GOLECHAS JEWELS,JAIPUR vs. CIT(A), DELHI

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC ” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Mk0 ehBk yky ehuk] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & DR MITHA LAL MEENA, AM vk;dj vihy la-@ITA No. 600/JP/2023 fu/kZkj.k o"kZ@Assessment Year : 2017-18 cuke M/s. Golechas Jewels The ITO Vs. 377, Kataria Bhawan, M.I. Road Ward 2(2) Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAGFG 0464 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Rajeev Sogani, CA jktLo dh vksj ls@Revenue by: Mrs. Monisha Choudhary, Addl. CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 06/03/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 10/04/2024 vkns'k@ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 08-09-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2017-18 wherein the assessee has raised the following grounds of appeal. ‘’1.1 That the Ld AO has erred in stating that the assessee has deposited cash from undisclosed source on the mere basis of increase in sales during the said period when compared from previous year to preceding previous year is not justified in nature.

2 2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirming the addition of Rs. 2586000/- u/s 68 of

2 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR the 1.T. Act 1961 even though the appellant had duly proved the source of cash generation.

3 3.That the Ld. AO as well as Ld. CIT (A) has grossly erred in law and to the facts of the case in making lump sum addition on the basis of his presumptions and guess work, without the support of any material either collected or placed upon records. 4 4. That the Ld AO has formed the decision merely on the basis of figures without considering the facts of the case. This shows that the decision was made prima facie from the beginning of the proceedings. The justifications provided by the assessee were not even considered and no alternate view or proof was given by AO, 5 5. That in the case law of, ITO Vs Manasa Medicals (ITAT Bangalore) it was held that cash deposited on account of cash sales during demonetization period cannot be added as unexplained under section 68 of the Income Tax Act as AO didn't rejected the books of accounts nor brought anything contrary on records to show that cash sales is not the source for cash deposits. Keeping the above judgement in view, the same should be held for the case under dispute.

It is also noted that the ld. AR of the assessee has filed vide application dated 15-02-2024 has filed following additional ground praying therein to admit the same. ADDITIONAL GROUND 1. In the facts and circumstances of the case and in law, Id. CIT- (A)/NFAC has erred in confirming the action of Id. AO in invoking the provisions of section 115BBE of the Act. The action of the Id. CIT- (A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by invocation of provisions of section 115BBE.

The above ground is a legal ground. All relevant facts are available on record. No new facts are required to be evaluated, nor is any further enquiry needed. The provisions of law are to be applied on the facts already available on record. Reliance is placed on the following judicial pronouncement:

3 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. [1998] 229 ITR 383 (SC) held that "...Under section 254, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals). Both the assessee as well as the department have a right to file an appeal/cross objections before the Tribunal. There is no reason why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier..." (Emphasis Supplied) The Bench has taken into consideration the above additional ground raised by the assessee and the Bench feels to adjudicate upon it as per merit of the case. 2.1 Apropos Ground No. 1 to 5 of the assessee, the facts as emerges from the order of the ld. CIT(A) are that he dismissed the appeal of the assessee by observing at para 6 to 7 as under:-

‘’6. Decision: I have carefully considered the facts of the case, submission made by the appellant and order passed by the A.O. u/s 143(3) of the 1. T. Act, 1961. In this case, the case was selected for scrutiny under CASS, and the main issue involved in this case, is the source of cash deposits amounting to Rs. 52,89,500/- during the demonetization period. During the assessment proceedings, the assessee had filed details before the AO, but did not offered any specific explanation in support of the source of the said cash deposits. 6.1 During the assessment proceedings, before the AO, the appellant has submitted the cash balance as on 01.11.2016, the details of which are as under:-

4 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR Branch Opening cash Cash sales from Closing cash balance as on 01- 01-11-2016 to 08- balance as on 08- 11-2016 11-2016 11-2016 Jaipur 34,80,471 15,86,000/- 50,63,931/- Mumbai 2,73,519/- 5,00,940/- 5,54,519/- Total 37,53,990/- 20,86,940/- 56,19,450/-

