SWARN GANGA JEWELLERS,CHANDIGARH vs. DCIT, CIRCLE 4(1) NOW DCIT, CIRCLE 1(1), CHANDIGARH

आयकर अपीलीय अिधकरण,च"ीगढ़ "ायपीठ “ए” , च"ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE "ी िव"म िसंह यादव, लेखा सद" एवं "ी परेश म. जोशी, "ाियक सद" BEFORE: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ ITA NO. 675/Chd/2022 िनधा"रण वष" / Assessment Year : 2017-18 Swarn Ganga Jewellers बनाम The DCIT, SCO 103, Sector 35C Circle4(1), Chandigarh Chandigarh-160035 Now DCIT, Circle 1 (1), Chandigarh "ायी लेखा सं./PAN NO: AANFS1031J अपीलाथ"/Appellant ""थ"/Respondent िनधा"रती की ओर से/Assessee by : Shri Parikshit Aggarwal, C.A राज" की ओर से/ Revenue by : Shri Dharam Vir, JCIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 04/06/2024 उदघोषणा की तारीख/Date of Pronouncement : 28/06/2024 आदेश/Order PER PARESH M. JOSHI, J.M. : This is an appeal filed by the Assessee in terms of Section 253 of the Income Tax Act, 1961, before this Tribunal being aggrieved by an order No. ITBA/NFAC/S/250/2022-23/1045180258(1) for A.Y. 2017-18 dt. 05/09/2022 which is hereinafter referred to as the “impugned order”. The impugned order is passed by CIT(A) in terms of Section 250 of the Income Tax Act, 1961. Factual Matrix

Month Cash Sales %age over Cash Sales %age over Cash Sales %age over during F.Y. total cash during F.Y. total cash during F.Y. total cash 2014-15 sales 2015-16 sale during 2016-17 sale during during the the year the year year April 1052333 29.63 925792 14.85 237818

by the assessee during the year whereas in the month of October and November 2016, the assessee has shown the cash sales of 77.58% of the total cash sales done during the year. ** On analysis of percentage of month wise cash sale figures over the total cash sale figure of respective F.Y. the monthly cash sales pattern in the F.Y. 2016-17 is not found in line with prior years. Moreover the assessee has made 77.58% of total cash sales in just two months of October and November 2016 (i.e; immediately before the demonetisation period) whereas during the same months for past years i.e 2014-15 & 2015-16 it was only 10.25% and 5.94% respectively. *** Therefore the cash sale pattern for F.Y. 2016-17 does not commensurate with the general business activity of the assessee in preceding years. **** To conclude, cash sales declared during the period immediately prior to the demonetisation is not in accordance with the normal cash sales pattern of earlier years.

Assmt. Year Opening Balance Closing Balance 2015-16 28,848 1,09,543 2016-17 1,09,543 1,74,509 2017-18 1,74,509 52,199

(vii) The onus to prove genuineness of transactions is on the assessee. From the above discussion, it is evident that the assessee has clearly failed to discharge its onus of proving the genuineness and reasonableness of the transactions (alleged cash sales) despite sufficient opportunities provided to it. It is clearly evident that assessee has shown cash sales to support the sudden deposit of high amount of unexplained cash made during the demonetization period. (viii) The assessee failed to furnish concrete evidences to justify the genuineness of its claim, in response to the detailed queries raised during the assessment proceedings that the assessee had unexplained cash and cooked up make belief story by showing these amounts as cash sales.

“7. In view of above detailed discussion and various legal and factual aspects of the case, it is concluded, on the basis of facts, circumstances and preponderance of probabilities, that the explanation furnished by the assessee as source of high cash deposit during demonetization period is a part of afterthought story in an attempt to explain the source of huge cash deposits during demonetization as part of sale proceeds of its business. It is further pertinent to reiterate that the sudden and unexpected announcement of demonetization caught the assessee unaware and it had no option but to deposit unexplained cash in to bank which now it is trying to pass off as its cash sale proceeds,

(Rs. 13,95,193 + Rs. 5,47,833) - Rs. 2,81,000= Rs. 16,62,026/- *(Cash in hand on 01.10.2016 + Genuine accepted cash sales during month of October, 2016 - cash deposited in bank during the month of October 2016.)

