RUKMANI JEWELLERS PRIVATE LIMITED,JAIPUR vs. DCIT CIR.-4 JAIPUR, JAIPUR

vkns'k@ ORDER PER: DR. S. SEETHALAKSHMI, J.M.

This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 17/08/2023 [here in after (NFAC)] for assessment year 2017-18 which in turn arise from the order dated 02.01.2020 passed under section 143(3) of the Income Tax Act, by the Circle-04, Jaipur.

2. The assessee has filed the present appeal on the following grounds: -

“1.1 The impugned order u/s 143(3) of the I.T. Act, 1961 dated 21.12.2019 as well as the notices and proceedings or action so taken by the ld. AO are illegal, bad in law, barred by limitation, without jurisdiction, and various other reasons or and further contrary to the real facts of the case hence the same may kindly be quashed.

1.2. The ld. CIT(A) has grossly erred in law as well as on the facts of the case in passing the Exparty order and confirming the order of the ld. AO without providing adequate and reasonable opportunity of being heard and not considering the material on record in the gross breach of natural justice. Hence the same entire addition may kindly be deleted and the assessment order may kindly be quashed.

2.1 Rs.1,78,08,630/-: The ld. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the addition of Rs.1,78,08,630/- made by the ld. AO on account of cash sales made before demonetization which was deposited in the bank account as alleged unexplained amount credited in the books u/s 68, also erred in invoking the provisions of Sec. 68 which is not invokeable in the present case . The Ld. CIT(A) and AO have also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the addition so made by the ld. AO is also being contrary to the real facts of the case and not according to the provision of law, hence the same may kindly be deleted in full. 2.2: The ld. CIT(A) has grossly erred in law as well as on the facts of the case in confirming the addition made by the ld. AO, despite the facts that the ld. AO has accepted the trading accounts, books of accounts sales and not invoked the provisions of Sec. 145(3). The Ld. AO has also erred in not considering the vital facts and material available on record in their true perspective and sense also proceeded on assumption, presumption and suspicion or guess work. Hence the addition so made by the ld. AO is also being contrary to the real facts of the case and not according to the provision of law, hence the same may kindly be deleted in full.

3. The ld. AO has also grossly erred in law as well as on the facts of the case invoking the provisions of Sec. 115BBE for taxing the income at the higher rate, without issue any show cause notice and also not applicable in the present case. The Ld. AO has also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the provisions of Sec. 115BBE so invoked by the ld. AO and confirmed by the ld. CIT(A) are also being contrary to the real facts of the case and not according to the provision of law, hence the same is illegal, bad in law, against the principle of natural justice the same may kindly be deleted in full.

5. That the appellant prays your honour indulgences to add, amend or alter of or any of the grounds of the appeal on or before the date of hearing.”

3. The fact as culled out from the records is that the assessee e-filed his return of income vide acknowledgement No. 258387821261017 for A.Y 2017-18 on 26.10.2017 thereby declaring total income of Rs. 29,09,080/-. The case was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS) for the complete scrutiny and accordingly, notice u/s 143(2) was issued on 22.09.2018 by this office by fixing the case for hearing on 26.09.2018. Thereafter, to complete the assessment proceedings in this case notice u/s 142(1) along with questionnaire was issued to the assessee on 05.10.2019 and 22.11.2019 fixing the case for hearing. In response thereto, the AR of the assessee submitted the reply and furnished required details/documents of the submission filed by assessee, notices u/s 142(1) was again issued on dated 19.12.2019 to the assessee for necessary information / details from the assessee. In response thereto the AR of the assessee submitted his reply on ITBA Portal. The assessee is engaged in the business of all gold jewellery, watches etc. having retail showroom. The assessee has filed its return of income for the year under consideration declaring the total income of Rs.29,09,080/- on dt. 26.10.2017. The turnover of the assessee for the year consideration is at Rs 23,98,45,370/- as against the turnover of Rs. 26,96,06,094/- in last year.

3.1 During the assessment proceeding the ld. AO noted that the assessee has deposited a sum of Rs. 2,25,82,742/- cash in the banks account during the period of Demonitisation. The assessee was required to produce the information in the a particular format for cash deposit, cash sales and cash balance so as to compare the same with the figures of AY 2016-17. The assessee submitted a reply. The assessee explained source of such huge cash deposits in bank. The assessee in his reply submitted that "the main source of cash deposit was cash sales made over the • Monthwise break up of sales • Ledger account of the above sales • Original Bills of sales made to such parties (for Verifiaction) • In case of bill amount exceeds Rs. 2 lacs, provide PAN of the purchaser.

3.2 The assessee submitted the reply in the form of charts which have been analyzed and from that ld. AO noted that the assessee has made cash deposit of Rs. 15,39,33,476/- in the AY 2017-18 out of which Rs.2,28,20,447/-pertains to 09.11.2016 to 31.12.2016 which is 14.82% of the total deposits. The assessee has claimed that the major source of cash deposit was sale proceeds. From the details so kept on record ld. AO noticed that the assessee has claimed goods of Rs. 4,29,08,725/- were sold in the month of October and November (upto 8th) which is unprecedented. Whereas total cash sales for AY 2017-18 is Rs. 10,74,41,749/-. It means that the assessee made 40% of the total cash sales in these 39 days. If we compare these sales to the rest of the months, average monthly sales is Rs.60 lacs only. Thus sale recorded in October and November (upto 8th Nov) is purely adjustment and further noted that the cash sales for the same period i.e. in the month of October and November (upto 8th Nov) (AY 2016-17) are Rs. 1,74,51,293/- only. So, there is no any seasonal factor (like Festival etc) is affecting the sales of the assessee every year. The assessee is simply making a story of cash sales as a source of cash deposits. The Product dealt with by the assessee i.e. silver and gold ornaments is not a daily usable product but are the luxury product which is mainly used by the limited class of the society. So, it is not that the demand for assessee's goods suddenly increased which resulted into a huge cash sales of Rs. 4,29,08,725/- in October and November (up to 8(th) Nov). The assessee did not attempt to explain the reasons for such a high sale in September and October ever.

3.3 On examination of the details and books the ld. AO further noted that a) The assessee has produced cash book and sales ledger in support of its claim of the above cash sales. On verification of cash book the ld. AO noticed that the assessee is claiming

2016. b) It is humanly impossible to sell goods worth Rs. 1,00,33,680/- in one day. The assessee's argument is that these sales were made after demonetization was declared at 8 pm. It is not possible to sale goods worth Rs. 1,00,33,680 in a span of 4 hours because old currency was not allowed to be accepted after 12 pm on 8th November, 2016. c) The assessee has sold goods to approx 107 People via separate bills. How it is possible that amidst such rush in the shop, the assessee could enter amount and weight and took a print out and got it signed by these 107 purchasers. How the assessee could manage to attend 107 people in 240 minutes! It is next to impossible. d) The assessee was asked to produce the bills for such sales.

The same were produced but such bills are not verifiable.

Generally, jewelers maintain a database of their customers with their complete address and contact number but here the bills do not contain proper name and address of the cannot be ascertained. e) Further, during the bill verification, it was marked out that the assessee has not entered mobile no of the persons to whom goods were sold on 8th November. However, the number is available on almost each and every bill except this date.

When the assessee was asked the reason for such difference, no satisfactory explanation could be offered in this regards. The assessee probably did this to hide the identity of the buyers or it is possible that these buyers do not exist at all. To make this transaction not verifiable, the assessee did not fill the column of Mobile/ Contact Numbers. f) In the stock register also, the assessee has not provided any description of the items purchased and kept as stock in trade.

The assessee maintains stock register in Qty in Grams only having columns of Qty Inward, Qty Outward,Closing Qty. In such case, it becomes unverifiable whether the assessee had a stock of the goods or not which has been claimed as sales by him.e.g. We do not know if the assessee had stock of 20 sales on 8th November, 2016. g) Similarly, on verification of the purchase bills also it was noticed that such bills also do not have any description of the goods. The bills mention "Gold Jewellery 22K and Qty in Gms only. Therefore, what has been purchased and entered into stock register remains unverifiable and so it cannot be accepted that the assessee has sold the same goods. h) Moreover, the average cash balance of the assessee is much lower ranging between 20 lac to 30 lac from 01.04.2016 to 30.09.2016 whereas the assessee has shown cash balance of Rs. 34 lac in October and Rs. 1.82 Cr as on 08.11.2016.

Thus, it is clear that the assessee enhanced his cash balance in the graft of cash sales to unverifiable persons. Main reason for such huge increase in cash balance is fake cash sales booked by the assessee in the month of October and November(upto 8th).

Considering the above factors, the ld. AO noted that it is clear case that the assessee has booked such sales during these 39 days part of which is not found genuine as it is not verifiable. As discussed verifiable during assessment. However, the assessee has already deposited cash of Rs. 3.25 Cr in the month of October. So, sale for the month of October will not have effect on cash balance on 8th November which is claimed to be the source of cash deposited during demonetization. Therefore, average monthly cash sales booked by the assessee in the rest of the months i.e from April to September are considered as sales are considered as genuine sales. Average sales per month comes to Rs. 61 lac approx (rounded off) and accordingly excess sales booked by the assessee for the month of November at Rs. 17808630/- considering exorbitantly high and unprecedented. However, as discussed assessee's average monthly sales at Rs. 61 lac means Rs. 2 lac daily. So, for 8 days of November, sales of Rs. 16 lacs is considered to be genuine and excess sales i.e. Rs. 1,78,08,630 is considered as unexplained amount credited in the books of the assessee. As the assessee could not provide any satisfactory arguments for amount credited in the books, and thus considering the provisions of section 68 an amount of Rs. 1,78,08,630/- is considered as unexplained cash credits of the assessee.

4. Aggrieved from the above finding recorded in the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below:

“6. Decision I have carefully examined the submission of the appellant as reproduced in the preceding paragraph and the facts emanating from the A. O's order, wherein addition has been made. 6.1 As mentioned above under Para 4 of this order, the appellant was accorded sufficient number of opportunities of being heard, but the appellant chooses not to avail any of the opportunity by not responding to any of the hearing notices. Be that as it may, the case is being taken up for adjudication on the basis of details available on record in the form of Assessment order, Statement of facts & Grounds of appeal filed by the appellant. 6.2 The brief facts of the case are that the case of the assessee was selected for scrutiny under CASS. The appellant is in the business of manufacturing and trading of gold ornaments and trading of watches and filed their ITR for A.Y.2017-18 at an income of Rs.29,09,080/-. During the course of assessment proceedings, it was noted that there were abnormally high cash deposits into the bank account of the assessee which were claimed to be out of cash sales. The AO analysed the sales trend and cash deposits for the immediately preceding year 2015-16 vis-à-vis the current financial year 2016-17 and concluded that huge cash sales shown by the appellant in his books of accounts is nothing but merely an attempt by the assessee to make an attempt to bring the unaccounted income in the form of cash sales and deposited the same in the bank account. The detailed reasoning for the conclusion is elaborated by the AO at page No.6, 7 and 8 of his order. Holding the credits to the extent of Rs.1,78,08,630/- as unexplained, the AO completed the assessment by making an addition of impugned unexplained credits u/s.68 of the Act. Aggrieved by the addition, the appellant has filed this appeal.