From the above table it is seen that, the assessee had submitted the breakup of cash sales and details of cash deposited from 01.11.2016 to 08.11.2016 However, the assesssee has neither submitted the details of party wise breakup to whom the gold was sold from the month of October 2016 to 8th November 2016 nor submitted details of denomination wise cash sales and cash deposits made into the bank account for verification, during the assessment proceedings. The relevant portion of the assessment order is reproduced below: The assessee has clamed sale of Rs. 15,86,000/- on 07 & 08.11.2016 which included sale of Rs. 11,75,000/- recorded on 08.11.2016 It appears that assessee is claiming cash sale of Rs 11,75,000 on account of announcement of demonetization Further, the sales register shows that assessee booked cash sales of Rs 1,36,56,743/- in the month of October 2016 which is 29.28%. This looks to be very high considering that only cash sales in the month of October 2016 has been considered. The claim of so much of cash sales is not acceptable due to following reasons: 1. The assessee in the e-filed response sheet has submitted that sales were made to unidentifiable persons. Thus, the assessee could not establish the identity of the customers whom sales have been made 2. During the course of assessment proceeding assessee did not produce books of accounts, invoices of cash sales, name & address of the persons whom cash sales have been made Thus, the cash sales claimed by assessee in the month of October 2016 to 08.11.2016 remained unverifiable

5 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR 3. The assessee did not produce cash book and sales register for the whole year due to which the sales claimed in the month October, 2016 could not be verified properly 4. The column no 11(b) of the Form 3CD requires the Auditor to furnish the list of books of accounts maintained by the assessee. The Auditor has mentioned that following books of accounts were maintained- a. Cash Book b. bank book c. Journal d. Sales book e. Purchase book f. Ledger

This qualification shows that the assessee did not maintain any stock register in the absence of which how claims of cash sales of Rs 1,52.42,743/- from 01.10.2016 to 08.11.2016 can be accepted to be genuine. Similarly, column 11 (c) requires the auditor to mention books of accounts examined. Again the stock register do not found a mention in the list of books examined by the Auditor These facts show that the books of accounts are not genuine and claims made by assessee are required to be seen in the light of Human Probability laid down by the Hon'ble Supreme Court. 4. The assessee has made exaggerated claims of cash sales from 01.10.2016 to 08.11.2016. It is very important to discussing the prevailing situation on the day which had impacted the motives and guided the actions of the assessee on a substantive level. The FY 2016-17 is marked by a major policy initiative Le demonetization announcement on the night of 8th November 2016. With effect from midnight of 8th November 2016, the currency notes of denomination of Rs 500 and Rs 1000 seized to be legal tenders. After that,

6 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR transactions in these notes were barred by law except few exceptions. The case of the assessee does not fall into those exceptions

The intention behind the policy move was to unearth black money hoarded in the form of cash(currency notes of Rs 500 and Rs 1000). Once these notes were discontinued to be legal tenders, those hoarding cash in these notes had only one option which is to deposit the same into bank account otherwise the same will be rendered as mere piece of papers. The assessee's case was no different. In light of the facts it can be safely held that assessee had cash balances hoarded in the form currency notes of Rs 500 and Rs 1000. In order to keep the value intact he was forced to deposit the same into bank account. However, it is anybody's guess considering the intention behind the move that the tax authorities will scrutinize the cash deposited and will ask for the source of the cash deposited in the bank

6.2 The opening cash in hand of assessee was Rs37,53,990/- as on 01.11.2016 and cash sales made during the period from 01.11.2106 to 08.11.2016 was Rs20,86,940/- and even deposited cash of Rs52,89,500/- into bank during the period from 01.11.2106 to 08.11.2016 and showing the cash balances of Rs.56,19,450/-as on 8.11.2106 raises the question of credibility of assessee's claim that the cash deposited in SBN notes during the period of demonetization was out of accumulated cash balances and any genuine cash sales were made during the period from 01.11.2106 to 08.11.2016 and the cash in hand of Rs56,19,450/-was really available as on 08.11.2016 or not.

6.3 Even presuming, the claim of assessee that the cash sale of Rs20,86,940/- was made after the declaration of demonetization but before 12.00 P.M is found to be accepted, then the assessee had to submit the details of party wise breakup of the customers to whom the sales were made & cash collected during the month of Oct 2016 to 8th Nov 2016. However, the assessee had not submitted the details of party wise breakup of the customers to whom the sales were made before midnight of the 8.11.2016. Hence the claim of assessee that the

7 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR source of cash deposit from cash sales could not be ascertained and accepted.