iii) In the month of November in the year 2014 and 2015, the cash sales were 5.44% and 2.91% respectively of the total cash sales made by the assessee during the year. The average of the sales made in the month of November in the year 2014 and 2015 comes out to 4.175% (i.e. [5.44 + 2.91] / 2). iv) Thus, 4.175% of total cash sales made in FY 2016-17 is taken as %age of total cash sales booked by the assessee in November, 2016 which comes to Rs.5,83,471/- (4.175% of Rs.1,39,75,355/-). The proportionate sales for the 1st eight days of the month of Nov., 2016 comes out to Rs. 1,55,592/- (i.e. Rs.5,83,471 x 8 / 30). Further, in order to give maximum benefit to the assessee considering the unprecedented demonetization circumstances and in order to be judicious and fair to the assessee and considering the nature of business of the assessee it is further accepted that on 08.11.2016 at night after the announcement of demonetization cash sales increased significantly, thus further cash sales booked on 08.11.2016 amounting to Rs. 5,00,000/- are also accepted on lump sum basis. Thus, cash sales to that extent of Rs. 6,55,592/- (i.e. Rs. 5,00,000/-+ Rs.1,55,592) is accepted as genuine cash sales for the month of November, 2016. v) In light of above discussion, total acceptable genuine cash sales and cash in hand as on 08.11.2016 works out to be Rs. 23,17,618/- (Rs. 16,62,026/- + Rs. 6,55,592/-). Thus final acceptable source of cash deposits made by the assessee during demonetization comes to Rs. 23.17,618/-.

The Ld. AO finally has held as under:

a. The said cash deposit was out of sales executed ; b. No defect in sales was pointed out; c. Acceptance of sales and still holding that cash is from some other source which has remained untaxed, the same amounted to impermissible double taxation ; d. The Ld. AO expected the appellant to produce something which the law or rules did not require the appellant to maintain ; e. The estimation exercise by the AO was extremely faulty.

wherein an amount of Rs. 50,00,000/- was surrendered by the assessee. Thereafter on 08/11/2016 old notes of Rs. 500 & 1000/- were demonetised by Government and RBI orders. During early periods/days of demonetisation there was a mad rush of customers and particularly to the jewellery shops by the woman folks. Under these circumstances there was huge sale of jewellery on 08/11/2016 post 8.15 p.m. Sudden spurt of sale of jewellery is on account of demonetisation only and no other factor can be attributed to it. Further assessee case herein cannot be treated in insolation. In so far as survey is concerned which happened on 06/09/2016 prior to demonetisation of old notes of Rs. 500/- and Rs. 1000/- an amount of Rs. 50,00,000/- was already surrendered on account of excess stock found and cash found during survey. It was done to buy peace of mind and to avoid litigation. The said surrender was done without pressure and coercion from any side. There should be no penal action and concealment. It was made for year under consideration i.e; F.Y. 2016-17 , A.Y 2017-18. The Ld. AR contended that the surrender letter dt. 06/09/2016 on page 165 of paper book was dully accepted by the Income Tax officials further during survey no adverse material evidence was found. We have perused the said letter dt. 06/09/2016. The Ld. AR emphatically pointed out that surrender of 50,00,000/- was from partner account despite no adverse papers detrimental to partner or firm was found during the course of survey. The Ld. AR invited our attention to computation of total income done by inviting our attention to page 133 of the paper book wherein he pointed out that sum of Rs. 50,00,000/- is credited into Profit & Loss Account, against assessee’s income. He emphasized no discrepancy was noticed in any books of account as on 06/09/2016. Stock Register during the course of survey was verified. No adversial document was drawn up during survey proceedings. It was purely a voluntary act and no fault of the assessee can be found in it. Moving forward reliance was placed on stock summary for the period 01/04/2016 to 31/03/2017 page 13 of paper

book which was read out and it was contended that same was part of record before Ld. CIT(A). The maintenance of stock in such manner was not at all doubted during the course of first appeal. Ld. AR then took us through VAT document i.e Form VAT-15 Receipt and Form-1(CST) Receipts which are from period 01/04/2016 to 30/06/2016 and every quarter thereafter till 31/03/2017 page 30-37 of paper book. This document is of Department of excise taxation Chandigarh administration which we have / had perused the same during the course of hearing itself. Our attention was also invited to individual sale invoice/s which are mostly of 08/11/2016 the day demonetisation took place. These sale invoice are from page 38 to 126 . It was stated that accounts of such sale invoice are of less than 2,00,000/- and therefore full name alongwith address, Pan and Aadhar details were not collected and further it was humanly impossible due to rush on day of demonetisation. Such failure was therefore not deliberate. We have perused these sale invoice/s. Our attention was also drawn to letter in reply dt. NIL which was filed before Ld. CIT(A) in response to his notice dt. 24/08/2022 by virtue of which assessee had submitted copy of Balance Sheet, Profit & Loss Account, complete audit report, all schedules, group statements and computation of income for A.Y 2016-17, 2017-18 & 2018-19 . it is stated in the letter that during survey on 06/09/2016 the assessee had offered a sum of Rs. 50,00,000/- to buy peace and avoid any litigation subject to no penal actions and concealment penalty. Copy of letter dt. 06/09/2016 evidencing surrender was attached. It was also avered that sum of Rs. 50,00,000/- being the surrender amount was added to the income of the firm and assessee had declared net income of Rs. 89,48,260/- during relevant A.Y 2017-18 . Complete submission filed before AO was also stated to be being furnished. We have perused the said reply on page 127 of paper book. We have simultaneously perused copy of ITR’s for A.Y 2016-17, 2017-18 and 2018- 19 from pages 128 to 139 of paper book and so also copy of audit report alonwith balance sheet for A.Y. 2017-18 & 2018-19 on page 140-164 of paper book. Though the compilation of judgments are filed but not a single

