ACIT CENTRAL CIRCLE-1 , JAIPUR vs. MAHENDRA KUMAR AGARWAL, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR. Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 172/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2017-18. cuke Asstt. Commissioner of Income-tax, Shri Mahendra Kumar Agarwal, Vs. Central Circle-1, 197, Johari Bazar, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. ABUPK 2500 L vihykFkhZ@Appellant izR;FkhZ@Respondent jktLo dh vksj ls@ Revenue by : Shri A.S. Nehra (Addl. CIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri Kapil Khejrolia (CA) lquokbZ dh rkjh[k@ Date of Hearing : 27/09/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 22/11/2022 vkns'k@ ORDER

PER: SANDEEP GOSAIN, J.M.

This appeal filed by the revenue is directed against order of the ld. CIT(A)-4, Jaipur dated 10-02-2022 for the assessment year 2017-18 wherein the revenue has raised the following grounds of appeal :-

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crores was deposited in the bank after demonetization was announced and was in the form of old currency notes. It defies all logic as to why would a person who has a regular bank account hold such huge cash in hand without any satisfactory reason? 2.2 that the taxpayers had failed to submit details like name, address, PAN of the buyers to establish the genuineness of high cash sales. 2.3 while granting relief to the assessee, the learned CIT Appeals has ignored the test of human probability and surrounding circumstances as laid down by the Honorable Supreme Court in the cases of Sumati Dayal 214 ITR 801 SC, and Durga Prasad More 82 ITR 540 SC. 3. The learned CIT appeal has erred in law and on facts in holding the income to be not taxable as per provisions of Sec. 115BBE of IT Act, 1961. 4. The learned CIT Appeal while granting relief has ignored that the taxpayer was involved in an activity against public policy. 5. The Appellant crave, leave or reserving the right to amend modify, alter add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.

income from business of trading of bullion, precious stones, diamond and

manufacturing of jewellery in his proprietorship concern M/s Mohan Lal Mahendra

Kumar Jewellers and interest income from savings bank account. The assessee’s

books of account are audited by Chartered Accountant. The assessee filed his

Income Tax Return on 27.10.2017 declaring total income of Rs. 1,27,020/-. The

case of the assessee was taken up for scrutiny u/s 143(3) of the Income Tax Act,

1961 under CASS and notice under section 143(2) of Income Tax Act 1961 was

issued on 09-08-2018. The assessee deposited Rs. 1,41,32,000/- in demonetized

currency during the demonetization period 09.11.2016 to 31.12.2016. The AO made

the addition of Rs. 1,41,32,000/- and the assessment of the assessee was completed

by AO vide her order dated 31.12,2019 at total income of Rs.1,42,59,020/- as

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against returned income of Rs. 1,27,020/-by giving reasons mentioned at page 2-5

of her assessment order. Aggrieved by the assessment order, the assessee filed

appeal before ld. CIT(A)-4, Jaipur. The ld. CIT(A) after analyzing each facts and

various judgments made finding in para 4.2 at page 22-28 of her order and

deleted the addition made by ld AO. Now, aggrieved by the order of the ld. CIT (A),

the revenue has preferred present appeal before us.

“4.1.3 (b) Regarding addition of Rs. 1,41,32,000/- made u/s 68 of the Act treating the cash deposited in demonetized currency as undisclosed income of Assessee.

1) The cash so deposited was accumulated cash which was received against/for sales made by it over the period of the year prior to demonetization

During the year under consideration the assessee, deposited Rs. 1,41,32,000/- in demonetized currency. The cash so deposited was accumulated cash which was received against/for sales made by it over the period of the year prior to demonetization, major most during the period from September-2016 to 07.11.2016.

2) The summary of cash book

The summary of cash book of the assessee for the period from 03.11.2016 to 08.11.2016 is as under: -

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Particulars Amount (In Rs.) Opening Balance as on 01.09.2016 20,98,024.45 Add: - Amount received against/for sales during month 17,22,424.00 of September-2016 Add: - Amount received against/for sales during month 1,14,43,282.00 of October-2016 Add: - Amount received against/for sales during period 14,37,830.00 01.11.2016 to 08.11.2016 Less: - Cash Deposited in bank (Net) during month of 20,79,000.00 September-2016, October-2016 and during period 01.11.2016 to 08.11.2016 Less: - Cash Expenses/payments during month of 4,51,639.00 September-2016, October-2016 and during period 01.11.2016 to 08.11.2016 Closing Balance as on 08.11.2016 1,41,70,921.45 Out of closing cash balance as on 08.11.2016 the amount of Rs. 38,921/- was in non-demonetized currency i.e. notes of 50, 100 etc. and the amount of Rs. 1,41,32,000/- was in demonetized currency.

3) Documents/Evidences filed during assessment proceedings:-

As apparent above the assessee was having sufficient cash in hand out of amount received against/for sales made and the same is duly evident from the Audited books of accounts. During the course of assessment proceedings, the assessee submitted the following documents to substantiate its claim: -

Cash book (Copy at PB Page 93 to 107) and sales register (Copy at a) PB Page 47 to 69) comprising the date wise transaction of sales and cash receipts. From perusal of these documents the cash sales and cash balance with assessee is duly apparent.

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b) Monthly summary of stock register were submitted along with submission dated 02.12.2019 (Copy of the same is at PB Page 108 to 120). From perusal of stock register, it is apparent that before making the sale the sufficient stock was available with assessee and genuineness of the same also not doubted by ld. AO.

c) Copy of assessment order of VAT submitted along with letter dated 26.12.2019 (Copy of the same is at PB Page 121 to 127). In this assessment order the sale of assessee accepted by VAT department.

4) Duly supported with the own previous history and trend of the assessee Thus the assessee duly substantiated its claim from the documentary evidence and also with the facts which duly supported with the own previous history and trend of the assessee duly accepted by the ld AO in this assessment order as well as in previous assessment orders. The assessee is engaged in the business of Jewellery and gold. In the trade of the assessee many of the customers usually pay in cash and as such, the assessee normally has sufficient cash balance throughout the year. The cash received against such cash sales is subsequently deposited into the banks from time to time as per his convenience & requirement of the assessee. The cash sale is regular feature of the assessee and the same is apparent from the cash book submitted during the course of assessment proceedings. a) Comparison of cash sales from previous year:- Thus from record it is apparent that cash sales & corresponding cash in hand have been a regular feature of the assessee’s business since the past several years. The same is clearly borne out from the comparative data of month wise cash sales as well as cash in hand of the year under consideration as well as of previous year and from comparison of the same it is clearly apparent that there is no major change in such trend. The cash receipts of/against sales in FY 2015-16 was of Rs. 2,45,73,510/- while in the FY 2016-17 the year under consideration the same was of Rs. 2,57,31,459/-, which is more or less similar to the previous year cash sales.

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The month to month sales varies due to demand in market because of sentiments of customers according to fluctuation in gold prices, festive seasons etc. which is not in control of the assessee. b) Comparison of cash in hand when at the end of October-2015 and Nov-15 Further, having the huge in cash in hand in not happened in this year only but the same happened in previous year also when at the end of October- 2015 and Nov-15 the assessee was having cash balance of Rs. 1.35 Crore and 1.08 crore respectively. c) Comparison of cash deposited in bank during the period 09/11/15 to 31/12/15 vis a vis 09/11/2016 to 31/12/2016 In previous year also during the period 09.11.2015 to 31.12.2015 the assessee deposited total cash of Rs. 1,23,00,000/- in his bank accounts and in compare to that during the period 09.11.2016 to 31.12.2016 the assessee deposited total cash of Rs. 1,41,32,000/- which is only 14.89% increased from previous year which is quite reasonable looking to the fact that overall sales of the assessee in compare to previous year have increased by Rs.6,63,12,037/- which is 59%. d) The contention of high cash sales is also supported by documents found in search:- It is further relevant to mention here that department has carried out search over the assessee on 03/04/2013 and the huge amount of cash sales was considered in the search assessment u/s 153A shown as under: -

AY Cash sales considered in assessment proceedings 09-10 70,19,73,650 10-11 33,07,00,180 11-12 32,21,16,054 12-13 32,50,47,797 13-14 1,67,89,43,997

e) Justification of higher sales in Oct 2016:-

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It is further relevant to brought in your kind notice that in the month of March-2016 and April-2016 there was strike of Jewellers for 42 days and during that period all manufacturing and trading work was temporary shutdown. Thereafter when the strike opened the marriage season was almost passed over, therefore the sales during first six month of the year effected badly. Further also when the business operations started after the strike due to increase in the gold prices the sale was not at good figure. Thereafter in the month of October-2016 the gold price was at lower side in comparison to previous three months and due to Diwali festival and marriage occasions the sale again boosted in this month, therefore the sales of October-2016 was comparatively at higher side. Thus this is the basis reason of sudden increase in the sales of this month in comparison to sales of same month in previous year. As in the month of October-2016 the price of gold decreased in comparison to previous few month and in the same moth the sales of festive season and marriage occasions started, therefore this resulted the dual benefit to the assessee and resulted the increase in sale. Therefore, persons who want to purchase Jewellery for their marriage ceremonies also purchased the jewellery in the October month looking to the lower prices of gold. f) The sales of assessee duly supported by the sale bill and invoice and duly verifiable form books of accounts including stock register:- The sales of assessee duly supported by the sale bill and invoice and duly verifiable form books of accounts including stock register, therefore, cannot be treated as abnormal and non-genuine. g) The assessee maintains regular books of account which were audited by reputed Chartered Accountant: - The assessee maintains regular books of account, which are audited by independent and reputed Auditor. The cash sales and the corresponding cash deposits in banks are duly reflected in books of the assessee in the respective years. The books of account and the entries pertaining to cash sales and cash deposits have been accepted by the Department in the assessments framed in the past years and also during this year (except to cash deposited in demonetized currency) and in subsequent year. The copy

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of assessment order of AY 2014-15 and AY 2018-19 are at PB Page 128 to 135. The audited financial statements form part of the regular returns filed by the assessee. The trend of cash sales and cash deposits existed in the past years as well as in the months prior & subsequent to the demonetization period. The entries pertaining to cash sales and corresponding cash deposits in banks were duly reflected in the books of account of the assessee. The audited books of account and the tax audit report for the impugned F.Y. 2016- 17 were also filed before the AO in course of the assessment proceeding and the sale for the other periods was accepted by the department. Sales shown by the assessee are fully backed with the sales bills, duly recorded in books of accounts and also in the stock register while on the other hand the ld. AO has not brought any material on record to establish that cash so deposited in bank account is undisclosed income of the assessee. h) The books of account not rejected and sales recorded in trading account were accepted by department: - The source of cash deposited in demonetized currency was sales made in cash and such sales was part of total sales credited in trading a/c and the assessee has already offered income on such sales in Trading Account by reducing the cost of sales from sales. The ld. AO accepted the sales shown in trading a/c as genuine and has not disturbed the cash sales so declared by Assessee. Thus, eventually on the one hand the ld. AO accepted the sales declared by the assessee and on the other hands the corresponding cash generated from such sale which deposited in bank a/c was treated as undisclosed income of the assessee. The ld AO is blowing hot and cold in same stream. The ld AO has not rejected the books of account of the assessee meaning thereby all the entries in the books of account recorded by the assessee is correct. Therefore, the separate addition for the sales recorded in the books of account cannot be made by treating the same as undisclosed income.

