paper

Page 23 of 67 book Vol.I of Rs.38,13,862/- [27.10.2016] &

Rs.42,22,530/- [28.10.2016]. In Grand total these purchases of old gold is included.

(iv) We observe that on page 46 of paper book Vol.I an e- mail of Ld. AR of the assessee to call the customers whose affidavits have been placed on record to u/s 131 of the Act before taking any decision in the matter.

These few affidavits with KYC details were of customers of assessee who had purchased jewellery in October and November, 2016 from the assessee’s shop.

(v) We have perused and observe that there is an affidavit of one Rakesh Agrawal who has deposed about robust sales of gold and diamond jewellery in the month of October & November, 2016 due to auspicious festivals of “pushya Nakshatra” and “Dhanteras” which fell in October 2016 & after demonetization customers flocked on 8th November, 2016 to make heavy purchases with old currency notes which pushed sales further astronomically (Page 47 & 48 of paper book Vol.I).

(vi) We have perused and observed on page 49 of paper book Vol.I that the assessee had produced before Ld.

A.O on portal all sales bills of October 2016 &

November, 2016 for verification and doing needful at the end of Ld. A.O. Further in order to confirm that cash sales were genuine and were backed by physical delivery of gold and diamond jewellery, the request for verification of stock was too made for physical verification and again request was made to call the customers whose affidavits were given to verify the facts.

(vii) We observe and note than on page 62,63,64,65, 66,

67,68,69,70 of paper book Vol.I cash sales records of the assessee for the period 1st October 2016 to 8th

November, 2016 are shown wherein total cash sales are of Rs.3,65,17,043/- which when reduced from opening balance of Rs.4,70,987/- comes to Rs.3,60,46,056/-.

(viii) We also observe and note that Preeti Jain vide her letter dated 10th November, 2019 has confirmed her accounts to the assessee firm wherein against the jewellery

Page 25 of 67 account she has shown debit of Rs.38,13,862/- against old gold sold and simultaneously has shown payment

(credit) of Rs.38,13,862/-. [Rs.10 lakhs on 12.01.2017,

Rs. 6 lakh on 07.03.2017 & Rs.22,13,862/- [22 lakh thirteen thousand eight hundred sixty two only] the aggregate of which comes to Rs.38,13,862/-. Hence both debit and credit have tallied. On page 51 of paper book Vol.I which is statement of account of Preeti Jain there is a credit entry of Rs.10 lakh on 12.01.2017. On 07.03.2017 (page 52 of paper book Vol.I) there is credit of Rs.6 lakh and on page 53 Vol.I there is credit of Rs.22,13,862/-. Basis page 50 to 53 of paper book

Vol.I it is clear that Preeti Jain had sold jewellery worth

Rs.38,13,862/- to the assessee firm which was treated as purchases by the assessee firm. Simultaneously we also observe and note that as and by way of a letter dated 12.09.2019 (Page 54 of paper book Vol.I) Rakesh

Agrawal (HUF) in a letter addressed to ITO 2(2), Bhopal had written in response to the Ld. A.O letter No.ITO

2(2)/(BPL)/133(6)/2018-19 dated 28.08.2919 for M/s

Swarna Sukh stating therein that Karta of HUF had sold the gold jewellery to the assessee firm for Rs.42,22,530/- and that same was disclosed in Return of Income of Assessment Year 2016-17 under the head

Short Term Capital Gain. It was further stated that the above gold jewellery at Rs.40,25,479/- was also declared in income declaration scheme Rules 2016 and tax paid was Rs.12,07,644/-. Copy of ROI and form under IDS Rules 2016 was too enclosed which are at pages 55 to 58 of paper book Vol.I. On page 56 of paper book Vol.I we notice jewellery sale at Rs.42,22,530/-.

(ix) On page 71 of paper book Vol.I we observe and notice that the letter dated 27.08.2019 to Ld. A.O by the Ld.

AR of the assessee the fact of purchase of gold ornament of Rs.38,13,862/- from Preeti Jain on 27.10.2016 along with her address and so also fact of purchase of gold ornaments of Rs.42,22,530/- from Rakesh Kumar (HUF) along with address were provided for. Explanation for spurt in sales in October and Page 27 of 67

November 2016 was given stating that in the month of October 2016 the auspicious festival of “Pushya

Nakshatra” and “Dhanteras” fell on 23.10.2016 and 28th October, 2016 respectively and people flocked in to make heavy purchases on those days due to auspicious reasons. Similarly on 8th November 2016 due to demonetization people flocked to make purchases with old notes. Explanation about deposit of Rs.20 lakh in PMGKY was too given as insisted by the department.

Necessary tax challans of Rs.9,28,000/- was too enclosed.

(x) On page 93,94 & 95 of paper book Vol.I we observe and notice the purchase details of major suppliers of gold to the assessee firm from M/s NS Jewellers & Bullion

Indore, Avon Jewellers, Bhopal, Raj Jewellers Rajkot including purchases from Preeti Jain and Rakesh

Agrawal (HUF).

(xi) We also observe and notice that under cover of a letter dated 12.08.2019 (which is separately filed) addressed to Ld. A.O with reference to his letter dated 23.07.2019

Page 28 of 67 details of purchase bills for Financial Year 2016-17 as Ann.6 was filed along with original bills (Produced).

Daily monthly cash sales and total sales during the year and previous year were enclosed as Annexure-7.

Quantitative stock during the year was Annexure-8. It was stated that for cash sales below 2 lakhs to a particular person identity was not taken as law did not require it. It was stated that however all sales are genuine and properly recorded in books. Complete books of accounts along with vouchers of expenses and bank statements were produced. It is to be noted only

Ann-8 was enclosed with aforesaid covering letter before us. This letter is not part of paper book but was separately filed.

(xii) We also observe and notice that on Page 147 & 148 of the paper book Vol.II reconciliation of purchases quantity/inwards in grams was 17365.820 worth

Rs.4,60,24,065/- and upon reconciliation of sales quantity in grams was 17477.862 worth

Rs.5,80,22,024/- (Page147 of paper book Vol.II).

