ASSISTANT COMMISSIONER OF INCOME TAX, COIMBATORE vs. AVR KUMBAKONAM SILVER SHOP JEWELLERS, SALEM

आयकर अपीलीय अिधकरण “सी” �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI माननीय �ी एबी टी. वक�, �ाियक सद" एवं माननीय �ी मनोज कुमार अ'वाल ,लेखा सद" के सम)। BEFORE HON’BLE SHRI ABY T. VARKEY, JM AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ ITA No.4/Chny/2024 (िनधा*रणवष* / Assessment Year: 2017-18) ACIT M/s. AVR Kumbakonam Silver Shop Jewellers बनाम/ Central Circle-3, 364, Jewellers Bazaar Street, Vs. Coimbatore. Salem-636 001. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AACFK-1324-P (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri R. Clement Ramesh Kumar (CIT)-Ld. DR � थ�कीओरसे/Respondent by : Shri N. Arjun Raj (Advocate) Ld.AR सुनवाईकीतारीख/Date of Hearing : 01-08-2024 घोषणाकीतारीख /Date of Pronouncement : 18-09-2024 आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member)

2.1 The Ld.CIT(A) erred in accepting explanation of the assessee that huge cash sales was made on 8.11.2016 and these cash deposits were made out of cash sales conducted on that day. 2.2 The Ld.CIT(A) ought to have appreciated that there were discrepancies in cash book of the assessee which prove that cash sales entered on 08.11.2016 is not genuine. It is seen from cash book that preceding and succeeding entries to the above cash receipt of Rs.3.82 crores have consecutive receipt bill nos.417 & 418. The cash receipt entry for Rs.3,82,16,454/- did not specify bill number and name of customer in cash book whereas in preceding and succeeding entries have bill numbers, name and address of customers. 2.3 The Ld.CIT(A) erred in failing to appreciate that assessee has not furnished list of customers along with identity who made purchases on 08.11.2016 for verification during assessment proceedings. Thus, the assessee had not substantiated huge cash sale on 8.11.2016. Hence, the Assessing Officer rightly assessed cash deposits as unexplained income and taxed as per provisions of section 115BBE of the Act. 2.4 The Ld.CIT(A) erred in observing that assessee has explained satisfactorily source for cash deposits in bank accounts as out of receipts from cash sales without appreciating that Assessing Officer is not satisfied with explanation of the assessee due to abnormality of sales on a single day i.e 8.11.2016.

As is evident, the sole issue that fall for our consideration is addition made by Ld. AO as unexplained income on account of cash deposited by the assessee during demonetization period. 2. The Ld. CIT-DR advanced arguments and submitted that there were discrepancies in the cash book of the assessee. The Ld. CIT-DR pleaded for confirmation of addition as made by Ld. AO. The Ld. AR, on the other hand, drew attention to the findings of Ld. CIT(A) in the impugned order and relied on various decisions of this Tribunal to support the same. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee being resident firm is stated to be engaged in trading of jewellery articles. The return of income as filed by the assessee was subjected to scrutiny to verify cash deposited by the assessee-firm during demonetization period. In this regard, various details were called

for by Ld. AO from the assessee and the same were duly furnished by the assessee along with bank statements and computation of income. 3.2 After considering assessee’s submissions, explanation and documentary evidences, the Ld. AO noted that the assessee deposited cash of Rs.499.49 Lacs during demonetization period from 09.11.2016 to 30.12.2016 in various bank accounts held by the assessee. Accordingly, the assessee was directed to substantiate the source thereof. 3.3 The assessee furnished explanation that after declaration of demonetization, there was panic amongst the public to exchange Specified Bank Notes (SBNs). There was huge rush in jewellery shops to buy jewellery articles. The customers rushed to the showroom and there was increase in volume of sales. The assessee could not refuse customers’ requests in order to maintain good relationship with them since it was engaged in this business for the past more than 90 years. Nevertheless, entire sales were accounted for by the assessee in its books of accounts and eventually there was decrease in stock of the firm. These sales figures were duly reported to Sales Tax Department and tax was also paid on these sales. The assessee stated that from 08.11.2016 at 8.15 PM to 12.00 AM, cash sales were made which led to increase in cash-in-hand. In support of its claim, the assessee furnished monthly summary of cash flows along with details of Specified Bank Notes (SBNs) as deposited during demonetization period. The assessee also furnished cash book and various other documents in support of its claim. 3.4 However, Ld. AO held the explanation of the assessee to be unbelievable. The claim was held to be non-genuine since the assessee did not submit customer wise / item-wise details to enable verification.