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i) Nothing incriminating was found in Survey over the assessee to show that the assessee was having any source of undisclosed income or sales of the assessee was not genuine:-

It is also relevant to mentioned here that in the wake of high cash deposited in demonetization currency, on 06.10.2017 the income tax department conducted survey u/s 133A of the Act at the business premises of the assessee. During the survey proceedings the department did not find any positive material/evidence to show that the assessee was having any source of undisclosed income or sales of the assessee was not genuine. The department did not find any unaccounted stock or excess cash in hand which shows that the assessee was carrying any unaccounted business activities. In the assessment order of AY 2018-19 (i.e. survey year) the addition of Rs. 1,13,941/- on account of alleged excess stock was made. This difference was also not on a/c of excess stock but the same was on a/c of weight difference in stock as taken by the survey party, which was not accepted by the ld. AO and blindly relying on the inventory of stock prepared by survey party this addition was made. The addition of Rs. 2865/- was made on a/c of alleged excess cash by not accepting the submission of the assessee such cash is saved with the assessee out of withdrawals made for household expenses. Thus, actually no excess stock and cash from the business premises of the assessee was found to survey party.

During the course of survey, no any positive material/evidence was found to prove that the cash deposited in demonetized currency was not from sales of goods but the same was from some other source. Had, the source of cash deposit in demonetized currency would be the undisclosed income of the assessee and not the sales made by assessee, then obviously during the course of survey the department must had found major discrepancies in to physical stock & cash with of the same as per books of accounts, which was not found. This also shows that the cash deposited in bank in demonetized currency is actually accumulated with assessee from

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the sales of previous period and the same was duly recorded in his books of accounts.

j) The other Jewellers experienced heavy cash sale in the evening of 08.11.2016, after the announcement of demonetization, but on this day the assessee could not make the sale of single penny as the showroom of the assessee could not be opened for customers.

It is also relevant to brought in your kind knowledge that before announcement of demonetization that on 7th or 8th November-2016 false ceiling of the showroom of the assessee fallen-down, which resulted shutting down the showroom of the assessee for counter sales. This was the reason that almost all the Jewellers experienced heavy cash sale in the evening of 08.11.2016, after the announcement of demonetization, but on this day the assessee could not make the sale of single penny as the showroom of the assessee could not be opened for customers. As a result of fallen down of false-ceiling the substantial renovation work got started in the month of November, which continued up-to January and only thereafter the showroom could be reopened for counter sales and thus after demonetization the cash sales could be started from February-2017. This implies that the business of the assessee was run with the same feature even after demonetization and there was no unusual trend in the cash sales or cash deposited in the banks during the demonetization period only. The fact that cash sales and cash deposits in banks are regular features of the assessee’s business (the cash deposited in pre demonetization period and post demonetization period) has not been controverted by the ld. AO and is clearly explicit from the data on record.

k) Addition is not based on evidences or positive material but on surmises and conjectures and with bias pre-set mind: - At the outset we would like to submit that from perusal of the assessment order it is explicit that impugned addition u/s 68 was made by the AO in the wake of demonetization and cash deposited in demonetized currency. Though the ld. AO was duty bound to examine the genuineness of sales and

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source of cash deposited in bank in demonetized currency but the same exercise was made with bias pre-set mind and with sole motive to treat the same as income of the assessee in any manner.

It is not the case of the revenue that assessee was not having the source of cash or has not shown the relevant stock register before the assessing officer or not having the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. The ld. AO did not make any enquiry on the material submitted by the assessee. She merely proceeded on presumption and assumption and make the addition on account of cash deposits without any reason.

She neither found any positive and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of bogus purchases, evidence of non-existing of stock as on the date of sales and non-existing cash in the books of account. The sales of the assessee is supported by the sales bill issued to customers and such sales bills are serially numbered. It cannot be denied that before announcement of demonetization the assessee was regularly making sales and issuing the sales bills to the customers, therefore the assessee was not having occasion for booking the bogus sales prior to announcement of demonetization as or such prior period the sales bills had already been issued. Therefore, it cannot be alleged that the assessee has booked the sales in backdate to generate the cash in hand because of the reason that the assessee could not change the sale bills issued prior to the date when the demonetization announced as the same had already been issued to the customers in the regular course of business in relation to sale made and without changing the sale bills of the previous dates the manipulation in sale is not possible. Therefore, addition for the source of corresponding cash in hand available with assessee, which deposited in bank in demonetize currency is merely on assumption, presumption and without any material.

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Thus ld. AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus. Merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law.

The assumption, presumption and pre set mind for addition is apparent from the assessment order which was framed on the basis of wrong or/and inappropriate facts and without considering the submission as well as facts of assessee in right perspective, which lead to wrong addition in the income of the assessee which was not supposed to be made. The same is apparent from the following: -

a) The amount deposited in demonetized currency out of cash balance with assessee as on 08.11.2016 is entirely added as income of the assessee presuming that as on this date the assessee did not holding any single disclosed SBN (Specified Bank Note). b) SBN (Specified Bank Note) was deposit out of the cash realized during the year for/against sales (which majorly made during the period from September-2016 to 07.11.2016) and the same was entirely added as income of the assessee by presuming that during these days i.e. more than 2 months the assessee has not carried out any business operations on these days and there was no regular cash sales of single penny on these days.

In view of above submission there cannot be any reason for disbelieving the genuineness of the sales of the assessee merely for the reasons that the cash so received immediately was not deposited in bank and the same only deposited after announcement of demonetization more so when the same is duly supported with sale bill, entries in genuinely accepted books of account and the assessee was having the sufficient stock for that much of sales.

L) In Vat assessment the sales declared by the assessee was accepted:-

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It is further most importantly relevant to mention here that the Commercial Taxs Department had accepted the sales of the assessee declared in its VAT returns as genuine, therefore there remains no reason to doubt the genuineness of part of such sale by the ld. AO. (Copy at PB page 121-127)

It is admitted position of law that no addition can be made in the income of the assessee only on the basis of suspicion. Suspicion howsoever strong but cannot partake the character of evidence. The reliance is placed on following decisions: -

i) Dhakeswari Cotton Mills Ltd vs. Commissioner of Income-tax [1954] 26 ITR 775 (SC) Case Law PB page 83-89 ii) Umacharan Shaw & Bros vs. Commissioner of Income-tax [1959] 37 ITR 271 (SC) Case Law PB page 90-85 iii) CIT vs. Kapil Nagpal, DBITA 609/2014 (Delhi HC) Case Law PB page 96-104 iv) Goyal Gases (P.) Ltd vs. Commissioner of Income-tax [1997] 94 TAXMAN 57 (DELHI) Case Law PB page 105-106

It is admitted position of law the suspicion can be initiating point for investigation but not the final basis of assessment/reassessment/addition.

i) PCIT v. Aditya Birla Telecom Ltd. [2019] 105 taxmann.com 206 (Bombay) Case Law PB page 107-112 ii) Rustagi Engineering Udyog (P.) Ltd vs. Deputy Commissioner of Income-tax [2016] 382 ITR 443 (Delhi). Case Law PB page 113-119 iii) Principal Commissioner of Income-tax vs. Meenakshi Overseas (P.) Ltd [2017] 82 taxmann.com 300 (Delhi) Case Law PB page 120-129

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iv) CIT vs. Shri Jawahar Lal Oswal, DBITA 49/1999 (Punjab & Haryana HC) Case Law PB page 130-142 v) Commissioner of Income-tax v. Neel Giri Krishi Farms (P.) Ltd. [2013] 218 Taxman 95 (Allahabad)(MAG.) Case Law PB page 143-146.

5) No addition of amount received against sales can be made u/s 68

The cash deposited in the demonetized currency added as income of the assessee by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in P&L account, therefore there is no occasion to again consider the same as income of the assessee by applying the provisions of section 68 of the Act. It is further relevant to mention here that if the intention of the legislature would be to apply the provisions of section 68 of the Act on the sale transactions also than it such case as per law it would be mandatory to have the identity, genuineness and creditworthiness of each buyer. But the law is not so and in case of sale below to certain limit the assessee was not required to prove all these ingredients of section 68 of the Act and even also in case of sale exceeding to certain limit the assessee is not required to prove the creditworthiness of buyer. Thus this also strengthen the contention of the assessee that the provisions of section 68 are not applicable on the transaction which are already credited in the P&L and the same can only made applicable on the cash credits such as loans, share application etc. It is an admitted fact that in the case of transactions of sales/purchases of goods/investments/assets the creditworthiness of the payee is not relevant for the receiver as the amount was received against the something sold to him, therefore such transactions cannot be examined with point of view of cash credits.

Hon’ble Rajasthan High Court in the case of Smt. Harshila Chordia vs Income-tax Officer APPEAL NO. 4 OF 2002 NOVEMBER 7,

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2006 [2008] 298 ITR 349 (Rajasthan) Case law Paper Book page 147-152 held that no addition could be made in respect of the amount standing in the books of the assessee, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them.

