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

per law he cannot proceed on mere suspicion and doubt the sales of

the Assessee.

Cause Notice dated 12.12.2019 in Para 3 (Refer Page No. 46 of the

Paperbook) proposed to reject the books of Accounts of the Assessee

and charge a Gross-Profit @18% however, post this SCN (, the

Assessee's submissions dated 12.12.2019 were filed and in his

Final Assessment Order dated 24.12.2019 (Corrigendum to

Assessment Order) Ld. A.O has not rejected the books which clearly

evidences that the Ld. A.O. has considered the voluminous

documents filed by the Assessee and accepted the books. That

during the course of the proceedings, the Assessee submitted the

following documents:

S. No. Particulars Page No. of the Paperbook 1. Tax Audit Report u/s 44AB 52 to 61 2. ITR and Computation % 62 to 63 3. Audited Financial Statements 64 to 85 4. VAT Returns 86 to 154 5. Trial Balance 155 Cash Transaction report with Assessee’s 6. 187 to 191 reply

16 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

keeps huge cash in hand which is also a finding of the Ld. A.O.,

though he had his reservations but it is a fact that the Assessee

keeps huge cash in hand. A comparative statement of month-wise

closing cash in hand for the Assessee is as follows:

Monthly closing cash in hand: Month AY 2016-17 AY 2017-18 April 54,44,398/- 79,45,210.61/- May 58,29,818/- 34,12,633.21/- June 27,42,407/- 44,43,979.21/- July 29,36,624/- 66,10,616.21/- August 30,95,777/- 81,59,103.21/- September 54,78,043/- 1,20,20,990.21/- October 64,44,836/- 2,35,74,608.21/- November 82,87,105/- 16,15,568.02/- December 44,17,201/- 24,05,820.61/- January 48,56,017/- 34,86,376.61/- February 31,99,792.61/- 46,10,121.61/- March 9,32,309.61/- 61,56,608.61/-

17 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

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.

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

18 ITA No.1189/Del/2022 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 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.

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

19 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

150083672394 passed by Gurudutt Ranga, AVATO (Ward 45), Delhi

was placed on record during the hearing on 23.04.2024.

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:

Turnover as per VAT returns:

Assessment Year Turnover AY 2016-17 Rs.7,53,73,559/- AY 2017-18 Rs.7,70,86,240/-

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

20 ITA No.1189/Del/2022 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.

Also, the sales are duly reflected in the P&L account of the

21 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

Assessee. The books of account of the Assessee are duly audited

and reported to the Income Tax Authorities. It is important to note

that no single adverse comment has been given by the auditors

during their audit of the said books.

completely on surmises and conjectures and not on legal principles.

The Ld. AO has wrongly stated that the Assessee has failed to

provide documents and information to substantiate the claims

which is contradictory to the records.

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

22 ITA No.1189/Del/2022 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.

Relevant extract has been reproduced herein below: “….. The Ld. DR placed reliance on various decisions. In the case of Sumati Dayal Vs. CIT (supra), CIT vs Durga Prasad More 82 ITR 540) both the cases are related to the circumstantial evidences in the absence of direct evidence. In the instant case, the facts clearly support that the assessee has made the sales and there were sufficient stocks to meet the sales. Thus, the facts of the assessee's case are clearly distinguishable. 9. 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.

unparalleled outcomes, demonetization was one of such situation

which bred extemporaneous rush in the jewellery shops pan India;

23 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

Therefore, it cannot be said that the Assessee has manipulated the

books to cover-up his unaccounted money which is contrary to the

facts and circumstances which are completely supporting the case

of the Appellant.

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.

Relevant extract has been reproduced herein below:

"4. 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."

24 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

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.

Relevant extract has been reproduced herein below:

"There is another dimension to this issue. The Assessing Officer made

addition of Rs. 22.06 lacs u/s 68 of the Act, which contemplates the

making of addition where any sum found credited in the books of the

Assessee is not proved to the satisfaction of the A.O. It is only when

such a sum is not proved that the Assessing Officer proceeds to make

addition u/s 68 of the Act. We are dealing with a situation in which

the Assessee has himself offered the amount of cash sales as his

income by duly including it in his total sales. Once a particular

amount is already offered for taxation, the same cannot be again

considered u/s 68 of the Act. In fact, such addition has resulted into

double addition."

25 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

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."

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.

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

26 ITA No.1189/Del/2022 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.

Relevant extract has been reproduced herein below:

[Transactions in relation to which permanent account number is to be quoted in all documents for the purpose of clause (c) of sub-section (5) of section 1394. 114B. Every person shall quote his permanent account number in all documents pertaining to the transactions specified in the Table below, namely:-

18 Sale or purchase, by any person, of goods Amount or services of any nature other than those exceeding two specified at Sl. Nos. I to 17 of this Table, if lakh rupees per any. transaction

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:

27 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

“… 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.

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.

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.

28 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

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

29 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

are not indicating any abnormal variations, supports the

submissions made by the assessee. Further, we observed that the

Co-ordinate Bench of ITAT, Visakhapatnam held that in the case of

ACIT vs. M/s Hirapanna Jewellers (supra) held as under:

“In the instant case the assessee had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock registers. Both the DDIT (Inv.) and the AO have conducted the surveys on different dates, independently and no difference was found in the stock register or the stocks of the assessee. Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/ stocks. 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 stocks. 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. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has famished the trading account, P& L account in page No.7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed to disprove the condition of the assessee. Suspicion however strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence.”

30 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

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.

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.

Further, considering the detailed findings of the Ld. CIT(A), we do

not see any reason to disturb the same. Accordingly, ground raised

by the Revenue is dismissed.

31 ITA No.1189/Del/2022 ITO vs. Ramesh Chander Rajput

Sd/- Sd/- (VIMAL KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 03/05/2024 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR ITAT, NEW DELHI