Page 29 of 67 4.4 In the “impugned assessment order” an amount of Rs.3,43,59,000/- is added to ROI of Rs.14,26,761/- and the assessed income of the assessee is assessed at Rs.3,57,85,761/-.

4.5 Total cash sales during the month of October 2016 & November 2016 aggregated to Rs.3,59,15,631/-. Since the assessee had declared Rs.20 lakhs under PMGKY the net cash sales during the demonetization was quantified as Rs.3,43,59,000/- and was added to the returned income u/s 68 of the Act.

4.6 Section 68 of the Act is reproduced below:-

Cash credits. “68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion the Assessing] Officer, satisfactory, the sum so credited may be charged to come-tax as the income of the assessee of that previous year”.

4.7 Basis above Section 68 of the Act we are of the considered opinion that the Ld. CIT(A) in the “impugned order” has rightly set aside the “impugned assessment order” on the cogent grounds and basis material on record. The Ld. CIT(A) has taken into consideration the entire gamut of the case including the peculiar facts and the circumstances of the instant case and has Page 30 of 67 rightly adjudged and adjudicated the first appeal of the assessee who was aggrieved by the “impugned assessment order”.

4.8 We hold that initial onus u/s 68 of the Act is on the assessee to establish by way of cogent evidence the genuineness of the transactions (in explanations)which the assessee herein has done so. The sudden spurt in sales of jewellery in October 2016 & November, 2016 is satisfactorily explained with the help and assistance of the books of accounts, the purchase details and the sale details. Stock register details too were furnished during the course of the assessment proceedings but the Ld. A.O failed to consider and analyse the same and has erroneously made the addition. We are of the considered opinion that once the assessee has submitted the requisite documents, information and material basis which he explains the nature and source of sums so credited in his books as just, fair and reasonable then the Ld. A.O must accept the same as satisfactorily explained.

But if he finds that the explanation, material, documents, informations so furnished basis which explanation is given is not satisfactory then the Ld. A.O must conduct an inquiry/analyze

Page 31 of 67 before invoking Section 68 of the Act so as to test whether the assessee’s explanation is to be relied upon or not as satisfactory or unsatisfactory. If perse explanation is found to be false and wrong on the nature and source of credits in books, it is open to the revenue to hold that it is income of the assessee exigible to tax and there would be no further burden on the revenue to show that the income is from any particular source. The assessee herein indeed was under a legal obligation to show the nature and source of credits in the books which in our considered opinion he has done so basis material on record.

4.9 In the “impugned assessment order” while conducting assessment proceeding there is no finding much less even a whisper that the assessee has been non cooperative in furnishing any material, information, documents and data. There is no finding that the assessee has furnished inaccurate particulars and/or has concealed the particulars with regard to its income or books. With regard to the credits in his books the assessee firm has stated that it is a business income especially of relevant month of October and November, 2016. The reason for business income being on higher side when compared with that Page 32 of 67 of immediate earlier year was clearly attributed to the fact that in the month of October 2016 auspicious festivals of “Pusha Nakshatra” and “Dhanteras” fell on 23.10.2016 and 28.10.2016 respectively when people flocked to make heavy purchases on these days due to the auspicious reasons. On 8th November 2016 the demonetization was announced and the people flocked to make purchases of gold ornaments in order to use their old currency. We also find that necessary and requisite information on sales were furnished which have not been held to be false, bogus or in genuine/not genuine by the Ld. A.O basis any material, document data so furnished during the course of assessment proceedings. In the “impugned assessment order” there is no express finding that the sales during the month of October and November 2016 are false, bogus and in genuine/not genuine. It has not been held that the assessee indulged in any false or manipulative practices to show sales so as to cover for his credits in the books. It is not held expressly that sales are all “sham” and “make believe exercise”. There is no finding on any fraudulent practices resorted to by the assessee. There is no finding that assessee

Page 33 of 67 arranged it’s business in such a way that an inference of a colourable device can be inferred from it. In brief no aspersions are casted on the assessee in any manner.

4.10 We hold that while it is true that most of the sales were below two lakhs and but that ipso facto does not means that no sales have taken place at all. By virtue of Section 269 ST of the Act it is laid down that no person shall receive an amount of Rs. Two lakh or more in aggregate from a person in a day or in respect of a single transactions otherwise than by an account payee cheque, bank draft or use of electronic clearing system through bank account but section does not say that for transactions below 2 lakhs any creditable documents of transactions relating to sales below 2 lakh per person must be submitted or maintained. The rise in sales in October & November 2016 was attributable to small purchases mostly below 2 lakh hence no adverse inference can be drawn that no creditable documents of cash sales have been provided by the assessee. There is absolutely no requirement in Income Tax law to produce name and complete address of customers to whom cash sales was made. If the reasoning and the approach of the Page 34 of 67 Ld. A.O is to be followed then to have/and to hold currency notes itself after sales would be a sinful exercise hence the legislature has rightly and prudently have laid down that transaction per person would be by crossed account payee cheque or draft or by electronic mode if value of transactions exceeds two lakhs per transaction per person in a day.

4.11 We find and hold that in the “impugned assessment order” despite furnishing all the material, information, documents, statements and accounting details with regard to the business of the jewellery which was carried out by the assessee wherein he purchases old gold too besides gold, manufactures it in form of jewellery in “sarafa” and finally sells jewellery to the customers no infirmities of any serious nature have been found. In the “impugned assessment order” there is no finding in this regard.

Hence we are of the considered view that explanation offered by the assessee with regard to nature and source of credits in the books are satisfactory and that the Ld. A.O has erred in law, consequently Ld. CIT(A) has rightly set aside the “impugned assessment order” by passing the “impugned order”.

Page 35 of 67 4.12 The core finding basis which addition of Rs.3,43,59,000/- has been done by the Ld. A.O in the “impugned assessment order” can be summed as under:-

1. When comparative analysis of sales in October & November, 2016 vis-à-vis sales of October & November, 2015 is done the percentage jump in sales is very high. The total sales increased by Rs.3,38,22,361/- {[Rs.3,59,15,631/- (October November 2016] –

Rs.20,93,270/- (October November 2015)]. The percentage jump in cash sales was of 1616%. In the subsequent months of December, 2016, January 2017,

February 2017 and March 2017 the sales of the assessee went down and was on similar trend as compared to the preceding year.