6) The name, address and PAN of the customers to whom cash sales was made is not furnished

As regarding to finding of the ld. AO that the name, address and PAN of the customers to whom cash sales was made is not furnished it is submitted that:-

a) It is not compulsory or mandatory under the I. Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit. It is voluntary to the customer to provide their personal information to the assessee while goods being sold. The assessee cannot enforce or compel to their customer to give their personal information and if the assessee would do it ruined to the business of the assessee.

b) Further in the preceding financial years, subsequent financial years and other periods of this same financial year, the same practice was being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. Therefore, due to non-furnishing of address and PAN of the customer, the sale made by the assessee cannot be doubted.

The cash sales of the previous months, previous years and next month or years was also made on the same trend with same set of particulars. Therefore, only the sales made and utilized for depositing the demonetized currency cannot be doubted for this reason.

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It is admitted fact that each transaction should be analyzed with the point of view of the businessman, generally prevailing practice in the trade and its acceptability in the eye of law. A transaction cannot be treated as non-genuine for wants of the details which are not required to obtain and keep as per the law.

The reliance is placed on the following decisions: -

i) Hon’ble High Court of Bombay in the case of R.B. Jessaram Fatehchand (Sugar Dept.) v/s Commissioner of Income Tax [1970] 75 ITR 33 (Bombay) Case law Paper Book Page 153-156 held that :- Section 145 of the Income-tax Act, 1961 [Corresponding to section 13 of the Indian Income-Tax Act, 1922] - Method of accounting - Rejection of accounts - On assessee's inability to supply addresses of purchasers who purchased goods on cash, ITO rejected assessee's books of account showing result in respect of cash sale transactions, and made addition - AAC deleted additions but Tribunal restored ITO's orders - Whether there was no necessity whatsoever for assessee to maintain addresses of cash customers - Held, yes - Whether, therefore, rejection of book results of assessee was unjustified - Held, yes - Whether, consequently, additions made to assessee's income were liable to be deleted - Held, yes ii) Hon’ble ITAT Jaipur Bench in the case of ACIT Circle-1 Jaipur Vs M/s Uttam Chand Deshraj (ITAT Jaipur Bench ITA No 419/JP/2010 Order dated 25/03/2011) Case law Paper Book Page 157-158 has made following findings as regard cash sales.

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“Making some sales in cash is also no ground for rejecting the books of account. There should be some material that cash sales made by assessee either on account of sale on a lower price or sale made out of the material which is not shown in the books of account. There is no instance that cash sales have been made on lower rate than prevailing market price. In view of these facts and circumstances, we hold that there was no justification in rejecting the books of account and disturbing the trading result.”

3) Kishore Jeram Bhai Khaniya, Proprietor, M/s Poonam Enterprises v. ITO ITA No. 1220/Del/2011 ITAT Delhi Judgement dated 13.05.2014) Case law Paper Book Page 159-167 The Hon’ble Tribunal held that We find that so long as the availability of stock in there and there is nothing adverse against the cash memos issued by the assessee, such cash sales cannot be doubted. Here it is pertinent to note that the volume of such cash sales at Rs.22.06 is to be seen in the light of assessee’s total turn- over of Rs.10.29 crores. It is but natural that if a customer makes cash purchase and lifts the goods, there is no duty cast upon the seller to insist for the address of the purchaser. In the light of the fact that stock record was available with the assessee, which evidenced the making of sale, we fail to appreciate as to how any addition can be made by treating cash sales as bogus………………………………….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

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

7) The submission on the findings/observations of ld. AO, which expressly not covered in the forgoing paras is as under: -

i) So far as finding in Point No. 2 at page 3 it is submitted and also apparent from detail submitted hereinabove the amount deposited in cash in demonetized currency was accumulated with assessee from the sales made up to 07.11.2016 and not out of the sales made in the month November (period after demonetization) and in the month of December-2016. In this para the ld. AO misconceived the actual facts of the case.

ii) Regarding the finding of ld. AO in para 4.4 (Page 5 of the assessment order), it is relevant to mention here that the corresponding sales, from which the cash generated with assessee, which deposited in bank a/c in demonetized currency, was part of total sales credited in trading a/c. The ld. AO accepted the sales shown in trading a/c as genuine and did not disturbed the cash sales so declared by Assessee. Thus, on the one hand the ld. AO accepted the sales declared by the assessee and on the other hands the corresponding cash generated from such sale and deposited in bank a/c was treated as undisclosed income of the assessee. So far as non- depositing the cash in bank a/c prior to demonetization it is relevant to mention here that there is no bar in the law that the assessee cannot hold the cash and he was supposed to deposit the same in bank immediately. The decision to kept the cash in hand or to deposit on bank is decision of the person who is dealing to such affairs and the department cannot put its step into the decision of businessman. The fact remains that the corresponding source of such cash i.e. sales is genuine, the cash was deposited out of cash balance in his audited

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books of accounts and the ld. AO has been accepted such sales being the part of trading a/c.

4.1.3 (d) In support of our submission given in paras hereinabove the reliance in this connection is placed on following judgements: -

i) In support of our submission reliance is placed on following judgements: -

1) 2021 (5) TMI 447 - ITAT Visakhapatnam Asst. Commissioner of Income Tax, Central Circle-1 Visakhapatnam Versus M/S Hirapanna Jewellers And (Vice-Versa) Case Law Paper Book 181- 184

Addition u/s 68 r.w.s 115BBE - assessee had deposited the sum in high denominations of specified bank notes (SBNs) post demonetization - CIT-A deleted the addition - HELD THAT:- The assessee produced the newspaper clippings of The Hindu, The Tribune and demonstrated that there was huge rush of buying the jewellery in the cities consequent to declaration of demonetization of ₹ 1000 and ₹ 500 notes on 08.11.2016.

As 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 [2010 (4) TMI 1070 - DELHI HIGH COURT] and Vishal Exports Overseas Ltd. [2012 (7) TMI 1110 - AHMEDABAD HIGH COURT]

2) ITAT Delhi in Argon Global Pvt Ltd vs ACIT CC-28, Delhi ITA No 3741-3746/Del/2019 order dated 31/10/2019 case Law Paper Book Page No 258-321.

20 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

Finding of ITAT 1. Firstly, ITAT observed that both the Assessing Officer and Ld. CIT (A) erred in deeming the total cash deposits during the demonetization period (9th Nov 2016 to 30th Dec 2016) as Rs. 180.53 Cr instead of the actual deposits of Rs. 175.28 cr during the said period. While arriving at the said figure of Rs. 180.53 crores, the Revenue Authorities had erroneously considered the total cash deposits of Rs. 5.25 crores (made on 31st Dec 2016) instead of the actual cash deposited during the demonetization period of Rs. 175.28 Cr.

The assessee also submitted that that in the same bank assessee has deposited cash in its 2 different branches which itself proves that the banks were not accepting such a huge deposit.

Even otherwise, it was submitted correctly that merely because the cash holding as on 8/11/2016 was not deposited immediately cannot lead to conclusion that assessee did not have that cash.

It can merely lead to a suspicion but based on this addition cannot be made without making further enquiry and conclusively proving that assessee did not have that kind of cash available with it.

Even otherwise, if the assessee had to introduce his unaccounted money he would have deposited it at the first instance.

21 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

In appeal by the Revenue, the Hon'ble High Court Pr. CIT (Central)-3 V/s M/s Agson Global Pvt. Ltd. In ITA No. 68-73/2021 order dated 19-01- 22 [Case Law Paper Book 322-374] dismissed the bunch of appeals filed by the Revenue by observing in para 17.6 as under:

“17.6. Having regard to the extensive material which has been examined by the Tribunal, in particular, the trend of cash sales and corresponding cash deposited by the assessee with earlier years, we are of the view that there was nothing placed on record-which could have persuaded the Tribunal to conclude that the assessee had, in fact, earned unaccounted income i.e., made cash deposits which were not represented by cash sales. Therefore, in our opinion, the Tribunal correctly found in favour of the assessee and deleted the addition made by CIT(A) of Rs.73.13 crores, under Section 68 of the Act.”

3) ITAT Chandigarh in the case of Smt Charu Agarwal & M/s Kalanidhi Jewellers Vs DCIT ITA No 310 & 311/Chd /2021 order dated 25/03/2022

[Case Law Paper Book 375-444]

The findings of Hon’ble ITAT is in para 10 of the order. Hon’ble ITAT after considering the decision of the Hon’ble Delhi High Court in the case of Pr. CIT (Central)-3 V/s M/s Agson Global Pvt. Ltd. In ITA No. 68-73/2021 and various other High Courts and decision of Hon’ble ITAT Vishakhapatanam

22 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

Bench on identical issue in the case of ACIT v/s Hirapanna Jewellers (2021) 128 Taxmann.com 29 held that the assessee was maintaining complete stock tally, the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified.

Sales made by the assessee to cover the cash deposited in the bank post demonetization, was sufficient source of the cash deposited i.e; the sales from the existing stock available with the assessee and was well explained, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. - Decided in favour of assessee.

4) 2021 (1) TMI 837 - ITAT Gauhati Nurul Islam Versus Ito, Ward-2, Nagaon) Case Law paper Book page 185-186

Addition u/s 68 - Cash deposits of special Bank notes of ₹ 500/- and ₹ 1000/- made during the demonetization period - According to Ld. A.R, a perusal of bank statement would reveal that there were regular bank deposits of cash and payment to the creditors (tea vendors) - HELD THAT:- As explained, the deposit of ₹ 8,75,000/- [₹ 2,00,000/- accepted by AO] cannot be said to be as result of non-genuine business receipt or a case of black money and therefore, in the peculiar facts narrated above, including the past history taken note of and the pattern of money deposited pre-demonetization and post that event as discussed, addition was not warranted and it is directed to be deleted; and further, profit embedded in ₹ 8,75,500/- need to be taxed @ 8% and it is ordered accordingly. Appeal of the assessee is partly allowed.

5) 2021 (12) TMI 599 - ITAT Bangalore Anantpur Kalpana Versus Ito, Ward – 1, Koppal.

23 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

Unexplained cash deposits in two bank accounts - Legal tender money in demonetization of currency - AO culled out, the deposits that was made of bank notes that were declared as not legal tender owing to demonetization of currency - HELD THAT:- Both AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. Addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation.

Assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources.