6.4 Therefore, in the case of assessee, where huge Cash was deposited in the bank during 01.11.2016 to 08.11.2016 but the sources were neither explained nor such money offered for taxation, the onus is on the assessee's to prove that the Cash deposits made did not bear the character of income. Therefore, the claim of assessee is not found to be genuine regarding the sources of cash deposit made during the period of demonetization. Accordingly, the grounds raised by the appellant is hereby dismissed. 7. In the result, the appeal is dismissed.’’ 2.2 During the course of hearing, the ld. AR of the assessee filed the following written submissions praying therein to quash the order of lower authorities. ‘’SUBMISSIONS

8 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR 4. Copy of GST certificates evidencing the above address of the assessee firm are enclosed [PB 51-56]

i. Identity of the customers not provided ii. Non-production of books of accounts, sales invoices and name and address of persons to whom sales have been made iii. Non-production of cash book and sales register iv. Non-mentioning of maintenance of stock register in Audit Report

9 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR

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11 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR 20. The assessee firm maintained regular books of accounts.Books of accounts of the The assessee firm maintained regular books of accounts.Books of accounts of the The assessee firm maintained regular books of accounts.Books of accounts of the assessee were audited under the provisions Section 44AB of the Income Tax Act, 1961. In the r the provisions Section 44AB of the Income Tax Act, 1961. In the r the provisions Section 44AB of the Income Tax Act, 1961. In the audit, there were no adverse remarks of the auditor and the auditor found the underlying audit, there were no adverse remarks of the auditor and the auditor found the underlying audit, there were no adverse remarks of the auditor and the auditor found the underlying evidences, substantiating the transactions recorded in the books of accounts, w.r.t. cash sales, to evidences, substantiating the transactions recorded in the books of accounts, w.r.t. cash sales, to evidences, substantiating the transactions recorded in the books of accounts, w.r.t. cash sales, to be adequate and reasonable.

12 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR

13 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR 28. Ld. AO emphasized on non-submission of party wise details of sales but ignored the fact that the assessee firm had submitted complete details of cash and credit sales undertaken by the assessee firm. No adverse inference has been drawn on the purchasesand stock-register submitted by the assessee.

The Hon’ble Bench deleted the addition. The relevant para 126 (vii) is reproduced hereunder:

14 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR “It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer. The assessee has maintained the complete stock tally in its accounting software. Such books of accounts are audited, quantitative records produced before the tax auditor, such quantitative records are certified by tax audit and no questions have been raised by the assessing officer. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details.”

“So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such

15 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise.” “We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them.”

16 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR of AO order]It is submitted that allegation made by ld. AO is totally baseless as the same is a presumption.No evidence is brought on record by lower authorities in support of their allegation.

i. In CIT vs P. Mohanakala (2007) 291 ITR 278 (SC),the Apex Court while dealing with the true nature and scope of Section 68 of the Act has held that the opinion of the assessing officer for not accepting the explanation offered by the assessees as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record. The court further held that the opinion of the assessing officer is required to be formed objectively with reference to the material available on record. Hence, application of mind is sine qua non for forming the opinion.

17 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR

ii. The Apex Court in DalgobindaParicha v. Nimai Charan Misra, AIR 1959 SC 914 defined opinion to mean something more than mere retailing of gossip or of hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question.

iii. In S.R. Bommai v. Union of India AIR 1994 SC 1918 while construing the expression “if the President…is satisfied” under Article 356(1) the Court at para 74 held that it is not the personal whim, wish, view or opinion or the ipse dixit of the President dehors the material but a legitimate inference drawn from the material placed before him which is relevant for the purpose.