3. The assessee has failed to produce name and complete

address of customers to whom cash sales was made neither assessee has been able to explain the sudden increase in sales in the month of October 2016 and Page 36 of 67

November 2016 and the drop in sales in the subsequent months.

4. The total turnover of the assessee during the relevant

year is of Rs.5,87,51,835/- and for the preceding assessment year 2015-16 is of Rs.2,69,21,273/-. The increase in total turnover was of Rs.3,18,30,102/- (+)

[[Rs.5,87,51,835/- (Assessment Year 2017-18) –

[Rs.2,69,21,273 (Assessment Year 2016-17)}.

5. The assessee in order to justify the quantitative sales has shown purchases made during the year. But on verification it was found that the major purchases was made on 27th October 2016 of Rs.38,13,862/- from Preeti

Jain and on 28th October 2016 of Rs.42,22,530/- from Rakesh Agrawal (HUF) who is related to Rakesh Agrawal the partner of the firm. Such purchases appears to be after though to justify the cash deposits made in the bank account during the demonetization period in the name of cash sales.

6. The assessee has placed on record few affidavits of persons to whom cash sales was made during the Page 37 of 67

demonetization period which amounted to Rs.12,06,886/-. Out of total cash sales during demonetization period of Rs.3,59,15,631/-, cash sales amounting to Rs.12,06,886/- only were verified. Basis this it was found that sudden increase in cash sales was not as per the business trend of the assessee firm.

Assessee has failed to provide documentary evidences of cash sales.

7. The purchases of Rs.38,13,862/- from Preeti Jain and of Rs.42,22,530/- from Rakesh Agrawal (HUF) totaling to Rs.80,36,392/- were unverifiable and an after thought to justify the cash sales.

8. The cash book patterns shows deposit of cash on every

single day by the assessee in the bank account. The assessee is in jewellery trading business and therefore for purchases the sales have to be regularly deposited in the bank account for making payments for purchases.

2016 the day of demonetization.

the same as source of demonetized cash deposited during demonetization period.

4.13 We hold that the above core reason of the Ld. A.O in the “impugned assessment order” are not based on the material available on record. The spurt in the sales in October & November, 2016 has been explained by the assessee due to festivals which came in October 2016. The cash sales are accounted for in the books i.e. sales register which have not been disputed by the Ld. A.O. The purchase register and stock register too have not been disputed by the Ld. A.O. The majority of sales were below 2 lakh hence in law there is no requirement to give the identity details. It is wrong on the part of the Ld. A.O to hold that purchases made from Preeti Jain & Rakesh Agrawal (HUF), without even discussing the material in support placed by the assessee on record. The material so placed on record by the assessee for Preeti Jain and Rakesh Agrawal (HUF) ought to have been examined by the Ld. A.O which he did not do so. We hold that it was incumbent upon the Ld. A.O

Page 39 of 67 to have verified the details of purchases so made from these two entities which was not done so and Ld. A.O has mechanically stated that details are unverifiable for sake of it. The cash sales due to spurt in sales on account of festivities could not be deposited daily for factors beyond the control of the assessee at the material time and place which was explained to by the assessee and mere non deposit of cash on daily basis does not ipso facto can be held to be a circumstance against the assessee when admittedly assessee had offered genuine and correct reasons. To establish contrary after initial discharge of burden of proof is the responsibility of revenue and revenue has failed to discharge the same by bringing out anomalies basis records which all assessee had produced. No defects are pointed out on purchases, sales and stock. There was no express allegation that the purchases were done from Preeti Jain & Rakesh Agrawal (HUF) to inflate the stock deliberately so that sales could be shown. It is not the case of the revenue that purchases from these two entities are bogus and paper transaction. It is also not the case of the Page 40 of 67 revenue that entries made in the books are accommodation entries.

4.14 While it is true that for the sales done in October/November 2016 affidavits of few persons who were the customers of the assessee were produced and request for examination of such persons was made but the Ld. A.O did not do so. No empirical examination of any documents, material placed on record was done by the Ld. A.O. Therefore we hold that findings of the Ld. A.O in the “impugned assessment order” is based on assumptions, presumptions, suspicion and surmises. There is nothing adversial brought on record by the Ld. A.O after initial burden of proof on nature and source of credits in book were disclosed to the Ld. A.O as and by way of explanations to him from time to time during the course of assessment proceedings.

4.15 We gainfully refer to the following facts and arguments too which were canvased by the assessee before the Ld. CIT(A) which are all recorded in the following paragraphs in the “impugned order” which are as below:-

“5.3.2.1. During the course of assessment proceedings, the appellant had claimed that it had filed all the requisite

Page 41 of 67 evidences and supporting documents called for by the assessing officer to augment its contention for cash sales effected during the demonetization period viz., Duly audited Complete Comp books of accounts, Sales Bills for October 2016 and November 2016, Purchase Bills with complete address, Month wise Quantitative details of Stock, and Affidavits from some of the identified customers (buyers) to whom sales-were-made-in-the- month-of-October-2016-and-November 2016 along with their KYC documents like Aadhar Card. 5.3.2.2. Further, the appellant had also filed an Affidavit from the partner of the appellant-firm, Shri. Rakesh Agrawal deposing that the appellant firm had made robust sales of Gold and diamond jewellery in the month of October, 2016 and November, 2016 as customers inflow was very good in that period because of auspicious occasions like 'Pushya Nakshatra' and 'Dhanteras' in the month of October, 2016. Shri. Rakesh Agrawal had also affirmed in his affidavit that due to declaration of demonetization, the customers flocked on 8th November, 2016 to make heavy purchases with old currency which pushed the sales further, and that all the cash sales were genuine and duly supported by sales vouchers (bills) and are recorded in the books of accounts. The appellant also claims that this affidavit has not been discredited or controverted by the assessing officer.

