DEPUTY COMMISSIONER OF INCOME TAX, CITY CENTRE, GWALIOR vs. SHEELADEVI NARWARIYA, GWALIOR ROAD MEHAGAON

per cent which shows that there was a small decline in the GP rate for the year under consideration in comparison to the earlier year, however in the assessment years 2014-15 and 2015-16 the G.P. rate was at 16.62 per cent and 13.47 per cent respectively which shows that there was a consistent declining trend in the G.P. rate which occurred due to increase in the sales which were at Rs. 3.04 crores, Rs. 9.46 crores, Rs. 10.68 crores and Rs. 12/83 crores for the assessment years 2014-15, 2015-16, 2016-17 and 2017-18 respectively which also shows that due to increase in turnover the G.P rate declined, so, it cannot be said that the cash sales made by the assessee during the pre-demonetization period Le; October 2016 resulted in extraordinary fall in the G.P. rate. [Para 10.2] The assessee maintained the proper books of account in regular course of business which were duly audited by the Independent Chartered Accountant under section 44AB, all the sales & purchases and stocks were recorded in the books of account which had not been doubled by the Assessing Officer. The sales shown by the assessee had been accepted by VAT/Sales Tax Department, the book result shown by the assessee were in the same line as had been accepted by the Department in the preceding years, the cash sales made by the assessee had been credited in the books of account and reduction in the stock has not been doubted, even during the course of search just after the closing of the year under consideration, neither excess nor shortage of stock was found in the stock register maintained by the assessee, the identity of the purchasers to whom cash sales had been made was disclosed in the sale bills where the name, address and PAN was mentioned. It is also not a case that there was sudden spurt in the sale only in the month of October 2016 as the chart furnished by the assessee before the Commissioner (Appeals) clearly revealed that the cash sales were on higher side in another months of different preceding years. The Assessing Officer made the addition on the basis of difference in the cash sales from 1-10-2016 to 29-10-2016, only on this basis that the said difference was there in the computer and the pen- drive found from the residential premises of the part time accountant of the assessee but no opportunity to cross examine the said accountant was given to the assessee and moreover, no specific defect was pointed out in the proper books of account maintained by the assessee in the regular course of business and nothing is brought on record to substantiate that the sales from 1- 10-2016 to 29-10-2016 were not made, out of the existing stock available with the assessee. In the instant case the assessee explained that the exhibitions were held in every year and the sales were normally higher in certain month and that in the month of October 2016 the cash sales was on the higher side as lots of 6 | P a g e

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festivals like Diwali, Dhanteras, Bhaiya Duj and Karwa Chauth etc. fell in that period. The said explanation cannot be brushed aside considering the trend of the society in India wherein people make the purchases of jewellery during the festive season. [Para 10.3]

In the instant case also the assessee was maintaining complete stock tally, the sales were recorded in the regular books of account and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was not justified. [Para 10.5]

The Assessing Officer made the addition on the basis of the statement of 'N', the then part time accountant of the assessee but no opportunity to cross examine to rebut the statement made by 'N' was allowed to the assessee and moreover nothing was brought on record to substantiate that cash obtained by the assessee from the sales which reduced the stock of the assessee was utilized elsewhere and that the cash sales made during the month of October 2016 were in the line of the cash sales in earlier years and was equal to the sales in the Month of July 2016, therefore, the addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was not justified. (Para 10.7)

Further, 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 Assessing Officer and sustained by the Commissioner (Appeals) was not justified. [Para 10.9]

Furthermore, the opening stock, purchases & sales and closing stock, declared by the assessee has not been doubted, the sales were made by the assessee out of the opening stock and purchases and the resultant closing stock has been accepted, the sales had not been disturbed either by the Assessing Officer or by the sales tax/VAT Department and even there was no difference in the quantum figures of the stock at the time of search on 12-4-2017, therefore, the sales made by the assessee out of the existing stock were sufficient to explain the deposit of cash (obtained from realization of the sales) in the bank account and cannot be treated as undisclosed Income of the assessee. [Para 10.11] The cash deposited post-demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the Assessing Officer, 7 | P a g e

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there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October 2016 prior to the making of the cash deposit in the bank account out of the sales. So, respectfully following the orders by the various High Courts and the Co-ordinate Benches of the Tribunal, it is viewed that the impugned addition made by the Assessing Officer and sustained by the Commissioner (Appeals) was not justified, accordingly the same is deleted. (Para 10.13)..."

The AO has taken the figure of cash sales during the demonetisation only and have not taken cash sales made during the month of November and December 2016. The submission made by the appellant has been found correct. Therefore, the addition of Rs. 1,84,71,745/-made by the AO u/s 69A is deleted.”

the impugned order, observed that the Assessing Officer has taken the

figure of demonetization period only and further he has stated that the

figures of Nov. & Dec. 2016 were only taken, whereas his intention was to

state for the remaining period. This seems to be a typographical/clerical

error, hence, ignorable. In the instant case, it is not under dispute that the

respondent assessee was running a retail diesel and petrol pump in the

name and style of M/s. Shaheed Sultan Singh Filling Station and engaged

in the sale of HSD, MS and oil. The aforesaid facts comprised in the

impugned order goes to show that after considering the detailed

submissions of the assessee, details of total sales reflected in the VAT

return, including cash sales and cash deposited in the bank account during

F.Y. 2015-16 and 2016-17 provided by the assessee and the comparative

figures of cash sales and cash deposited during these two years, learned 8 | P a g e

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CIT(Appeals) has opined that the Assessing Officer has considered the

cash sales made during the month of November and December, 2016 only,

i.e., demonetization period only and not of the remaining period as actually

intended by the first appellate authority. The revenue has failed to adduce

any contrary evidence to discard assessee’s submissions. We, therefore,

do not find any substantial error of fact or law to interfere with the impugned

order. The aforesaid point is determined in negative against the appellant

revenue. The revenue’s appeal is liable to be dismissed.

Order pronounced in the open court on 08.12.2025.

Sd/- Sd/- (M. BALAGANESH) (SUNIL KUMAR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 08.12.2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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