As in the case of CIT Vs. Associated Transport Pvt. Ltd. [1994 (1) TMI 18 - CALCUTTA HIGH COURT] on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources.

When cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee 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 - See M/S HIRAPANNA JEWELLERS AND (VICE-VERSA) [2021 (5) TMI 447 - ITAT VISAKHAPATNAM] - thus

24 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

the addition made is not sustainable and the same is directed to be deleted. Appeal of the assessee is allowed.

6) 2021 (2) TMI 737 - ITAT Gauhati Nilkantha Saha Versus ITO, Ward-Morigaon

Unexplained cash credit u/s 68 - cash deposited during the demonetization period - AO acknowledges that the assessee has filed audited accounts and produced copy of the ledger of the sales and purchases along with copy of the books related to the purchase and sales made by the assessee without supporting bills and invoices - HELD THAT:- As brought to notice by the Ld. A.R that assessee is into dry fish business and his accounts are audited for the last seven (7) years. - the profit embedded in sales amount has been accepted by the AO, so, question is whether separate addition is justified and whether this action of AO amounts to double addition of the same trading receipt.

No doubt in such a factual scenario, it amounts to double addition. When the justifiability of separate addition is to be examined, it should be borne in mind that the AO is making a ‘guess’ about the source of demonetized currency. And the assessee is assailing the ‘guess work’ with an explanation which should be tested; and if the explanation given by the assessee is a plausible/probable from a traders/business man’s/prudent man’s angle/view, then that cannot be brushed aside by the AO, without disproving the explanation / facts or by giving cogent reasons.

Statement of bank accounts of assessee (3 bank accounts) it is noted that assessee has deposited in his three bank account (pre- demonetization) an amount to the tune of ₹ 2,38,94,037/- and during (Post-demonetization period) the assessee had deposited to the tune of ₹ 2,38,94,037/- and it is found that the total bank deposit tallys with the figure shown in trading account i.e., ₹ 4,76,78,990/- (₹ 4.76

25 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur. crores). So taking into account all these facts and circumstances and demonetization being declared on the night of 8/9th November, 2016, it is noted that AO has accepted the invalid currencies to the tune of ₹ 11,08,796/- because it was shown by the assessee in his regular books maintained as on 08.11.2016. The assessee’s explanation in respect of ₹ 12,41,704/- is that it is the amount which has been deposited by the sundry debtors as on 08.11.2016 which is found to be correct for the reason that the sundry debtors as on 08.11.2016 was to the tune of ₹ 14,93,120/- as is evident from the list of sundry debtors .

So on the same reasoning as adopted by the AO to have accepted ₹ 11,08,796/- (invalid currency notes) as genuine (trade receipt), I find no reason not to accept the explanation of assessee that ₹ 12,41,704/- was deposited by the sundry debtors reflected in the books as on 08.11.2016. And since the AO has accepted the sales/turnover of the assessee which were reflected in the audited books of accounts, as well as the explanation of assessee is supported by material on record, the AO/Ld. CIT(A)’s action of addition of ₹ 12,41,704/- cannot be countenanced. So on this factual finding the assessee’s explanation regarding ₹ 12,41,704/- is plausible. And it is noted that the AO / Ld. CIT(A) / Ld. D.R could not disprove or controvert this fact and so it is accepted. In the aforesaid facts and circumstances, the assessee depositing invalid notes to the tune of ₹ 12,41,704/- cannot be dis- believed as from any tainted source or termed as black money. So taking into consideration the peculiar over all facts and circumstances discussed supra, it is directed that the addition of ₹ 12,41,704/- be deleted - Appeal of the assessee is allowed.

7) Lalchand Bhagat Ambica Ram Vs. CIT (1959) 37 ITR 288 (SC)) Case Law paper Book page 187-199

which is set in somewhat similar back drop in connection with treatment of the encashment of high denomination notes by the assessee therein on the promulgation of High Denomination Bank

26 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

Notes (Demonetization) Ordinance, 1946as unexplained money on mere conjecture and surmise of the Revenue Authorities. The relevant facts of the said case are that the ITO in the course of the assessment noticed that the appellant therein had encashed high denomination notes of the value of ₹ 2,91,000. The ITO asked for an explanation, which the appellant gave stating that these notes formed part of its cash balances including cash balance in the Almirah account. The appellant sought to prove the fact that the high denomination notes encashed by it formed part of its cash balances from certain entries in its accounts wherein the fact that moneys were received in high denomination notes had been noted. Portions of these entries to the effect that moneys had been received in high denomination notes were found by the ITO to be subsequent interpolations made by the appellant with a view to advance its case that the cash balances contained the high denomination notes encashed by it. The ITO rejected the appellant's explanation that the high denomination notes formed part of its cash balances and treated the sum of ₹ 2,91,000 as the appellant's secreted profits from business and included it in its total income and assessed the appellant. Before the Tribunal, the appellant stated that the said entries were made in sheer nervousness after the coming into force of the High Denomination Bank Notes (Demonetization) Ordinance, 1946, on 12th Jan., 1946, as the appellant did not know that it had specific proof in its possession of having the high denomination notes as part of its cash balances. The Tribunal held that there was no other reason to suspect the genuineness of the account books in which these interpolations were made. If the entire account books were fabricated to serve its purpose, there would be no need for the appellant to make interpolations between the lines already written in a different ink and in such an obvious manner as to catch one's eye on the most cursory perusal. The Tribunal, however, examined the cash book and taking into consideration all the circumstances which had been adverted to by the ITO held that the appellant might be expected to have possessed as

27 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur. part of its business cash balance of at least ₹ 1,50,000 in the shape of high denomination notes on 12th Jan., 1946, when the Ordinance above-mentioned was promulgated. The Tribunal came to the conclusion that the nature of the source from which the appellant derived the remaining 141 high denomination notes of ₹ 1,000 each remained unexplained to its satisfaction. It accordingly ordered that the addition be reduced from ₹ 2,91,000 to ₹ 1,41,000. On the said facts, the Hon’ble Supreme Court held that–the Tribunal having held that books of assessee were genuine which showed a cash balance of ₹ 3,10,681 on the relevant date; the Tribunal could not have accepted the cash balance of ₹ 1,50,000 out of the value of high denomination notes of the value of ₹ 2,91,000 and treated the balance ₹ 1,41,000 as income from undisclosed sources. It was held that in doing so, The Tribunal had indulged in conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained. The relevant excerpts from the order of the Hon’ble Apex Court are reproduced hereunder:

If the entries in the books of account in regard to the balance in Rokar and the balance in Almirah were held to be genuine, logically enough there was no escape from the conclusion that the appellant had offered reasonable explanation as to the source of the 291 high denomination notes of ₹ 1,000 each which it encashed on 19th Jan., 1946. It was not open to the Tribunal to accept the genuineness of these books of account and accept the explanation of the appellant in part as to ₹ 1,50,000 and reject the same in regard to the sum of ₹ 1,41,000.Consistently enough, the Tribunal ought to have accepted the explanation of the appellant in regard to the whole of the sum of ₹ 2,91,000 and held that the appellant had satisfactorily explained the encashment of the 291 high denomination notes of ₹ 1,000 each on 19th Jan., 1946. [para 14]

28 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur. The Tribunal, however, appears to have been influenced by the suspicions, conjectures and surmises which were freely indulged in by the ITO and the AAC and arrived at its own conclusion, as it were, by a rule of thumb holding without any proper materials before it that the appellant might be expected to have possessed as part of its business, cash balance of at least ₹ 1,50,000 in the shape of high denomination notes on 12th Jan., 1946,-a mere conjecture or surmise for which there was no basis in the materials on record before it. [para 15]

Unless the Tribunal had at the back of its mind the various probabilities which had been referred to by the ITO it could not have come to the conclusion it did that the balance of ₹ 1,41,000 comprising of the remaining 141 high denomination notes of ₹ 1,000 each was not satisfactorily explained by the appellant. [para 18]

If the entries in the books of account were genuine and the balance in Rokar and the balance in Almirah on 12th Jan., 1946, aggregated to ₹ 3,10,681-13-9 and if it was not improbable that a fairly good portion of the very large sums received by the appellant from time to time, say in excess of ₹ 10,000 at a time, consisted of high denomination notes, there was no basis for the conclusion that the appellant had satisfactorily explained the possession of ₹ 1,50,000 in the high denomination notes of ₹ 1,000 each leaving the possession of the balance of 141 high denomination notes of ₹ 1,000 each unexplained. Either the Tribunal did not apply its mind to the situation or it arrived at the conclusion it did merely by applying the rule of thumb in which event the finding of fact reached by it was such as could not reasonably be entertained or the facts found were such as no person acting judicially and properly instructed as to the relevant law could have found, or the Tribunal in arriving at its findings was influenced by irrelevant considerations or indulged in

29 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

conjectures, surmises or suspicions in which event also its finding could not be sustained. [para 19]

As the conclusion of the ITO was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb came to the conclusion that the possession of 150 high denomination notes of ₹ 1,000 each was satisfactorily explained by the appellant but not that of the balance of 141 high denomination notes of ₹ 1,000 each.[para 20]

Therefore, the Tribunal in arriving at the conclusion in the present case indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and the Court is entitled to interfere. [para 23]

8) Hon’ble Supreme Court in the case of Mehta Parikh & Co. V/s. CIT 1956) 30 ITR 181 held as under:) Case Law paper Book page 200- 207

“The finding of the Tribunal that high denomination notes of the value of ₹ 30,000 represented the concealed profits of the appellant is not supported by any evidence, and is, in consequence, erroneous in point of law and liable to be set aside. The accounts of the appellant have been accepted by the Tribunal as genuine, and it is impossible to say, having regard to the cash balance shown therein, that notes in question could not have been included therein. The Tribunal observes that it is unlikely that so many high denomination notes would have been held as part of the cash on hand for a such a large number of

30 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

days. That, no doubt, is highly suspicious; but the decision of the Tribunal must rest not on suspicion but on legal testimony.”

9) Lakhmi chand Baijnath V. CIT [1959] 35 ITR 416 (SC).)

