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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI DINESH MOHAN SINHA
आदेश/ O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 08.02.2024 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 17.12.2019 passed by learned ITO-1, Ratlam [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2017-18, the assessee has filed this appeal on the grounds mentioned in Form No. 36 (Appeal Memo).
Registry has informed delay of 1 day in filing this appeal. Ld. AR submitted that the delay has occurred due to calculation mistake and Page 1 of 9
Rajendra Kumar Gandhi – AY 2017-18 prayed to condone the same. Ld. DR does not have any objection against submission and prayer of Ld. AR. Accordingly, the delay of 1 day is condoned and the hearing of appeal is proceeded.
The background facts leading to present appeal are such that the assessee-individual filed his return of income of AY 2017-18 declaring a total income of Rs. 3,70,300/-. The case was selected for scrutiny and the AO issued notices u/s 143(2)/142(1). Ultimately, the AO completed assessment vide order dated 17.12.2019 u/s 143(3) determining total income at Rs. 89,30,429/- after making two additions, namely (i) addition of Rs. 59,86,000/- u/s 69A on account of unexplained deposit in Bank A/c during demonetization period, and (ii) addition of Rs. 25,74,129/- on account of difference in value of opening stock as on 01.04.2016. Aggrieved, the assessee carried matter in first-appeal but did not get any success. Now, the assessee has come before ITAT in next appeal contesting both additions made by AO.
Addition of Rs. 59,86,000/- on account of unexplained deposit in Bank A/c during demonetization period:
Ld. AR carried us to following paras of assessment-order where the AO has made this addition as under:
“6. Again show cause notice with notice u/s 142(1) dated 23/11/2019, the assessee was asked to explain as to why the unexplained cash deposit, closing stock, loan and advances, unsecured loans, deduction claim u/s. 80D, should not be added to the total Income of the assessee. The assessee was asked to furnish the reply on 28/11/2019. Written compliance was made on 30.11.2019 and 3/12/2019, same was examined carefully. In the reply it has been stated
Rajendra Kumar Gandhi – AY 2017-18 that the cash which has been collected from sale of gold bullion and ornaments has been deposited in the bank.
7. Therefore during the course of assessment proceeding, vide notices u/s 133(6) dated 28/11/2019 was issued to following persons to confirm purchase of gold ornaments and bullion from the assessee :- 1. Prakash Patidar, Susasara M.P. 2 Ankit Ji Bamniya Ratlam M.P.
3 Bansilal Gurjar Shyamgarh M.P. 4 Anandilal ji Dhakad Badahela mata ji Ratlam M.P. 5 Parasmal Ji Jain, Satrampur M.P.
6 Mukesh Ji Nayak, Sarwami Ratlam M.P. 7 Ashok Pawar, Badnawar Dhar M.P. 8 Mangilal Rathod, Dhar M.P.
9. Ishawer Lal Patidar, Bajna Ratlam M.P. 10 Sanjay Sisodiya, Rajod M.P. No compliance made by any person of above mentioned notices.
Again show cause notice with notice u/s 142(1) dated 07/12/2019, the assessee was asked to furnish confirmation letter from all customers to whom the assessee had made sale of Rs 1,00,000/- and above with supporting documents like copy of ITR, proof of identity, Copy of bank pass book, and source of cash deposit., The assessee was asked to furnish the reply on 12/12/2019. No compliance was made by the assessee. 9. xxxxx 10. The assessee had deposited cash of Rs 59,86,000/- in bank account number 252104000029403 with IDBI BANK LTD Ratlam during the demonetisation period i.e. 09/11/2016 to 30/12/2016. During the financial year he has deposited total Rs. 60,13,500/- in bank account number 252104060029493 with IDBI BANK LTD, Retlam 11. As has been stated in his reply the assessce has deposited cash which has been collected from sale of gold bullion and ornaments. To examine the same notice u/s 133(6) was issued to the above mentioned persons. Notices to all the above referred persons are delivered properly but none of them have made any compliance of the notices. They have not furnished any confirmation letter confirming purchase of omaments in cash from the assessee shop. In absence of confirmation of cash sales; the receipt of cash receipt of Rs 59,86,000/- is remained un-verified and added to the income of the assessee u/s 69 of the act.
Rajendra Kumar Gandhi – AY 2017-18 Since the assessee has failed to furnish explanation and supporting documents regarding cash deposits in his bank account during the demonetization period. Consequently, the unexplained. cash deposits is treated as income of the assessee and added to the total Income. Therefore, I am satisfied that it has committed default within the meaning of section 271AAC of the I.T. Act, 1961. Penalty proceeding u/s 271AAC is being Initiated separately.”