5.3.2.3. Furthermore, with regard to purchase of old jewellery by appellant, confirmation letters and bank statements were furnished in respect of purchases from Preeti Jain, and confirmation letters, copy of declaration made under IDS 2016 Income) in respect of scheme & Return of Income (along with Computation of purchases from Rakesh Agrawal HUF.

5.3.2.4. The break-up details of the Rs. 3,63,59,000/- cash deposited is as follows:

Bank Name Date of Deposit Amount Deposited {in Rupees)

Corporation Bank, 08.11.2016 9,50,000/- Kolar Road, (Demonetization Nayapura, Bhopal (CC day) Loan A/c.) Road, HDFC Bank, Chuna 10.11.2016 26,60,000/- Bhatti, Bhopal Page 42 of 67 SBI, Kolar Road, 10.11.2016 70,00,000/- Bhopal

Corporation Bank, 10.11.2016 57,00,000/- Kolar Road, Nayapura, Bhopal (CC Loan A/c)

Corporation Bank, 12.11.2016 1,52,50,000 Kolar Road, Nayapura, Bhopal (CC Loan A/c)

Corporation Bank, 05.12.2016 43,99,000 Kolar Road, Nayapura, Bhopal (CC Loan A/c) SBI, Kolar Road, Bhopal

SBI, Kolar Road, 05.12.2016 4,00,000 Bhopal Total 3,63,59,000/-

5.3.2.5. From the above, the appellant had contended that a sum of Rs. 9,50,000/- was deposited into bank account on 08 11 2016 le e. on the day of declaration of Demonetization by Hon'ble PM, and that this fact has been stated by the assessing officer himself at Page 4/Para 41 Last line of assessment order. The appellant further states that, it is noteworthy that the assessing officer has harped upon cash deposited during Demonetization period. The Demonetization scheme was announced around 8 O'clock in the night on 8th November 2016 whereas the sum of Rs. 9,50,000/- was deposited much before demonetization scheme was announced, in day time, during cash transaction hours of banks which is maximum up to 6’0 clock in the evening for any bank. Since the assessing officer has added even this deposit of Rs. 9,50,000/-, the appellant had argued that, in any case and without prejudice to the generality of its submissions, this sum of Rs. 9,50,000/- cannot be added u/s. 68 because firstly, this cash has been deposited prior to Demonetization period and further for the reason that the appellant has been carrying sufficient cash in hand in its books even prior to 1st October 2016.

5.3.2.6. The appellant had further stated that with regard to the balance cash deposit of Rs.3,54,09,000/- (Rs.3,63,59,000/- demonetized cash deposit less Rs. 9,50,000/- deposited before Demonetization), the action of the assessing officer is arbituary, unfounded, untenable, unsustainable and was guided by whims and caprice, as proved from the fact that the assessing officer has made addition for the entire cash deposited during demonetization period, and has not considered even opening cash as per books, normal sales, recovery from debtors and normal holding of cash by the appellant.

5.3.2.7. In order to prove cash sales and cash deposited in the banks, the appellant filed wholesome and overwhelming evidences and explained the source of cash deposited into bank as made out of cash sales and recovery from debtors by filing Cash Book and complete Books of Accounts. The appellant had further contended that it had sufficient cash for deposit into its bank accounts, the summary of which is as hereunder:

Opening Balance as on 1.10.2016 4,70,987 Cash Sales from 01.10.2016 to 16 to 3,60,46,056 8.11.2016 Recovery from Debtors from 01.10.206 17,73,786 to 8.11.2016 Total availability of cash prior to 3,82,90,829 demonetization Total cash deposited during Rs.3,63,59,000 demonetization

5.3.2.8. The appellant had also explained that there was robust sales in the month of October 2016 and November 2016 due to the reason that in the month of October 2016, the auspicious festivals of 'Pushya Nakshatra' and 'Dhanteras' fell on 23rd October, 2016 and 28th October, 2016 respectively and the people flocked to make heavy purchases on these days due to auspicious reasons. Similarly, there was huge rush on 08.11.2016 for purchase of jewellery not only in the appellant's shop, but also in all the jewellery shops in Bhopal as well as throughout the country, since the citizens intended to liquidate the old currency notes in view of the sudden demonetization. The appellant further contends that this explanation remained uncontroverted by the assessing officer.

5.3.2.9. In order to prove its sales, the appellant had produced all the sale bills recorded in its books of accounts before the assessing officer and had also admitted all those sales as revenue receipts and paid tax thereon. The appellant had also further contended that the sales so credited in the books of accounts and offered as revenue receipt in the return of income was duly accepted by the assessing officer after thorough examination. However, the assessing officer had observed that the appellant had failed to produce credible documents of cash sales made and also stated that the appellant had failed to produce name and complete address of customers to whom cash sales was made, and had therefore rejected the appellant's contentions that the cash deposits were sourced out of cash sales and accordingly proceeded to treat the cash deposits as income u/s 68.

5.3.2.10. In this context, the appellant had argued that the assessing officer had not rejected the appellant's books of accounts and had consequently therefore accepted the Opening stock Purchases Closing Stock, Sales and Trading results. Accordingly, the appellant had rightly contended that without disproving any of the above and without bringing any cogent evidence, the assessing officer has resorted to the huge addition u/s 68 simply on the basis of surmises and conjectures and hence the addition u/s 68 cannot be sustained. For the above proposition, reliance is placed on the decision of the H'ble Bombay High Court delivered on 30 March, 1969 in the case of R.B. Jessaram Felehchand (Sugar Dept.) vs Commissioner Of Income-Tax, Bombay [1970] 75 ITR 33. (BOM) wherein the H’ble Court had held that: "In the case of a cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser. In our opinion, therefore, the rejection of the results of the assessee's cash book by the Income-tax Officer was not at all justified and the Appellate Assistant Commissioner, therefore, was right in deleting the addition made by the Income-tax Officer.... In our opinion, the assessee's account books are to be accepted, unless, on verification, they disclosed any faults or defects, which cannot be reasonably and satisfactorily explained by the assessee. All the other transactions, except the cash transaction, which were verifiable, have been verified and scrutinised by the Income-tax Officer and there is nothing wrong whatsoever found with them. As to the cash transactions also, the quantity of sugar sold has not been disputed. The rates at which sugar was sold were not such as would excite suspicion by reason of being lower than the Page 45 of 67 prevailing market rates. The names of the customers are also entered in respect of the transaction. All that is not dons is that the addresses are not entered and on enquiry the assessee was unable to supply the addresses. Since, having regard to the nature of the transaction and the manner in which they had been affected, there was no necessity whatsoever for the assessee to have maintained the addresses of cash customers, the failure to maintain the same or to supply them as and when called for cannot be regarded as a circumstance giving rise to a suspicion with regard to the genuineness of the transactions. The Tribunal, therefore, was not right, in our opinion, in setting aside the order of the Appellate. Assistant Commissioner and restoring that of the Income-tax Officer