The assessee also did not submit any CCTV records to prove that there was huge rush of customers during that period. The assessee failed to provide list of persons who advanced cash to him along with the confirmation in respect of said cash credits. Accordingly, cash-in-hand as increased by Rs.406.62 Lacs on that day was treated as unaccounted money u/s 69A r.w.s. 115BBE and added to the income of the assessee. 3.5 In the alternative, Ld. AO held that the assessee deposited SBNs for Rs.406.62 Lacs on various dates from 10.11.2016 to 21.11.2016. The purpose and intent of the Government was to eradicate the Black Money from the system. Under such a scenario, the assessee ought not to have accepted SBNs from the general public in the garb of sales or realization of debts. The very act of the assessee in depositing impugned amounts in various dates from 10.11.2016 to 21.11.2016 clearly proves beyond doubt that either the same were his unaccounted income that was lent earlier and realized at later date or the assessee was involved in converting SBNs into legal tender and thereby earn huge commission by way of unaccounted sales realization. From this angle also, the aforesaid amount was to be treated as unexplained money u/s 69A r.w.s. 115BBE. Appellate Proceedings 4.1 During the appellate proceedings, the assessee reiterated that the deposits were sourced out of cash accumulated up-to 08.11.2016 on account of cash sales as well as realization from debtors. The assessee also submitted that it had duly furnished summary of cash book for the period from 01.11.2016 to 08.11.2016, 09.11.2016 to 30.11.2016 and 30.11.2016 to 31.12.2016 which substantiate the source of cash deposits. It was submitted that out of cash deposit of Rs.368.49 Lacs, Rs.49.59 Lacs represent opening balance whereas the balance

represents sales realization. The assessee also furnished bill-wise details and receipt number-wise details, the monthly summary of stock register etc. to support the submissions. The assessee also exhibited trends of cash sales made on auspicious day like Akshya Tritiya in earlier years. The complete stock summary was also furnished. Reliance was placed on various judicial decisions to assail the impugned additions. 4.2 The Ld. CIT(A) considered the submissions of the assessee and held that the explanation offered by the assessee was in line with the trend of cash deposits in the past years which were accepted by the Department in the assessments made u/s 143(3) of the Act. The Ld. AO did not bring on record any material to draw an inference that the explanation offered by the assessee was incorrect or unreasonable or that the impugned sum represents income of the assessee from undisclosed sources as against the entries recorded in the audited books of the Assessee. The cash deposited in the banks was from the explained source which could not be treated as unexplained money u/s 69A without bringing on record any credible evidence / material in support of such allegation. The entire sales of the assessee were supported by the bills, duly verifiable from books of accounts & records and Ld. AO did not point out any specific defect in the sale and the sales during the demonetization period were in line with sales trend of earlier years. The Ld. AO did not bring any single evidence on record in support of his allegation. The entire assessment order was based on presumption and assumption by twisting the data to make the huge addition. The increase in sales was normal on occasions like Navratri, Diwali and Akshay Tritiya and there was no abnormal rise in the cash

sales. Further, the sales were duly supported by proper invoices and shown in the VAT returns which are accepted by the VAT authorities and VAT returns were not revised. 4.3 The Ld. CIT(A) concurred that the assessee maintained proper books of account in regular course of business which was duly audited by the independent Chartered Accountant u/s 44AB of the Act. All the sales, purchases and stocks were duly recorded in the books of account which had not been doubted by the AO. The sales shown by the appellant had been accepted by Sales Tax / VAT Department. The AO has not disputed the books of accounts and also did not point out any discrepancy in the sales register or stock at any time of the year including on opening day of 08.11.2016. To hold that the sales were not made on 08.11.2016, one has to prove that the assessee did not have sufficient stock on that day which was not the case. No defect was pointed out in the stock registers. When there was no defect in the purchases and sales and the same were duly matching with inflow and the outflow of Stock, there was no reason to disbelieve the sales. The cash sales made by the assessee had been credited in the books of account and reduction in the stock had not been doubted by Ld. AO. The book of accounts had not been rejected. It was also observed that no businessmen could refuse to make sale to any customer when stock is available and if it is within the four comers of law, especially when price of the gold was high and there was demand for gold at that time of the day, the same could not be doubted. There was no rule that sales could not be made late in the evening or in the night. If minimum details of the customers were taken on sale bills as required under VAT Act then it could not be doubted particularly in the rush of the hour. If the AO