Ld. AR then carried us to Page 4 of Paper-Book to show that the assessee made deposits during demonetization period in three tranches, viz.
(i) Rs. 57,90,000/- was deposited on 16.11.2016 in Specified/demonetized Bank Notes (SBNs) out of opening balance of Rs. 58,04,128/- held by assessee at the time of declaration of demonetisation, (ii) Rs. 1,80,000/- was deposited on 03.12.2016 in operative currency out of cash balance held by assessee on that day, and (iii) Rs. 16,000/- was also deposited on 20.12.2016 in operative currency out of cash balance held by assessee on that day. Ld. AR submitted that AO has noted in Para 5 of assessment-order “The assessee filed written submission through E-Compliance on 14.11.2019 as well as Copy of Income-tax Return, Computation of Income, details of commission or brokerage, copy of various bank statements, Profit and Loss account and Balance-Sheet, Cash-Book, Copy of Establishment licence of shop registration certificate, etc. Same are examined.” He submitted that the Cash- Book filed to AO, which stands examined by AO, shows the availability of cash balances on different dates as claimed by assessee as well as the entries of impugned deposits made in Bank A/c. So far as the source of deposits is concerned, the same was from sale of gold bullion and ornaments. The assessee was previously doing business of job work, commission and brokerage of jewellery but thereafter also started trading of Page 4 of 9
Rajendra Kumar Gandhi – AY 2017-18 Gold & Silver jewellery in the name of M/s V.N. Jewellers and for this purpose obtained registration under Madhya Pradesh VAT laws w.e.f.
17.08.2016, copy of Registration Certificate issued by VAT authorities is filed at Page 54 of Paper-Book. The assessee has obtained VAT registration prior to declaration of demonetization. The assessee also filed VAT return for the period 01.10.2016 to 31.12.2016 declaring a taxable sale of Rs. 56,04,173/- with output VAT of Rs. 56,041/- and taxable purchases of Rs. 66,17,389/- with input VAT of Rs. 34,412/- and paid balance VAT through bank. The copy of VAT return is filed at Page No. 55-60 of Paper-Book. A detailed statement of sales is also filed at Page 74-76 of Paper-Book giving party names, bill no., bill date, quantity, amount of sale, VAT 1% and gross amount of sale including VAT. The statement of purchases is given at Page 61 of Paper-Book. All these documents were filed to AO and the AO has not raised any doubt qua the purchases, sales, cash-book and other documents of assessee. The AO has made addition solely because the customers did not respond to the notices u/s 133(6). Relying upon the decision of ITAT, Chennai in The Income-tax Officer Vs. M/s Sahana Jewellery Exports order dated 20.12.2023, Ld. AR contended that the AO cannot make addition in the hands of assessee only because the customers have not complied with the notices u/s 133(6). Ld. AR prayed to delete the addition made by AO therefore.
Per contra, Ld. DR for revenue submitted that the AO has doubted the cash-receipts from customers and not the purchase, sales, etc. He
Rajendra Kumar Gandhi – AY 2017-18 submitted that the AO has also issued notices u/s 133(6) to customers to verify the factum of cash-receipts but the customers have not responded to AO’s notices, therefore the AO was justified in rejecting assessee’s claim and making addition.
We have considered rival submissions of both sides and perused the case record. The controversy here relates to the source of cash deposit made by assessee in bank a/c during demonetization period. The assessee claimed before AO that the sales of business was the source for accumulation of cash which was deposited in bank a/c. The assessee has filed contemporary details/documents of purchases, sales, cash-book, VAT return and the AO has examined those details/documents as is clearly acknowledged by him in Para 5 of assessment-order. Nowhere in the assessment-order, the AO has pointed out any fallacy or flaw in the books of account of assessee or the transactions of purchases and sales made by assessee. The sole reason of taking adverse view against assessee is the non-response of notices sent by AO u/s 133(6) to customers. This, in our considered view, is not a valid reason to make addition. On similar set of facts, the ITAT, Chennai has, in M/s Sahana Jewellery (supra) relied by Ld. AR, held thus:
“14. Be that as it may. The fact remains that, the assessee has furnished name and address of the customers from whom it has received cash for sale of jewellery. The assessee need not obtain confirmation and submit to the AO, because, the law does not mandate colleting PAN details of the persons, if sale value of jewellery does not exceed Rs.2 lakhs as per Rule 114B of Income Tax Rules, 1962. In so far as compliance of KYC norms, it is mandatory under Prevention of Money Laundering Act, 2002, w.e.f. 04.05.2023 onwards and not applicable for the impugned assessment year. Therefore, in our considered view, when the assessee has furnished name and address of the persons from whom it has received trade advances for sale of jewellery, the assessee has satisfactorily discharged onus
Rajendra Kumar Gandhi – AY 2017-18 cast upon to furnish name and address of the persons. Therefore, the observation of the AO in light of provisions of Sec.68 of the Act, that the assessee has not satisfactorily explained cash receipts is unwarranted and devoid of merits.