5.3.2.11. The appellant had also further objected to the addition made u/s 38 because the sale proceeds were already offered and admitted as income, and hence the appellant had contended the assessing officer is not permitted to tax the same amount as addition u/s 68 of the Act again as deeming income, which amounts to double taxation once as sales and secondly as unexplained cash credit. The above contention of the appellant with regard to double taxation merits consideration.

5.3.2.12. Further, purchases, sales and stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the appellant should not have the sufficient stocks in its possession or there must be defects in the stock registers/stock. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stock. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales”.

4.16 Basis above 4.15 the Ld. CIT(A) in the “impugned order” in following para has held as under:-

“5.3.2.13. At this juncture, it is pertinent to state that the appellant had contended that the reduction of stock is matching with the corresponding sales and that the appellant has not declared exorbitant profits. To augment his contention, the Page 46 of 67 appellant has furnished the Audit Report u/s 44AB and the financial statements viz., Trading Account and P & L Account. I had perused the above financial statements accompanying the Audit Report u/s 44AB and concur with the appellant that the cash generated represented the sales as could be inferred from the Audit report u/s 44AB and financial statements furnished which clearly evidence the reduction of stock position commensurate with the sales outgo.

5.3.2.14. Therefore, the assessing officer's treatment of the cash deposited in the banks during the demonetization period as unexplained cash credits u/s 68 of the Act is factually and legally incorrect because the nature and source of the cash deposits being proceeds arising out of cash sales, opening cash in hand and recovery from debtors is patently evident from the entries in the audited books of accounts of the appellant. Further, as rightly contended by the appellant, it is not the case of the assessing officer that the cash deposited in the banks during the demonetization period was in excess of what was available in the cash books. The fact that the cash deposits in banks were sourced out of cash sales etc., as above, is evident from the entries in the cash books and as argued by the appellant that the same has also been accepted by the assessing officer deserves to be considered because the assessing officer hadn't rejected the appellant's books of accounts.

5.3.2.15. The appellant's contentions that the Commercial Tax Department had also accepted the correctness of the purchases and sales shown in the VAT returns on the basis of audited books of account cannot be ignored. Further, as claimed by the appellant, these factual aspects with regard to purchases and sales from VAT returns were also examined during the assessment proceedings and found to be correct by assessing officer.

5.3.2.16. The appellant had correctly pointed out that the day of demonetization i.e. 08.11.2016 was an exceptional day in view of demonetization of old notes and the public were really in a frenzy mood and were anxious and in a jittery to convert their old currency notes into some other form and felt wiser to make investment in yellow metal.

5.3.2.17. The appellant had further claimed that he did not and could not take the KYC details which were not mandatory in respect of the sales below Rs.2 lakhs and all the cash sales, undisputedly, were below Rs. 2,00,000/-, and the appellant had Page 47 of 67 correctly stated that this has also not been controverted by the assessing officer.

5.3.2.18. As rightly contended by the appellant, the assessing officer has accepted the books of accounts and has not rejected the same. No defects were found by the assessing officer in the Books of Accounts, Trading account, P&L account and the financial statements of the appellant, and the assessing officer had also not drawn any adverse inference from the financial statements of the appellant, and therefore, any addition u/s 68 was not warranted at all. At this juncture, reliance is placed on the decision of the H'ble Ahmedabad Tribunal in the case of Shree Senend Textile Indus. Ltd. vs The Dy.GIT, Gircle-8,, Ahmedabad in A No. 1166/And/2014 dated 06.01.2020 wherein the H'ble Tribunal held that: ... We were also aware of the fact that there is no-iota-of evidence-having-any-adverse remark-on- the purchase shown by the assessee-in-the-books-of-accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding. In view of the above we are not-convinced with the finding of the learned CIT(A) and accordingly we set aside the same with the direction to the AO to delete the addition made by him..."

5.3.2.19. The assessing officer has also observed that the appellant has not been able to establish the reason for carrying such large demonetized cash in his hands when he was regularly depositing the cash on account of sales in bank accounts almost every day before the demonetization period. The assessing officer has also further argued that the reason for sudden spurt in sales in the month of October 2016 and November 2016 and the drop in sales in the subsequent months were not explained by the appellant. But, the appellant explanation that he has carried the huge cash only from 23.10.2016 as huge sales took place on 23.10.2016 on the Occasion of "Pushya Nakshatra and on 28.10.2016 on the occasion of Dhanteras deserves to be considered.

5.3.2.20. Further, the appellant had also aptly brought to light the reason for huge cash in hand from the premise of sudden declaration of demonetization scheme on the night of 8th November 2016, when the public at large frenzied to make heavy purchases of gold jewellery throughout the country with old currency which pushed the sales further. Therefore, the assessing officer's arguments that the appellant had not explained the huge cash in hand is unfounded and deserves to Page 48 of 67 be rejected. In this regard, the appellant had also claimed that the assessing officer had never asked the appellant to explain the reasons for carrying such huge cash, and had contended that if asked to explain, the appellant would have duly explained that the same was necessitated because during that period all the office-staff were females and hence one of the partners of the appellant firm Shri. Rakesh Agrawal, had to go personally to deposit cash each time leaving the shop. The appellant had further stated that one of the bank branches viz., Corporation Bank, Kolar Road Branch was about 1.5 - 2.00 kms, away from the appellant's shop and it was not safe and prudent to carry huge cash in transit in one go. This argument of the appellant also merits consideration.

