NATIONAL JEWELS NEAR NEW MARKET, JAGADHRI ROAD, YAMUNANAGAR,HARYANA vs. THE INCOME TAX OFFICER WARD 5 YAMNUNNAGAR , HARYANA

आदेश/ORDER

PER KRINWANT SAHAY, ACCOUNTANT MEMBER:

The appeal in this case has been filed by the

assessee against the order dated 27.02.2024 passed by

the Ld. CIT(A), NFAC, Delhi. The grounds of appeal are

as under:

ITA 222/CHD/2024 A.Y.2017-18 2 “1. That the Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi has erred in confirming the order of Assessing Officer in assessing the income of the assessee, at Rs. 6,67,49,380/- and also confirming the addition at Rs.6,57,05,000/- (Le. Rs. 4,14,40,000/- + 2,42,65,000/-) u/s 68 of the Income Tax Act and taxing the same in the ambit of section 115BBE of the Income Tax Act.

ITA 222/CHD/2024 A.Y.2017-18 3 it has been held that if requisite stocks are available and which have been sold, there is no justification in making the addition.

manufacturing and trading in jewellery and trading in

bullion i.e. gold bar and gold coins and as per the

assessment order, most of the purchases of bullions are from

Government Agencies likes MMTC, PNB and other agencies.

The assessee is maintaining regular books of accounts,

which have duly audited and the returns have been filed on

ITA 222/CHD/2024 A.Y.2017-18 4 the basis of such audited Balance Sheet and Profit & Loss

account. The case was taken up under scrutiny on account

of the fact that the assessee had received a sum of

Rs.4,14,40,000/- from M/s. Hemant Jewels Pvt. Ltd., Delhi

through their bank account with Bank of India and ICICI

Bank and against which, the sales of the bullion have been

made by the partnership firm. But, it has been reported by

the Investigation Wing that the said party namely M/s.

Hemant Jewels Pvt. Ltd. do not have any business premises,

has not filed Income tax return and not even filed return

with ROC and further it was noticed that the assessee had

deposited a sum of Rs. 2,42,65,000/- by way of cash in their

regular bank account during demonetization period and,

accordingly, a show-cause notice was issued by the

Assessing Officer that why the above said amount of Rs.

4,14,40,000/- and Rs. 2,42,65,000/- may not be added to

the returned income.

submitted that M/s. Hemant Jewels Pvt. Ltd. has PAN,

VAT Nos. and the payment for sale of the jewellery had

been received by the assessee, through banking channels

ITA 222/CHD/2024 A.Y.2017-18 5 from Hemant Jewels which has either been received in

advance or on the same day the sale has been made. It

has also been contended by the assessee that it had

made the sales out of the available stocks, which has not

been doubted by the Department. The assessee is also

maintaining complete stock records of jewellery items

and bullion and other gold items. Even the cash

deposited during the mainly demonetization period is

mainly out of the sales of the jewellery. Similar sales

have also been made in the entire year and such sales of

the assessee have not been doubted at all. However, the

Assessing Officer stated that the sale proceeds have been

made to the defunct company. M/s. Hemant Jewels Pvt.

Ltd. It had made the payments to the assessee for

purchases of the bullion, by depositing the cash in their

bank account and then immediately, thereafter, the

amount have been remitted to the assessee through

banking channels. The AO stated that the assessee do

not maintain stock register. The assessee has replied

that daily stock account depicting the quantity of pure

gold and jewellery issued, received and closing balance

ITA 222/CHD/2024 A.Y.2017-18 6 was submitted to the Assessing Officer, which have been

placed in the paper book also. The same details was

furnished for FY 2014-15 & 2015-16. The Assessing

Officer also stated in his order that the sales in October

& November, 2016 has increased substantially and,

accordingly rejected the books of accounts u/s 145(3) of

the Act and also, on the basis of the non-compliances to

the ROC by M/s. Hemant Jewels, made an addition of Rs.