Case Law paper Book page 208-211

Amount credited in business books can normally be presumed as business receipt. When an amount is credited in business books, it is not an unreasonable inference to draw that it is a receipt from business

10) Hon’ble Allahabad High Court in the case of Sri Ram Tandon Vs. CIT (1961) 42 ITR 689 ordained as under: Case Law paper Book page 212-216

“It appears extremely difficult to appreciate how the Tribunal thought it necessary or proper to make an estimate of 35 notes at ₹ 1,000 each to have been contained in the cash balance. The Tribunal has given no reason whatever for its finding that the assessee possessed 35 notes of ₹ 1,000 each on the day the Ordinance was promulgated. This evidently is an arbitrary expression of its own guess, which cannot be accorded the status of a finding. Equally arbitrary is the other finding that the balance of 10 notes was from an undisclosed source. After having heard counsel for the Department and after giving best consideration to the matter one is quite unable to see any reason or basis for the so called finding recorded by the Tribunal that the assessee was in possession of 35 notes on the day the Ordinance was promulgated or that 10 notes were from some undisclosed source. These cannot be recognised as finding at all. The assessee's business was not one in which large amount of petty notes might have been necessary for the purpose of business, and keeping money in large notes is evidently more convenient for counting, for making payments and for other purposes and no material has been placed to

31 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

show that the explanation offered by the assessee was one which was inherently improbable or one which could not be accepted. The so- called estimate made by the Tribunal was based on no reason and was a mere guess. In fact there was no justification in the circumstances of the case for making an estimate at all. The assessee had a large cash balance which could very conveniently include the 45 high denomination notes encashed by him. The explanation offered by the assessee was not unreasonable and nothing has been said which could justify its being rejected as unreasonable. On the other hand the so-called estimate by the Tribunal is based on no reason and is purely arbitrary and cannot be upheld as legal.”

11) Hon’ble Allahabad High Court in the case of Kanpur Steel Co. Ltd. Vs. CIT (1957) 32 ITR 56 (All) opined as under: Case Law paper Book page 217-219

“when the assessee-company had given an explanation which was reasonable, the IT authorities could have been entitled to treat the sum of ₹ 32,000 as income from undisclosed sources only if there was some other material from which such inference could have been drawn. No other material has been mentioned by the Tribunal in their appellate judgment or in the statement of the case. It further appears that the Tribunal, in holding that seven high denomination currency notes of the value of ₹ 7,000 only could form part of the cash balance and the remaining currency notes could not do so, were acting on their surmises for which there was no basis and which had no support from any material on the record. In these circumstances, it must be held that there was no material for holding that the sum of ₹ 25,000 being the value of high denomination currency notes exchanged in pursuance of the High Denomination Bank Notes (Demonetisation) Ordinance, 1946, represented income of the assessee company from some undisclosed sources.”

32 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

12) Madhuri Das Narain Das Vs. CIT (1968) 67 ITR 368 (All) Case Law paper Book page 220-221

Section 4 of the Income-tax Act, 1961 [Corresponding to section 3 of the Indian Income-tax Act, 1922] – Income – Chargeable as – Assessment year 1947-48 – Assessee encashed 28 high denomination notes of Rs. 1,000 each after issuance of High Denomination Bank Notes (Demonetisation) Ordinance, 1946 – When asked to explain source of said notes, assessee submitted that same had come out of closing cash balance of its business – ITO disbelieved explanation and treated entire amount as assessee’s income from an undisclosed source – Tribunal accepted that 22 notes could have come out of cash balance of Rs. 38,000 and odd, and remaining 6 notes could not have formed such balance – Whether finding of Tribunal, being based upon surmises and conjectures, could not be upheld – Held, yes

13) K.S. KannanKunhi Vs. CIT (1969) 72 ITR 757

Case Law paper Book page 222-224

Thus we find that the Income-tax Officer and the Appellate Assistant Commissioner also have not considered the acceptability or otherwise of the assessee's explanation, except making an assertion that it was not acceptable. The other important aspect, namely, whether, on the facts and in the circumstances of the case, it should be inferred that these amounts constituted income of the previous year, though the explanation offered by the assessee was not acceptable, did not receive the consideration of the Appellate Tribunal or the subordinate authorities. Except some agricultural properties, whose annual income came to about Rs. 6,000 according to the assessee, it had no known source of income in India, until it started the toddy business on August 17, 1950. Nor is there any material in the case even to raise a reasonable suspicion that the assessee indulged in any activity of an income-earning nature in the

33 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

accounting year or in prior years. In these circumstances, a finding that the sum of Rs. 60,518 found with the assessee must be its income from undisclosed sources during a period of about seven and a half months prior to August 17, 1950, appears a little preposterous. Whatever it may be, the explanation offered by the assessee was not on the face of it improbable, though it is entirely a matter for the fact- finding authority to accept it or not. But if the Appellate Tribunal rejects the explanation without considering its acceptability in the light of the facts and circumstances of the case, or it rejects the explanation without stating any grounds whatsoever, or upon a view of facts which could not reasonably be entertained by any person acting judicially, the case would fall within the principle laid down by the Supreme Court in Mehta Parikh & Co.'s case (supra), and the finding of the Tribunal would not be valid. In our view, the same is the position in this case; the addition of Rs. 60,813 as the income of the assessee from undisclosed sources was not valid or justified.

14) Hon'ble Supreme Court in the case of CIT vs Devi Prasad Vishwnath Prasad (1969) 72ITR194 (SC) Case Law paper Book page 225-228

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.

15) Hon’ble High Court of Allahabad in the case of Gur Prasad Hari Das vs Commissioner of Income Tax [1963] 47 ITR 634 (Allahabad) Case Law paper Book page 229-231

Section 143 of the Income-tax Act, 1961 [Corresponding to section 23(3) of the Indian Income-tax Act, 1922] - Assessment – Addition to income - Assessment year 1947-48 – On demonetisation of high denomination notes assessee encashed 21 such notes, part of

34 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

which were held, by Tribunal as his income from undisclosed sources on ground that same could not be satisfactorily explained by assessee – Whether, prima facie value represented by high denomination notes in possession of assessee must be presumed to be part of his cash balance and if department wanted to treat such value as his concealed income from some undisclosed sources, it was for department to establish that fact on basis of material in their possession – Held, yes – Whether in view of fact that Tribunal accepted assessee’s case at least with regard to eight notes and further that it made its own estimate of cash balance of assessee confining some proportion of high denomination notes implying thereby possibility of assessee receiving such notes during course of his business, Tribunal committed an error in not accepting assessee’s explanation in toto in regard to all notes – Held, yes – Whether, in view of aforesaid, there was no material before Tribunal for holding that assessee could not have been in possession of any of remaining thirteen notes also and that those notes or any part of them represented income of assessee from some undisclosed sources – Held, yes

16) Hon’ble High Court of Bombay in the case of Narendra G Goradia vs Commissioner of Income Tax [1998] 101 Taxman 571 (Bombay)/[1998] 234 ITR 571 (Bombay)/[1999] 154 CTR 365 (Bombay)

Case Law paper Book page 232-237

Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1979-80 - In relevant period assessee had tendered notes of Rs. 1000 denomination valuing Rs. 2 lakhs for encashment - There was no dispute about source of money nor about fact that there was sufficient balance on date of deposit - Assessing Officer, however, made additions of part of amount for want of details of receipts of some of high denomination notes - Whether there was no

35 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

justification for adding a portion of amount tendered by assessee for encashment of high denomination notes as income of assessee from undisclosed sources for alleged failure of assessee to furnish source of acquisition of amount in such notes - Held, yes

17) CIT v. Vishal Exports Overseas Ltd., Tax Appeal No. 2471 of 2009 decided by Gujarat High Court on 03.07.2012

Case Law paper Book page 238

In the facts of above case the assessee was an exporter. The issue was regarding sale of Rs.70 lacs included in turn-over which was more than 500 crores. The assessee had claimed deduction u/s 80HHC of the Act. On the basis of information received by the Assessing Officer from investigation he considered the entry for export of 70 lacs as bogus. He denied benefit u/s 80HHC of the Act. Further, he made addition of Rs. 70 lacs in the income u/s 68 of the Act. It was held that once the assessee has already included the amount of sale of Rs. 70 lacs in Profit and Loss Account and determined the income on that basis no further addition could be made u/s 68 of the Act as it would tantamount to double taxation of same income. The Assessing Officer could only reject claim u/s 80HHC of the Act.

18) CIT v/s. Kailash Jewellery House ITA No. 613/2010 decided by Delhi High Court on 09.04.2010 Case Law paper Book page 239

In the facts of above case cash of Rs.24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no

36 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that 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. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department. Promulgated

19) 2021 (10) TMI 1139 - ITAT DELHI Neeru Jain Versus Ito, Ward-67 (4) Delhi Case Law paper Book page

Addition u/s 69A - Cash deposits during the demonetization period - Assessee submitted that the savings were out of accumulated savings in the form of pin money and minor cash gifts received by her from her parents and in-laws on the occasion of birthdays, anniversaries etc. - HELD THAT:- CIT(A) grant relief to ₹ 50,000/- and upheld the addition to the extent of ₹ 2,00,000/-. Before us, assessee has submitted that the deposits to be out of accumulated savings and out of the cash gifts received by her on the occasion of birthdays and anniversaries. It is also a fact that assessee's husband is an income tax payer working for an MNC.

In view of the CBDT Circular vide Instruction No. 03/2017 dated 21st February 2017 and relying on the decision of SMT. UMA AGRAWAL BABA KAPUR SUNARAN KA MOHALLA VERSUS I.T.O –1 (3) GWALIOR, M.P. [2021 (6) TMI 712 - ITAT AGRA], the explanation of the assessee about the source of cash deposits cannot be brushed aside without there being any evidence to the contrary.- Decided in favour of assessee.

20) 2021 (9) TMI 1192 - ITAT VISAKHAPATNAM DY. Commissioner Of Income Tax Circle-3 (1) Visakhapatnam Versus Sri Jaya Prakash Babu Valluri And (Vice-Versa)

37 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

Cash deposits made during demonetization period, which was added back to income u/s 69A - HELD THAT:- CIT(A) observed that the assessee is maintaining regular books of accounts and the deposits were made out of the book balances and therefore, following the decision of Karthik Constructions [2018 (3) TMI 39 - ITAT MUMBAI] the Ld. CIT(A) held that there is no case for making the addition, accordingly deleted the addition.

