ARUN RAJPUT,DELHI vs. ITO, WARD-45(3), NEW DELHI

The assessee has filed appeal against the order of the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi[“Ld. CIT(A)”, for short] dated 09.03.2023 for the Assessment Year 2017-18. 2. Brief facts of the case are, assessee filed its return of income for the Assessment Year 2017-18 on 30.10.2017 declaring total income of Rs.12,93,560/-. The case of the assessee was selected under complete scrutiny through CASS. Accordingly, notices under section 143(2) and 2 142(1) of the Income-tax Act, 1961 (for short ‘the Act’) were issued and served on the assessee. The reason for selection of this case was high value receipt of cash shown from third parties in response data and abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period. The assessee is the proprietor of M/s. Sunny Jewellers dealing in sale of jewellery in gold and other precious metals, ornaments and has declared total purchase of Rs.82,04,192/- and sale of Rs.50,13,807/- in the return of income. During the year under consideration, assessee has deposited total cash of Rs.45,23,500/-. During the demonetization period, assessee has deposited Rs.43,73,500/- in the Axis Bank and Rs.1,50,000/- in another account maintained in the same bank, the total deposit of Rs.45,23,500/-. The AO observed that total cash deposit made by the assessee during the year pertains to demonetization period only. Since the assessee has made the deposits only during demonetization period and observed that the assessee had cash book as on 08.11.2016 with a cash balance of Rs.4,57,741/- only and it is manipulated statement and not supported with evidences. When the assessee was asked to furnish sources of cash deposited during the year, in reply assessee submitted that cash deposited in bank are out of collection, cash balance in hand and cash withdrawals from banks. Further it is submitted that assessee is in the business of 3 jewellery, for the purpose of business, assessee purchased gold from relatives. Cash received from sale of gold was deposited in the bank. After considering the same, the AO rejected the submissions of the assessee and analysed cash deposit pattern, cash sales and cash-in-hand in the following table :- Period Total Purchase Gross Sale Cash Sale Cheque sale G.P. N.P. F.Y. 2015-16

4.2016 to 8.11.2016 4538441 1746607 1746607 1000 23.41 17.72 9.11.2016 to 31.12.2016 42347 2775700 11800 0 21.96 20.35 1.1.2017 to 31.3.2017 1494099 491500 491500 0 11.69 5.24

Further he analysed the month-wise cash sales and cash deposited w.e.f. 01.04.2016 to 08.11.2016 in the following chart :-

Similarly, he analyzed the cash sales and cash deposited from 01.04.2017 to 08.11.2017 in the following chart :-

After comparing both the charts, the AO observed that the cash deposits are not a regular feature in the case of the assessee and it is only during demonetization period, such amount of cash was deposited in the bank account. Accordingly, he applied the test of human probability in this case and questioned the rationality. Since the assessee has basically made the cash deposit only during demonetization period, accordingly, he rejected the claim of the assessee that assessee has purchased gold from relatives and having sold the same, deposited the amount so received in the bank account and observed that claim of the assessee for having the cash in hand is fake. Further he observed that assessee is not one of the entities authorized by Central Government to accept SBNs during demonetization period in exchange for goods/services. Considering the past profile of the assessee analyzed by him, no such quantum of cash deposited by the assessee. Accordingly, he invoked the provisions of section 69A of the Act to make the addition of Rs.45,23,500/- and also invoked the provisions of Section 115BBE of the Act.

After considering the submissions of the assessee, ld. CIT (A) dismissed the appeal of the assessee by heavily relying on the findings of the AO. 8. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal :- “The Ld. ITO has erred in law and on facts in raising demand of Rs.47,02,703/- by making an addition of Rs.45,23,500/- u/s 143(3) of the Income Tax Act, 1961 without analyzing the facts. The Order passed by the Ld. ITO is arbitrary, unlawful and against the cannons of natural justice.