4,14,40,000/- and Rs. 2,42,65,000/- as 'unexplained

cash credit.

assessee furnished various submissions before the CIT(A)

which have been produced before us also and made

detailed submissions, that complete quantitative tally is

there and the amount received from M/s. Hemant Jewels

through banking channel is on account of the sale of

gold bullions, similarly, the cash deposits are majorly

out of sale proceeds of the gold jewellery and the Ld.

CIT(A) stated that the sale bills are self-serving

document and the assessee is not maintaining stock

ITA 222/CHD/2024 A.Y.2017-18 7 register. He confirmed the finding for rejection of books

of accounts and relied upon the report of the

Investigation Wing, regarding the fact that Hemant

Jewels Pvt. Ltd. is a defunct entity and also the cash

sales during the demonetization period have increased

substantially. Accordingly he has dismissed the appeal of

the assessee.

has raised various grounds of appeal, the Ld. Counsel

pointed out that the two main grounds are with regard to

the addition of Rs. 4,14,40,000/- on account of amount

received on account of sale proceeds of gold the bullion

through banking channel from M/s. Hemant Jewels Pvt.

Ltd. And second, the addition of Rs. 2,42,65,000/- on

account of cash sales out of the existing stock of gold

jewellery. The Ld. Counsel argued that the sales to

Hemant Jewels Pvt. Ltd. (HJPL) is during the regular

course of business and the said concern is very much in

existence as per the ROC records and even as per the

AO's order, where he has reproduced the company

ITA 222/CHD/2024 A.Y.2017-18 8 Master Data of HJPL, the status of the company in the

records of ROC have been mentioned as "Active" and

assessee is not concerned about the fact of HJPL for not

filing Income Tax Return or the earlier shop at the given

address had been taken over by the PNB on account of

default of loan. It was further argued that HJPL has a

bank account from which, the payments have been

received by the assessee of the sales of bullions/gold and

the assessee is not concerned about the affairs of HJPL,

since the assessee is only concerned with regard to the

recovery of the amount of bullion sold to HJPL. Even

some payments had been received in advance from the

said party initially while the other payments have been

received on the same date on which the sales were made

to the Company. The counsel relied upon the following

documents to prove the genuineness of the sales made to

HJPL and the cash sales during demonetization period as

under:

“a. Copies of invoices issued to HJPL. b. Copy of account of HJPL in the books of assessee depicting the payment received in advance or received on the same date of making sales to the party.

ITA 222/CHD/2024 A.Y.2017-18 9

c. The copy of the relevant extract of the bank account of the assessee depicting the amount being received via regular banking channels.

d. The purchase ledger of Delhi Branch (from which goods were supplied to H.JPL) showing the date wise purchase of bullion made from the supplier namely MMTC PAMP India Pvt. Ltd. which is a Government regulated undertaking.

e. The record of HJPL updated with the registrar of companies depicting the 'active' status of the Company.

f. Month wise branch wise details of cash deposited in A.Y 2015-16 to 2017-18 depicting that the assessee has regularly being making cash sales to the tune of 2 crore to 2.3 crore in the earlier years as well.

g. The details of the parties from whom purchase above 5 lakh has been made along with the confirmed copy of ledger accounts.

h. Copies of quarterly VAT returns evidencing the sales made by the assessee during the year.

i. The quantitative summary of every kind of stock traded by the assessee depicting the opening balances, quantity purchased, quantity sold and closing balances for F.Y 2015-16 to 2017-18.

j. The daily quantitative stock of pure gold depicting the quantity of said stock received and issued during the relevant A.Y.

k. The daily stock account of gold jewellery depicting the quantity of said stock received and issued during the relevant A.Y.

l. The above set of documents duly justifies the genuineness of sales made to HJPL and the genuineness of cash sales made by the assessee during the demonetization period.”

chart submitted during the course of hearing, that no

ITA 222/CHD/2024 A.Y.2017-18 10 case could be made of the alleged unexplained credit

because, there has been reduction of stock, which have

not been doubted as per the stock tally/register

submitted during the course of hearings before the

AO/CIT(A) and the sales have been accepted as reflected

in the audited trading account and the resultant profits

rising out of such transactions have been disclosed. They

have also been accepted and, thus, under such

circumstances, it is not a case of unexplained credit at

all.

been issued in the regular course of business and the

finding of CIT(A) that the HJPL did not have resources to

pay the amount for the purchase of jewellery by the said

concern is none of the concern of the assessee. The Ld.