iv. The Apex Court in the Lal Chand Bhagat Ambica Ram v. CIT (supra) approvingly noted the decision of the Hon’ble Allahabad High Court in the case of Kanpur Steel Co. Ltd. vs CIT (1957) 32 ITR 56 and summarised the findings in the following words: “(i) that the burden of proof lay upon the Department to prove that the sum of Rs. 32,000 represented suppressed income of the assessee from undisclosed sources, and the burden was not on the assessee to prove how it had received these high denomination currency notes; for, until the Demonetisation Ordinance came into force high denomination currency notes could be used as freely as notes of any lower denomination and no one had any idea that it should be necessary for him to explain the possession of high denomination currency notes, the assessee has naturally not kept any statement regarding the receipt of these currency notes, and it was for the first time on January 12, 1946, when the Ordinance came into force, that it became necessary for the assessee to explain its possession of these currency notes; and (ii) that the explanation given by the assessee that the notes formed part of the cash balance of Rs. 34,000 and odd was fairly satisfactory and was not found by the Tribunal to be false; the statement of sales was hardly relevant to the question; the Department, in relying on the entries relating to the bills of each day, committed an error and no inference should have been drawn from them; that any one single transaction did not exceed Rs. 399 did not preclude the possibility of payment in high denomination notes for such transaction; therefore, the Tribunal rejected the explanation of the assessee on surmises, and there was no material for the Tribunal to hold that the sum of Rs. 25,000 represented suppressed income of the assessee from undisclosed sources.”

18 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR Respectfully following the consistent view and after considering the factual matrix of the cash on hand in our considered view the addition made cannot sustain and therefore, we vacate the addition of Rs. 80,00,000/- made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO. ACIT Central Circle-1 vs. Shri Mahendra Kumar Agarwal ITA No. 172/JP/2022 [CLC 120-176] We agree with the findings of ld.CIT(A) that the AO has not brought any material on record to establish that the salebills are bogus nor any evidence indicating that such sales was bogus and merelyhaving some doubt by twisting the data and giving some findings which are notalone sufficient to justify the addition the income so assessed in not tenable in theeye of law. In fact, the AO neither found any concrete and conclusive evidence ofback dating of the entries of sales, evidence of bogus sales, evidence of boguspurchases, and non-existing cash balance in the books of account. The AO did noteven reject the books of accounts of the appellant under the provision of section145(3) of the Act. Therefore, the contention of the revenue on the facts andcircumstances of the case is not accepted and we see no reason to interfere in theorder of the ld. CIT(A). Thus, we sustain the order of the ld. CIT (A) with theobservations above. The appeal of the revenue stands dismissed

a. It was held in CIT vs. Sun Engineering Works [1992] 64 Taxman 442 (SC)that each case has its own distinct set of facts. Before equating any other preceding decision of any court, the facts have to be meticulously matched. Variation in facts would render the judgment inapplicable even if there is may be broad similarity in facts.

b. Durga Prasad More [1971] 82 ITR 540 (SC) [Page 8 , AO Order]

i. The Hon’ble Supreme Court delivered this decision while dealing with the reliability of a self-created document i.e. a trust deed in that case. The Hon’ble Supreme Court held that there was no source of income of wife of the assessee from which she could generate funds for purchase of property. Therefore, treated the income from property as the income of the assessee.

ii. Whereas in the present appeal, the source of cash is clearly established. The evidences for cash sales are on record and there are no defects pinpointed by the ld. AO contrary to the facts submitted by the assessee.

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iii. The observation of the Hon’ble Supreme Court, in this case, at para 9, reproduced below supports the case of the assessee: “Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each, case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it.”

c. Sumati Dayal [1995] 80 Taxmann 89 (SC)[Page 8, AO Order]

i. The decision of the Hon’ble Supreme Court is not applicable to the facts of the present case. In the said case, the evidences filed by the assessee were not in her favor, no expenditure or incidental expenses were booked against the income credited in her capital account.

ii. In the present case, the assessee has all the evidences which were filed before the lower authorities. The said evidences clearly support the contention of the assessee to be the income of the assessee firm and the same is already offered for taxation in the form of revenue receipt i.e., sales. The sales are interlinked to purchases made by the assessee firm, which are not doubted by the lower authorities. Therefore, the theory of human probabilities would only arise when the evidences are controverted by the lower authorities, which is not done in the present case.

d. A. Rajendran [2011] 198 taxman 509 (Delhi)[Page 9 , AO Order]

i. In the above decision, being in favor of the assessee, Hon’ble High Court has held that “the reasons which entered the mind of the authorities to reject the explanation offered by the assessee in each case and in the context of the case laws referred above, we have no doubt at all that the explanation offered by the assessee in each case has been arbitrarily and unreasonably rejected. All the reasons we have no doubt at all, are in realm of surmises, conjectures and suspicions, which approach stands totally prohibited by the decided case laws referred to above.”