5.3.2.21. The appellant had further stated that consequent upon demonetization, the appellant was advised by the banks to deposit the cash amounts only in tranches, as there were serpentine queues in the banks, and accordingly, as per the advice received from the bankers, the appellant had to keep huge cash in hand generated from sales and deposited the same huge cash over the period of demonetization (i.e. between 10.11.2016 to 30.12.2016) as permitted by the RBI. This contention of the appellant also appears to be genuine and acceptable. Therefore, from the foregoing explanations offered by the appellant it is clearly plausible for the appellant to have actually had sudden and huge increase in sales in the months of October 2016 and November 2016 due to the auspicious occasions of 'Pushya Nakshatra' and 'Dhanteras' in the month of October, 2016 and the Demonetization induced sales in November 2016 which also offers a plausible explanation for the drop in sales in the subsequent months.

5.3.2.22. The assessing officer had further observed that in order to justify the quantitative sales, the appellant has shown purchases, made during the year, but on verification, it was found that the major purchases was made on 27th October 2016 of Rs. 38,13,862/- from Preeti Jain on 28th October 2016 of Rs. 42,22,530/- from Rakesh Agrawal (HUF), According to the assessing officer, these purchases were an afterthought to justify the cash deposits made in bank account during the demonetization period in the name of cash sales But, the appellant had contended that these observations of the assessing officer are diametrically opposite to the facts on records because the appellant had sufficient stock in the books before making any and every sales. The appellant had further also contended that major purchases were also made from Page 49 of 67 various parties like M/s. NS Jewellers & Bullion, Indore, M/s. Alon Jewellers, Bhopal and M/s. Raj Jewellers, Rajkot for which the appellant had submitted purchase details. In this regard, the appellant had rightly argued that "It is not understandable as to how it is feasible to do sales of more than Rs. 3 crore on purchase of around say Rs. 80 lacs [38,13,862/- from Preeti Jain and Rs.42, 22,530/-from Rakesh Agrawal [HUF)], as assumed by the assessing officer...". In this context, the appellant had also argued that the assessing officer had not rejected the appellant's books of accounts and had consequently therefore accepted the Opening stock, Purchases, Closing Stock, Sales and Trading results. Further, purchases, sales and stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the appellant should not have the sufficient stocks in its possession or there must be defects in the stock registers/stock. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stock. He has not disturbed the closing stock which has direct nexus with the sales. The movement. of stock is directly linked to the purchase and the sales. The appellant further contends that without disproving any of the above and without bringing any cogent evidence, the assessing officer-has- resorted to the huge addition-u/s-68-simply-on-the basis of surmises and conjectures and hence the addition u/s 68 cannot be sustained. In this regard, reliance is placed on the decision of the H'ble Delhi High Court in the case of CIT v. KAILASH JEWELLERY HOUSE in Appeal No. ITA 613/2010, wherein the H'ble High Court has ruled that "... The Commissioner of Income- tax (Appeals) had returned a finding that the stock and cash found at the time of search had been examined by the Assessing Officer and was compared with the stock and cash position as per books. The stock and cash position as per the books had been arrived at after the effect of the aforesaid cash sales. The stock position as well as the cash position as per the said books had been accepted by the Assessing Officer. The Commissioner of Income-tax (Appeals) also noted that the appellant had furnished the complete set of books of accounts and the cash books and no discrepancy had been pointed out. The Assessing Officer had doubted the aforesaid sales as bogus and had made the aforesaid addition. However, the Commissioner of Income- tax (Appeals) as well as the Income-tax Appellate Tribunal returned findings of fact to the contrary. The Tribunal also noted that the departmental representative could not challenge the factual finding recorded by the Commissioner of income-tax

(Appeals). Nor could he advance any substantive argument in support of his appeal. The Tribunal also observed that it is not in dispute that the sum of Rs 24,58,400/-was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. It is in these circumstances that the Tribunal observed that the cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The findings of the Commissioner of Income-tax (Appeals) and the Tribunal, which are purely in the nature of the factual findings, do not require any interference and, in any event, no substantial question of law arises for our consideration. The appeal is dismissed."

5.3.2.23. The assessing officer had further relied on the decision of the H'ble Supreme Court in the case of Sumati Dayal V. CIT [1995] 214 ITR 801 (SC) while making the addition u/s 68. However, the above decision will not be applicable to the instant case of the appellant because in case of Sumati Dayal, the H'ble Court had held that "The transaction about purchase of winning ticket took place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase had to be drawn on the basis of the circumstances available on the record, " implying that circumstantial evidences can be taken in the absence of direct evidence, whereas in the instant case, the facts and evidences clearly evidence that the appellant has made the cash sales and there were sufficient stocks to meet the sales. Thus, the facts of the appellant's case are clearly distinguishable from the above decision of the H'ble Apex Court.