7. All the grounds raised by the appellant are in respect of addition of Rs. 1,78,08,630/-made by the AO. Since the only issue involved is of addition made u/s 68 on account of unexplained cash credits found credited in the books of account of appellant. It is imperative to look upon the ratios laid down by the various Hon'ble Courts in respect of unexplained credit / money found credited in the books/bank accounts of the assessee.

7.1 The fundamental question involved is that whether or not the AO was justified in making the addition of Rs. 1,78,08,630/- under section 68 in the hands of the assessee, and the most critical thing to be examined in this regard is explanation of the assessee with respect to these credits. There is no, and there cannot be any, dispute on the fundamental legal position that the onus is on the assessee to prove 'bonafides' or 'genuineness' of the money credited in his bank account. This approach finds support from the scheme of Section 68/69, which provides that where any sum is found credited in the books / bank accounts of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, such sum may be charged to income tax as the income of that assessee for that previous year. The burden is thus on the assessee to prove the nature and source thereof, to the satisfaction of the Assessing Officer. Everything thus hinges on the explanation given by the assessee and on how acceptable is the explanation so given by the assessee. The next question is as to what the kind of explanation that the assessee is expected to give.

7.2 As noted by Hon'ble Delhi High Court, in the context of issuance of share capital and in the case of PCIT Vs Youth Construction Pvt Ltd [(2013)357ITR197 (Del)], "it involves three ingredients, namely, the proof regarding the identity of three applicants, their creditworthiness to purchase the shares and the genuineness of the transaction as a whole".

7.3 That is the approach adopted by Hon'ble Courts above all along. In the case of CIT v. United Commercial and Industrial Co (P.) Ltd [1991] 187 ITR 596 (Cal)], Hon'ble Calcutta High Court has held that under the scheme of Section 68" it was necessary for the assessee to prove prima facie the identity of creditors, the capacity of such creditors and lastly the genuineness of transactions".

7.4 Similarly, in the case of CIT v. Precision Finance (P.) Ltd [1994] 208 ITR 465 (Cal)], it was observed that "it is for the assessee to prove the identity of creditors, their creditworthiness and genuineness of transactions".

7.5 While examining the issue of genuineness of the transactions entered into by the assessee, it is also important to keep in mind Hon'ble Supreme Court's observation, in the case of CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)], to the effect that "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities".

7.6 Similarly, in a later decision in the case of SumatiDayal v. CIT [(1995) 214 ITR 801 (SC)], Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities............ Similarly the observation............that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available.....In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably".

7.7 An addition under Section 68 can be made where any sum is found credited in the books of account for any previous year, and the assessee either offers no explanation about the nature and source as regards the same, or the explanation offered by him in the opinion of the assessing officer is not found to be satisfactory. That before adverting further, the relevant extract of the aforesaid statutory provision, viz. Section 68, which reads as under: -

"Cash credits.

35 [Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless,

(a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited, and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

36 [Provided also] that nothing contained in the first proviso 37 [or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10."

7.8 That a bare perusal of the aforesaid deeming section therein reveals there has to be credit of amounts in the books of accounts maintained by the assessee, such credit has to be of a sum during the previous year, and the assessee offered no explanation about the nature and source of such credit found in the book, or the explanation offered by the assessee in the opinion of the Assessing Officer is not satisfactory, it is only then the sum so credited may be charged to income-tax as income of the assessee for that previous year. The expression "the assessee offers no explanation" means where the assessee offers no proper, reasonable and acceptable explanation as regards to the sum found credited in the books maintained by the assessee. It is true, the opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on record.

This is the settled position of law that a statutory provision has to be strictly construed and interpreted as per its plain literal interpretation, and no word howsoever meaningful it may so appear can be allowed to be read into a statutory provision in the garb of giving effect to the underlying intent of the legislature.

7.9 In a much-related case of identical facts of abnormally huge cash deposits in the bank accounts by a jeweller, the Hon'ble ITAT Hyderabad, 'B' Bench in the case of Assistant Commissioner of Income Vs M/s. Vaishnavi Bullion Private Limited in & 561/Hyd/2020 and ITA 58 & 59/Hyd/2021, Hon'ble ITAT upholds the addition of about Rs.100 Cr. as unexplained credit in the batch of appeals involving two jewellery and bullion dealers in the context of post-demonetisation cash deposits;

7.9.1 The Hon'ble ITAT rejects Assessee's submission of receiving cash from thousands of customers immediately after announcement of demonetisation. ITAT remarks, "The assessee either deposited its undisclosed amount or otherwise helped DR undisclosed, unanimous and unidentifiable persons to convert their undisclosed prohibited currency into bullion after notification of demonetization. In both circumstances, the action of the assessee was not permissible in the eyes of the law";

7.9.2 The Hon'ble ITAT Holds the addition to be sustainable under Section 68, relies on SC ruling in Apex Labs to reject Assessee's submission that even though the transactions are held illegal by the Revenue only the income can be taxed under the Act which does not differentiate between legal and illegal incomes;

Also holds that demonetised currency was received by the Assessee and was wrongfully deposited with the bank, thus, upholds the assessment order by concluding that the Assessee mischievously and unscrupulously brought the demonetised currency into the network;

7.9.3 Discards Assessee's claim that money was received from the customers and upholds Revenue's stand that no legal sale of gold could be made with use of prohibited currency; the Hon'ble ITAT takes a stern view on Assessee's conduct by observing that,

"The persons like assessee have given a setback to well-intended and well-thought policy of Government of India and they have used this as an opportunity to convert their or others' ill-gotten money into bullions....The above said act of the assessee is not only against the law but also against the interests of the nation.";

7.10 Thus, the judicial authorities have taken an extremely adverse view of such practises adopted by various assessees to make an attempt of aggregating their books and trying to explain the huge cash deposits by making bogus sales entries in their books of accounts. Having considered entire facts of the case, and the case laws cited above, it is apparent that the appellant has completely failed to offer any explanation either before the AO during assessment proceedings or before me during appellate proceedings, despite affording sufficient number of opportunities and hence, I find no infirmity in the order of AO. Accordingly, the addition made of Rs. 1,78,08,630/- is confirmed. As a result, the appeal is dismissed.

5. Since, here also the aggrieved with the order of the ld. CIT(A), prefer the present appeal on the grounds as reiterated here in above with this tribunal. To support the various grounds raised by the assessee ld. AR of the assessee filed a detailed written submission and the same is reproduced here in below :

“FACTS: 1. The brief facts of the case are that the appellant-assessee is a Pvt. Limited and a regular I.T assessee. The appellant assessee is engaged in the business of all gold jewellery, watches etc. having retail showroom. The assessee has filed its return of income for the year under consideration declaring the total income of Rs.29,09,080/- on dt. 26.10.2017. The turnover of the assessee for the year was of Rs 23,98,45,370/- as against the turnover of Rs. 26,96,06,094/- in last year. The case was selected for the scrutiny assessment. The ld. AO issued the notice U/s 143(2) on dt. 22.09.2018 in response thereto assessee has submitted the reply thereafter the ld. AO has issued the notice u/s 142(1) on 05.10.2019 and 19.1.2019 in response thereto assessee filed the reply details as required admittedly vide page 2 para 1 of the assessment order. During the course of assessment proceedings the ld. AO has noted that the assessee has deposited cash of Rs.2,25,82,742/- in the bank during the demonetization period. The ld. AO required to the assessee to file the the information in the a particular format for cash deposit, cash sales and cash balance so as to compare the same with the figures of AY 2016-17. In response thereto the assessee has submitted the same vide page 2-5 of the assessment order and (PB50,51,58,60,61)

The ld. AO has asked to the assessee to explain the source of cash deposits in the bank account. In response thereto the assessee submitted that “the main source of cash deposit was cash sales made over the counter”

The ld. AO has also asked to the assessee to produce the (i) Month wise break up of sales, ii) Ledger account of the above sales, iii) Original Bills of sales made to such parties (for Verification) and iv) in case of bill amount exceeds Rs. 2 lacs, provide PAN of the purchaser. In response thereto the assessee submitted the reply admittedly.

Thereafter the ld. AO has stated that the assessee has made cash deposit of Rs.15,39,33,476/- in the AY 2017-18 out of which Rs.2,28,20,447/-pertains to 09.11.2016 to 31.12.2016 which is14.82% of the total deposits.

The ld AO has further stated that 1). It has also been noted that the cash sales in the month of October and November(upto 8th Nov) is Rs. 4,29,08,725/- whereas total cash sales for AY 2017-18 is Rs.10,74,41,749/-. It means that the assessee made 40% of the total cash sales in these 39 days, If we compare these sales to the rest of the months, average monthly sales for Rs.60 lacs only. Thus sale recorded in October and November(upto 8th Nov) is purely adjustment and sounds abnormal. And therefore, it is also not justified.

2).The cash sales for the same period i.e. in the month of October and November (upto 8th Nov) (AY 2016-17) are Rs. 1,74,51,293/- only. So, there is no any seasonal factor (like Festival etc) is affecting the sales of the assessee every year. The assessee is simply making a story of cash sales as a source of cash deposits.

3). Product dealt with by the assessee i.e. silver and gold ornaments is not a daily use product. It is a luxury product which is mainly used by the limited class of the society. So, its not that the demand for assessee’s goods suddenly increased which resulted into a huge cash sales of Rs. 4,29,08,725/- in October and November(upto 8th Nov). The assessee did not attempt to explain the reasons for such a high sales in September and October ever..

4-5). The assessee has produced cash book and sales ledger in support of its claim of the above cash sales. On verification of the same, it was noticed that the assessee is claiming sales of Rs. 1,00,33,680/- for only one day i.e.8th November, 2016.It is humanly impossible to sell goods worth Rs. 1,00,33,680/- in one day. The assessee’s argument is that these sales were made after demonetization was declared at 8 pm. It is not possible to sale goods worth Rs. 1,00,33,680 in a span of 4 hours because old currency was not allowed to be accepted after 12 pm on 8th November, 2016.