Having said so, let us come back whether the assessee could able to explain source for cash deposits made during demonetization period or not. It is an admitted fact that the assessee was having sufficient cash balance as per cash book maintained for the relevant period. In fact, cash in hand as on the date of demonetization i.e. 08.11.2016 was at Rs. 48,84,03,169/- and said cash balance is backed by cash receipts recorded in the books of accounts before the date of demonetization. Further, cash receipts from various persons have been further substantiated with sales made to them before the date of demonetization. In fact, the assessee has filed various evidences, including sales bills to support its arguments. The AO never disputed sales declared by the assessee nor pointed out any discrepancy in purchase or stock in trade held in the business of the assessee before the date of demonetization. In fact, the assessee has filed comparative sales for the month of April, 2016 to November, 2016 and corresponding April-15 to November, 2015 and we find that there is no abnormal deviation in sales declared for the month of November, 2016 when compared to earlier periods. It is not a case of the AO that the assessee has declared sales without purchases. In fact, a sale declared by the assessee is backed by corresponding purchases, and is supported by necessary purchase bills. The AO could not point out any discrepancy in stock register maintained by the assessee nor made out a case that the assessee has declared sales without there being any stock in hand. Therefore, in absence of any contrary findings to the effect that the sales declared by the assessee is not backed by any corresponding purchase or supported by stock in hand, in our considered view, simply sales cannot be rejected on the ground that sale for the particular month or period is higher when compared to corresponding previous period. In our considered view, there cannot be any reason for uniform sales in all days or month or year. There may be various reasons for increase or decrease in sales which depends upon various factors, including festival sales, clearing sales, yearend sales, etc. Therefore, in our considered view, the explanation of the assessee that it has received cash from various customers towards sale of jewellery and subsequently the advances have been converted into sales, appears to be bona fide and reasonable.”
8. Thus, considering the facts of assessee in the light of decision cited above, we are inclined to hold that the addition made by AO is not sustainable. Accordingly, we direct the AO to delete the impugned addition.
The assessee succeeds in this issue.
Addition of Rs. 25,74,129/- on account of opening stock:
This issue is quite straight and does not require much elaboration.
The AO has made this addition in Para 12 of assessment-order by Page 7 of 9
Rajendra Kumar Gandhi – AY 2017-18 mentioning that the assessee has claimed opening stock of Rs. 25,74,129/- as on 01.04.2016 and submitted copies of purchase bills but the closing stock shown by assessee was Rs. Nil in ITR of preceding AY 2016-17. Ld. AR, however, successfully demonstrated that in AY 2016-17, the assessee was engaged only in job work, commission and brokerage, therefore the assessee declared “Sunari Work Gold Investment of Rs. 25,74,129/-” under the heading “Fixed Assets” in the Balance-Sheet as on 31.03.2016 (Page 35 of Paper-Book) and there was no closing stock shown. It is when the assessee started trading of jewellery from 17.08.2016 during current year after obtaining registration under VAT (as discussed in earlier part of this order) that the same jewellery held by assessee in the list of fixed assets as on 31.03.2016 became part of business stock of assessee and was declared as opening stock as on 01.04.2016 in Trading and P&L A/c. Ld. AR has also shown, with the help of documents held in Paper-Book in the shape of Purchase Bills of M/s D.P. Jewellers, Purchase Bill of M/s Manohar Lal Ratan Lal & Company and Bank Statement of assessee at Pages 77, 78 and 28 of Paper-Book, the factum of purchases made by assessee in preceding AY 2016-17 which has given rise to holding of impugned closing stock as on 31.03.2016 / opening stock as on 01.04.2016. Even the AO has also mentioned in assessment-order that the assessee filed purchase bills. Ld.
DR for revenue though relied upon orders of lower-authorities yet could not controvert the submissions made Ld. AR with are fully supported by documentary evidences. Being so, we do not find any justification in the Page 8 of 9
Rajendra Kumar Gandhi – AY 2017-18 addition made by AO. Accordingly, the AO is directed to delete this addition also. The assessee succeeds in this issue.
Resultantly, this appeal is allowed.
Order pronounced by putting on notice board as per Rule 34 of ITAT Rules, 1963 on 28/02/2025