ii. It is important to note that decisions of Hon’ble Supreme Court in the case of Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal [1995] 80 Taxmann 89 (SC)have also been referred in the said case. However,

20 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR Hon’ble Court has held that such decisions have been delivered in different set of facts and circumstances and are not applicable to the present case.

iii. In the light of the above, above decision does not apply to the present case of the assessee firm.

e. Major Metals Ltd. vs. Union of India [2012] 251 CTR 385 [Page 9, AO Order]

i. In the above decision, Settlement Commission has confirmed additions u/s 68 on non- furnishing of documents by the company. The decision of Sumati Dayal [1995] 80 Taxmann 89 (SC) has also been referred in the said case.

ii. The set of facts referred in the above case and instant case of the assessee firm are totally different as in the above decision a list of documents were asked to produced by the company in order to pass triple test laid down u/s 68. However, the company could not furnish those documents and then question of probabilities was arisen and addition was confirmed. In the instant case of the assessee firm, documents are produced before the lower authorities and, therefore, when documents are submitted for substantiating the claim, the same have to be looked first before examining the probabilities.

iii. Hence, the above decision does not apply to the present case. f. Sampat Raj Ranka[2001]73TTJ642 (JD.)[Page 9, AO Order]

i. The decision of Hon’ble ITAT, Jodhpur Bench is applicable to the present case. The decision of ITAT in fact supportsthe case of the assessee. Hon’ble Bench has itself admitted that “the lower authorities had rejected the direct evidence on the basis of assumptions and presumptions ignoring that that the assumptions and presumptions had to be examined in the light of evidence on record and the same could not override the facts” [Headnotes reproduced]

ii. In Para-10, it has been stated that, “preponderance of human probability is a circumstantial evidence and if, direct evidence is placed on one scale and human probabilities on the other, direct evidence is bound to carry more weight”.

21 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR iii. Therefore, it is clear that direct evidence carries more weight than the theory of human probability. The same is applicable to the facts of the present case.

g. Hacienda Farms (P.) Ltd [2011] 198 taxman 509 (Delhi)[Page 9, AO Order]

i. The facts in the above decision are entirely different from the present case. In the said decision, the assessee had received advances in form of cash from vegetable vendors and supplied vegetables in a time-frame of four to nine months. Such advances were against the prevailing trade practise of vegetable trade. Thus, the contention of the assessee was not accepted and advances were treated as undisclosed income.

ii. In the present case, the purchases made are well before the period of demonetization and subsequently, the transaction of sale has been carried out. There is no case of advance received by the assessee. Therefore, the facts of above-mentioned decision are clearly different from the present case.

h. Pradip Kumar Loyalka [1997] 63 ITD 87 (Pat.)[Page 9, AO Order] The above decision was pronounced in different set of facts. The facts are that the assessee received certain amount of gifts, for which no returns of gift were filed. In the present case, the sales are added as income u/s 68. It is important to note that sales are already offered for taxation and such sales are not disturbed.

i. R.S. Rathore [1996] 86 taxman 20 (Raj.)[Page 10, AO Order] The above decision of Jurisdictional High Court is totally based on different facts. The said decision was delivered in respect of certain investments made in a company and the money was borrowed for the said investment. In the present case, the set of facts are totally different. Sales which are already offered for taxation are doubted and that too without bringing on record any iota of evidence which could establish that the sales made by the assessee are not genuine. Therefore, the decision does not apply to the present case. In view of the above, application of Section 68, read with Section 115BBE, by the ld. AO, to the amount of Rs. 25,86,000 accounted for as sales by the assessee firm, is illegal and deserves to be quashed.’’

22 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR On the other hand, the ld. DR strongly supported the order of the ld.CIT(A). 2.3

2.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that Assessee, a partnership firm, is engaged in the trade of precious and semi-precious stones and jewellery since 2009.The assessee firm, for the year under consideration, filed its return of income on 27.10.2017, declaring loss of Rs. 10,68,145. Copy of ITR-V, Computation of income and audited financial statements for AY 2016-17 and AY 2017-18 are placed at PB 1-26 and Assessment proceedings u/s 143(3) were completed in the case of the assessee firm on 25.12.2019by making additions amounting to Rs. 25,86,000 u/s 68 and taxed the income by invoking the provisions of section 115BBE.Subsequently, rectification order u/s 154 was passed by AO by revising the assessed total income of Rs 15,17,855 to Rs 25,86,000. The said revision, by way of rectification, was made on account of following two reasons:

i. Adding back of donation of Rs 39,000 debited in profit and loss account ii. Not allowing set off of loss against the addition made u/s 68 of Rs 25,86,000. The carried forward loss assessed at Rs 10,29,145 (10,68,145-39,000)