6).The assessee has sold goods to approx 107 People via separate bills. How it is possible that amidst such rush in the shop, the assessee could enter amount and weight and took a print out and got it signed by these 107 purchasers. How the assessee could manage to attend 107 people in 240 minutes! It is next to impossible. 7). The assessee was asked to produce the bills for such sales. The same were produced but such bills are not verifiable. Generally jwellers maintain a database of their customers with their complete address and contact number but here the bills do not contain proper name and address of the purchaser. In such case, the transaction is genuine or not cannot be ascertained.

8). Further, during the bill verification, it was marked out that the assessee has not entered mobile no of the persons to whom goods were sold on 8th November. However, the number is available on almost each and every bill except this date. When the assessee was asked the reason for such difference, no satisfactory explanation could be offered in this regards. The assessee probably did this to hide the identity of the buyers or it is possible that these buyers do not exist at all. To make this transaction not verifiable, the assessee did not fill the column of Mobile/Contact Numbers.

9). In the stock register also, the assessee has not provided any description of the items purchased and kept as stock in trade. The assessee maintains stock register in Qty in Grams only having columns of Qty Inward, Qty Outward, Closing Qty. In such case, it becomes unverifiable whether the assessee had a stock of the goods or not which has been claimed as sales by him.e.g. We do not know if the assessee had stock of 20 pcs of chains or earnings which has been claimed by it as sales on 8th November, 2016.

10). Similarly, on verification of the purchase bills also it was noticed that such bills also do not have any description of the goods. The bills mention “Gold Jewellery 22K” and Qty in Gms only. Therefore, what has been purchased and entered into stock register remains unverifiable and so it cannot be accepted that the assessee has sold the same goods.

11). Moreover, the average cash balance of the assessee is much lower ranging between 20 lac to 30 lac from 01.04.2016 to 30.09.2016 whereas the assessee has shown cash balance of Rs. 34 lac in October and Rs. 1.82 Cr as on 08.11.2016. Thus, it is clear that the assessee enhanced his cash balance in the graft of cash sales to unverifiable persons. Main reason for such huge increase in cash balance is fake cash sales booked by the assessee in the month of October and November(upto 8th).

The ld. AO on the basis of above allegation and observation has held that the assessee has booked such sales during these 39 days part of which is not found genuine as it is not verifiable and neither sales nor purchases for such sales are found verifiable during the course of assessment. The assessee has already deposited cash of Rs. 3.25 Cr in the month of October. So, sale for the month of October will not have effect on cash balance on 8th November which is claimed to be the source of cash deposited during demonetization.

Therefore, average monthly cash sales booked by the assessee in the rest of the months i.e from April to September are considered as sales are considered as genuine sales. Average sales per month comes to Rs. 61 lac approx (rounded off)and accordingly excess sales booked by the assessee for the month of November is computed as below: Sales for the month of November(upto 8th November) : The assessee has booked Rs. 1,94,08,630 on account of cash sales during these 8 days which is exorbitantly high and unprecedented. However, as discussed above assessee’s average monthy sales is Rs. 61 lac means Rs. 2 lac daily. So, for 8 days of November, sales of Rs. 16 lacs is considered to be genuine and excess sales i.e. Rs.1,78,08,630 is considered as unexplained amount credited in the books of the assessee. All of the above facts indicate that the assessee fabricated the books and tried to bring the unaccounted income in the form of cash sales and deposited the said cash in the bank account. Considering the above facts, it is clear that the assessee could not provide any satisfactory arguments for amount credited in the books. Therefore, provisions of section 68 are attracted here.

5. Applicability of section 68: The onus to prove the identity, genuineness and creditworthiness was on the assessee and it failed to discharge it. Therefore, the amount of Rs.1,78,08,630/- which is cash deposited in the bank during the period of demonetization is considered as unexplained cash credits and therefore, provisions of section 68 of the I T Act, 1961 are invoked here. Section 68 says that “68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year The ld. AO also invoked the provisions of Sec. 115BBE.

Against the order of the ld. AO assessee has filed the appeal before the ld. CIT(A) who has confirmed the order of the ld. AO vide 3 to 8 of CIT(A) order. The ld. CIT(A) has referred some judgments but the same are not applicable in the present case. Hence this appeal.

SUBMISSIONS: 1. No Show cause notice issued before making the addition, invoking the provisions of Sec. 68, Sec.115BBE, and before pointing out the various allegation: At the very outset it is submitted that the ld. AO has not issued any show cause notice before making the addition of Rs.1,78,08,630/-, before invoking the provisions of Sec. 68 and115BBE and before making various allegations as made in the assessment order. As clearly appearing from the various cause notice. As under A. 143(2) Notice issued on 22.09.2018 pgae 2-3 of A. This is a form notice for selecting the case for Scrutiny, in this notice also nowhere it has been stated that whether the case is selected for limited scrutiny and complete scrutiny, which was mandatory as per CBDT circulars. B. Notice U/s 142(1)issued on 05.10.2019. pgae 4-8 of Annexure A: in the is notice the ld. AO has asked to the assessee various details which has been replied by the assesse admittedly. C. Notice U/s 142(1)issued on 22.11.2019. pgae 9-10 of Annexure A: in this is notice the ld. AO has asked to the assessee to file some more information/details which has also been replied by the assesse admittedly. D. Notice U/s 142(1)issued on 19.12.2019. pgae 11-13 of Annexure A: in this notice the ld. AO has also asked to the assessee to file some more information/details on next day i.e on date 20.12.2019 which has also been replied by the assessee admittedly. Thereafter the ld. AO has completed the assessment on 21.12.2019. In support note sheet on portal is enclosed at Page 1 of Annexure A. 1.2 On perusal of above notices it is clear these nowhere the ld. AO has given or issued any show cause notice before making the additions or allegations or invoking the provisions of 68 and Sec. 115BBE. The ld. AO has not brought any allegation in the notice of the assessee before making the same and It was mandatory on the part of the ld. AO to issue the specific show cause notice to this effect asking to the assessee as to why the income should not be taxed as above before doing so. It is very settled legal position that a person (assessee) is entitled to opportunity to show cause as to why not the income of the assessee is determined and charged or taxed in the manner as proposed by the Assessing Officer but in the instant case no such type of opportunity had been provided hence the addition so made may kindly be deleted . But the ld. AO has failed to do so, which is against the principal of natural justice and against the law. Thus how the ld. AO can make the addition of alleged undisclosed receipts of Rs.1,78,8,630/- and also cannot invoke the provisions of Sec. 68 and 115BBE. Hence the entire additions are liable to be deleted. in full kindly refer Sanghi Brothers (Indore)Limited v/s Inspecting ACIT 122 CTR 19(MP), Malik Packaging v/s CIT 284 ITR 374 (All), T.C.N. Menon v/s ITO 96 ITR 148(Ker). 1.3 Thus it is the settled law that no addition can be made without issuing the show cause notice or without confronting to the assessee.

1.4 In the case of Shreyas Builders & Anr. vs. M.d. Kodnani & ors.* (2000) 161 CTR 0527 : (2000) 242 ITR 0320 it has been held that A perusal of the show-cause notice shows that it neither discloses the material nor the reasons. It is a cryptic notice. It does not indicate the material on the basis of which the Appropriate Authority reached the tentative conclusion that the transaction is undervalued. It also does not disclose any reason why the Appropriate Authority has reached the tentative conclusion that the transaction has been undervalued. It is further to be seen here that in ground (b) of the petition a grievance in this regard has been made by the petitioners and in the affidavit in reply filed by the respondent/ competent authority, the competent authority does not state the reasons for non-disclosure of the material as also the reasons in the show-cause notice. The basic approach of the authority is erroneous. Unless the Appropriate Authority discloses the reasons why it prima facie finds that the transaction is under valued, the person to whom the show-cause notice is issued would not be able to put up a defence. Thus issuance of such show-cause notice would defeat the very purpose for which the show-cause notice is required to be issued. A show- cause notice which does not disclose the material on the basis of which the Appropriate Authority has reached the tentative conclusion that the transaction has been undervalued and the reasons for reaching that tentative conclusion is a defective show-cause notice and, therefore, an order made on the basis of that show-cause notice would be an incompetent order and, therefore, liable to be set aside.—Mrs. Nirmal Laxminarayan Grover vs. Appropriate Authority (1997) 139 CTR (Bom) 40 : 1995(2) Mh. L.J. 755 : TC S3.267 followed; C.B. Gautam vs. Union of India (1992) 108 CTR (SC) 304 r/w (1993) 110 CTR (SC) 179 : (1993) 199 ITR 530 (SC) : TC S3.142 relied on.

Also refer recent decision of this honble Tribunal in the case of M/s Motisons Jewellers Ltd in & 178/Jp/2022 dt. 29.09.2022. Copy enclosed.

2. All the allegation of the ld. AO based on guess work, assumption, presumption and suspicion and our WS on the same are as under:

2.1). On the allegation that the cash sales in the month of October and November(upto 8th Nov) is Rs. 4,29,08,725/- whereas total cash sales for AY 2017-18 is Rs.10,74,41,749/-. It means that the assessee made 40% of the total cash sales in these 39 days, If we compare these sales to the rest of the months, average monthly sales for Rs.60 lacs only. Thus sale recorded in October and November(upto 8th Nov) is purely adjustment and sounds abnormal.: In this regard it is submitted that the allegation of the ld. AO based purely of assumption, presumption and suspicion, the ld. AO has ignored the facts, there was Deepawali Season and thereafter the marriage season had started and in the marriage session the sale of gold and silver jewelry increased. And the items in which assessee deals based on demand and there was huge demand due to marriage season and admittedly the sale was high for 4 hours due to demonetizations. 2. 2).The cash sales for the same period i.e. in the month of October and November (upto 8th Nov) (AY 2016-17) are Rs. 1,74,51,293/- only. So, there is no any seasonal factor (like Festival etc) is affecting the sales of the assessee every year. The assessee is simply making a story of cash sales as a source of cash deposits.:- This allegation is also wrong because as we have stated above that just after the marriage season is started and in 2016 the Deepawali was on 30th Oct. 2016 and after 2-3 days gape the shopping of marriages is started. Hence the allegation of the ld. AO is absolutely wrong without seeing the same. Further when the ld. AO herself admitted that in the in the month of October and November (upto 8th Nov) (AY 2016-17) are Rs. 1,74,51,293/- only i.e for 5,63,000/- per days in last year. Thus to this extent also the ld. AO has not accepted the sales, in this ratio the ld. AO has also failed to consider the rate of gold as in the last year the average rate of gold was about 26000/- (24KT) and 24000(22KT) and in this year the rate of gold 31000/- and 29000/- thus there was increase of 20% which is to be added, in support we are enclosing herewith rate comparison chart of two years As annexure B, further the sale of 4 hours of 8th November cannot be denied and the sale of from 8.00 PM to 12.00 PM was valid and allowed in old notes and the ld. AO herself admitted the same, this demand also cannot be denied. And a businessmen or any person would not like to loss opportunity if allowable as per law.