5.3.2.24. The assessing officer had concluded that the appellant couldn't explain the source of the cash deposited in the bank and that the appellant had failed to substantiate the cash deposited with documentary evidence. But, as discussed in the foregoing paragraphs, the appellant had submitted documentary evidences in the form of Sales Bills, Affidavits and Aadhar Card of some of the customers, Affidavit of the partner, Audit Report, Trading Account, Profit & Loss Account, which the assessing officer has not disproved or discredited. From these evidences the appellant had substantiated that he had sufficient stock to effect the cash sales as claimed by the appellant which constituted for the explanation of the source for the cash deposited in the bank: Therefore, it is clearly seen that the appellant had submitted sufficient documentary evidences to demonstratively prove the cash sales and deposits in the bank and discharged complete onus cast upon him. On Page 51 of 67 the contrary, the assessing officer has not disproved any of these evidences but had proceeded to make addition u/s 68 As per settled settled law, in such cases where the appellant had discharged his onus, then it becomes incumbent on the assessing officer to conclusively establish that the appellant had undisclosed income, but, as rightly contended by the appellant, the assessing officer could not do so, and therefore, no addition was warranted u/s 68 in the case of the appellant since the cash deposited in the bank had been explained by the appellant with sufficient documentary evidence. Further, when the appellant had already offered the sales as revenue receipts, adding the same again u/s 68 and invoking the provisions of section 115BBE for taxing the cash deposits would amount to double taxation of the same income twice, which is prohibited by law. Accordingly, the addition made by the assessing officer u/s 68 and taxed u/s 115BBE was not at all warranted, and, therefore, deserves to be deleted. In this regard, reliance is placed on the decision of the H'ble Vishakhapatnam Tribunal in the case of ACIT vs. M/s Hirapanna Jewellers in I.T.A.No.253/V/iz/2020 dtd. 12.5.2021 for AY 2017-18 where on similar facts of cash deposit in Bank during demonetization, the H'ble ITAT has held that: "In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. we have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales' since, the assos000 has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High court in the case of Vishal Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld.CIT (A) and the same is upheld." The above decision of the H'ble Tribunal is squarely applicable to the facts of the case of the appellant In this context, reliance is also placed on the decision of the H'ble Delhi ITAT in the case of Agons Global P. Lte v. ACIT in to 3746/Del./2019 wherein the H'ble Tribunal had held that: ...When the assessee had regular cash sale and deposit of cash in bank accounts and if nothing incriminating was found to prove the contrary, then, addition u/s 68/sec. 115BBE of such cash sale would tantamount to double addition."

Page 52 of 67 4.17 The Ld. CIT-DR has contended before the Tribunal that the “impugned assessment order” should be upheld and that the “impugned order” should be set aside. In this regard we additionally hold that :-

Agrawal (HUF) of Rs.42,22,530/- (Related to Rakesh

Agrawal partner of assessee firm) on 28.10.2016 appears to be an after though in order to justify the cash deposits made in the bank account during the demonetization period in the name of cash sales, we hold that such observations is merely based on suspicion. It is based on presumptions, surmises and conjectures. Basis which additions u/s 68 of the Act cannot be made. We hold that it was incumbent upon the Ld. A.O to have examined all the material details and supporting furnished by the assessee firm in order to justify that transaction of purchases were all

Page 53 of 67 ingenuine. The Ld. A.O erred in law in not examining the material so produced and has given aforesaid observations without any basis. The observation of the Ld. A.O is subjective. No definite observation is made. In any event we hold that such purchases have not been expressly held to be a bogus purchase or sham or make believe arrangement in light of material produced by the assessee on pages 50 to 53, pages 54 to 58, 94 of Paper Book Vol.I and Page 36 of stock register etc. These documents were not examined by the Ld. A.O and no finding on purchases made from these two entities are given at all. Hence observation of the Ld. A.O is based on no evidence. Consequently the Ld. CIT-DR’s contention that the “impugned assessment order” should be upheld is untenable.

2. The Ld. A.O save and except recording simply that the few affidavits of persons to whom the cash sales was made during the period of demonetization amounting to Rs.12,06,896/- has failed to give any finding in respect of such affidavits. The Ld. A.O ought to have Page 54 of 67

verified the affidavit and further ought to have conducted the enquiry on it but nothing was done.

Hence we hold the “impugned assessment order” as erroneous. The contention of Ld. CIT(A) that the “impugned assessment order” should be upheld and order of Ld. CIT(A) should be set aside is thus not based on any cogent ground. In the “impugned assessment order” even benefit to the extent of Rs.12,06,896/- is not given to the assessee an approach wholly untenable in law. Once the Ld. A.O has held that the affidavits are verified/verifiable one then corresponding finding is must otherwise it amount to non-application of mind and arbitrary exercise of power. There is no finding that these affidavits are expressly rejected by the Ld.

A.O. No “aspersions” are casted on the assessee that they are self-serving affidavits to justify the cash sales.

Explanation of the assessee is rejected as it did not suit the Ld. A.O which is a subjective.

the Ld. A.O has erroneously held that opportunity was given to the assessee to provide the necessary documentary evidence of cash sales but the assessee failed to provide the necessary documentary evidences of cash sales. We hold that perse this is a wrong finding as everything was given to the Ld. A.O during the course of the assessment proceedings. The Ld.

CIT(A) has correctly set aside the “impugned assessment order”.

deduction/set off. The amount of Rs.20,00,000/- is minued from Rs.3,63,59,000/- and final figure comes to Rs.3,43,59,000/- which we hold to be a fair as taxes on Rs.20,00,000/- have already been paid.

5. For sake of repetition we further hold that the Ld.

A.O in the “impugned assessment order” has recorded

Page 56 of 67 that the assessee in the instant case has just not explained the source of cash deposited in the bank but has also failed to substantiate the same by documentary evidence, in respect of which the assessee has completely failed. We hold the aforesaid finding of Ld.

A.O as wrong finding of fact basis paper book filed before us which shows many documents, material and information along with data were given to the Ld. A.O during the assessment proceedings along with evidences in support of same consequently finding of Ld. A.O is erroneous.

basis paper book filed before this Tribunal we notice and observe that full and complete details of Preeti Jain

Page 57 of 67 vide paper book Vol.I pages 50 to 53 were given wherein she has confirmed the transaction along with payment details. On page 73 of paper book Vol.I her details along with per postal address were too placed on record.

Further Rakesh Agrawal (HUF) as a separate legal entity’s details too were furnished vide paper book pages 54,55,56,57,58 and postal details too were furnished in paper book page 71 Vol.I. Hence the finding in the “impugned assessment order” these evidences/documents/material are unverifiable one cannot be sustained. There is in fact no finding to the effect that these purchase artificially jacked up the purchases and stock position of the assessee so as to justify increase in cash sales.

Page 58 of 67 the sales have to be regularly deposited in the bank account for making payments for the purchases. Even on 8th November, 2016 the assessee deposited cash of Rs.9,50,000/- in the bank account. In this regard we have carefully seen the “impugned order’s” para

5.3.2.19/9.3.2.20 & 9.3.2.21 (supra 4.16) and agree with the reasoning of Ld. CIT(A). We further hold that “impugned assessment order” there is no categorically finding that the assessee had cash of earlier years in old currency and deposited the same in guise of sales during the course of business during October &

November, 2016.