It is noted that against the order passed by AO, assessee firm preferred appeal before the National Faceless Appeal Centre (“NFAC”/ “ld. CIT(A)”). NFAC, vide order dated 08.09.2023, in Appeal No. CIT(A)-1,Jaipur/11206/2019-20, dismissed

23 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR the appeal of the assessee firm. Against the order passed by NFAC, the present appeal has been preferred by the assessee firm before this ITAT, Jaipur Bench. In this case, it is seen that the assessee firm, during demonetization period, from 09.11.2016 to 30.12.2016, deposited a sum of Rs. 52,89,500 in its bank account. The assessee firm submitted following details of cash balances as on 01.11.2016 to 08.11.2016 before ld. AO[Page 2 of AO Order]

Cash Sales from Opening cash balance Closing cash balance Branch 01.11.2016 to as on 01.11.2016 as on 08.11.2016 08.11.2016 Jaipur 34,80,471 15,86,000 50,64,931 Mumbai 2,73,519 5,00,940 5,54,519 Total 37,53,990 20,86,940 56,19,450

The cash deposits of Rs 52,89,500 were out of the cash balances in the books of accounts indicated by the assessee hereinabove. It is also noted that AO accepted the cash deposited of Rs 2,32,500 shown in respect of Mumbai Branch. However, he doubted the remaining cash deposits of Rs 50,57,000 (52,89,500-2,32,500) in respect of Jaipur office and eventually added a sum of Rs 25,86,000 out of cash deposit of Rs 50,57,000 at Jaipur by disbelieving the cash sales of equivalent amount. The assessee firm explained the source of entire cash deposits as the cash received out of the cash sales during the period under consideration. However, ld. AO disbelieved the explanation of the assessee for the following reasons:

24 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR

It is seen that the cash sales are one of the common practices in jewellery sector. he cash sales are one of the common practices in jewellery sector. he cash sales are one of the common practices in jewellery sector. The assessee has been selling jeweller The assessee has been selling jewellery in cash in past also. The cash sales of the y in cash in past also. The cash sales of the previous months, previous years and next month or years was also made on the previous months, previous years and next month or years was also made on the previous months, previous years and next month or years was also made on the same trend with same set of particulars. The trend of cash deposits for the previous same trend with same set of particulars. The trend of cash deposits for the previous same trend with same set of particulars. The trend of cash deposits for the previous year were submitted before ld. AO. year were submitted before ld. AO. The history of cash deposits in the previous f cash deposits in the previous years has been admitted by ld. AO at years has been admitted by ld. AO at Page-2 of his order. Screenshot of the same of his order. Screenshot of the same is as under:

The above data as stated by . AO The above data as stated by . AO is summarized by the assessee in his written is summarized by the assessee in his written submission as under:-

25 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR Particulars AY 2016-17 AY 2017-18 Cash deposits for whole year 2,17,77,000 1,36,60,500 D Cash Deposits for demonetization 25,50,000 52,89,500

It is evident from the above table that the total cash deposits have decreased as compared to the preceding year. The only reason for doubt in the mind of AO for cash deposits is the increase in the same during the period of demonetization. Copy of ledgers of sales are placed at PB 74-83.However, for ready reference, the same are reproduced branch wise as under:

Mumbai Branch: AY 2017- 01.04.16 to 08.11.16 to 31.12.16 to Total 18 07.11.16 30.12.16 31.03.17 Cash sales 9,90,250 - 7,27,000 17,17,250 Credit sales 96,87,612 70,10,481 90,22,660 2,57,20,753 Total 1,06,77,862 70,10,481 97,49,660 2,74,38,003

Jaipur: AY 2017- 01.04.16 to 08.11.16 to 31.12.16 to Total 18 07.11.16 30.12.16 31.03.17 Cash sales 48,06,100 11,75,000 - 59,81,100 Credit sales 1,15,22,119 7,00,000 10,00,000 1,32,22,119 Total 1,63,28,219 18,75,000 10,00,000 1,92,03,219