2.3). Product dealt with by the assessee i.e. silver and gold ornaments is not a daily use product. It is a luxury product which is mainly used by the limited class of the society. So, its not that the demand for assessee’s goods suddenly increased which resulted into a huge cash sales of Rs. 4,29,08,725/- in October and November(upto 8th Nov). The assessee did not attempt to explain the reasons for such a high sales in September and October ever.:- Vide para 2.2 further as we have stated about the marriage and other social season after deepawali and the ld. AO has wrongly stated that the assessee did not attempt to explain the reasons for such a high sales because in para 1 we have already stated that the ld. AO has not asked or issued any show cause notice for the same, what details asked by the ld. AO have been given by the assessee. 2.4-5). The assessee has produced cash book and sales ledger in support of its claim of the above cash sales. On verification of the same, it was noticed that the assessee is claiming sales of Rs. 1,00,33,680/- for only one day i.e.8th November, 2016.It is humanly impossible to sell goods worth Rs. 1,00,33,680/- in one day. The assessee’s argument is that these sales were made after demonetization was declared at 8 pm. It is not possible to sale goods worth Rs. 1,00,33,680 in a span of 4 hours because old currency was not allowed to be accepted after 12 pm on 8th November, 2016.:- In this regard we have already stated that the observation of the ld. AO based purely on guess work, assumption, presumption and suspicion because in the instant case the assessee had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock registers and no differences were found in the stock register or the stocks of the assessee. Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/ stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The AO accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& L account (PB34-47) and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the lower authority, both the authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed to disprove the condition of the assessee. Suspicion may be strong however cannot take the place of reality, are the settled principles kindly refer Dhakeshwari Cotton Mills 26 ITR 775 (SC) also refer R.B.N.J. Naidu v/s CIT 29 ITR 194 (Nag), Kanpur Steel Co. Ltd. v/s CIT 32 ITR 56 (All).Also refer CIT v/s KulwantRai 291 ITR 36( Del). In CIT v/s Shalimar Buildwell Pvt Ltd 86 CCH 250(All) it has been held that the AO made the addition merely on suspicion which was not desirable in the eye of law.

1.4 Kindly refer (a) Reliance is placed on same and identical matter where Hon’ble VISAKHAPATNAM ITAT Bench (DB) in the matter of M/s Hirapanna Jewellers, Visakhapatnam for AY 2017-18 has very well supported the view of assesse as follows; “9. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the 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 (Supra) and the Hon’ble

Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra),Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld.” Further assessee admittedly produced sales bills, cash book and all books of account which have not been rejected. The sales was not only 4 hours as presumed by the ld. AO but the same was also for whole days i.e form 10.AM to 8.00PM. Further the sale of 4 hours of 8th Novemeber cannot be denied and the sale of from 8.00 PM to 12.00 PM was valid and allowed in old notes and the ld. AO herself admitted the same and not held invalid or illegal. that there was a rush in the shop to purchase the jeweller after the news was published in various newspapers.

2. 6).The assessee has sold goods to approx 107 People via separate bills. How it is possible that amidst such rush in the shop, the assessee could enter amount and weight and took a print out and got it signed by these 107 purchasers. How the assessee could manage to attend 107 people in 240 minutes! It is next to impossible.:- In this regard it is submitted that again the ld.AO has proceeded on assumption, presumption and suspicion how the ld. AO can assume that the assessee could not sale sold goods to 107 person in four hours, it is for the businessmen not for the AO. AO is not a businessmen and assesse is businessmen he know how to run business in a pressure movement. He ignored that there was fourteen staff members with assessee there apart 4 directors and their family members. In support kindly see PB 46 where in the P&L account assessee has paid or shown salary of 51.91 Lakhs to employees and the ld. AO has not disputed any expenditure calimed in the P&L account nor trading account. For Example an AO not passed an assessment order in days in starting of years and when the time limit is going to expired they passed so many assessment orders in a days or weeks. Thus every person is expert their own field.

2. 7). The assessee was asked to produce the bills for such sales. The same were produced but such bills are not verifiable. Generally jwellers maintain a database of their customers with their complete address and contact number but here the bills do not contain proper name and address of the purchaser. In such case, the transaction is genuine or not cannot be ascertained.:- In this regard it is submitted that the ld. AO has not stated how the sales bills is not verifiable, when she has not made any inquiry nor rejected the books of accounts. And in the IT act it is not required to maintain the data base of the clients and the assessee cannot compel to the customers to provide all the details at that time in the permissible limit. At the business premises there is systematic arrangement as sales man, cash counter, note/rupees counting machine, bills checking, computer, tally etc.. The doubt may be raised where the shop is running by one or two persons. And in the crowed some data is left then it mean not there was no sales.

It is not compulsory or mandatory under the I. Tax Act, 1961 to collect the 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. Further in the preceding financial year the same practice being followed by the assessee where no details of name, address and PAN of customer was available with the assessee. In the preceding year the cash sales made by the assessee were accepted by the ld. AO. Therefore, due to non-furnishing of address and PAN of the customer, the sale made by the assessee in the demonetization period 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.

In the case of R.B. Jessaram Fatehchand Sugar ... vs CIT , ... on 30 March, 1969 Equivalent citations: 1970 75 ITR 33 Bom “4. In our opinion, the assessee's account books are to be accepted, unless, on verification, they disclosed any faults or defects, which cannot be reasonably and satisfactorily explained by the assessee. All the other transactions, except the cash transaction, which were verifiable, have been verified and scrutinised by the Income-tax Officer and there is nothing wrong whatsoever found with them. As to the cash transactions also, the quantity of sugar sold has not been disputed. The rates at which sugar was sold were not such as would excite suspicion by reason of being lower than the prevailing market rates. The names of the customers are also entered in respect of the transaction. All that is not done is that the addresses are not entered and on enquiry the assessee was unable to supply the addresses. Since, having regard to the nature of the transaction and the manner in which they had been effected, there was no necessity whatsoever for the assessee to have maintained the addresses of cash customers, the failure to maintain the same or to supply them as and when called for cannot be regarded as a circumstance giving rise to a suspicion with regard to the genuineness of the transactions. The Tribunal, therefore, was not right, in our opinion, in setting aside the order of the Appellate Assistant Commissioner and restoring that of the Income-tax Officer. There are no circumstances disclosed in the case nor is there any evidence or material on record which would justify the rejection of the book results.

2.10). Similarly, on verification of the purchase bills also it was noticed that such bills also do not have any description of the goods. The bills mention “Gold Jewellery 22K” and Qty in Gms only. Therefore, what has been purchased and entered into stock register remains unverifiable and so it cannot be accepted that the assessee has sold the same goods.:- Vide para 2.9 11). Moreover, the average cash balance of the assessee is much lower ranging between 20 lac to 30 lac from 01.04.2016 to 30.09.2016 whereas the assessee has shown cash balance of Rs. 34 lac in October and Rs. 1.82 Cr as on 08.11.2016. Thus, it is clear that the assessee enhanced his cash balance in the graft of cash sales to unverifiable persons. Main reason for such huge increase in cash balance is fake cash sales booked by the assessee in the month of October and November(upto 8th).: - In this regard it is submitted that it is on the businessmen how to maintain the cash and when cash to be deposited in the bank, there may be so many reason not to deposit cash daily in the bank, when the cash was as per the cash book which is the part of books of account and has not been rejected, the cash was supported with cash books sales, ledger etc. then how the ld. AO can doubted on her accepted action.

4. The ld.AO stated that, average monthly cash sales booked by the assessee in the rest of the months i.e from April to September are considered as sales are considered as genuine sales. Average sales per month comes to Rs. 61 lac approx (rounded off)and accordingly excess sales booked by the assessee for the month of November is computed as below: Sales for the month of November(upto 8th November) : The assessee has booked Rs. 1,94,08,630 on account of cash sales during these 8 days which is exorbitantly high and unprecedented. The ld AO has taken average monthly sales at Rs. 61 lac means Rs. 2 lac daily. So, for 8 days of November, sales of Rs. 16 lacs is considered to be genuine and excess sales i.e. Rs.1,78,08,630 is considered as unexplained amount credited in the books of the assessee by the ld. AO. By invoking the provisions of sec. 68. And sated that The onus to prove the identity, genuineness and creditworthiness was on the assessee and it failed to discharge it. Therefore, the amount of Rs.1,78,08,630/- which is cash deposited in the bank during the period of demonetization is considered as unexplained cash credits and therefore, provisions of section 68 of the I T Act, 1961 are invoked here.:-

In this regard it is submitted that when the ld. AO has accepted the books of accounts no sect. 68 can be invoked nor applicable.

(a) 5.1 Reliance is placed on the decision of Hon'ble Rajasthan High Court in the case of Smt. Harshiia Chordia vs ITO (2008) 298 ITR 349 in which it was held that "Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them". (b) CIT vs Associated Transport Pvt. Ltd. on 4 January, 1994 Equivalent citations: 1995 212 ITR 417 Cal.

“6. The Tribunal was of the view that the assessee had sufficient cash in hand. In the books of account of the assessee, cash balance was usually more than Rs. 81,000. There is no reason to treat this amount as income from undisclosed sources. It is not a fit case for treating the amount of Rs. 81,000 as concealed income of the assessee and consequently imposition of penalty was also not justified in this case.

7. Basically, the Tribunal has come to the decision after a review of the entire facts. The Tribunal does not appear to have failed to consider any relevant material and whether the Tribunal has appreciated the facts correctly or not cannot be gone into in the reference jurisdiction. It is the appraisal of facts by the Tribunal which is the final fact finding body. No question of perversity has been raised.

8. Therefore, questions Nos. 1 and 2 in Matter No. 1865 of 1991 are answered in the affirmative and in favour of the assessee.

9. The question in Matter No. 1863 of 1991 is also answered in the affirmative and in favour of the assessee. 10. There will be no order as to costs.”

© Also on the decision of Hon’ble ITAT, Nagpur Bench in the case of M/s Heera Steel Limited vs ITO (2005) 4 ITJ 437in which it was held that cash sales cannot be equated with cash credit under section 68.