Vol.II where there is a notice wherein the assessee has been asked “you have made sales of Rs.2,42,81,404/- and Rs.1,61,33,133/- in the month of October &

November, 2016 respectively, no documentary evidences were given by you in spite of specific query raised. So please explain why the above sales for the month of October 2016 & November 2016

Page 59 of 67 may not be added to your income as un explained cash credit u/s 68 of the Act”. We further observe that basis page 122 of paper book Vol.II the assessee AR had enclosed list of sales made in the month of October

2016 and November, 2016. The details contains bill no, date, name of buyer, amount and mode of payment. It was also stated that since Income Tax Act does not require asking of PAN or identity address, etc. for the transactions less than Rs. 2 lakh per person in a year, the assessee firm cannot insist on asking for identity, address, etc. of the customer nor it is practical to do so.

Sales are supported by bills and duly recorded in the books of accounts. We have perused paper book Vol.II pages 125 to 136 & so also pages 137 to 142 containing details of sales for October & November, 2016 wherein at column particulars sales are both by name and by cash. Major sales are of cash of below Rs.2 lakh. These sales details also had details of mode of payment too i.e. cash/car/cheque. These sales register have not been seen to have been examined by Ld. A.O and all cash

Page 60 of 67 sales are arbitrary held to be unexplained with regard to nature and source. The Ld. A.O has not brought on record any other evidence that these cash sales so deposited pertains to some other activities of the assessee or are fully unexplainable with regard to the activities carried out by the assessee. Under section 68 what is required to be explained is nature and source of credit which we hold is sufficiently explained and VAT returns in support of such sales have been filed and placed on record. The Ld. A.O has not found fault with VAT returns. Few of these cash sales were tallied by us and were found tallied on test check basis.

Consequently we upheld the “impugned order” of Ld.

CIT(A) and do not subscribe to the arguments of Ld.

CIT-DR that the “impugned assessment order” should be upheld basis judgment of Hon’ble Supreme Court in Re Sumati Dayal case (supra) . We hold that once the assessee has explained the nature and source of credits in his books by tangible material then one is required to see and appreciate those material/evidence and Ld. A.O

Page 61 of 67 must enquire into it and after analysing those, must give a reasoned conclusions as and by way of a reasoned order. In quasi-judicial process of adjudication and adjudgment there is no scope for any suspicion, presumption and assumptions. The Ld. A.O should have tangible material worth a credence which he must cull out by due process. There should be discovery basis due process to make addition u/s 68 of the Act to income which was already returned as and by way of income from business. To tax such income as not forming part of business income as same is unexplained by virtue of unsatisfactory explanation with regard to its nature and sources the revenue must discharge and rebut initial onus which assessee had discharged in this case. In the instant case Revenue has not swiftly examine the sales, purchase, stock and simply on basis of earlier year sales has drawn a conclusion that there is huge cash sales when admittedly they were on account of two auspicious occasion of “pukshya Nakshatra” and “Dhanteras”

Page 62 of 67 falling in October 2016. The huge rush of people on 08.11.2016 is un denying fact. Hence the “impugned order” is upheld.

4.18 The revenue has challenged in appeal before us that the Ld. CIT(A) while passing the “impugned order” which has resulted into the deletion of Rs.3,43,59,000/- made by Assessing Officer on account of unexplained cash credit u/s 68 of Income Tax Act, 1961 is an untenable ground in view of our findings as aforesaid which is basis premises drawn by us. We also hold the contention of the Revenue that the test of human probabilities laid down by Apex Court in case of Sumati Dayal V/s CIT 1995 AIR 2019 applies to the fact of this case as sales jumped very high astronomically during demonetization when compared with cash sales of same period of 2015 and thus fails the test of human probabilities does not apply to the facts and circumstances herein. In this context we respectfully say that the facts and the circumstances in Re Sumati Dayal case were altogether different then the facts and circumstances of the present case in the instant appeal. In Re Sumati Dayal case amounts were received from the various Race clubs on basis of Page 63 of 67 winning tickets presented by her. The dispute was are they really winnings from the races. This raised a question whether the apparent can be considered as real. Hon’ble Supreme Court on earlier occasion in Durga Prasad More case had laid down that apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look in to the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The transaction in Re Sumati Dayal case was about purchase of winning tickets takes place in secret and direct evidence about such purchase would be rarely available. Therefore the Hon’ble Apex Court held that an inference about such a purchase has to be drawn on the basis of circumstances available on record. In Re Sumati Dayal case having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on record it was held that an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. The court held that “In our opinion the majority opinion after considering surrounding

Page 64 of 67 circumstances and applying the test of human probabilities has rightly concluded that the appellant’s claim about the amount being her winning from races is not genuine”.

In the present case facts are different wherein credits have been found in the books of assessee and assessee was called upon to show cause and to explain the nature and source of credits. The assessee firm has placed all the explanations along with material, information, documents, data etc. on record that the nature and source of its income is from the business of jewellery. It is also said that there was a spurt in sales in October & November 2016 on account of festivities including “Pukshnakshatra” and “Dhantaras” and demonetization as such no comparison can be drawn. The assessee has also placed on record its purchase and sale details together with stock which are not expressly held to be a faulted one. Assessee could give all the accounts which were audited one. The assessee has shown purchase details and sales details and so also stocks which have not been found to be false or manipulated one. There is no findings that the assessee deliberately in order to show higher sales in October/November,

Page 65 of 67 2016 inflated its purchases through bogus entries obtained from two entities. Under these facts and circumstances we hold that theory of probability cannot be applied and circumstantial evidence cannot be looked in to as there is overwhelming documentary evidence of books, confirmations etc. which are not expressly rejected by the Department.

5.2 In the result appeal of the revenue is dismissed and “impugned order” is upheld.

Order pronounced in open court on 31.07.2025.