It is also noted that the Comparative chart of cash deposits made by the assessee firm is as under:

Particulars AY 2016-17 AY 2017-18 Turnover 4,32,77,865 4,66,41,222

26 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR Cash deposits 2,17,77,000 1,36,60,500 % of Sales 50.31% 29.28%

Hence, it is apparent from the above data, that the total cash deposits have decreased by Rs 81,16,500. If we compare the cash deposits on percentage basis, the same was 50.31% in the preceding year which came down to just 29.28% in the relevant year. The trend of cash deposits are in declining trend, despite of the fact that the turnover of the assessee has increased during the relevant year. The above data signifies that the cash deposits out of cash sales is a regular feature of the assessee firm.The increase of cash deposits during the period of demonetization, compared to same period of preceding year, cannot be a criteria for doubting the sales. No other credible reason is given by lower authorities to doubt the sales. No deficiency is pointed out in duly maintained books and adequately supported business transactions.It is submitted by the ld. AR of the assessee that law nowhere prohibits cash sales. The assessee firm by selling the jewellery in cash did not violate any of the provisions of the Income Tax Act, 1961. It is submitted that ld. AO has not mentioned any provisions of the Act/ Rules having been violated by the assessee firm while undertaking such cash sales. It is noted that AO disbelieved the cash sales for the reason that name and address of the buyers were not maintained by the assessee firm for which the ld. AR of the assessee submitted that it is not mandatory under the Income Tax Act, 1961 to collect the information

27 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR related to full name, address, contact details of the customers to whom goods are sold below the prescribed limit. It is voluntary on the customers to provide their personal information to the assessee. The assessee cannot force or compel the customers to give the information. If the assessee made such attempts, it could adversely affect the business of the assessee. Therefore, due to non-availability of this information of the customers with the assessee, the sales cannot be doubted. We also found from the records that the sales made and utilized for depositing the demonetized currency cannot be doubted only for the reason that certain particulars were missing on the sales invoices. It is also noted from the records that the assessee firm maintained regular books of accounts.Books of accounts of the assessee were audited under the provisions Section 44AB of the Income Tax Act, 1961. In the audit, there were no adverse remarks of the auditor and the auditor found the underlying evidences, substantiating the transactions recorded in the books of accounts, w.r.t. cash sales, to be adequate and reasonable. The details of party-wise purchases along with their PAN and address were submitted before AO. Copy of reply is placed in paper-book[PB 57-58]. The said fact is not in dispute. . AO has not doubted the amount of purchases made by the assessee firm. Availability of stock for cash sales is not doubted by lower authorities. It is also noted that details of stock records and sales register were uploaded on e-filing portal. Copy of replies reflecting the same are placed in paper-book at [PB 62-

28 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR 63]The said fact is undisputed. Screenshot of the relevant submission before ld. The said fact is undisputed. Screenshot of the relevant submission before ld. The said fact is undisputed. Screenshot of the relevant submission before ld. AO is as under:

From the submissions of the assessee, it is noted that From the submissions of the assessee, it is noted that at the cash book for following t the cash book for following period were submitted before ld. AO period were submitted before ld. AO[PB 61] Year Month 2015 November and December 2016 November and December 2017 November and December

