ITO WARD-51(5), DELHI vs. RAMESH CHANDER RAJPUT , DELHI

The Ld. AR also submitted that, as far as the finding of the Ld. A.O. that the Assessee withdrew Rs. 31 lakhs from bank despite having Rs. 49,21,712/-cash in hand is concerned, in this regard it is submitted that the Assessee has a practice of having high cash in hand, he don't keep much balance in its bank accounts. This fact can be corroborated by the fact that when there is any payment is to be made through banking channel then only the Assessee deposit the amount so that the payment could be honored. Although, this withdrawal of Rs. 31 Lakhs pertains to April 2016 which is not relevant to the case at hand as the disputed amount/manipulation as alleged by the Ld. A.O in its para 5(iii) is post October 2016. It is submitted that the opening balance of cash in hand as on 01 October 2016 at Rs. 40 Lakhs is Adhoc as against the cash book figures of Rs. 1,20,35,988.61/- is totally uncalled.

The Ld. AR submitted that as far as the stocks are concerned, it is an undisputed fact that the Assessee had sufficient stocks in his books to support the sales made in October and November 2016 which is also accepted by the Ld. A.O. The only reservation raised by the Departmental Representative during the ITO vs. Ramesh Chander Rajput course of the hearing was regarding the high GP ratio on the sales made on 08.11.2016 which is in fact supports the case of the Assessee that the sale made on 08.11.2016 was made at relatively higher margin since the demand was at its peak.

The Ld. AR submitted that the further estimation of sales of the Assessee for 1.25 month i.e., 1.10.2016 to 08.11.2016 on average basis is also incorrect because sales have been accepted by VAT, by Income tax. If the Ld. A.O. wanted to reduce the sale he should take this figure out of the turnover as per P&L account.

The Ld. AR further submitted that the VAT returns are duly accepted by the VAT authorities and pertinently, no VAT return was revised for the year under consideration. It is submitted that the VAT return for quarter ending 30.09.2016 was filed on 28.10.2016 therefore the same cannot be doubted. It is important to note that the VAT assessment was also done in the case of the Assessee for the year under consideration wherein no demand was raised. All the invoices, ledgers, returns were duly accepted by the VAT department. Order dated 26.02.2021 having reference number

The Ld. AR submitted that the sales of the Assessee are duly reported to the VAT authorities, the Assessee placed the copies of its VAT returns (Refer Page 86 to 154 of the Paper book). The comparative statement of turnover of the Assessee clearly shows that there was no abnormal increase in the turnover of the Assessee for the year under consideration. The comparative statement for different Assessment Year is as follows:

The Ld. AR submitted that on the eve of 08th November 2016, the announcement of demonetization was made by the Hon'ble Prime Minister, after the announcement, there was an unprecedented rush at all the jewellery shops pan India including that of the Assessee. The shop is in the main market area making it easily approachable and the timing, i.e., 08:00 pm which is the peak time of the day when the footfall in the market is at its ITO vs. Ramesh Chander Rajput maximum as compared to any point of time in a day. The announcement triggered the public to rush towards jewellery shops as buying gold, diamonds and other precious stones was the most favorable investment one could make at such a short point of time. It is pertinent to mention that as per the news reports, all the Jewellers of the country reported unusual high volume of sale that day. Due to panic and high rush, the customers were not bothered with the design of the jewellery but only focused on its weight and purity, thereby the time and attention taken by a customer was substantially very less which enabled the Assessee and its staff to cater many customers. In fact, it is imperative to bring on record that the October 2016 was the month of festivals such as Karva Chauth (19.10.2016), Dhanteras (28.10.2016) Diwali (30.10.2016), Dussehra (11.10.2016), and Bhai Dooj (01.11.2016), also due to upcoming wedding season the sales for October were at peak. It is pertinent to mention that all the sales were duly recorded in the books, invoices were generated and reported to the VAT authorities.

The Ld. AR submitted that the said order has been passed completely on surmises and conjectures and not on legal principles.

The Ld. AR submitted that the Assessee strongly relies on the recent order dated 12/05/2021 of the Hon'ble ITAT Vishakhapatnam in the matter of Asst Commissioner of Income Tax 1 V. M/s. Hirapanna Jewellers ITA/253/Viz/2020, (Refer Page 38 of the Legal Paperbook) wherein the Hon'ble ITAT held that the announcement of demonetization led to unprecedented rush towards the jewellery shops which soared the sales of gold and diamond jewellery and the cash receipts represent the sales which the Appellant has rightly offered for taxation. The ITO vs. Ramesh Chander Rajput facts of this case were similar to that of the Assessee as the sales in October and November were high on account of festival season and due to unprecedented demonetisation therefore the Assessee strongly relies on this case as it is squarely applicable to the facts and circumstances of the present case. Trading account of the Appellant shows sufficient stock to effect the sales.

