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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 2. That survey u/s 133A of the Income Tax Act, 1961 was conducted on the business premises of the Assessee on 06/09/2016. The assessee surrendered a sum of Rs. 50,00,000/- during the survey and paid tax thereon. The return of income was filed on 01/11/2017 declaring a total income of Rs. 89,48,260/-. Thereafter the case of the assessee was selected for scrutiny under compulsory scrutiny guidelines and notice under section 143(2) of the Act was issued on 11/09/2018. The assessment was finalised vide order dt. 23/12/2019 whereby addition of Rs. 95,70,882/- was made u/s 68 r.w..s 115BBE of the Act.
During the period commencing from 09/11/2016 to 31/12/2016 (demonetisation period) the assessee had deposited sum of Rs. 1,18,88,500/- in their bank account with HDFC Bank. During the course of the proceedings, the assessee was asked to explain the source of such huge cash deposit post demonetisation announcement. The Assessee submitted that same is on account of sale of goods.
The Department of Income Tax analysed the sale pattern & comparative chart of the cash sales made for the F.Y. 2014-15 to F.Y. 2016-17; and the following comparative chart of cash sales is observed for F.Y. 2014- 15, 2015-16 & 2016-17 which is as below in the form of table:
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 1.70 May 600119 16.90 300640 4.82 765124 5.47 June 272412 7.67 465639 7.47 769582 5.51 July 438488 12.35 3874698 62.16 423880 3.03 August 278260 7.84 13010 0.21 239072 1.71 September 289686 8.16 18507 0.30 583951 4.18 October 170698 4.81 188796 3.03 2796229 20.01 November 193242 5.44 181560 2.91 8045811 57.57 December 154490 4.35 249356 4.00 22050 0.16 January 78860 2.22 6890 0.11 37950 0.27 February 3600 0.10 8460 0.14 29350 0.21 March 18950 0.53 0 0.00 24538 0.18 Total 3551138 100.00 6233348 100.00 13975355 100
The Department of Income Tax made following observation on the basis of above table drawn: (i) The cash sales declared during the month of October 2016 & November 2016, that is immediately before the Demonetisation period has seen an exponential rise when compared to the corresponding period in earlier years. * In the month of October and November in the year 2014 & 2015, the cash sales were 10.25% and 5.94% respectively of the total cash sales made 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.
The assessee was issued a show cause notice dt. 15/12/2019. The relevant portion of SCN is as below: From the information available with the Income Tax Department, it is seen that the assessee has deposited amount of Rs.1,18,88,500/- during the demonetization period (i.e. 09.11.2016 to 30.12.2016). Various details regarding the cash deposited were asked vide queries dated 05.12.2019. However, the assessee has not provided any replies w.r.t these cash deposits. In view of non-submission of reply the entire cash deposit remained unexplained. In view of this the assessee is asked to show cause as to why not the money deposited during the demonetization period be considered as unexplained cash credits in the books of the assessee and addition be made into the income of the assessee."
7. No reply was furnished by the assessee to above show casue notice. No specific reply on record.
8. In so far as proceedings before Ld. AO is concerned the assessee has placed on record two letters i.e dt. 06/12/2019 and 13/12/2019 (page 165 to 171 of Paper Book). From letter dt. 06/12/2019 it can be safely be concluded that no explanation is given which Department was seeking and so also from letter dt. 13/12/2019. Consequently the assessee was without any effective explanation to the Department as no reply was given to SCN nor any explanation offered to core allegation of the Department. The letters dt. 06/12/2019 and 13/12/2019 are replies to queries raised in the course of normal assessment proceedings. In letter dt. 06/12/2019 it was stated in para II that complete address of the parties to whom sale and purchase was made during the year are being filed alongwith photocopy of bills.
Non disclosure of identity of buyers / clients (Name, PAN and Address) of assessee is clearly seen and visible to whom probably cash sales were made.
That contents of letter dt. 16/12/2019 of the assessee (page 7 of paper book) shows that the assessee had deposited sale proceeds of the goods i.e; jewellery items in the bank account of the assessee and that there is nothing on record to attract the provisions of section 68/69 of the Income Tax Act. HDFC Bank account statements were filed. It is stated “ that during the year the assessee has deposited the following amounts in the bank accounts under the demonetisation period and that deposit slips too were brought on record for verification: Current old Date of Bank Details of Total amount Source of or new deposit account in current notes deposited deposit which deposited deposited Old 10.11.2016 9,90,000 9,90,000 Sale of goods IDFC Bank, Sec-43, Chandigarh Old 11.11.2016 HDFC Bank, 74,90,000 74,90,000 Sale of goods Sec-43, Chandigarh Old 12.11.2016 HDFC Bank, 34,08,500 34,08,500 Sale of goods Sec-43, Chandigarh
Opening and closing balance of A.Y. 2015-16, A.Y. 2016-17, A.Y. 2017- 18 were too given as under:
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
In view of above factual backdrop the Ld. AO in his order dt. 22/12/2019 has determined the following facts:
5.12 From above, the following facts emerge in the case: (i) The Cash sales declared during the period are not on the same pattern with the cash sale pattern of earlier years. (ii) The assessee has not provided the identity of the customers, during the entire course of assessment proceedings to whom the sales have been made, rendering them unamenable to any independent verification. No such identity of the customers was provided by the assessee both during the assessment proceedings. Even in the reply submitted w.r.t the queries regarding cash deposits during demonetization period raised vide notice dated 05.12.2019, reply of which was filed by the assessee on e-filing portal on 17.12.2019, no such-details of the customers was provided. (iii) The only logical inference that any reasonable person of normal prudence can draw is that the assessee has manipulated its cash book to justify the source of abnormal, anomalous cash deposits made during demonetization under guise of cash sales. (iv) Further, regarding details of parties to whom sales are made (including cash sales), vide its reply uploaded on 17.12.2019, the assessee did not provide the details of individual cash sales made prior to the demonetization period. In this regard, it is mentioned that no verifiable details of alleged purchasers was submitted to whom alleged cash sales were made indicating all the cash sale was below the value of Rs. 2 lakhs which is the threshold above which buyers have to provide the permanent account number (PAN) issued by the income tax department and TCS has to be deducted u/s 206 of IT Act, 1961. While it is possible that a majority of cash sale bills were below Rs. 2,00,000/- but it is highly unlikely that not even a single cash sale above Rs. 2,00,000/- has been actually made by the assessee. (v) From above discussion and facts, it is logically inferred that the assessee has simply introduced its own unaccounted cash into its cash book under the guise of cash sale by generating sale bills below Rs. 2,00,000/- per alleged sale bill. In view of above, the reported cash sale cannot be accepted as genuine. (vi) Absence of submission of details which was amenable to independent verification (in the sense that complete name and address and PAN of the purchaser was provided and could be taken up. for verification to corroborate the claim of the assessee that genuine cash sales had taken place) indicates highest possibility of manipulation of cash book.
(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.
13. The Ld. AO after determining the above facts and upon relying the judgments of Hon’ble Supreme Court of India is case of CIT Vs. Durga Prasad More 214 ITR 801, Sumati Dayal Vs. CIT 1995 AIR 2109 , Mcdowell & Co. Ltd. Vs. The Commercial Tax Officer 1986 AIR 649, Hon’ble ITAT Delhi in case of Hersh Win Chadha Vs. DCIT in to 3098 & 3107/Del/2005) in following paragraphs has held as follows:
“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,
However, without prejudice to above, it is fair and reasonable to give benefit to the assessee to the extent of cash in hand as on 01.10.2016 which was Rs. 13,95,193/-. i). With respect to cash sales made for the months of October, 2016 & November, 2016 reference of average cash sales made in October, 2014 & October, 2015 and November 2014 & November 2015 is being taken and that would fairly reflect actual sales booked by the assessee during October, 2016 & November, 2016. In the month of October in the year 2014 and 2015, the cash sales were 4.81% and 3.03% respectively of the total cash sales made by the assessee during the year. The average of the sales made in the month of October in the year 2014 and 2015 comes out to 3.92% (i.e. [4.81 + 3.03] / 2). ii) Thus, 3.92% of total cash sales made in FY 2016-17 is taken as %age of total cash sales booked by the assessee in October, 2016 which comes to Rs.5,47,833/- (3.92% of Rs.1,39,75,355/-), thus, cash sales to that extent is accepted as genuine cash sales. Thus, total cash in hand as on 31.10.2016 is worked as:
(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:
8.3 Thus, in view of above discussion an amount of Rs. 95,70,882/- ( Rs. 1,18,88,500 - Rs. 23,17,618) remains unexplained cash credits and thus it is hereby added to the income of the assessee u/s 68 rw 115BBE of the Act. Further, penalty proceedings u/s 271AAC(1) of the Income Tax Act, 1961 are also initiated separately on this issue. [Addition Rs. 95,70,882/-]
Thus against returned income of Rs. 89,48,260/- sum of Rs. 95,70,882/- is added as supra and finally assessed income is Rs. 1,85,19,140/-.
The matter was carried in first appeal by the assessee to Ld. CIT(A) under section 250 of the Income Tax Act, 1961 who has sustained the assessment order of Ld. AO dated 22/12/2019 under section 68 r.w.s 115BBE of the Act. 16. The assessee being aggrieved by the impugned order of CIT(A) has raised following grounds of appeal in view of above factual matrix:
1. That on facts, circumstances and legal position of the case, the Worthy CIT(A), NFAC has erred in passing the order in contravention of provisions of S. 250(6) of the Income Tax Act, 1961.
That on facts, circumstances and legal position of the case, the Worthy CIT(A), NFAC has erred in confirming the action of Ld. AO in making addition of Rs. 95,70,882/- by erroneously holding that cash deposit in bank during demonetization period is from unexplained sources even when : 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. 3. That on facts, circumstances and legal position of the case, the imposition of tax rate of 60% u/s 115BBE + Surcharge thereon has been wrongly imposed and even if it be admitted academically that addition is to be confirmed, only normal tax rate was imposable. 4. That on facts, circumstances and legal position of the case, the impugned assessment order as well as the appellate order deserves to be quashed since both these orders were passed without granting reasonable opportunity of being heard to the appellant. 5. That the appellant craves leave for any addition, deletion or amendment in the grounds of appeal
on or before the disposal of the same. RECORD OF HEARING
17. The hearing took place before us on 04/06/2024 when both the parties to the proceedings appeared before us. The Ld. AR has filed a paper book containing pages 1 to 171 and compilation of judgements in support (not recited at Bar). The Ld. AR interalia contended that assessee is in the business of jewelleries. That a survey took place on 06/09/2016 and later demonetisation followed on 08/11/2016. Survey preceeds demonetisation 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.
18. Per contra the Ld. DR at the outset and threshold made it clear that in so far as survey is concerned which happened on 06/09/2016 under section 133A is concerned he has no comments to make. He further stated that as far as amount of Rs. 50,00,000/- is concerned which was surrendered on 06/09/2016 the Department has no grievance on it. He fairly conceded that on 06/09/2016 nothing adversial was found in survey and that he accepts stock upto 01/10/2016 as undisputed even by Department. He expressed that he reasonable feels that proper and appropriate matching must have been done both by Department as well s by assessee “ upto date and properly”. Moving forward he stated that sales comparison done by AO and CIT(A) especially for two months, November & December or October to December i.e; prior to demonetisation are all correct and proper way to do any assessment. His core grievance was that assessee during such a time ought not to have collected cash against sales. The Department is correct in making Table supra whereby correct and proper analysis is done as to why sales escalated in the two months period whereby huge unaccounted 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 19. In the premises we now examine legality, validity and proprietary of “impugned order” of Ld. CIT(A) who has sustained the order in assessment of Ld. AO dt. 22/12/2019. We note that Ld. AO has invoked the provisions of section 68 r.w.s 115BBE of the Act. We reproduced the extract of section 68 as under: Cash credit 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: Provided that where the sum so credited consists of loan or borrowing or any on or body and such amount, by whatever name called, any explanation offered by such assessee previous years 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: Provided also that nothing contained in the first proviso 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. The assessee is in jewellery business in city of Chandigarh which is a capital city of State of Punjab, State of Haryana besides Union Territory of Chandigarh. It is fairly an urban city with all model facilities. It is surrounded by upcoming Mohali in Punjab & Panchkula in Haryana. It can thus be safely called Tricity. It is a natural phenomenon particularly on day of 8th November 2016 for affluents to rush to jewellery shops to unwind their cash which is either save in their cubboards or hoarded. Panic was indeed not confined to Tricity of Chandigarh but Pan India particularly large urban cities like Mumbai, Delhi, Indore, Jaipur, Kolkata, Chennai, Hyderabad, Surat, Ahemdabad to name few. No embargo was placed by Government on jewellery shops between 8 to mid night on 8th November 2016. Notes were legal tender and one could spent it as per their whims and fancies. In a panic mode people with heavy purse moved out to unwind themselves. The jewellers in the real world or on real time basis became soft targets of their onslaughts as if it was free fall for one and all meaning rush rush with money in hand to spend. We are in no way trying to justify whether demonetisation was correct or wrong general psyche is described only. We are confining ourself to provisions of section 68 r.w.s 115BBE of the Income Tax Act, 1961. We expect both jewellers and people particularly affluents to follow law particularly fiscal laws strictly as fiscal statutes are required to be construed and implemented strictly. Be that as it may the assessee was surveyed as back as on 06/09/2016 and had surrendered Rs. 50,00,000/- in survey operation which was much prior to 08th November 2016 the day of demonetisation (to demonetise currency in county like India is a really very very difficult task as secrecy is a condition precedent). No adverse material was found in the survey. No adverse document was drawn up or made during survey on 06/09/2016. Assessee vide surrender letter dated 06/09/2016 voluntarily surrender’s Rs. 50,00,000/- 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.
Then follows the demonetisation w.e.f 09/11/2016 to 30/12/2016. The November and December 2016 were thus crucial months for people of India who had demonetised old notes of Rs. 500/- and Rs. 1000/- respectively in their hands.
We have to examine cash credits under section 68 of the Income Tax Act, 1961. The amount of cash credit in the books of the assesee is admittedly on account of sale of jewellelry which fact is more or less an admitted position in the light of facts and circumstances described (supra). The amounts are deposited by the assesee in their bank i.e HDFC Bank, Sector 43, Chandigarh. The assessee in law is required to offer explanation with regard to such cash credits in a previous year which he has offered i.e; cash sales mostly during the time of demonetisation and in particular on 08/11/2016. It is not a case where no explanation is offered or given, about nature and source of cash. Nature is sale of jewellery by a jeweller assessee and consideration for same is cash given by their buyers / customers. Therefore both the requirement of law i.e; nature and source of cash is explained alongwith necessary proof and / or supportings in Form of sales invoices, VAT returns, HDFC account statement evidencing deposit of cash (supra), balance sheets, computation of income, P&L accounts etc. This fact has remained undisputed what is disputed by the Department is that ‘further and better particulars of the customer/buyers of jewellery’ are not provided to the Department despite several opportunities afforded to them. The assessee in this regard has taken shelter that majority of the sales invoice of 08th November 2016 does not carry an amount of Rs. 2,00,000/- or more against each individual customer / buyer of goods hence there is no necessity in law to obtain KYC details of such buyers / customers. Department cannot 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.
We hold that order of CIT(A) impugned in this appeal is bad in law as he has failed to examine the VAT details filed by the assessee in support of their contentions which is an approach wholly untenable in law. It was incumbent upon the Ld. CIT(A) to have verified the VAT details and ought to have dealt with in a reasonable way before rejecting first appeal. VAT details supports the case of the assessee.
We have noted the finding of our very Bench of ITAT in cases of Windlas Jewellers Ambala Vs. ITO Ward 2 Ambala Cantt in dt. 01/04/2023 and so also in cases of Madan Lal Aggarwal HUF Vs. DCIT CC-2, Chandigarh in ITA No. 28/Chd/2023 dt. 08/12/2023 wherein it has been held that:
We have considered the rival contentions and gone through the record. The entire case of the revenue is on the basis of assumption that the assessee during the demonetization period had made sales accepting demonetized currency which was deposited in the bank account of the assessee. However, the case of the assessee is that the assessee has made genuine sales and that the sales were duly recorded in the books of account and books of account were duly audited and that the deposits in the bank account were made out of cash sales. The assessee has duly furnished the relevant documents including stock register, cash book, bank account statements, quantity-wise trading accounts, VAT returns, month-wise sales and cash receipts and party-wise purchases summary etc. The books of account of the assessee in this case have not been rejected. The case of the revenue is based merely on suspicion. There is no evidence brought on record that the cash sales made by the assessee were not genuine. The burden is upon the Assessing Officer in this respect who alleges sales to be ingenuine. The additions cannot be confirmed in this case merely on the basis of suspicion when the assessee proved his case and has furnished sufficient documents. The issue is squarely covered by various decisions of the Coordinate Benches of the Tribunal . The ld. Counsel for the assessee in this respect has relied upon the following case laws: i ) ACIT vs. Goel Jewel lers Overseas Corp in ( ITAT Delhi ) ii ) DCIT Central Circle-1, Ludhiana vs. M/s Roop Fashion reported in [2022] 98 ITR (Trib) 419 [ ITAT Chand) ] iii ) Gulshan Kumar vs. DCIT in ITA No.488/Chd/2022 ( ITAT Chandigarh) iv) Smt. Tripta Rani vs. ACIT, Ludhiana in ITA No.135/Chd/2021 ( ITAT Chandigarh) v) Madan Lal Aggarwal HUF vs. DCITin ITA No.28/CHANDI/2023 ( ITAT Chandigarh) dated 18.12.23 7.1 We f ind that the issue involved in this case is squarely covered by the decision of the Coordinate Chandigarh Bench of the Tribunal in the case of ‘Madan Lal Aggarwal HUF vs. DCIT’ (supra) , the relevant part of the order is reproduced as under: “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. 11.2 Our attention was invited to decision of the Hon'ble Punjab and Haryana High Court in of 1999 dated February 21, 2014 in case of M/s S.V. Auto Industries, Phagwara v. Commissioner of Income Tax, Jalandhar and another wherein it was held that "Concededly, books of accounts including stock register maintained by the assessee in the course of manufacturing process and business operations, have neither been doubted in their correctness nor have been questioned much less rejected under Section 145 of the Act. Once the books of accounts have not been doubted in their correctness and much less are rejected, there is absolutely no explanation coming forth from the revenue as to why the Assessing Officer as also the appellate authorities including the Tribunal went on to substitute their own judgment for the actual figures of wastage emerging from stock register and from the books of accounts of the assessee? When the books of accounts including stock register etc. have neither been rejected nor are doubted, accounts could not be bye passed merely on the whims and fancies of the authorities." 11.3 Further, reference was drawn to the decision of the Hon'ble Supreme court in case of Mehta Parikh and Company vs. CIT (1956) 30 ITR 181 (SC) wherein it was held as under: "It has to be noted, however, that beyond these calculations of figures, no further scrutiny was made by the Income-tax Officer or the Appellate Assistant Commissioner of the entries in the cash book of the appellants. The cash book of the appellants was accepted and the entries therein were not challenged. The Tribunal also fell into the same error. It could not negative the possibility of the appellant being in possession of a substantial number of these high denomination currency notes. It, however, considered that it was impossible for the appellants to have had 61 such notes in the cash balance in their hands on 12th January, 1946, and then it applied a rule of the thumb treating 31 out of such 61 notes as within the bounds of possibility, excluding 30 such notes as not covered by the explanation of the appellants. This was pure surmise and had no basis in the evidence, which was on the record of the proceedings. To put the matter in a nut-shell, the accounts of the appellant have been accepted by the Tribunal as genuine, and it is impossible to say, having regard to the cash balance as shown therein, that the notes in question could not have been included therein. The Tribunal observes that it is unlikely that so many high denomination notes would have been held as part of the cash on hand for a such a large number of days. That, no doubt, is highly suspicious ; but the decision of the Tribunal must rest not on suspicion but on legal testimony. 11.4 Our attention was further invited to the following decision of Coordinate Bench Chandigarh & a few others where under similar circumstances cash deposited during demonetization out of cash sales without rejection of books of accounts was held not justified: a. [2022] 98 ITR (Trib) 419 (ITAT [Chand]) THE DCIT CENTRAL CIRCLE-1, LUDHIANA VERSUS M/S ROOP FASHION AND (VICE-VERSA) b. 2023 (3) TMI 755 - ITAT CHANDIGARH, SH. GULSHAN KUMAR VERSUS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2,LUDHIANA ITA No. 488/Chd/2022, Dated: - 31-10-2022 c. ITAT CHANDIGARH [2022] 97 ITR (Trib) 389 (ITAT [Chand]) SMT. TRIPTA RANI VERSUS THE ASSISTANT. COMMISSIONER OF INCOME TAX LUDHIANA. d. 2023 (4) TMI 529 - ITAT AMRITSAR RAJ KUMAR (M/S RADHIKA SALES CORP) DHAB WASTI RAM, AMRITSAR VERSUS ITO, WARD 3 (3) ,AMRITSAR. I.T.A. No.195/Asr/2022, Dated: - 11-4-2023 e. 2023 (3) TMI 1196 - ITAT DELHI M/S. FINE GUJARANWALA JEWELLERS VERSUS INCOME TAX OFFICER, DELHI, I.T.A. No. 1540/DEL/2022 Dated: - 27-3-2023 f. 2022 ITAT Lucknow Subodh Chandra Seth ITA 352/Lkw/2020 dated 22/8/22 g. 2022 ITAT Lucknow SITA RAM RASTOGI ITA 23\LKW\2022 dated 8/9/2022 12. The Ld. DR has relied on the order of the AO as well as that of the Ld. CIT(A). We have already taken note of the findings of the AO, hence the same are not reproduced for the sake of brevity. As far as the findings of the Ld. CIT(A) is concerned, the same are contained at para 5 of the impugned order and the same reads as under: "5. The appellant submitted during the appellate proceedings that it is part of CM jewellers group and therefore it is covered by the declaration of Rs.3,00,00,000/- made by the group under PMGKY. Further, it was submitted that the cash of Rs.21,00,000/- was deposited out of day to day cash sales. The appellant submitted that there was no justification to make addition u/s 68 of the Act on account of cash sales recorded in books of accounts. The Ld. AR also questioned retrospective applicability of section 115BBE of the Act. After taking into consideration the above facts , the opportunities vide letter dated 24.08.2021 and 17.09.2021 were granted to the appellant to produce complete sale bill books and complete books of accounts for the year under consideration in order to verify the grounds of appeal and to verify the above contention. In response , the appellant submitted only copy of sales account, however, failed to produce the complete sale bill books for the period under consideration. Upon perusal of the submission of the appellant, it is noted that the cash sales shown by the appellant during the months of October and November, 2016 are considerably higher than the respective months of F.Y. 2015-16 and F.Y. 2014-15 .The onus to substantiate the cash sales was on the appellant which it has failed to discharge both during the assessment and appellate proceedings. The appellant has failed 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."
We have heard the rival contentions and purused the material available on record. The assessee has deposited a sum of Rs 20 lacs on 10/11/2016, Rs 50,000/- on 6/12/2016 and Rs 50,000/- on 20/12/2016 in its bank account maintained with SBI, Ambala City. The source of such cash deposits has been explained by the assessee as out of its cash sales so undertaken from time to time and it has also been explained that such cash sales are subject to VAT where VAT has been collected and deposited with the government treasury. In support of its explanation, the assessee has furnished the cash book containing the entries towards the cash sales, cash deposits with bank, complete sale and purchase ledgers, sundry creditors, VAT returns, copy of trading and profit/loss account and balance sheet which are duly audited. No defect has been pointed out by the AO in terms of availability of stock or in any of the documentation so submitted by the assessee or in the books of accounts. Therefore, merely the fact that certain cash deposits have been made by the assessee during the period of demonization and such deposits are on a higher side considering the past year figures cannot be basis to hold the explanation so made by the assessee as unsustainable and treat the cash sales as bogus and bringing the cash deposits to tax u/s 68 of the Act. The comparative figures for past years can no doubt provides a starting point for further examination and verification but basis such comparative analysis alone and without any further examination which points out any defect or manipulation in the documentation so submitted or in terms of availability of requisite stock in the books of accounts, the sales so undertaken by the assessee which is duly recorded in the books of accounts cannot be rejected and treated as bogus. In view of the same, we find the explanation of the assessee as genuine and reasonable duly supported by the documentation and books of accounts and the addition so made by the AO and confirmed by the ld. CIT(A) is directed to be deleted.”
8. In view of the above observations, we do not find any justification on the part of the lower authorities in making the impugned additions and the same are accordingly ordered to be deleted.