alleges that the assessee had brought the unaccounted money then the onus was on AO to bring on record credible evidence to demonstrate that such purchases and sales as made by the assessee were out of books or the assessee had other source of income which was not disclosed. In the absence of any such evidence, bald allegation could not be accepted. 4.4 Further, human probability test could not be applied in assessee’s case because it was a known fact that there was huge rush in jewellery shop and therefore, huge cash sales made on 08.11.2016 could not be doubted by comparing it with regular sales. The assessee also brought on record increased sales on some auspicious days like Navratri, Diwali and Akshaya Tritiya which could happen during demonetization also as it was unique situation and there was a demand. 4.5 Finally, the impugned deposits were held to be satisfactorily explained and the impugned addition was deleted. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 5. From the facts, it emerges that the assessee is engaged in trading of jewellery articles and it has maintained proper stock of traded items. The books of account of the assessee have duly been audited by Chartered Accountant u/s 44AB and no defect has been pointed out in the same by Ld. AO. The books have not been rejected. The sales have duly been evidenced by invoices which have been furnished to Sales Tax / VAT Department and the same has been accepted therein. The increase in sales is evidenced by corresponding decrease in stock. The assessee has maintained proper cash book which has duly been furnished to Ld. AO during the course of assessment proceedings. The

cash deposits are duly backed up by the entries made in the cash book. The assessee has incurred cash sales up-to 08.11.2016 which has been utilized to make impugned cash deposits in the bank accounts. The stock-in-trade has moved out of assessee’ books of account. When the sale has been reflected in the books of accounts and offered to tax, adding the cash generated out of such sales again would amount to double addition which is impermissible. The cash sales proceeds have been credited in the books of accounts and the same form part of assessee’ cash book. On these facts, it could very well be said that the assessee’s claim was backed up by sufficient documentary evidences. 6. The allegation of Ld. AO is that such abnormal sales could not be achieved by the assessee immediately upon announcement of demonetization by the Government. However, such allegations are bereft of any concrete evidence on record. It is trite law that no addition could be made merely on the basis of suspicion, conjectures and surmises. In the present case, the assessee has duly discharged the burden of establishing the source of cash deposit and the onus was on Ld. AO to disprove the same. However, except for mere allegation and few statistics, there is nothing on record to support the conclusions drawn by Ld. AO that the assessee’s own unaccounted money was introduced and accommodated under bogus customers’ name during the demonetization period. The demand of Ld. AO to produce CCTV recording after lapse of considerable period of time could not be said to be reasonable particularly when all the other evidences support the case of the assessee. Since cash generated out of sales has been credited in the books of accounts, the provisions of Sec.69A could not be invoked in the present case. The case laws as cited by Ld. CIT(A) duly supports the

case of the assessee. Under these circumstances, the impugned additions have rightly been deleted by Ld. CIT(A). The same could not be faulted with. Therefore, the corresponding grounds raised by the revenue stand dismissed. 7. The appeal stands dismissed. Order pronounced on 18th September, 2024

Sd/- Sd/- (ABY T. VARKEY) (MANOJ KUMAR AGGARWAL) �ाियक सद" /JUDICIAL MEMBER लेखा सद" / ACCOUNTANT MEMBER चे4ई Chennai; िदनांक Dated :18-09-2024 DS आदेशकीJितिलिपअ'ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. � थ�/Respondent 3. आयकरआयु=/CIT Coimbatore. 4. िवभागीय�ितिनिध/DR 5. गाडBफाईल/GF