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 assessee 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.

It is humbly submitted that unparalleled situations breeds unparalleled outcomes, demonetization was one of such situation which bred extemporaneous rush in the jewellery shops pan India;

The Ld. AR submitted that the Assessee strongly relies on the order dated 09.04.2010 passed by Hon'ble High Court of Delhi in the matter of Commissioner of Income Tax V. Kailash Jewellery House ITA/613/2010. Wherein the finding of the Hon'ble Tribunal as well the Ld. CIT (Appeals) that in the cases of cash deposited as proceeds from sales whereby the sales are duly recorded in the books of Assessee and had found place in the profit and loss account was not interfered with.

The Ld. AR submitted that the Assessee also relies upon the order of Hon'ble ITAT Delhi in the matter of Kishore Jeram Bhai Khaniya v. ITO [ITA. No. 980, 1220/Del./2011 dated 13.05.2014 ITAT- Delhi) wherein it is specifically held that once the amount of cash sales has been shown as income by duly including it is his total sales, the same cannot be considered u/s 68 of the IT Act.

The Hon'ble Supreme Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 that "It is for the Assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed. The Assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again."

Having provided the explanation for the said cash deposit by the Assessee, pertinently voluminous records were provided to the AO, but AO wrongly proceeded on conjectures and surmises without appreciating the material placed on record. It is a settled position that AO cannot just reject the material placed and or explanation provided by the Assessee without proving the same to be false with substantiating evidence.

The Ld. AR submitted that the Rule 114B of the Income Tax Rules, 1962, governs the requirement of reporting the PAN card details of the persons dealing beyond a threshold prescribed in the table provided in the said rule. Sale and purchase of jewellery are ITO vs. Ramesh Chander Rajput covered under serial number 18 of the said table which clearly provides that the PAN details of the customer are required for the sale or purchase exceeding Rs. 2 lakhs. Therefore, the Assessee was not required as per law to mention the PAN details of the customers for the sales below Rs. 2 lakhs consequently the Ld. AO has wrongly made this as one of the reason to invoke section 68 of the Act against the Appellant.

The Appellant relies upon R.B. Jessaram Fatehchand (Sugar Deptt.) V. CIT (1970) 75 ITR 33, wherein Hon'ble High Court of Bombay held that in the case of a cash transactions where the buyer takes the delivery of goods by paying in cash, in that scenario the seller is hardly bothers about the name and address of the purchaser. Relevant extract has been reproduced herein below:

The Ld. AR also submitted that, from the submissions made above and settled legal position that Section 68 Is not applicable in the case of sales, because the amount which is taxed once cannot be taxed again. Therefore, the Ld. AO has wrongly invoked Section 68 and 115BBE of the IT Act without appreciating the facts and documents placed on record.

Considered the rival submissions and materials placed on record, we observed that assessee is a proprietor of three business concerns Rajput Jewellers, Rajput Electronics and Rajput Handloom. The business of the assessee is mostly on cash basis and as per the information submitted before us shows that assessee has declared turnover of Rs.7,70,86,240/- in the Asst. Year 2017- 18 and the turnover of assessment Year 2016-17 is Rs.7,53,73,559/- respectively. Since, the assessee has deposited huge cash during the demonetization period. The case of the assessee was selected for scrutiny.

On careful review of the cash in hand submitted by the assessee before the Tax Authorities show that during the Assessment Year 2016-17, the assessee has carried closing cash balance from the range of 27 lacs to 82 lacs at each of the closing month. During the current assessment year, the assessee has followed the similar pattern till August, 2017, however, in September to October, assessee has huge closing cash balance to the extent of Rs.1,20,00,000/- and 2,35,00,000/- respectfully. The same was deposited during November and December. Subsequent to cash deposit in bank the assessee has maintained similar pattern of cash holding during the rest of the period. It clearly shows that assessee sold jewellery particularly during the demonetization period, we also observed that assesse had huge stock in September to the extent of Rs.5,27,73,912/- and in November closing stock of Rs.40,11,1,925/-, it clearly shows that assessee has sufficient stock to cover the cash sales during the period of demonization. When the assessee demonstrated that assessee has sufficient cash sales and carries sufficient cash balance in his books of accounts which supports the cash deposits in the bank and also financial results

From the above, it is clear that as long as assessee explains the source of sales, submits the details of receipts particularly cash sales and demonstrates the availability of cash and sufficient stock in the business to support the cash deposit in the bank and at the same time, AO has not brought anything on record to substantiate his finding, merely interprets the data rather than indulging in making proper enquiry.

In our considered view merely comparing the sales in cash deposits with the earlier assessment years without bringing on record anything against the assessee for making cash sales and cash deposits, in our considered view, the assessee has explained the source of cash deposits and rightly offered to tax in its books of accounts, therefore, it does not call for separate disallowance.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced in open Court on 3rd May, 2024.