(d) The AO has made addition by invoking the provision of section 68. The precondition for invoking section 68 is that there has to be credit of amount in the books maintained by the assessee. [CIT vs P. Mohanakala (2007) 291 ITR 278 (SC)].

(e) The section is applicable only when a sum is found credited in the books of the assessee[Rakesh Kalia v. CIT, (2006) 286 ITR 357 (Dei.)].In the case of assessee neither any sum has been credited in the books of accounts or in the bank account even for a single day throughout the year which is evident from the peak analysis of bank account is submitted here with. As evident from the bank account, sale proceeds realized was deposited in the bank are utilized in the same day for making payments of purchases. The sale proceeds realized was not lying as credit in the books of accounts of the assessee even for a single day. Hence by any stretch of imagination, payments received from the trade debtors cannot be covered within the meaning of credits under section 68.

(f) In the case of "Dewas Soya Ltd. Vs ITO HAT Hon'ble ITAT has also held just because the amounts were received from the buyers in cash, the assessee cannot be penalized because the restriction placed for payment u/s 40A(3) of the Act applies to buyer and not the seller. There being no restriction under the Act to accept cash against sales, the assessee Company cannot be penalized. (g) Hon'ble supreme court in the case of CIT v. P. Mohan Kala 291 ITR 278 (SC) has clearly explain that the primary condition for invocation of section 68 is that there has to credit of amount in the books of the assessee and such credit shall be sum of money emphasis is placed on the physiology used in the section wherein the phrase any sum is found credited has been used and the legislation has not used the word deposited. In other word the balancing effect of the transaction has to be credit account in the books of accounts which is not the case with the assessee.

(h) In the case of Rameshwar Meena in CO No. 35/Jp/2017 A/o dt. 30.04.2019 this Honble ITAT has held that Given the fact that such bank account maintained with the AxisBank was not reported by the assessee at the time of filing of return of income and the fact that the assessee is engaged in the transportation business and in absence of any contrary findings by the lower authorities regarding any other source of income, such cash deposits are treated as undeclared receipts from the assessee’s transportation business and net profit on such undeclared business receipts is directed to be applied. Given that the assessee has declared net profit of 2.39% which has been accepted by us while adjudicating earlier grounds, the same net profit is directed to be applied on such business receipts of Rs 13,55,000. In the result, the assessee’s cross objection is partly allowed.

Thus alternatively and without prejudice at the worst the ld. AO could have applied the Net profit rate on such alleged non geneuine sales of Rs.1,78,08,630/- as declared by the assessee at bthe rate of 0.96% which is also higher in comparison to earlier years.

5 Addition u/s 68 is not warranted: As the ld. AO has made the addition by invoking the provisions of Sec. 68 which is not applicable, because the cash deposited in the bank account is not a credit entries taken from anywhere or from others it is the assessee’s self money received from sales. And if the ld. AO was of the view that it was the undisclosed or unexplained money then at the worst addition was to be made u/s 69A not u/s 68. The ld. AO one side accepted the books of accounts and other side he made the addition u/s 68 which is not permissible, once the ld. AO herself admitted books then how on the same books addition can be made u/s 68.

6. Directly covered matter : As under the same fats This Honble bench in the case of M/s Motisons Jewellers Ltd in & 178/Jp/2022 dt. 29.09.2022 has held as under:

“20. We have considered the rival contention and perused the orders of the authorities and the material available on record arguments advanced by both the parties and also gone through the judicial decision relied upon by both the parties to drive home to their contentions. We find from the records that show cause notice so as to rejection of books of account u/s 145(3) of the Act was not given by the AO and the assessment completed in the manner provided u/s 144 of the Act. It is also noteworthy to mention that that the AO has not given any show cause notices as required u/s 144/145 of the Act before estimation of income by applying the N.P. Rate. It is also ridiculous to note that AO had rejected the books of account u/s 145(3) of the Act which has been confirmed by the ld. CIT(A) but assessment has been framed u/s 143(3) and not u/s 144 as required u/s 145(3) of the Act which indicates that the assessment is bad in the eyes of law. From the order of the ld. CIT(A) it is seen that the ld. CIT(A) had examined the genuiness of purchases from M/s. Paras Gems and Jewellers, M/s. Girdhar Jewellers (P) Ltd. and M/s. Girdhar Jewellers and held the same as genuine on the basis of her detailed findings in para 6.2 (x) for which the Department has not challenged the findings of the ld. CIT(A) as to the issue of genuineness of the purchases and thus the books of account cannot be rejected on the ground of genuineness of purchases. It is essential to indicate that when all the purchases are genuine and correctly recorded in the books of account as well as stock register then the books of account should not be rejected u/s 145(3) of the Act. It is further noted from the record that the assessee claimed that out of total claim of Rs.12,17,48,500/- deposited into bank account in demonetized currency, the amount of Rs.25,96,480/-was realized from its debtors and Rs.11,86,250/- was received as advance from the customers and the ld. CIT(A) in her order treated the entire cash sales and corresponding cash deposit as genuine. Thus the amount received from debtors/ advance from customers cannot be treated as unverifiable and this cannot be a ground for rejection of books of account. We noted from PB Page 163 of the paper book i.e. the list of debtors where total sales to such debtors was amounting to Rs.41,75,995/- against which Rs.13,30,000/- was received at the time of sales and balance Rs.28,45,995/- was outstanding which was receivable from the debtors. It is also observed from the records that lower authorities considered the sale of Rs.41,75,955/- made to the parties as genuine and while computing the total sales of the assessee and even for estimating the net profit, the lower authorities had considered these sales as part of turnover and thus treated the cash received from the debtors immediately at the time of Sales of Rs.13,30,000/- and Rs.2,49,515/- received after 8-11-2016 as genuine and verified. We feel that out of total amount of Rs.12,17,48,500/- deposited into bank account, the cash realized from debtors was of Rs.25,96,480/- which is a meager amount looking to the quantum of sales of the assessee and this cannot be treated as nongenuine. It is also noted from the record that the AO made the telephonic enquiry / verification from the debtors on test check basis for 6 cases only where the list contains more then 250 names, however, in case of discrepancy the opportunity of cross examination was required to be made by the assessee but it was not made by the AO. Therefore, it can be said that the assessee was deprived of cross examining the parties due to lapse on the part of the AO. As regards the genuineness of advance from customers, the assessee received advance of Rs.11,86,250/- from the customers which the lower authorities considered the corresponding sales made to these customers as genuine and it happens in such business that receiving of advance from customer is regular feature and the same was also prior and after the period 03-11-2016 to 8-11-2016 and advances made during this period cannot be treated as non-genuine. Such advances are adjusted against sales made to the parties. It is also noted that the ld.CIT(A) sustained the addition of Rs.47,72,297/- on account of N.P and ground against such addition is unverifiable amount of Rs.37,82,730/- (i.e. on account of realization Rs.25,96,480/- from debtors and Rs.11,86,250/- from advances). It is apparent from records that all the amounts realized from debtors and received as advance from customers during the period 03-11-2016 to 8-11-2016 was genuine and verifiable from the accounts then there is no cogent reason by the lower authorities to treat the same as non genuine. Hence, looking into the entirety of the facts, circumstances of the case and the case laws cited by the AR of the assessee (supra), we allow the appeal of the assessee by holding that the rejection of books of account on the basis of insignificant defects in all respect, is not justified and books of account deserves to be accepted. Before invoking the provisions of Section 145(3) of the Act, the AO has to bring on record material on the basis of which he has arrived at the conclusion with regard to correctness or completeness of the accounts of the assessee or the method of accounting employed by it. In the instant case, it was not the case that the assessee had not followed either cash or mercantile system of accounting. It was also not the case that the Central Government had notified any particular accounting standard not followed by assessee. Further the assessee maintains proper books of account audited by Chartered Accountant and the profit may be derived from the audited books of account therefore there is no justification in estimation of income by applying NP rate and accordingly the lower authorities are directed to delete the addition of Rs. 47,72,297/- sustained by ld CIT(A).”

The case of the assessee is much more strong footing because in the case of assesee the ld. AO ha neither invoked sec. 145(3), nor rejected the books of accounts nor estimated the profit rather made entire amount as addition, nor issued any show cause notice nor made any inquiry.

8. Double Taxation is Unconstitutional therefore Illegal: The Ld. AO has grossly erred in law and facts in making addition on account of Undisclosed Income u/s 68 of the act, of Rs. 1,78,08,630/- alleging that Cash sales is unexplained amount, though it is very much included in the Sales of the assessee of concerned period and profit has been offered for Tax on such amount (Rs.1,78,08,630-) too and similarly accepted by the Ld. AO during the course of assessment proceedings, therefore such allegation is evasive, conjecture, surmises and vague in the air, therefore deserve to be deleted.

It is fundamental rule of taxation that unless provided, same income cannot be taxed twice. In this preposition kindly refer the decision of this Honble Bench in the case of Sh. Avdesh Dangayach V/s ACIT Cir.6 in dt. 23.02.2017 vide page 10. Also Kindly refer Laxmipat Singhania v/s CIT 72 ITR 291(SC), CIT v/s M.P. JayaRam 100 Taxman 544(Kar), Gyan Chand Jain v/s ITO 73 TTJ 859(Jd). Gem Palace v/s CIT 168 ITR 543(Raj.)., Ramanlal Madan Lal v/s CIT 116 ITR 657(Cal.), Jain Brothers v/s UOI 77 ITR 107(SC), Further the Honble ITAT in the group case of M/s Gowadia Jewellers in ITA No. 776/Ju/05 at page 8-para 15 dt. 30.09.2008 deleted certain additions, mainly on the reasoning that such income was already disclosed in the hands of the working partner and as such same income cannot be brought to tax as undisclosed income of the firm.

9.1 By perusal of the assessment order the ld.AO proceed only on assumption, presumption, suspicion guess work and invoked the provision section 68 of the act, this contention is fully backed because she has accepted the trading account and sales have sufficiently entered into such Books of Accounts under the head of Sales and the Net Profit as shown by the assessee in its Income Tax return has been culminated after taking consideration such sales in Financial figures on which assesse has paid the Tax too.

9.2 Here it is notable that once Ld. AO presumed such Cash sales of Rs. 1,78,08,630/- as Unexplained Income rather not Sales than first she should eliminate such Rs.1,78,08,630/- from books of accounts and (particularly from Sales account) then calculate the Net Profit otherwise this receipts of Rs.1,78,08,630/- is being added twice one under the head of Sales Account, itself and other as Unexplained Income u/s 68 of the act, which is clearly adverse of the Rule of law, which is nurtured through Article 265 of the constitution.