judgment was either referred or reliance was placed on it. Before moving forward we observe that this Tribunal cannot be loaded with precedent case law unless and until its contents alongwith ratio are not read out across Bar during the course of hearing. In Tax Law there is no dearth of case law but counsel and assessee’s representative should cite and rely upon only relevant case law applicable to same set of facts and circumstances as far as possible and should not unnecessary burden this Tribunal. We are not averse to case law as binding precedents on us but our point of view is to restrain professionals so that this practice of loading case law as binding precedent is considerably restraint and control is exercised. Though we cannot restrain professionals from citing authorities but they should cite the same across bar so that one and all know it during the course of hearing itself. No doubt such exercise take time and therefore professionals as far as possible should restrict to the relevant and applicable case laws so that precious judicial time is saved.

money which ought to have been deposited into banking system came to be deposited / invested in gold and other Form of jewellery. The jeweller’s as a community ought not have done so. No material particulars of customer’s were collected like Name, address, Pan, Aadhar, etc. In brief jewellers ought to have cooperated with Department in operation clean money, moving further forward with enthusiasm he stated very modestly that human probability test is best criteria to determine such a rush on very day of demonetisation. The assessee has placed reliance on sale invoice which are only representative in nature as it is of 8th November 2016 only such sales invoice cannot be a representative lot for entire A.Y. 2017-18 firstly and that the same should be discarded by this Tribunal. Around 88 invoices which are on record for 08/11/2016 presuming it to be issued between 8 to 10 P.M is an Act of impossibility in rush rush situation. Therefore sales invoices produce are sham and make believe arrangement on part of the assessee. Such details ought to have been uploaded on the system before AO further surprisingly and shockingly no labour details / income are shown on Bills. Whether bills are “all inclusive or not” stated. Making charges in jewellery matters now particularly on Bills. The Ld. DR vehemently contended that to handle customers around 100 to 150 in two hours is an act of impossibility. It is not humanly possible. He therefore contended that Table drawn up by Department (supra) is correct as abnormal trade pattern is seen when comparison is made with previous years i.e; October / November 2015. Regular trade pattern is absent. Identity of buyers are not disclosed with their KYC details. The Ld. DR placed reliance on page 150 of paper book to demonstrate that profit has increased. In rejoinder the Ld. AR submitted that summary of stock is filed further stock register was verified on day of survey i.e; 06/09/2016. On survey it was found and matched. No adverse material was found. No adverse document like panchnama, report bearing signature of assessee was drawn up. In brief as far as stock is concerned it was stated by him that theer is nothing adversial against assessee. With regard to KYC of customers he stated that if cash sales are in excess of Rs. 2,00,000/- then only

KYC is required. He stated that in the year 1978 demonetisation of Rs. 1,000/- note was done which was very different exercise then the one carried out in the year 2016. There was mad rush of customers and not only in Chandigarh but across India. It was indeed a unprecedented move in history of India. Majority of sales of jewellery happened on night of 08/11/2016 therefore table drawn up by Department (supra) is wrong and cannot be relied upon. Amount of Rs. 50,00,000/- paid on account of voluntary surrender is adjusted. Consequently addition should be deleted as very basis of it is wrong. Findings and Conclusion

without any coercion, undue influence, pressure etc. It is a suomoto exercise by him in what is called by him to buy peace and avoid litigation. This amount is shown in the books of account of the assessee for the year under consideration and brought to tax.

compel the assessee to do impossible particularly so during demonetisation time. We hold that said contention of assesse is correct in law as they are in business to earn profit. Further there was no express ban on sale of jewellery during demonetisation time. We hold that proviso to section 68 too is not applicable in peculiar facts and circumstances of the present case. The nature of prejudice caused to the Department is not spelt out expressly in both orders of lower authority in terms of proviso to Section 68 of the Income Tax Act. The Department had enough coercive power to venture out to such person’s even when no details were available to them in Form of KYC. No efforts have been made by the Departmental officers to atleast record a statement of the assessee and its partners. The officials of jewellery shops statements are too not recorded to cough up the truth, with regard to buyers of the goods. No doubt the law by virtue of the goods. No doubt the law by virtue of section 68 first proviso states that “ Provided that where the sum so credited consists of loan or borrowing on 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 AO aforesaid has been found to be satisfactory. The difficulties of the Income Tax Authorities was this as no KYC details were furnished by the assessee of buyers of goods. Per contra the stand of the assessee throughout on basis of sale invoice mostly of 08th November 2016 was that such sales were below Rs. 2,00,000/- and law does not mandates collection of KYC details of such customers / buyers. There is thus impossibility in performing such duties especially during the period of demonetisation. Law cannot in such a situation expect to do an impossible. We are in agreement with contention of the assessee. We hold that Department has failed to bring

any material evidence prejudicial to the assessee and therefore finding under section 68 r.w.s 115BBE is not sustainable as initial burden of proof that cash amount is towards sale of jewellery which was duly accounted in books of account of the assessee stands discharged. Further books of account has not been ‘even tainted’ as not properly maintained in accordance with law. Needless to state the books of accounts in law means as per section 2(12A) as “books or book of account includes ledgers, day books, cash books, account books and other books, whether kept in the written form or in electronic form or in digital form or as print outs of data stored in such electronic form or in digital form or in floppy disc, tape or any other form of electro magnetic data storage devide. “ In the present case only on basis of Table (supra) the Department of Income Tax has fastend the liability of tax under section 68 r.w.s. 115BBE without pointing out any lacuna in books of account of the assessee. The only lacuna they have pointed out is cash deposit. Be that as it may cash deposit are regularly deposited by the assessee in their Firm’s bank account with HDFC Bank. Extracts of statement of account has been produced; coupled with other financial documents which assessee is mandated by law to comply no discrepancies whatsoever has been found or alleged. There is no whisper’s on stock in both AO’s and CIT(A) orders. No reference is made about purchases made by the assessee. In brief purchases / stock have remained undisputed.

Chandigarh in ITA No. 28/Chd/2023 dt. 08/12/2023 wherein it has been held that:

“11. It was further submitted that a complete set of books of accounts were maintained and audited by a Chartered Accountant and these books are not rejected by AO but at the same time, part of the sales were held to be bogus and cash received against such sales added as Income u/s 68 ignoring that sales has already been declared as income by assessee. It was submitted that post deposit of cash, a survey was conducted to verify the deposit on 21-3-2017 and following undisputed facts are as per records: a. no evidence of any back dating of Sales were found. b. No difference in stock was found. c. There was sufficient stock available with assessee to make the sales.

d. Assessee was regular in filing VAT returns and the same were never revised. e. If cash sales of Rs. 18,41,619/- is bogus then such stock must have been found in excess on the date of survey at the business premises. f. Further, VAT @ 12% is paid to Government on such sales. The regulatory authority i.e Sales Tax department had accepted the recorded sales for the year and copy of Assessment order is lying at page 83. 11.1 It was submitted that the basic principle is the same in the law relating to income-tax as well as in civil law, namely, that if there is no challenge to the transaction represented by the entries or to the genuineness of the entries, then it is not open to the other side -in this case the revenue to contend that that which is shown by the entries is not the real 'state of affairs.

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to furnish documentary evidence sought during the appellate proceedings thereby failing to establish genuineness of the cash sales and therefore, has failed to explain source and nature of such cash deposits in the bank account/ books of accounts. In view of the fact that the cash sales made by the appellant could not be verified and the genuineness of the same could not be established during the assessment as well as appellate proceedings, the addition made by the AO is justified and the same is hereby sustained. After going through the facts of the case it has been observed that unexplained cash sales is deemed income u/s 68 of the Act as the appellant could not establish the genuineness of the same and the income assessed u/s 68 is liable to be taxed as per the provisions of section 115BBE of the Act. Therefore, this case falls squarely under the ambit of section 115BBE of the Act as applicable w.e.f. from 01.04.2017 i.e. for the year under consideration. Thus, it is not a case of retrospective application of section 115BBE of the Act. In this case, the AO has not considered the amount of Rs.17,00,000/- as genuine sales and therefore, reduced the total sales by the same amount, therefore, no double addition on this account has been made. Thus, it is found that the case laws relied upon by the appellant have no bearing on the instant case. Regarding the submission of the appellant that it's case is covered by declaration of Rs.3,00,00,000/- made by M/s CM Jewellers group under PMGKY, it is held that the declaration was made in the case of M/s CM Jewellers and not the appellant. Therefore, no credit out of the same can be allowed to the appellant."

आदेशानुसार/ By order, सहायक पंजीकार/