21) 2021 (9) TMI 627 - ITAT DELHI Muon Computing P. Ltd., Versus Ito, Ward-17 (2) , New Delhi.

Addition of high cash in hand - high cash on hand disclosed in the balance sheet as compared to the preceding year - HELD THAT:- Revenue has not brought any material suggesting that the withdrawal made by the assessee were utilized for making payments. It is also not brought on record that the amounts so withdrawn from the bank account was utilized for any other undisclosed purposes - CIT(A) observed that despite having sufficient cash in hand, the assessee withdraw the amount. It is correct that the assessee has withdrawn higher amounts than the immediate preceding years but that cannot be sole reason for making addition purely on the basis of suspicion.

We failed to understand the reasoning of the Assessing Officer that the amount was withdrawn to justify the cash deposits during demonetization period i.e. between 09.11.2016 to 30.12.2016. It is also seen that the cash was withdrawn much prior to such event. So far observation regarding sharp increase in payable expenses is concerned, there is no finding by the Assessing Officer that such expenses are bogus - addition has been made purely on the basis of suspicion. Such action of authorities below cannot be affirmed - Decided in favour of assessee.

4.1.3 (e) Drawing inference from the above cited cases, in the instant case, the assessee furnished a reasonable explanation with regard to the nature and source of the

38 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

cash deposited in banks in demonetized currency which was not found to be false by the Department. The explanation offered by the assessee was in line with the trend of cash deposits in the past years which was accepted by the Department in the assessments framed u/s 143(3) of the Act in the past and future. No material was brought on record by the Revenue Authorities to draw an inference that the explanation offered by the Assessee was incorrect or unreasonable or that the impugned sum represented income of the assessee from undisclosed sources as against the entries recorded in the audited books of the Assessee. The cash deposited in banks against from the explained source could not be treated as undisclosed income of the Assessee u/s 68 without bringing on record any credible evidence/material in support of such allegation merely on the basis of surmises and conjecture of the ld. AO.

4.1.3 (f) Ld AO made addition u/s 68 just to levy huge tax by applying the provisions of section 115BBE

As stated in the forgoing paras the whole purpose of the ld. AO is to somehow trigger the provisions of section 115BBE read with section 68 of the Act to the income already offered for tax by the assessee (as cash sales) at a higher rate of tax of 77.25% (i.e. flat rate of 60% plus surcharge @ 25% on such tax and cess as applicable) on gross basis (without any deduction/allowance). Section 115BBE of the Act is a machinery provision to levy tax on income and it should not enlarge the ambit of section 68 of the Act to create a deeming fiction to tax any sum already credited/offered to tax as income. Section 68 of the Act traditionally applies to unexplained ‘cash credit’ like loans, deposits, advances, share capital, etc. and not to sums already offered to tax as income by the assessee in its return of income at the highest slab rate. Such recourse is unwarranted keeping in mind the objective to introduce section 115BBE of the Act was only to curb the practice of laundering of unaccounted money by taking advantage of the basic exemption limit. The reason and purpose of the provision was explained by the explanatory memorandum to the Finance Bill 2012 as under:-

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1) “Under the existing provisions of the Income-tax Act, certain unexplained amounts are deemed as income under section 68, section 69, section 69A, section 69B, section 69C and section 69D of the Act and are subject to tax as per the tax rate applicable to the assessee. In case of individuals, HUF, etc., no tax is levied up to the basic exemption limit. Therefore, in these cases, no tax can be levied on these deemed income if the amount of such deemed income is less than the amount of basic exemption limit and even if it is higher, it is levied at the lower slab rate.

2) In order to curb the practice of laundering of unaccounted money by taking advantage of basic exemption limit, it is proposed to tax the unexplained credits, money, investment, expenditure, etc.,which has been deemed as income under section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of 30% (plus surcharge and cess as applicable). It is also proposed to provide that no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of the Act in computing deemed income under the said sections. This amendment will take effect from 1st April, 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years.”

Thus, the intention of the Legislature behind introduction of section 115BBE was not to bring to tax genuine receipts already offered to tax as income by the Assessee at higher tax rates. Such an interpretation would lead to recurring attempts on the part of the revenue authorities to reject genuine explanations offered by the assessee with respect to sums credited/offered as income in its books as unsatisfactory solely to extort higher rates of taxes thereon u/s 115BBE of the Act. The A.O in exercising his powers u/s 68 of the Act is not vested with unfettered powers to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjecture. The AO is bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by the taxpayer. From the facts of the case at hand, it is clear that

40 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

the A.O has acted unreasonably and capriciously in rejecting the genuine explanations offered by the Assessee in respect of the impugned cash deposits as unsatisfactory solely with the aim of fastening exorbitant tax liability on the assessee under the garb of unexplained cash credit u/s 68 of the Act. Such recourse primarily hedged on surmises, conjecture, assumptions, presumptions and whims of the ld. AO is clearly unwarranted and the additions so made is unsustainable in the eyes of law and thus deserves to be quashed.

The ld. AO while making the impugned addition u/s 68 and rejecting the explanation offered by the Assessee with respect to the nature and source of the cash deposited in bank accounts during the demonetization period in demonetized currency and have acted merely on surmises, conjectures, suspicion, presumptions and assumptions. The humble submissions of the assessee highlighting the glaring internal inconsistencies in the orders of the ld. AO the repeated violations of the provisions of law by them are as under:

i) The AO has treated the cash deposited in the banks during the demonetization period in demonetized currency as unexplained cash credits u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales etc. is patently evident from the entries in the audited books of account of the Assessee.

ii) It is not the case of the Department that the cash deposited in the banks during the demonetization period was in excess of what was available in the cashbooks. The fact that the cash deposits in banks were sourced out of cash sales is evident from the entries in the cashbooks.

iii) The books of account of the Assessee have been audited by an independent reputed auditor. The cash sales & receipts are duly supported by relevant bills, which were produced before the AO in

41 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

course of the assessment proceedings, and nothing adverse in connection therewith was noted by the A.O.

iv) The fact that cash sales and corresponding cash deposits in banks have been regular feature of the assessee’s business over the past several years has not been denied by the A.O. In fact, in the past, the AO after conducting a detailed scrutiny of books of account of the assessee and after arriving at complete satisfaction with respect to the correctness of the entries recorded therein1accepted the cash sales and corresponding cash deposits in banks in the assessments framed u/s 143(3) of the Act. Thus, there is no reason why similar modus operandi, which continued in the current F.Y. 2016-17 (A.Y. 2017-18), should not be accepted by the AO and rejected on mere surmises and conjecture of the A.O.

It is pertinent to note that while the A.O. has accepted the cash deposited in the bank accounts in the previous financial years, cash deposited in banks during the impugned F.Y. 2016-17 in the Non- demonetized currency. The ld. AO did not accept the same modus operandi with respect to the cash deposited in demonetized currency merely on the pretext that the same was deposited in demonetized currency and hence was suspicious in nature. Thus, ld. AO is blowing hot and cold in same stream accepting and rejecting the explanations offered by the assessee with respect to the transactions of identical nature at her sheer convenience merely on the basis of surmises and conjecture without any evidence or material on record. Thus, bald allegation of ld. AO that the cash deposited in demonetized currency had arisen from some undisclosed source not reflected in the books of account as against the accounted cash sales in books of account and also which is regular feature of the trade of assessee and in consistency with past history of assessee. The conclusion of ld. AO is dehors of any credible evidence/material on record is unsustainable both in law and on facts. Addition so made by the AO deeming the

42 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

impugned cash deposits arising out of accounted cash sales as unexplained cash credits merely on the basis surmises & conjectures is fallacious and deserves to be deleted.

It is also pertinent to mention here before applying the provisions of section 115BBE of the Act the specific show caused notice was not given to the assessee and in absence of specific show cause notice the provisions of this section cannot be applied mechanically. Reliance is placed on the decision of Hon’ble Jodhpur bench of ITAT in the case of Suraj Kanwar Devra v/s ITO 2(2), Udaipur in ITA No. 50/Jodh/2021 dated 23.11.2021

Without prejudice to our forgoing submission we may further submit that amendment provisions of section 115BBE of the Act as amended by the Taxation (Second Amendment) Act, 2016 are applicable from 15.12.2016 and are not retrospective in operation and therefore not applicable to the cash deposited in the bank prior to 15.12.2016. The Tax laws as the Taxation (Second amendment) Act, 2016 was amended on 15.12.2016 and received the ascent of President of India on the said date. It was submitted that though the amendment was applicable for assessment year 2017-18 but only on income referred to in said section pertaining to the date after 15.12.2016. As in case of the assessee, the cash in demonetized currency was lastly deposited on 12.12.2016 and accordingly at the material time, old provisions of section 115BBE were applicable. The amendment provisions are not retrospective in operation and are not applicable in the present case and therefore the ld. AO has been wrongly taxed the addition made u/s 68 of the Act by applying the amended provisions. In support of this the reliance is place on decision of Hon’ble Supreme Court in case of Karim tharuvi Tea Estate Ltd. vs. State of Kerala [1966] 60 ITR 262 (SC).

43 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

apply to the assessment for that year, even if the assessment is actually made after the amendments come into force.

4.1.3 (g) In view of above submission it is submitted that entire sales of the assessee are supported by the bills, duly verifiable from books of accounts & records and the same is completely genuine. The ld. AO did not specify any defects in the sale and the sale is in line of its own previous history of the assessee. The ld. AO could not brought any single evidences on record to prove his allegation to be correct. Further all the surrounding circumstances and human probability of this much cash sale are also in favour of the assessee. The assessee submitted the best possible details/information/documents/explanation to present its case before ld. AO and as explained in forgoing paras no specific defects had been pointed out by ld. AO therein. The entire assessment order is based on presumption and assumption by twisting the data and drawn the conclusion therefore as per his own whims just to make the huge addition. There is no abnormal rise in the cash sale made by the assessee. The sales are genuine and supported by the proper invoices and properly shown in the VAT return, which also accepted by the VAT authorities, therefore, the same cannot be considered as fabricated or manipulated transactions.

It is further relevant to mention here that ld. AO alleged that cash deposited in bank account in demonetized currency is undisclosed income of the assessee which deposited under the garb of cash sales. In this regard it is submitted that there is no evidence with ld. AO to support this allegation. The assessee is having only source of income from business of Jewellery and except to that the assessee is not having any other business. The ld. AO also could not prove the source of

44 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

generation of undisclosed income. Therefore, merely on the basis of presumption and assumption no such addition can be made in total income of the assessee.