Counsel relied upon judgments on account of cash sales

made to the customers, during demonetization period

wherein, it was held that the assessee is not bound to

give the details of cash sales to its customers as per the

judgment of the Hon'ble Bombay High Court in the case

ITA 222/CHD/2024 A.Y.2017-18 11 of 'RB Jessaram Fatehchand vs. CIT as reported in 75

ITR 33 and "ITO vs. Sunny Jewellery House" in ITA No.

196/Chd/2014 vide order dated 06.05.2016 and "ITO vs.

Jethu Ram Prem Chand as reported in (2001) 114

Taxman 219 (Delhi)".

CIT(A) is correct in holding that the assessee has sold

gold jewellery to HJPL, while as per the stock registers,

invoices and other documents filed by the assessee,

reflect that the assessee has actually sold gold gold

bullion to the said concern. It was further argued that

even the AO and CIT(A) were incorrect when they stated

that the assessee had only made purchases of bullion

during the year. It was argued that the jewellery was also

purchased for which the evidence in the form of ledger

accounts and stock register had been submitted before

the AO/CIT(A) alongwith the invoices of purchase.

defects have been pointed by the Assessing Officer as

recorded in the Audited Books of accounts and confirmed

ITA 222/CHD/2024 A.Y.2017-18 12 copies of the accounts of the parties, from whom,

purchases have been made. He further submitted that

there is a availability of stocks with the assessee and

without pointing out any specific defects, the books of

accounts have been rejected, without any reason and

consequent addition have been made against the facts &

circumstances of the case.

Hon'ble Delhi High Court in the case of CIT vs. Akshit

Kumar reported in 197 DTR 121, Agson Global Pvt. Ltd.

in ITA No. 68 to 71/2021 vide order dated 19.01.2022

and also the judgments of the Chandigarh Bench of ITAT

in the case of Akriti Jain in ITA No. 481/Chd/2023,

Fashion Zone in ITA No. 331/Chd/2023, Charu Aggarwal

of Chandigarh Bench reported in 96 ITR (Trib.) 66 and

other judgments of the co-ordinate Bench i.e. of 'Jaipur

Bench' for the preposition that if the requisite stock is

available with the assessee and sales are made during

the demonetization period and the stock have been

reduced correspondingly. The addition cannot be

ITA 222/CHD/2024 A.Y.2017-18 13 sustained and all such judgments are on account of the

deposits of the cash in the bank account during the

demonetization period.

passed by the AO and argued that, since HJPL did not

have requisite capacity to buy such substantial jewellery.

It was not filing any returns of income and there has

been cash deposits in the accounts of HJPL, from where,

the remittances of the amount of the sales made by the

assessee concern, have been made. It causes a doubt and

suspicion about the capacity of the HJPL. Further, there

is no name & address of the person to whom the cash

sales have been made and, thus, under such

circumstances, the books of accounts have rightly been

rejected by the AO and the addition as confirmed by the

CIT(A) be sustained.

Counsel of the assessee and we also heard the CIT (DR),

we have also gone through the assessment order and the

order of the CIT(A) and "brief synopsis' and the paper

ITA 222/CHD/2024 A.Y.2017-18 14 books submitted by the Ld. Counsel. The Ld. Counsel

has explained the source of the cash deposit of Rs.

2,42,65,000/- and as also the amount of Rs.