9.3 Here it is appreciable that assessee hammering this facts in assessment Proceedings also and to till date that cash sales is duly entered into Books of Accounts under the head of Sales and whatever Profit calculated in his Income Tax Return it is based on such Sales which includes such Questioned Cash sales of Rs. 1,78,08,630/-.

10. Addition made without corroborative material and without rebutting produced evidences: The ld. AO as well as the ld. CIT(A) have grossly erred in law as well as on the facts of the case in making addition of Rs.1,78,08,630/- on account of alleged Undisclosed Income U/s 68 alleging that cash sale is not genuine, but without bringing any cogent material in support of her contention and without bringing corroborative evidence and without considering the materials and explanations available on records in their true perspective and sense, therefore addition is illegal and such addition should be deleted in toto, The Honble Raj. High Court in the case of Malani Ramjivan Jagannath vs. ACIT 316 ITR 120(Raj.) it has been held that In each trading account, only four entries were there of opening stock, purchase on debit side, sales and closing stock on credit side. The quantum and value of purchases and sales had not been in dispute inasmuch as they were held to be fully vouched. Value of opening stock also cannot be disputed as it came from closing stock of previous year. The inventories of closing stock was also not found to be incorrect. That is to say actual stock position was not in dispute. The previous year's books of account were not found to be incorrect. In the face of these undisputed facts and circumstances, the Tribunal could not have interfered with the order of CIT(A). In doing so, it had ignored all admitted facts in the face of which there was no occasion for the AO to have resorted to estimate method. There being no dispute about the sales and purchases, non- maintenance of stock register lost its significance so far as arriving at GP is concerned. Therefore, the CIT(A) was right in his reasoning about admitted state of affairs. Resorting to estimate of GP rate was founded on no material. Mere deviation in GP rate cannot be a ground for rejecting books of account and entering realm of estimate and guesswork. Lower GP rate shown in the books of account during current year and fall in GP rate was justified and also admitted by the AO as well as CIT(A) as well as the Tribunal. Therefore, fall in GP rate lost its significance. Having accepted the reason for fall in GP rate, namely, stiff competition in market and also that huge loss caused in particular transaction, neither the rejection of books of account was justified nor resort to substitution of estimated GP by rule of thumb merely for making certain additions. Therefore, the findings arrived at by the Tribunal suffers from basic defect of not applying its mind to the existing material which were relevant and went to the root of the matter. When all the data and entries made in the trading account were not found to be incorrect in any manner, there could not have been any other result except what has been shown by the assessee in the books of accounts. Therefore, the order of the Tribunal cannot be sustained

11. The Assessee is a law abiding person and do their business within the limitation as provided by the legislature therefore what he could do in following law of land, he did. It is registered with Income Tax Department filling their Income Tax Return continuously and regularly after getting audited their Books of Accounts from Qualified Chartered Accountants and paid the Tax as due. Similarly Registered under VAT/GST and filling their monthly as well as Annual returns after depositing due Tax. It is also apposite mention here that whatever transactions are being shown by the books of accounts of the assesse have been submitted GST department also and the complete GST Returns also have been submitted before Ld. AO as well as Investigation team for their verification and it is also appreciable that GST department has accepted such Sales and Purchase Transaction in same manner without making any adverse comments. Therefore it is also thinkable that if one Central Government Revenue department accepts the results of Books of Accounts as shown by the assesse how other can reject without pointing out any cogent mistake on record or without bringing any corroborative material on record. The ld. AO has also not doubted the other Govt. Agencies i.e VAT/GST which is also equal to income tax. And in these days are so many penal provision in the GST on wrong sales/purchase, hence the same cannot be ignored.

Commercial Tax Deptt., or GST were directly concerned with the collection of tax on sales and hence, the with correctness thereof. The sales, having accepted by them, there was no reason to make a further enhancement in the declared sales Kindly refer Shree Shankar Khandsari Sugar Mills v. CIT 193 ITR 669 (Kar). More particularly, when no evidence of suppression of sale is found nor alleged so.

12.1 We have already stated that that the cash in hand is supported with the cash book, sales book, purchase book, inventory register and ledgers which are duly maintained during the course of day to day business transaction, which also duly audited by the qualified chartered accountant and accepted by the ld. AO as the ld. AO nowhere invoked the provisions of sc. 145(3). Cash is maintained on daily/periodic basis and supported with the sufficient evidences which were duly verified/checked during the course of assessment proceedings we produced a complete set of Cash book from 01.04.2016 to 31.03.2017. The cash was generated through Cash Sales as made during the course of day to day business transaction supported with the availability of inventory can be verified with the inventory record. The cash as retained by the assessee was quite reasonable looking to the turnover of the company 12.2. Inventory Register: It is further submitted that the inventory register is being maintained during the course of day to day business transaction and fully supported by valid Purchase Bills. By perusing the Stock Register it is revealed that Quantitative details is being maintained on day to day basis, and the movement of Inventory describes that at the time of outward of Inventory sufficient balance was there and such balance was built up through valid Purchases which’s payments have been made through Account Payee cheques and the ld. AO wrongly stated that purchase bogus without giving any example or evidence in a very lightly manner when purchases were made through valid Bills and there payments have been made through account payee cheque up to that date. In support for example we are producing 3month stock inventory register. As annexure-C 12.3 As the assessee maintaining Purchase /sales and other documents In this year the Deepawali was on 30.10.2016, Annkut on 31.10.2016 and on 01.11.2016 there was Bhaiya Duj and before Deepwali there were heavy rush or pressure on the shops. Hence the cash in hands in the Months of Oct. 2016 has increased day by day and accumulated till the first week of Nov.2016. And after Deepwali about one week every business men live in easily mood and feel free for some time. However on 10th /11th November the marriages were going to be started, as on Ekadahsi being the abhooj Muharat there were so many marriages in Rajasthan or India and due to this marriage season the sale of jewellery has increased drastically and it is very know facts and the Cash has been accumulated and deposited in the bank and the assessee was not known that there shall be Demonetization from 08.11.2016.

12.3 Thus cash deposited by assessee was part of business and generated during day to day business transaction and was fully disclosed and explained in books of accounts including cash book as maintained during day to day business transaction or generated through sales of jewelry as fully supported by valid sales bill by charging/collecting GST and also part of books of accounts, Copy of sales bills or ledger was submitted before lower authorities. On perusal of the sales registered it is revealed that all the details minutely have been mentioned. If the ld. AO was having any doubt he could have made in depended inquiry but he has failed to do so. The inventory, as sold out and was the main cause for generating cash has generated during day to day business transaction, as purchasing in normal business course from valid suppliers and supported with the valid purchase bill bearing GST Number and paying the GST to the suppliers which was dully deposited by the supplier into government account in due course. All Purchase bills were presented before Ld. AO, the payment of all the purchase bill were made before survey through an account payee cheque and cleared from bank before survey which was duly accounted for in the books of account as maintained during day to day business transaction which was verified by the survey team during survey/search as well as by Ld. AO also and purchase register is also part of books of account as impounded during search by the income tax department and kept them in soft copy (Copy of purchase register and copy of purchase bills are being submitted before your honor for your kind consideration).

13.1 GST Department has accepted such Sales of without raising any Question;As we have already submitted that the assessee is registered under various laws which are as follows; (a) GST earlier under V. The items in which assessee trades are liable to taxable under Good and Service Tax, earlier it was Value added Tax. Since incorporation of firm, assessee is depositing the VAT and thereafter GST and filling respective returns in due course without getting late even the assessee has deposited his latest return then for the month of February, 2018 in due time by showing the all transaction in the month of February which were described in here above. Copy of all Sales Tax Return viz. VAT and GST are attached as PB62-105).

Hence Ld. AO’s observation regarding Cash deposited is not tenable on many grounds as above and also because Ld. AO could not provide the satisfactory observation about Inventory position which is very important to rebut assesse’s contention, if for a while we follow the contention of the Ld. AO than we are not able to provide an amicable reply regarding Inventory or stock position because if the cash was not from the sale then there should be excess stocks to that extent, and the ld. AO has failed to state where the stock has gone has gone to that extent. These facts support our case and against the case of the lower authorities.

In this regard we placed our reliance on Jurisdictional High Court order in the matter of CIT Vs. M/s Ceramic Industries and M/s Ceramic Tableware (P) Ltd. 65/2009,44 and 56 of 2010, 83/2011,63 and 65 of 2014, 124,135 and 198 of 2016 dated 25/05/2017.Where it has been held “We agree with the arguments of the ld. AR that the main objection raised by the AO was that input/output ratio in various months has the inconsistency which has been duly explained by the assessee vide letter dated 26.03.2004 and the second objection by the AO was that the sister concern M/s. Bharat Potteries Ltd. has declared more yield and more gross profit, has also been explained by the assessee vide the same letter dated 26.03.2004. Therefore, the inconsistency in the input/out ratio in various months the reasons for which has been explained by the assessee, cannot be the basis for rejection of books of account. The yield and gross profit rate declared by the assessee can also not be the basis for rejection of books of account since M/s. Bharat Potteries Ltd. is manufacturing maximum of stoneware crockery and for many other reasons which were explained by the assessee vide its letter dated 26.03.04 which was ignored by the AO and the AO has not pointed out any specific defects in the purchases, sales, opening stock and closing stock of the assessee and the AO has not brought on record any cogent material to prove that the assessee has sold the under-production out of the books of account. Therefore, in such circumstances and facts of the case, the AO is not justified in rejecting the books of account by invoking Provisions of Section 145(3) of the Act and the additions made by the AO are liable to the deleted. The objection of the ld. DR that the ld. CIT(A) has not relied upon the CGCRI Report, Calcutta, the ld. AR has pointed out that the in the same report it has been mentioned that the said organization is not involved production practice and the are not sure to what extent their opinion will be useful for the purpose of the assesseeand in such circumstances and facts of the case, the report of CGCRI, Calcutta alone cannot be the basis for rejection of books of account and making an estimation of wastage and the ld. CIT(A) was not justified in ignoring other material which was placed before him as mentioned hereinbefore. Therefore, the ld. CIT9A) was not justified in sustaining the applicability of Section 145(3) of the Act and addition of Rs. 11,15,087/-. Thus Ground No.1 of the assessee is allowed and the solitary ground of the Revenue is dismissed.”