Thus, addition u/s 68 of Income Tax Act, 1961 is completely wrong, unjustified, perverse and not according to the settled principal of law, therefore the same deserves to be deleted and Ld CIT(A) has rightly deleted the addition.”

record and gone through the orders of the lower authorities. The assessee is an

individual and deriving income from business of jewellery. The books of assessee’s

are audited by the independent Chartered Accountant and copy of audit report and

statement of profit and loss account are filed by the assessee. It is noted from the

record that the case of the assessee was taken up for scrutiny for assessment u/s

143(3) under CASS and desired information as sought by the AO were submitted by

the assessee from time to time. The AO noticed that, assessee has deposited cash

aggregating to Rs. 1,41,32,000/- during the demonetization period i.e. between

09.11.2016 to 30.12.2016 in the form of Specified Bank Notes (SBNs). The assessee

justified the cash deposits during demonetization period by submitting that cash

sales boosted during Diwali period and the cash generated from that time was

deposited during demonetization. However, the AO did not accept the contention of

assessee by mentioning that if the sales were high during Diwali then corresponding

cash deposits must also be available in the bank account but the cash was deposited

much after Diwali and there was no justification as to why the assessee was holding

such high cash in hand after Diwali, only to deposit it in his bank account on

demonetization. The AO further justified the addition by mentioning that the

45 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

assessee has not submitted any details like the name, address, PAN No. of the buyer

to establish the genuineness of high cash sales during the course of the year under

consideration. The AO held that the cash deposited during the demonetization

period is nothing but undisclosed income of the assessee which was deposited in his

bank account during demonetization and in order to evade the tax liability on this

unexplained cash deposit the assessee has tried to explain it under the grab of cash

sales. The AO made the addition of Rs. 1,41,32,000/- under section 68 r.w.s.

115BBE of the Act. The ld. CIT(A) has deleted the addition on the basis of her

findings in para 4.2 at page 22-28 of her order as under:-

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

(i) Brief facts related to the issue are that the AO noticed that the appellant has deposited cash of Rs. 1,41,32,000/- in its bank account during demonetization period viz. between 09.11.2016 to 30.12.2016 whereas a cash of Rs. 87,29,000/- was deposited during the period 01.04.2016 to 07.11.2016 i.e. during pre- demonetized period. Further during the months of November and December 2016, the sales were 1.5 times more than the remaining part of the year. The appellant has explained it to be out of cash sales made by him. However, the AO tried to analyze the cash deposit in the previous year vis-à-vis the current year and has observed that the cash deposited during the demonetization period is high vis-à-vis cash deposited in the same period in the FY 2015-16, however the AO also observed that the total cash deposited for the entire year has decreased substantially in the current FY when compared with the previous year. Further, the AO observed that the sales were high during Diwali than corresponding cash deposit should have also been available in bank account which was on the contrary deposited much after Diwali. Accordingly, the AO observed that there is no justification for the sales made during the month of November and December 2016 being 1.5 times more than the remaining months of the year and therefore

46 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

these cash sales are not real sales and the assessee has tried to introduce his own unaccounted money in the garb of cash sales and therefore made addition of aforesaid amount of Rs. 1,41,32,000/-.

(ii) The Ld. AR has furnished detailed explanation on this issue. The crux of the explanation is that complete regular books of accounts, bills, vouchers and day to day stock register having complete quantitative details have been maintained by the appellant which have been duly audited. It was submitted that the cash sale transactions are recorded in the regular books of accounts, sales are made out of stock-in-trade and the said Stock Register was produced before the AO alongwith sales invoices, bills, Bank statements & VAT Returns and also demonstrated correlation of such cash sales with purchase and stock of business in the course of assessment proceedings. It was further contended that the appellant has charged VAT on all bills and all such sales have been reflected in the VAT Returns of the appellant which has been accepted by the VAT Department.

(iii) I have considered the facts of the case and it is observed that the sales are made out of stock-in-trade and the said Stock Register was produced before the AO alongwith sales invoices, bills, Bank statements & VAT Returns and also demonstrated correlation of such cash sales with purchase and stock of business in the course of assessment proceedings. As regards the stock position the appellant has produced the monthwise details of stock and it is observed that the books of accounts of the appellant an audited and complete quantitative details have been submitted by the appellant before the AO. Further it is also observed that the appellant has charged VAT on all bills and all such sales have been reflected in the VAT Returns of the appellant. The appellant produced the VAT assessment order wherein the VAT Department has accepted the sales declared by the appellant and therefore the initial burden cast on the appellant is discharged and therefore it cannot be disputed that the appellant does not have all the necessary documents to prove the genuineness of sales.

(iv) Further it is observed that the cash receipts against sales in the previous F Yr. 2015-16 was at Rs. 2,45,73,510/- while in the year under consideration the same was at Rs. 2,57,31,459/- which is more or less similar to the previous year cash sales. I find that huge cash in hand was available with the appellant in the previous year at the end of October 2015 and November 2015. There was cash

47 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

balance of Rs. 1.35 Crores and Rs. 1.08 Crores available respectively with the appellant. Also the fact remains that during the previous F Yr. 2015-16, the appellant has deposited a total cash of Rs. 1,23,00,000/- in his bank accounts during the period 09.11.2015 to 31.12.2015 whereas during the year under consideration, in the same period, the appellant has deposited a total cash of Rs. 1,41,32,000/- which is marginally more than the previous year. It is brought to my notice that the overall sales of the appellant in comparison to the previous year has increased by Rs. 6,63,12,037/- which is 59%.

(v) It is also brought to my notice that survey proceedings u/s 133A of the Act were also conducted on the business premises of the appellant on 06.10.2017 wherein nothing incriminating was found which could prove any source of undisclosed income or sales of the appellant. Further, in the assessment order of A Yr 2018-19 i.e. survey year, the addition of Rs. 1,13,941/- was made on account of excess stock , however the same was on account of weight difference in stock.

(vi) Further, on perusal of the details filed by the appellant before the A.O., it is observed that all the books of accounts were produced by the appellant before the A.O. It is not the case of the A.O. that the appellant did not have the sufficient stock for making the sales. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details. The ld. AO did not make any enquiry on the material submitted by the appellant. He merely proceeded on statistical analysis to make the addition on account of cash deposits. He neither found any concrete and conclusive evidence of back dating of the entries of sale, evidence of bogus sales, evidence of bogus purchases, and non-existing cash in the books of account. Infact the AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act.

(vii) It is also observed that the AO has treated the cash deposited in the banks during the demonetization period in demonetized currency as unexplained cash credits u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales etc. is patently evident from the entries in the audited books of account of the Assessee. It is not the case of the A.O. that the cash deposited in the bank during the demonetization period was in excess of what was available in the cashbooks. The fact that the cash deposits in banks were sourced out of cash sales is evident from the entries in the cashbooks. The books of

48 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

account of the appellant have been audited by an independent reputed auditor. The cash sales & receipts are duly supported by relevant bills, which were produced before the AO in the course of assessment proceedings, and nothing adverse in connection therewith was noted by the AO.

(viii) Thus the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus. Merely analysing the data by twisting the same and giving some findings which are not alone sufficient to justify the addition, the income so assessed is not tenable in the eyes of law. Therefore there cannot be any reason for disbelieving the genuineness of the sales of the appellant merely for the reasons that the same is of abnormal amount more so when the same is duly supported with sale bills and the appellant was having the sufficient stock for that much of sales and the sales have been duly incorporated in the VAT Returns.

(ix) The fact also remains that the demonetization of Rs. 500/- and 1000/- note was declared by the Hon’ble Prime Minister at 8:00 PM on 08.11.2016 and it is an open fact that immediately after the announcement, all the various persons having soon to be demonetized notes almost flocked to the jewellers to purchase the jewellery in exchange of these notes. There was an article in the Economics Times wherein the secretary of Indian Bullion and Jewellers Association mentioned that Jewellers had sold as much as 15 ton of gold ornaments and bars worth around Rs. 5000 crores on the intervening night of November 8 and 9, 2016 after the announcement of demonetization. Naturally after the spread of the news of demonetization, the general public had purchased the jewellery not only for the wedding in the immediate vicinity but also for wedding and functions in late November or December and also even otherwise for future use in functions. And due to this there was heavy cash purchase in November 2016 for the purpose of utilizing the demonetized notes whereas the purchases in the month of December, 2016 has been very low. However, the purchase for both the months taken together is not exceptionally high and the increase is mainly due to total increase in turnover and the specific reason of demonetization. It was further submitted that sales made by the appellant was fully vouched and verified and are duly recorded in the books of accounts, which were also audited. Further the sales are duly backed by purchases and opening stock available with the appellant and after these sales the stock of the appellant correspondingly got reduced.

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(x) Moreover, the Ld. AR has rightly pointed out that on one hand the sales shown by the appellant are fully backed with vouchers and duly recorded in the books of accounts and also in the stock register while on other hand the AO has not brought any material on record to establish that these sales are bogus.

(xi) As regards the addition of an amount of Rs. 1,41,32,000/- deposited by the appellant in cash in the bank account, the AO has considered that these were Specified Bank Notes and added the same as income of the appellant by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in Profit & Loss Account, therefore there is no occasion to again consider the same as income of the appellant by applying the provisions of section 68 of the Act.

(xii) The Hon'ble Supreme Court in the case of CIT vs Devi Prasad Vishwnath Prasad (1969) 72ITR194 (SC) (Copy at Case Law PB Page No. 225- 228) held 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.

(xiii) 2021 (5) TMI 447 – The Hon’ble ITAT Visakhapatnam in the case of Asst. Commissioner of Income Tax, Central Circle-1 Visakhapatnam versus M/s Hirapanna Jewellers and (vice-versa)) (Copy at Case Law PB Page No. 181-184 ) held that-

Addition u/s 68 r.w.s 115BBE - Assessee had deposited the sum in high denominations of specified bank notes (SBNs) post demonetization - CIT-A deleted the addition - HELD THAT:- The assessee produced the newspaper clippings of The Hindu, The Tribune and demonstrated that there was huge rush of buying the jewellery in the cities consequent to declaration of demonetization of ₹ 1000 and ₹ 500 notes on 08.11.2016.