29 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR It is worthwhile to note that ld. AO has also accepted the opening stock, purchase, It is worthwhile to note that ld. AO has also accepted the opening stock, purchase, It is worthwhile to note that ld. AO has also accepted the opening stock, purchase, as well as the closing stock at the year as well as the closing stock at the year-end to be genuine and correct.Copy of end to be genuine and correct.Copy of ledgers of purchases are placed at ledgers of purchases are placed at PB67-73Ld. AO has not rejected the books of Ld. AO has not rejected the books of accounts by invoking the provisions of section 145(3) of the Act. This meansthat voking the provisions of section 145(3) of the Act. This meansthat voking the provisions of section 145(3) of the Act. This meansthat all the entries in the books of accounts recorded by the assessee are correct. all the entries in the books of accounts recorded by the assessee are correct. all the entries in the books of accounts recorded by the assessee are correct. Suspicion, however strong it may be, cannot be termed as evidence. It should not Suspicion, however strong it may be, cannot be termed as evidence. It should not Suspicion, however strong it may be, cannot be termed as evidence. It should not be used against the appellant be used against the appellant without disproving the sales with tangible evidence. without disproving the sales with tangible evidence. Once the books of accounts are not rejected, no separate addition for the sales Once the books of accounts are not rejected, no separate addition for the sales Once the books of accounts are not rejected, no separate addition for the sales recorded in the books of account can be made by treating the same to be recorded in the books of account can be made by treating the same to be recorded in the books of account can be made by treating the same to be undisclosed income of the assessee. undisclosed income of the assessee. From the facts on records, it shows that on records, it shows that AO also ignored the fact that trading results of the assessee firm are in increasing trend. also ignored the fact that trading results of the assessee firm are in increasing trend. also ignored the fact that trading results of the assessee firm are in increasing trend. The following details were submitted before AO The following details were submitted before AO by the assessee by the assessee which are undisputed[PB 61,84]:

30 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR The sales and profit figures in absolute terms are in rising pattern and the cash so deposited out of the cash sales are already included in the turnover of the year under consideration. It is also noted that AO emphasized on non-submission of party wise details of sales but ignored the fact that the assessee firm had submitted complete details of cash and credit sales undertaken by the assessee firm. No adverse inference has been drawn on the purchasesand stock-register submitted by the assessee. Assessee firm was a registered VAT dealer and all such sales had been reflected in the VAT returns (Rajasthan and Maharashtra) of the assessee. The assessee submitted the same during the assessment proceedings [Page 7 of AO Order]. During the course of hearing, the ld. AR of the assessee submitted various case laws whose details mentioned hereinabove. We also noted that the written submission raised by the assessee contesting the orders of the lower authorities has merit and there appears no ambiguity. In such a situation, we do not concur with the order of the ld.CIT(A) and thus Ground No. 1 to 5 of the assessee are allowed. 3.1 As regards the additional ground, it is noted that AO has invoked the provisions of section 115BBE on cash deposit of Rs 25,86,000 which is received out of cash sales of the assessee. The same has been upheld by ld. CIT(A)/NFAC. From the available records and the submissions of the assessee, the Bench feels that Section 115BBE cannot be invoked for sales already recorded in books. The provisions of section 115BBE cannot be invoked for any and every addition made

31 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR to the returned income. In the instant case, cash sales are alleged to be non-genuine and section 68 is invoked for making the said additions. Sections 68 and 69A create certain deeming fictions, whereby certain amounts which are not considered as income by the assessee, are deemed to be income of the assessee. A deeming fiction of income cannot apply to an item which is already treated as income by the assessee himself. The question of deeming an item to be income can only arise if the item is not otherwise disclosed as income. We also take into consideration the decision of Hon’ble Delhi High Court, in the case of Keshav Social and Charitable Foundation (2005) 278 ITR 152, considered a situation where the assessee, a charitable trust, had disclosed donations received by it as its income, and claimed exemption u/s. 11. The Assessing Officer, on finding that the assessee was unable to satisfactorily explain the donations and the donors were fictitious persons, held that the assessee had tried to introduce unaccounted money in its books by way of donations and, therefore, the amount was to be treated as cash credit u/s. 68. The Delhi High Court held that section 68 did not apply, as the assessee had disclosed such donations as its income. Hence, in this view of the matter, application of Section 115BBE, by the AO, to the amount of Rs. 25,86,000 accounted for as sales by the assessee, is illegal and deserves to be quashed. Hence, on such amount, there cannot be any applicability of Section 115BBE. Thus the additional ground raised by the assessee is allowed.

32 ITA NO. 600/JP/2023 GOLECHA JEWELS, JAIPUR VS ITO, WARD 2(2), JAIPUR 4.0 In the result, the appeal of the assesee is allowed Order pronounced in the open court on 10/04/2024.

Sd/- Sd/- ¼ Mk0 ehBk yky ehuk ½ ¼lanhi xkslkbZ½ (Dr. Mitha Lal Meena) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 10 /04/2024 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- M/s. Golecha Jewels, Jaipur 2. izR;FkhZ@ The Respondent- The ITO, Ward2(2), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 600/JP/2023) vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेजज. त्महपेजतंत