14. Evidence or Evidence Act has also not been considered: Section 34 of the Indian Evidence Act says . 1[Entries in books of account including those maintained in an electronic form] when relevant.—1[Entries in books of accounts including those maintained in an electronic form], regularly kept in the course of business, are relevant whenever they refer to a matter into which the Court has to inquire, but such statements shall not alone be sufficient evidence to charge any person with liability. Illustration A sues B for Rs. 1,000, and shows entries in his account-books showing B to be indebted to him to this amount. The entries are relevant, but are not sufficient, without other evidence, to prove the debt. COMMENTS Admissibility Entries in account books regularly kept in the course of business are admissible though they by themselves cannot create any liability; Ishwar Dass v. Sohan Lal, AIR 2000 SC 426. Unbound sheets of paper are not books of account and cannot be relied upon; Dharam Chand Joshi v. Satya Narayan Bazaz, AIR 1993 Gau 35. Books of account being only corroborative evidence must be supported by other evidence; Dharam Chand Joshi v. Satya Narayan Bazaz, AIR 1993 Gau 35. Here cash deposited by the is supported with the cash book and the cash books is also supported with the books of accounts maintained by the assessee which is also supported with sales/cash sales, purchase, stock register, ledger, bank accounts, bills, vouchers and other documents. And the ld. AO has not rejected all these or not invoked provision of section 145(3), otherwise she could have invoked the same. Thus cold and hot breath cannot blow together.

10. We discharge the order recorded by the High Court and allow the appeal. We decline to answer the question did not arise out of the order of the Tribunal. The assessee will pay the costs of the Commissioner in this court and in the High Court.”

(b) Similarly the presumption as presumed by the Ld. AO regarding Cash of Rs.1,78,08,630/- is purely vague in the air and without having any evidence should not be sustainable and well supported by the landmark judgment in the matter of CIT vs Shri Kulwant Rai on 13 February, 2007 Equivalent citations: 2007 291 ITR 36 Delhi “16. This cash flow statement furnished by the assessed was rejected by the Assessing Officer which is on the basis of suspicion that the assessed must have spent the amount for some other purposes. The orders of Assessing Officer as well as Commissioner of Income Tax are completely silent as to for what purpose the earlier withdrawals would have been spent. As per the cash book maintained by the assessed, a sum of Rs. 10,000/- was being spent for household expenses every month and the assessed has withdrawn from bank a sum of Rs. 2 lacs on 4th December, 2000 and there was no material with the Department that this money was not available with the assessed. It has been held by the Tribunal that in the instant case the withdrawals shown by the assessed are far in excess of the cash found during the course of search proceedings. No material has been relied upon by the Assessing Officer or Commissioner Income Tax(A) to support their view that the entire cash withdrawals must have been spent by the assessed and accordingly, the Tribunal rightly held that the assessment of Rs. 2.5 lacs is legally not sustainable under Section 158BC of the Act and the same was rightly ordered to be deleted.

17. The above being the position, no fault can be found with the view taken by the Tribunal. Thus, the order of Tribunal does not give rise to a question of law, much less a substantial question of law, to fall within the limited purview of Section 260A of the Act, which is confined to entertaining only such appeal against the order which involves a substantial question of law.

10. A bare perusal of the aforesaid chart indicates that for the A.Y. 2008-09 the assessee had been assessed under Section 143(3) of the Act at a total income of Rs. 2,84,371/-. In that assessment the books of account of the assessee were also accepted. It clearly appears that the income disclosed by the assessee in the present year is similar or comparable to the income which the department assessed at the hands of the assessee five years later. This fact itself indicates that the rejection of books of account and the consequential best judgment assessment made by the assessing officer in the present year is wholly excessive, arbitrary and unfounded.

11. In view of the above, we answer question no.1 in favour of the assessee and against the revenue. We have found that the rejection of books of account of the assessee was unfounded. Consequently the estimation and enhancement of income that followed also cannot be sustained. Question no.4 thus does not require to be answered. Accordingly, the appeal is allowed. No order as to costs.” (d) In the matter of PCIT-3 Vs. Swapnanda Properties Pvt Ltd. Reported on [2019] 111 taxmann.com 94 (Bombay) has held; “11.We note that the books of accounts of the Respondent were rejected by the CIT (A) under section 145(3) of the Act. However, the Tribunal found in the impugned order that the invocation of section 145(3) of the Act is unjustified as no defect was noted in the books of accounts to disregard the same. We note that CIT (A) in his order while rejecting the Books of Account does not specify the defect in the record. The basis of the rejection appears to be best judgment of assessment done by him. The rejection of books should precede the best judgment assessment. On facts, the Revenue has not been able to show any defect in the Respondent's records which would warrant rejection of books and making a Best Judgment Assessment. Thus, on facts the view taken by the Tribunal is possible view. Therefore, no substantial question of law arises. Thus not entertained.” Although in the case of assessee no books rejected and hence on much strong footing. (e) In the matter of CIT Vs. Pinkcity Developers reported on (2017) 398 ITR153 (Rajasthan)/(2018)99 Taxmann.com 422 (Rajasthan) has held; “7.The counsel for the respondent contended that the Tribunal while considering the objection of section 145(3) of the Income-tax Act has rightly observed as under: "(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2), have not been regularly followed by the assessee, the Assessing Officer may make an assessment in the manner provided in section 144."

8. Taking into considerations, the overall facts and circumstances of the case, we are of the opinion that the Tribunal while confirming the order passed by the Commissioner of Income-tax (Appeals) has not committed any error, therefore, the issue is answered in favour of the assessee and against the Department. The appeal stands dismissed.”

pay the costs of the assesse.” 16.1 Invocation of Section 115BBE is illegal: The invocation of the provision of Section 115BBE of the act, by the ld. AO is illegal, bad in law, against the principle of natural justice. Because firstly the ld. AO has not issued any show cause notice for that we have already stated in above para 1 and also as under Recently the Honble ITAT Jodhpur Bench Jodhpur in the case of Smt. Suraj Kanwar Devra vs ITO ITA 50/Jodh/2021 dt. 23.11.2021 It has been held that “The AO has not issued any show cause notice before invoking the provision of Sec. 115BBE for taxing the income on higher rate. It was mandatory on the part of the AO to issue the specific show cause notice to this effect asking to the assessee as to why the income should not be taxed under sec. 115BBE before doing so. It is very settled legal position that a person (assessee) is entitled to opportunity to show cause as to why not the income of the assessee is determined and charged or taxed in the manner as proposed by the A.O. but in the instant case no such type of opportunity had been provided but the AO has failed to do so, which is against the principal of natural justice and against the law. This sec. 115BBE is charging of tax a the higher rate and it cannot be applied directly without giving any show cause notice when the issue are disputed that whether the higher rate of tax applicable or not on the alleged income or the nature of income falls u/s 68/69 and 115BBE. Hence it was mandatory on the part of the AO to issue show cause before invoking the provisions u/s 115BBE, in absence of the same the rate cannot be charged more than to normal rate of tax, the addition if any sustained.” Copy of order is enclosed.

16.2. Invalid invocation of Provision of Sec. 115BBE: When the cash was deposited out of the business receipts neither addition can be made nor provisions of Sec. 115BBE can be invoked. Because it is not unaccounted income u/s 68/69 rather it is the business receipts and the ld. AO has never brought on record any evidence that the assessee is having others sources of unaccounted income other than to business. He is only assumed, guess work and made the addition on assumption, presumption and suspicion by ignoring the evidences filed which has never been controverted by bringing any material evidences. And it is also settled legal position that suspicion may be strong, however cannot take place of reality kindly refer Dhakehswari Cotton Mills Ltd. v CIT (261 ITR 775(SC), in which held: “In making an assessment under Section 23(3) of the Indian Income tax Act, the Income-tax Officer is not fettered by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a court of law, but the Income-tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-Tax, Punjab (1944) 12 I.T.R. 393” Also refer DhirajlalGirdharilal v CIT (26 ITR 736 (SC), Omar Salary MohanmedSait v CIT (37 ITR 151) (SC), Lekchabnd Bhagat Ambica Ram v CIT (37 ITR 285) (SC), CIT v Nandini C. (1989) 230 ITR 679, 689 (Cal).

18. We also would like to submit that the judgments and WS given in the Honble ITAT order in the case of M/s Motisons Jewellers Ltd.(Supra), may kindly be treated as part of our WS and also consider here.

6. To support this various contentions recorded in the written submission the ld. AR of the assessee relied upon the paper book wherein the evidence / decision were placed before us the same are as under :

PAPER BOOK INDEX

S.No. Particulars Page No. 1. Copy of ITR with computation of total income and Audit report 1-16 for A.Y. 2016-17. 2. Copy of ITR with computation of total income and Audit report 17-47 for A.Y. 2017-18. 3. Copy of letter to AO dt. 27.11.219 with details 48-51 4. Copy of letter to AO dt. 11.10.219 and 20.12.2019 with details. 52-61 5. Copy of VAT/GST return. 62-105 6. Copy of Stock details of Oct. 2016 to Dec. 2016 106-111C 7. Copy of sales bills of November 2016 112-218

7. The ld. AR of the assessee in furtherance to the above written submission also argued that as regards the mentioning of the cell number in the bill he submitted that the Rajasthan High Court has held that there is no such requirement [ Harshil Choradia 298 ITR 349 ]. The assessee has filed all the details that has been called for even for comparison last year data was submitted. There no defect found in the stock details as well as in the books of accounts. There is no rejection of the books which are audited under the income tax Act and companies act. Even there is no single defect found in those audited accounts and before making the addition the book results are not rejected. The action of the lower authority taxing the sales as well as cash deposit is double taxation and law does not permits. There is no show cause notices for taking such action against the assessee. So considereding the decision of the Jaipur Bench in the case of Motisons Jewelers Limited the addition sustains is required to be deleted.

8. The ld DR is heard who has relied on the findings of the lower authorities and has argued that the addition has been made on account of the fact the assessee has deposited cash during the demonetization which is very much on higher side and the same is not acceptable on account of the detailed finding recorded in the order of the lower authority. The ld. DR also submitted that the bills raised on the date of demonetization there is no cell number recorded in the bills whereas in the others it is. At page 113 the cell number is written but it is not correct. The ld. DR also relied upon the decision cited by the ld. CIT(A).

Sub:-Submission of written reply and copies of case law's relied by revenue in the case of M / s Rukmani Jewellers Pvt. Ltd. Respected Sir/Madam, Kindly refer to today's hearing in the above case today. In addition to my arguments, I had relied on following case laws in favour of revenue. The copies of same are submitted herewith in duplicate alongwith my written submission.

6. Hon'ble ITAT Hyderabad "B" Bench in a much-related case of identical facts of abnormally huge cash deposits in the bank accounts by a jeweller, in the case of Assistant Commissioner of Income Vs M/s Vaishnavi Bullion Private Limited in & 561/Hyd/2020 and ITA 58 &59/Hed/2021, uphelds the addition of about Rs. 100 Cr. as unexplained in the batch of appeals involving two jewellery and bullion dealers in the context of post-demonetisation cash deposits. The Hon'ble ITAT rejected Assessee's submission of receiving cash from thousands of customers immediately after announcement of demonetization. ITAT remarked, "The assessee either deposited its undisclosed amount or otherwise helped undisclosed, unanimous and unidentifiable persons convert their undiselosed prohibited currency into bullion after notification of demonetization. In both circumstances, the action of the assessee was not permissible in the eyes of the law". (Page No. 27 to 91) The Hon'ble ITAT holds the addition to be sustainable under Section 68, relies on SC ruling in Apex Labs to reject Assesses's submission that even though the transactions are held illegal by the Revenue only the income can be taxed under the Act which does not differentiate between legal and illegal incomes. Also holds that demmonetised currency was received by the Assessee and was wrongfully deposited with the bank, thus, upholds the assessment order by concluding that the Assessee mischievously and unscrupulously brought the demonetized currency into the network. Discards Asessee's claim that money was received from the customers and upholds Revenure's stand that no legal sale of gold could be made with use of prohibited currency: the Hon'ble ITAT takes a stern view on Assessee's conduct by observing that, "The persons like assessee have given as setback to well-intented and well-thought policy of Government of India and they have used this as an opportunity to convert their or others ill-gotten money into bullion. The above said act of the assessee is not only against the law but also against the interests of the nation." Thus, the judicial authorities have taken an extremely adverse view of such practices adopted by various assessees including appellant in the present case to make an attempt of aggregating their books and trying to explain the huge cash deposits by making bogus sales entries in their books of accounts.

7. AO has rightly discussed the following reasons in holding the declared sales just before and on demonetization day as bogus, abnormal, just adjustments and against human probability:-

(i) Out of total cash sales of A.Y. 2017-18 of Rs. 10.74 Cr, sales of Rs. 4.29 Cr. Le. 40% has been shown in 39 days from 1 October to 8th November, 2016, (ii) The cash sales in preceding A.Y. 2016-17 during these 39 days was only Rs. 1.74 Cr. as against this year's claim of Rs. 4.29 Cr. (iii) Assessee's claim of sale of Rs. 1.00 Cr on a single day on 8 ^ (1/2) November which is 10% of total sales of this year and of Rs. 1.94 Cr. in 8 days (1 November to 8th November, 2016) which is about 19% of annual sales is abnormal and improbable. (iv) It is humanly and practically improbable and unmanageable to issue 107 bills (many bills contained 2 or 3 jewellery items) in rush of 4 hrs from 8 PM to 12 PM after weighing each item, taking print out of bill and getting it signed by 107 customers. It may also taken into consideration that majority of customers of jewellery items are ladies who would not have come without gents companion in the night of 8th November. (v) None of the 107 bills issued on 8 ^ (th) November, 2016 had address of purchasers and majority of them had no proper name and contact nos. In lack of which identity of customers and genuineness of transactions could not be ascertainable. This is against the general practice of asessee's entering mobile nos. of customers in each and every bill during the year except on 8th November. (vi) In stock register, assessee had not provided any number and description of different types of jewellery items purchased and kept as stock. It could not be verified whether assessee had stock of items claimed as sold by him. In purchase bills also there was no description of goods. It mentioned only "Gold jewellery 22K" and quantity in Grams only. (vii) Average Cash balance of assessee was between Rs. 20 lacs to 30 lacs from 1.04.2016 to 30.09.2016 which suddenly increased to 1.82 Cr as on 08.11.2016. (viii) AO has rightly adopted sale of Rs. 16 lacs in 8 days from 1 November to 8 ^ a November, 2016 (Rs. 2 Lac per day which is average daily annual sale) as against claimed sale of Rs. 1.94 lac and had rightly added excess sale of Rs. 1.78 Cr as un- explained credits.

8. In view of the facts submitted above and the relied court decisions AO has rightly held and ld. CIT(A) has rightly rejected the appeal of the assessee holding that assessee failed to prove satisfactorily the amounts credited in its books of accounts and in holding that assessee has made an attempt of aggregating its books

The details called for by the AO were submitted by the assessee from time to time. Vide order dated 21.12.2019 assessed the income of the assessee at Rs.2,07,17,710/- where by making an addition of Rs. 1,78,08,630/- being the amount of cash sales made as unexplained credit as per provision of section 68 of the Act. The bench noted that while doing so the ld. AO has not issued any show cause notice for making the addition nor the books results declared by the assessee was rejected, no defects in the records produced. The bench noted that the apple of discord in this case of the deposit of the cash for an amount of Rs. 1,94,08,630/- during the 01.11.2016 to 8.11.206 till the date of demonetization out of which the ld. AO has considered the cash to the tune of Rs. 16,00,000/- as explained and the balance amount of Rs. 1,78,08,630/- was added as income u/s. 68 of the Act. In first appeal the ld. CIT(A) has confirmed the action of the ld. AO holding as under 7.10 Thus, the judicial authorities have taken an extremely adverse view of such practises adopted by various assessees to make an 51 Rukmani Jewellers Pvt. Ltd. vs. DCIT attempt of aggregating their books and trying to explain the huge cash deposits by making bogus sales entries in their books of accounts. Having considered entire facts of the case, and the case laws cited above, it is apparent that the appellant has completely failed to offer any explanation either before the AO during assessment proceedings or before me during appellate proceedings, despite affording sufficient number of opportunities and hence, I find no infirmity in the order of AO. Accordingly, the addition made of Rs. 1,78,08,630/- is confirmed. As a result, the appeal is dismissed.

Thus, the fact of the case on hand is similar to the jurisdictional high court decision cited by the ld. AR of the assessee. The ld. AR of the assessee also relied upon the co- ordinate Jaipur ITAT decision also on the issue and the revenue not proved that the sale made by the assessee which is executed after giving the goods to the customer, duly supported by the invoice issued, assessee having sufficient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT. Therefore, the contention of the revenue based on the facts and circumstance of the case is not accepted and we see no reason to dispute the sales recorded in the books. Moreover in the turnover this sales is already recorded and there is no finding in income cannot be taxed twice. b) It is humanly impossible to sell goods worth Rs.

1,00,33,680/- in one day. The assessee's argument is that these sales were made after demonetization was declared at 8 pm. On this issue bench noted that the assessee has submitted the invoice. On this invoice only the date is written and the it is not finding recorded on oath that sales is only after 8PM. Since the period was of marriage seasons it was not under dispute that the assessee not sold the goods. Therefore, once the goods is supported by the Invoice recorded in the books and no defects found merely the same is recorded on the date of demonetization addition of cash receipt cannot be made in the hands of the assessee. Moreover, the sales already recorded is also not considered to be reduced as income of the assessee therefore, the action of the lower authority is not in correct. c) The assessee has sold goods to approx 107 People via separate bills. How it is possible that amidst such rush in the print out and got it signed by these 107 purchasers. Even On this issue bench noted that the assessee has submitted the invoice. On this invoice only the date is written and it is not finding recorded on oath that sales is only after 8PM. Since the period was of marriage seasons it was not under dispute that the assessee not sold the goods. Therefore, once the goods is supported by the Invoice recorded in the books and no defects found merely the same is recorded on the date of demonetization addition of cash receipt cannot be made in the hands of the assessee. d) The assessee was asked to produce the bills for such sales.

The same were produced but such bills are not verifiable.

Generally, jewelers maintain a database of their customers with their complete address and contact number but here the bills do not contain proper name and address of the purchaser. On this issue since there is binding judgment of jurisdictional high court in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC) we do not find merits in the arguments of the revenue. e) Further, during the bill verification, it was marked out that the assessee has not entered mobile no of the persons to whom goods were sold on 8th November. However, the number is available on almost each and every bill except this date. Even on this issue since there is binding judgment of jurisdictional high court in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC) we do not find merits in the arguments of the revenue. f) In the stock register also, the assessee has not provided any description of the items purchased and kept as stock in trade. The assessee maintains stock register in Qty in Grams only having columns of Qty Inward, Qty Outward,Closing Qty. The bench noted that the ld. AO has accepted the facts that the assessee maintained the stock quantity in grams and the same is not found defective. The quantitative information was provided column no. 35bB of the Tax Audit Report already on record and the same is not disputed. noticed that such bills also do not have any description of the goods. The bills mention "Gold Jewellery 22K and Qty in Gms only. As discussed herein above once the ld. AO accepted that the assessee maintained the stock in Grams and the same is not disputed the merely the description not mentioned will not hold the goods sold as non-genuine. h) Moreover, the average cash balance of the assessee is much lower ranging between 20 lac to 30 lac from 01.04.2016 to 30.09.2016 whereas the assessee has shown cash balance of Rs. 34 lac in October and Rs. 1.82 Cr as on 08.11.2016. Thus, it is clear that the assessee enhanced his cash balance in the graft of cash sales to unverifiable persons. This contention of the revenue is incorrect the cash book submitted by the assessee having the day to day cash balance and the sales is also not disputed the cash so generated cannot be considered as unexplained and regards the cash sales the jurisdictional high court has already held that when the cash sales is recorded the cash deposits becomes self explanatory and such amounts were received by the added tax paid invoice.

Merely the assessee unable to record the mobile number it does not make the sale as non-genuine and we find support of this contention from the decision of the jurisdictional high court in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC)(supra) we do not find any merits on the finding of the ld. AO and that of the ld. CIT(A) in disbelieving the sales recorded by the assessee as the sales is in course of business is duly supported by the invoice and delivery of the goods recorded in the books of the assessee. The cash is generated out of the stock already on record and thus the sales made by the assessee company is genuine sales recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. Now on the part of the receipt of the cash from the customer the jurisdiction high court judgement in the case of Smt. Harshil Chordia Vs. ITO reported at 298 ITR 349 (Rajasthan-HC) held that 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 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.

The decision relied upon and cited by the ld. DR are on different facts, wherein the purchases were not correctly recorded, creditors circumstance based on the same set of the facts when the revenue partly considered the sales on the same invoice for an amount of Rs. 16,00,000/- why not on the balance. Thus, the facts of the case are different considering the finding recorded here in above.

Therefore, the contention of the revenue based on the facts and circumstance of the case is not accepted and we direct to delete the addition of Rs. 1,78,08,630/-. Based on this observation ground no. 2 raised by the assessee is allowed.

15. The ground no. 1 and 5 being general in nature and ground no 3 & 4 are consequential in nature.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open Court on 20/12/2023.