As 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

50 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

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 [2010 (4) TMI 1070 - Delhi High Court] and Vishal Exports Overseas Ltd. [2012 (7) TMI 1110 - Ahmedabad High Court]

(xiv) The case of CIT v/s. Kailash Jewellery House ITA No. 613/2010 was decided by the Hon’ble Delhi High Court on 09.04.2010(Copy at Case Law PB Page No. 239) wherein it was held that “In the facts of above case, cash of Rs.24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not established with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that 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. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department”.

(xv) The case of CIT v. Vishal Exports Overseas Ltd., Tax Appeal No. 2471 of 2009 was decided by the Hon’ble Gujarat High Court on 03.07.2012(Copy at Case Law PB Page No. 238) wherein it was held that “In the facts of above case the assessee was an exporter. The issue was regarding sale of Rs.70 lacs included in turn-over which was more than 500 crores. The assessee had claimed deduction u/s 80HHC of the Act. On the basis of information received by the Assessing Officer from investigation he considered the entry for export of 70 lacs as bogus. He denied benefit u/s 80HHC of the Act. Further, he made addition of Rs. 70 lacs in the income u/s 68 of the Act. It was held that once the assessee has already included the amount of sale of Rs. 70 lacs in Profit and Loss Account and determined the income on that basis no further addition could be made u/s 68 of

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the Act as it would tantamount to double taxation of same income. The Assessing Officer could only reject claim u/s 80HHC of the Act”.

(xvi) In view of the facts of the case, it is evident that the appellant has duly substantiated its claim from the documentary evidences and also with the facts which duly supported with his own previous history and trend. Further the books of accounts have not been rejected as no discrepancy was found therein and the fact remains that the AO has accepted the cash sales as he accepted the declared sales, declared purchase, declared opening and closing stock and declared profits as well. The amount of cash sales is being reflected in its trading and profit and loss account. Thus the contention of the appellant that assessing the said cash sales as unexplained cash credit u/s 68 means that the impugned sales had been taxed twice, firstly the same was treated as sales and secondly the same was treated as unexplained cash credit/money u/s 68 of the Act appears to be correct and therefore this would tantamount to double taxation of income, which is impermissible in law. Accordingly, the action of the AO in holding that the appellant could not substantiate the increase in sales with documentary evidences is not based on correct appreciation of the facts. Therefore, I find that the AO was not justified in making an addition of Rs. 1,41,32,000/- under section 68 of the Act and consequently the aforesaid addition is directed to be deleted. As regards applying the provisions of section 115BBE of the Act on the additions made u/s 68, it is held that since the addition on account of alleged bogus cash sales has been deleted by me, therefore no separate adjudication is required on this issue raised by Ground of Appeal No. 2 as it will only be academic in nature. Accordingly, the Grounds of Appeal No. 1 to 3 are treated as allowed.”

We also find that the Department has raised the solitary ground for deletion of

addition of Rs.1,41,32,000/- made by the AO by applying the provisions of Section

68 and taxed as per provisions of Section 115BBE of the Act. We found that all the

points or allegation mentioned by the AO are duly considered and discussed by the

ld. CIT(A) while dealing with the appeal of the assessee. The revenue did not pin

point which of the findings of the ld. CIT(A) is incorrect or against the facts placed

on record by the assessee. We noticed that during the course of assessment

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proceedings, the AO examined the books of account and she has not rejected the

books of account of the assessee and provisions of section 145(3) were not applied.

During the year under consideration the assessee deposited Rs. 1,41,32,000/- in

demonetized currency. The cash so deposited was accumulated cash which was

received against/for sales made in the proprietorship concern of assessee M/s

Mohan Lal Mahendra Kumar Jewellers. The assessee submitted the summary of cash

book as under:-

“The summary of cash book of the assessee for the period from 03.11.2016 to 08.11.2016 is as under: -

Particulars Amount (In Rs.) Opening Balance as on 01.09.2016 20,98,024.45 Add: - Amount received against/for sales during month 17,22,424.00 of September-2016 Add: - Amount received against/for sales during month 1,14,43,282.00 of October-2016 Add: - Amount received against/for sales during period 14,37,830.00 01.11.2016 to 08.11.2016 Less: - Cash Deposited in bank (Net) during month of 20,79,000.00 September-2016, October-2016 and during period 01.11.2016 to 08.11.2016 Less: - Cash Expenses/payments during month of 4,51,639.00 September-2016, October-2016 and during period 01.11.2016 to 08.11.2016 Closing Balance as on 08.11.2016 1,41,70,921.45 Out of closing cash balance as on 08.11.2016 the amount of Rs. 38,921/- was in non-demonetized currency i.e. notes of 50, 100 etc. and the amount of Rs. 1,41,32,000/- was in demonetized currency.

53 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

From the above summary, it is apparent that the assessee had cash balance of Rs.

1,41,70,921.45 as on 08-11-2016 which was generated from cash sales and such

sales was part of total sales credited in trading a/c and the assessee has already

offered income on such sales in Trading Account by reducing the cost of sales from

sales. The AO has not pointed out any defect in the cash books and other books of

account produced before her. The AO herself accepted the sales shown in trading

a/c and has not disturbed the cash sales so declared by assessee and the sales of

assessee duly supported by the sale bills and invoices and duly verifiable from books

of accounts including stock register and considering availability of stock in hand, it

proved that the sales made by the assessee are genuine sales duly recorded in the

books of account. All the details required to prove the sales made by the assessee

were provided in the assessment proceedings. The assessee has filed sufficient

evidence to substantiate his sales. He has filed (1) Copy Cash book (Copy at APB

Page 93 to 107) and sales Register APB at page 47-69 comprising the date wise

transaction of sales and cash receipts (2) Monthly summary of stock register (Copy

of the same is at APB Page 108 to 120 which shows that before making the

sale the sufficient stock was available with assessee (3) Copy of Assessment Order

of VAT APB Page 121 to 127. The VAT department accepted the sales of the

assessee. Thus the assessee substantiated his cash receipts from sales from the

documentary evidence and also with the facts. The assessee explained the AO that

the assessee’s contention of cash sales is duly supported with own previous history

and trend that cash sales & corresponding cash in hand have been a regular feature

of the assessee’s business since the past several years. The cash receipts against

54 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

sales in FY 2015-16 was of Rs. 2,45,73,510/- while in the FY 2016-17 the year

under consideration the same was of Rs. 2,57,31,459/- which is more or less similar

to the previous year cash sales. The month to month sales varies due to demand in

market, festival seasons, fluctuation in gold prices and for several other factors.

Further in previous year also during the period 09.11.2015 to 31.12.2015 the

assessee deposited total cash of Rs. 1,23,00,000/- in his bank accounts and in

comparison to that during the period 09.11.2016 to 31.12.2016 the assessee

deposited total cash of Rs. 1,41,32,000/- which shows increase by 14.89% over the

previous year which is quite reasonable looking to the fact that overall sales of the

assessee in comparison to previous year have increased by Rs.6,63,12,037/- which

is 59% as explained by the assessee to AO vide letter dated 26/12/2019 copy at

APB page 40-44. The assessee has justified higher sales in Oct 2016 by submitting

letter dated 28/12/2019 to AO copy place at APB page 45-46. The assessee

submitted that on 06.10.2017 the income tax department conducted survey u/s

133A of the Act at the business premises of the assessee. During the survey

proceedings the department did not find any positive material/evidence to show that

the assessee was having any source of undisclosed income or sales of the assessee

was not genuine. The assessee is engaged in the business of Jewellery and gold.

The higher cash sale on festival season Karva Chouth, Dhanteras and Diwali and

marriage season is general feature in the trade of the assessee and such sales is

also apparent from the cash book submitted during the course of assessment

proceedings wherein the AO has not found any defect. Looking to the above facts

and circumstances of the case the sales made by the assessee is genuine which is

executed after giving the goods to the customer, duly reflected in the invoice issued,

55 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.

assessee having sufficient stock in the books, sales is duly reflected in the books of

accounts supported by payment of VAT and the revenue has not brought any

positive material to prove it as bogus sales. It is not the case of the A.O. that the

assessee did not have the sufficient stock for making the sales. Thus, it cannot be

said that the figures of sales and purchases are not supported by the quantity

details. As regards not providing the name, address and PAN of the customers to

whom cash sales was made, the assessee has explained that the sales were below

the prescribed limit so it is not compulsory or mandatory under the Income Tax Act,

1961 to collect the information related to full name, address and PAN of the

customer to whom goods were sold in cash during the course of business below to

the prescribed limit. The assessee further explained that in the preceding financial

years, subsequent financial years and other periods of this same financial year, the

same practice was being followed by the assessee where no details of name,

address and PAN of customer was available with the assessee and such practice was

accepted by the AO. We find the explanation of the assessee is genuine and the

sales cannot be doubted merely on surmises and conjectures on the ground of non-

furnishing of address and PAN of the customer. The AO did not make any enquiry on

the material submitted by the appellant. She merely proceeded on statistical analysis

to make the addition on account of cash deposits. We agree with the findings of ld.

CIT(A) that the AO has not brought any material on record to establish that the sale

bills are bogus nor any evidence indicating that such sales was bogus and merely

having some doubt by twisting the data and giving some findings which are not

alone sufficient to justify the addition the income so assessed in not tenable in the

eye of law. In fact the AO neither found any concrete and conclusive evidence of

56 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur. back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstances of the case is not accepted and we see no reason to interfere in the order of the ld. CIT(A). Thus, we sustain the order of the ld. CIT (A) with the observations above. The appeal of the revenue stands dismissed. 5. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 22/11/2022.

Sd/- Sd/- ¼lanhi xkslkbZ½ ¼ jkBkSM+ deys'k t;arHkkbZ ½ (RATHOD KAMLESH JAYANTBHAI) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 22/11/2022. Das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Shri Mahendra Kumar Agarwal, Jaipur. 2. izR;FkhZ@ The Respondent- The ACIT, Central Circle-1, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 172/JP/2022} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत

57 ITA NO. 172/JP/2022 Shri Mahendra Kumar Agarwal, Jaipur.