At the time of hearing, ld. AR of the assessee brought to our notice the findings of tax authorities. He submitted that the Assessing Officer had made addition u/s 69A. The Assessing Officer cannot invoke section 69A when the assessee had maintained books of account and no cash was found with the assessee. He prayed that the cash deposited was only from the cash sales and withdrawals from bank in the past. He relied on the following decisions :- (i) Rakesh Kumar Goel, Ghaziabad vs Ito Ward-2(2)(2), Ghaziabad on 28 April, 2025; (ii) Hon'ble Delhi High Court in the case of CIT Vs. Anoop Jain 424 ITR 115 (Delhi); (iii) Hon’ble Allahabad High Court in the case of Smt. Sadhana Jain New Delhi dtd 27 Feb 2025; (v) ITAT Delhi in the case of M/S Godwin Tourism Pvt. Ltd. V. DCIT 2024 (8) TMI 1173, dated- August 21, 2024. 8 10. On the other hand, ld. DR of the Revenue submitted that purchases were recorded by the assessee are from its relatives which was not substantiated and also claimed that payments of purchase were made only to the relatives. He submitted that cash deposited was only during demonetization period. The submissions made by the assessee are not reliable. Accordingly, he relied on the findings of the lower authorities. 11. Considered the rival submissions and material placed on record. We observe that assessee has deposited cash during demonetization period and even AO has observed that the assessee is not a habitual depositor of cash in bank and retained the cash sales with him. After analyzing the pattern of sales and cash deposits during AY 2016-17 and 2017-18, the AO observed that very few deposits were made by the assessee during non-demonetization period and only during demonetization period assessee has made the deposits. The AO rejected the submissions of the assessee on the basis that assessee is not an authorized dealer to exchange SBN during that period and the purchases recorded by the assessee are from his relatives and not satisfied with the submissions of the assessee, he proceeded to make the addition u/s 69A of the Act. 12. Before us, ld. AR of the assessee submitted that AO had accepted the sales recorded by the assessee and also assessee has proved the genuineness of the sales recorded by the assessee and also assessee has 9 proved the genuineness of the sales by submitting the VAT returns during the period. With regard to purchases from relatives, it was submitted that the purchases were made in the month of July and consistently assessee has made the sales which was not disputed by the Revenue. Since the assessee has deposited the cash during demonetization period the provisions of section 69A were invoked. After considering the factual matrix on record, we observe that assessee is a small trader and purchases gold from his relatives and sales the gold and jewelries in cash which was supported by the details submitted before the tax authorities. We observe that Revenue has accepted the cash sales declared by the assessee and also cash generated by the assessee out of the same sales. Since the sales is already declared in the return of income invoking the provisions of section 69A is questionable considering the facts, in order to invoke the provisions of section 69A the relevant cash should have been found in the possession of the assessee, which is not recorded in the books of the assessee and nature/source is not satisfactorily explained by the assessee. We observe that in this case, the assessee has deposited the cash in bank during demonetization and the same are already recorded in the books of account, therefore, invoking of section 69A is not justified and in this regard, there are several decisions, particularly, Hon’ble High Court of Delhi in the case of CIT vs. Anoop Jain (supra) held as under :-

Similarly, Hon’ble Allahabad High Court in the case of Smt. Sadhana Jain (supra) held as under :- "The provisions of section 69A are explicit and come into play when in a particular assessment year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money bullion, jewellery and other article is not recorded in the books of account and the assessee is unable to give any explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuation articles."

Coming to the facts in the present case, we observe that assessee is not a habitual depositor of cash sales in the bank account and he maintains only cash books and the cash sales which are recorded in the books of account are already accepted by the Revenue and just because cash was deposited during demonetization, it is natural for the assessee who was having cash which are out of cash sales already declared by him and additional cash in hand it is natural for any trader who are dealing in cash sales will deposit the same in the bank when faces the situation of keeping the SBN in hand. Considering the nature of business and habitual nature of the 11 assessee who never deposited any cash in the bank and maintained all cash in hand himself, he deals with the expenditure out of cash sales generated in the business, we are inclined to allow the claim of the assessee on the basis that assessee has declared the purchases which were not purchased during demonetization period and there is a movement of stock in the books of account and also assessee has brought on record cash book to support the cash deposits during the year. The findings of the AO itself shows that assessee is not a habitual depositor of cash, therefore, we are inclined to allow the grounds raised by the assessee on the issue of invoking of provisions of section 69A as well as factual matrix on record. 15. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 26TH day of November, 2025. (ANUBHA SHARMA) ACCOUNTANT MEMBER