4,14,40,000/- as received from HJPL through banking

channel and the said amount is on account of the sale

proceeds of available stock with the assessee concern, for

which, no doubt have been raised by the AO and the

CIT(A). The assessee had realized its sale proceeds of the

bullion to HJPL and for making the sales, the assessee is

not concerned about the identity, creditworthiness of the

party. Since it is not unexplained credit and such

provisions of section 68 are not applicable. All the sales

are subject to VAT and VAT has been collected and

deposited with the Government Treasury and copy of the

VAT returns and inter-state sales have been placed on

record before the Authorities below and before us also.

No defects have been pointed out in the regular books of

accounts maintained by the assessee and remittance by

the HJPL on account of purchase of bullion, made by

that concern, is through banking channel and the sales

have been accepted by the Assessing Officer and CIT(A).

ITA 222/CHD/2024 A.Y.2017-18 15 For making such sales, the requisite stock is available

supported by day to day stock register and, as such,

under such circumstances, when the corresponding stock

have been reduced as per the day to day quantitative

details furnished before the AO/CIT(A).The corresponding

sale realization is there, under such circumstances, the

very basis of confirming the addition by the CIT(A) is not

in order and under such circumstances. The CIT(A) was

not justified in rejecting the books of accounts u/s

145(3) as complete records in respect of the purchases

and sales of gold bullion have been maintained and all

such purchases & sales are backed by all the invoices.

The judgments as relied upon by the assessee of 'Delhi

High Court and of the co-ordinate benches are fully

applicable to the facts and circumstances of the case.

There is no material with the AO/Ld. CIT(A) to hold that

it is 'unexplained credit' as the sales have been recorded

in the regular books of accounts and, as such, such

sales would have already be a part of the profit & loss

account and the AO have already accepted the

availability of cash in the hands of the assessee and then

ITA 222/CHD/2024 A.Y.2017-18 16 the deposit of such cash in the bank account cannot be

rejected.

being given in identical facts & circumstances in the case

Aakriti Jain in ITA No. 481/Chd/2023 for AY 2018- 19

vide order dated 14.06.2024, in which, it has been held

as under:

"9. We have also heard the rival submissions of the parties and perused the material available on record. The Id. Counsel for the Assessee has explained the source of such cash deposits and it has also explained that such cash sales are subject to VAT where VAT has been collected and deposited with the Government treasury. In support of her explanation, the Assessee has furnished the documents of the relevant period of VAT returns, copy of trading and profit and loss accounts and balance sheets, which are duly audited. We find that the Assessing Officer has accepted the cash sales and the Assessing Officer has also accepted the VAT collected and deposited in the Government account. Even the Assessing Officer has accepted the VAT returns filed by the Assessee and accepted by the Indirect Taxes Department. Therefore, it clearly shows that the Assessing Officer has not doubted the availability of cash in the hands of the Assessee. Once availability of

ITA 222/CHD/2024 A.Y.2017-18 17 cash in the hands of the Assessee is accepted, then deposit of such cash in bank account cannot be rejected.

Assessment Order and by the ld. CIT(A) in the appeal order.

We have also considered the brief submissions filed by the

ld. counsel of the assessee and his arguments made during

proceedings before us. We have considered the arguments

made by the ld. AR and we find that the ld. DR mostly relied

upon the findings given by the ld. CIT(A). We find that as per

the facts and legal positions discussed above, the ld. CIT(A)’s

action of sustaining addition of Rs.4,14,40,000/- as received

on account of sales made to M/s. Hemant Jewels Pvt. Ltd.

ITA 222/CHD/2024 A.Y.2017-18 18 and cash sales made by the assessee to the tune of Rs.

2,42,65,000/- cannot be sustained. Accordingly, the

assessee’s appeal on both these grounds of appeal are

allowed.

allowed.

Order pronounced as on 22.10.2024.

Sd/- Sd/- (A. D. JAIN) (KRINWANT SAHAY) VICE PRESIDENT ACCOUNTANT MEMBER “GP-Sr. PS” आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. .��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar