PRADEEP KUMAR,LUCKNOW vs ACIT-1, LUCKNOW

Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW

Before: SHRI G. D. PADAMAHSHALI & SHRI SUBHASH MALGURIA

For Appellant: Shri Vijay Prakash Agrawal, Adv

For Respondent: Shri Sanjeev Krishna Sharma, D.R

PER SUBHASH MALGURIA, J.M.:

This appeal has been filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 06.02.2024 for the assessment year 2017-18, raising the following grounds of appeal:

The learned CIT (Appeals) has erred in upholding the order of the learned Assessing Officer invoking the provisions of section 68 of the Act, despite the fact that the appellant duly explained that the impugned cash deposits was proceeds from sales made during the period. 2. The learned CIT (Appeals) has erred in confirming the additions of cash deposits made during the demonetization and revenue also accepting purchase, debtors, creditors, closing stock, sale and cash book etc. thereby bringing the same amount to tax twice of Rs.1,50,00,000/-.

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The learned CIT (Appeals) has erred in confirming the cash deposits under section 68 without bringing any tangible evidence that cash deposit is not from books. The addition u/s 68 can be made only for credit entries from the books of account. 4. The learned Assessing Officer and learned CIT (Appeals) failed to appreciate that the quantum of sales claimed by the Appellant was also supported purchases, stock, VAT Return, audit report etc. 5. The order of the learned Assessing Officer and learned CIT (Appeals) is purely based on surmises and conjectures without any logical reasoning. 6. That the Learned CIT Appeal has erred in confirming the addition of Rs.40,00,000/- deposited under PMGKY scheme claimed by appellant as deduction. 7. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.

The brief facts of the case are that the assessee, proprietor of M/s Bacche Lal Chain and Jewellers, engaged in wholesale and retail business of gold, silver, bullions, ornaments and allied products, filed his return of income on 7.11.2017 declaring a total income of Rs.1,44,91,920/-. The case was selected for scrutiny through CASS. During the year under consideration, the assessee declared income from business at Rs.1,20,82,365/-, income from house property at Rs.2,52,000/-, income from other sources (being interest) at Rs.17,20,261/- and long term capital gain at Rs.5,90,244/-. On the total turnover of Rs.31,47,84,794/-, assessee declared gross profit at Rs.1,97,08,882/- and net profit at Rs.1,60,82,364/-. The

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Assessing Officer completed the assessment under section 143(3) of the Act by making addition of Rs.1,50,00,000/- under section 68 of the Act and disallowance of Rs.40,00,000/- under section 37 of the Act. 3. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who dismissed the appeal of the assessee, confirming the order of the Assessing Officer. Being further aggrieved, the assessee is in Appeal before the Tribunal. 4. With regarding to the addition of Rs.1,50,00,000/- made under section 68 of the Act, the ld. counsel for the assessee submitted that the assessee has complied with all the notices issued by the Assessing Officer from time to time and had filed the quantitative tally of stock month-wise for the preceding year as well as the current year, complete cash book, month-wise sales and purchases for the preceding year as well as the current year, monthly VAT return for the preceding year as well as current year, stock summary, job works expenses, loan and advances, daily cash summary, ledger account of all the parties from whom purchases were made. He further submitted that all these details were furnished before the Assessing Officer in the required format as desired by the Assessing Officer. The Assessing Officer has made detailed scrutiny of the details so furnished by the assessee and finding therein no discrepancy, he accepted the returned income and not rejected the books of account. Moreover, he has also accepted the trading results and sales. The assessee had duly explained before the Assessing Officer that the amount of Rs.1,95,00,000/- deposited in the bank accounts of the assessee is out of sales and the amount realized from the customers and all the sales and purchases are fully verifiable and stock tally has also been maintained on

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computer systems. He further contended that all the purchases are covered by VAT regulations and the accounts of the assessee are duly audited by Chartered Accountant. It was submitted that the sale of the assessee for the period April to September for the assessment year under consideration has increased to Rs.6,16,97,627/- as compared to Rs.3,74,67,689/- of the same period in the preceding assessment year. In October due to Deepawali festival, the sale in the assessment year under consideration has increased to Rs.3,13,34,752/- as compared to the previous year of Rs.1,11,27,598/- and the cash sale out of this amount is Rs.1,90,69,418/-, which is about 60.85% only, the details of which can be evidenced from the month-wise details of Sales/Gross Receipts of the assessee appearing at page 19 of the paper book. He also submitted that in succeeding months from December to March, 2017, the sale has increased substantially in comparison to the preceding year and the total sale during the financial year 2016-17 was 3.21 times of total sales made in the preceding year. From this, it is amply clear that the increase in sales is not only in the month of October but also the succeeding months. There could not be any cause for the uniform sales on all the days, months, or years. There might be diverse reasons behind fluctuations in sales, tied to factors like seasonal, clearance, or year-end sales. The assessee had also furnished the following details before the Assessing Officer: i. Comparative chart of month-wise sale. ii. Month-wise purchase details. iii. Month-wise sale details. iv. Details of month-wise purchase along with comparative figures with preceding as well as subsequent year.

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v. Details of sundry creditors. vi. Details of cash deposited during demonetization period. vii. Details of month-wise cash deposited in bank accounts. viii. Monthly stock summary. ix. Details of job work expenses with TDS. x. Details of loan and advances. xi. Details of Sundry Debtors. xii. Daily cash summary for the period 1.10.2016 to 31.12.2016. xiii. Copy of VAT return for assessment years 2015-16 and 2016-17. xiv. Details of salary. xv. Details of TDS on unsecured loan. xvi. Ledger copy of unsecured loan. xvii. Details of purchases made from 1.10.2016 to 8.11.2016. 5. The ld. counsel for the assessee submitted that the Assessing Officer has not pointed out any defect in the books of account, therefore, treating the cash deposits in the bank account of the assessee, amounting to Rs.1,50,00,000/- as unexplained, is unjustified. Since the Assessing Officer has not doubted the purchases, sales and stock of gold, the ld. CIT(A) was not justified in confirming the order of the Assessing Officer in a random manner. The ld. counsel for the assessee has also placed reliance on the following decisions: 1. Smt. Charu Aggarwal vs. CIT [2022] 140 taxmann.com 588. 2. ACIT vs. Hirapanna Jewellers [2021] 128 taxmann.com 291.

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Anantpur Kalpana vs. ITO [2022] 138 taxmann.com 141. 4. Mahesh Kumar Gupta vs. ACIT [2023] 151 taxmann.com 339. 5. DCIT vs. Roop Fashion[2022] 145 taxmann.com 216. 6. ITO vs. J.K. Woods India Pvt. Ltd. [2024] 158 taxmann.com 208. 7. Shobha Devi Dilipkumar vs. ITO [2024] 160 taxmann.com 1249. 8. Bawa Jewellers Pvt. Ltd. Vs. DCIT, ITA No.352/DEL/2021 [ITAT, Delhi Bench]. 9. Lalchand Bhagat Ambica Ram vs. CIT, 371 ITR 288 (SC). 10. Mehta Parikh Co. vs. CIT, 30 ITR 181 (SC). 11. CIT vs. Associated Transport Pvt. Ltd. [1996] 84 taxmann 146. 12. CIT vs. Chandra Surana, ITA No.166/JP/2022 [ITAT Jaipur Bench]. 13. Balvinder Kumar vs. ITO, ITA No.256/Amr/2022 [ITAT Amritsar Bench]. 14. JKG Exports vs. ACIT, 161 taxmann.com 481. 15. Prashant Pitti vs. ACIT, ITA No.3032/DEL/2022 [ITAT Delhi Bench]. 16. Smt. Sarika Jain vs. CIT, [2017] 84 taxmann.com 64. 17. Sunny Kapoor vs. ITO [2022] 142 taxmann.com 577.

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18.

Sita Ram Rastogi vs. ITO, ITA No.23/LKW/2022 [ITAT Lucknow Bench]. 6. On the other hand, the ld. D.R. has contended that the assessee failed to explain and substantiate the credits in the Bank accounts of the assessee and that therefore, the action of the authorities below is justified and no interference is called for in their orders.

We have heard both the parties and perused the material on record. It is an undisputed fact during the period from 9 to 30th of November, 2016, the assessee, during the demonetization period, had deposited an amount of total sum of Rs.1,95,00,000/- in his bank account (Rs.1,50,00,000/- in account No.200013785541 with Indusind Bank and Rs.45,00,000/- in account No.001863400000627 with Yes Bank). The assessee is engaged in wholesale and retail business of gold, silver, bullions, ornaments and allied products, for which, Sale Register, Ledger, Cash book, Stock Register, Purchase bills, etc., are being maintained and the same were produced before the Assessing Officer during the course of assessment proceedings. They were duly examined by the Assessing Officer. The assessee had explained before the Assessing Officer that the above referred amount deposited in the bank was out of sales and realized from the customers and all the sales and purchases are fully verifiable and stock tally has also been maintained by the assessee on computer systems. All the purchases made by the assessee are also covered by VAT regulations and the account of the assessee is duly audited by the Chartered Accountant. During the course of hearing, the assessee had also produced before the Assessing Officer Comparative chart of month-wise sale, Month-wise purchase

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details, Month-wise sale details, Details of month-wise purchase along with comparative figures with preceding as well as subsequent year, Details of sundry creditors, Details of cash deposited during demonetization period, Details of month-wise cash deposited in bank accounts, Monthly stock summary, Details of job work expenses with TDS, Details of loan and advances, Details of Sundry Debtors, Daily cash summary for the period 1.10.2016 to 31.12.2016, Copy of VAT return for assessment years 2015-16 and 2016-17, Details of salary, Details of TDS on unsecured loan, Ledger copy of unsecured loan, Details of purchases made from 1.10.2016 to 8.11.2016, etc. which, acknowledged to have been received by the Assessing Officer as per View Response to Notice ID 100018031183 and ID 100020848195 appearing at pages 22 to 26 of the paper book. The Assessing Officer after verification of the details so furnished by the assessee, made an addition of Rs.1,50,00,000/- under section 68 of the Act, on random basis on a presumption that the same was generated in old SBNs during the demonetization period, as in the opinion of the Assessing Officer, the assessee failed to prove satisfactorily the source and nature of amount of cash deposited in bank accounts during the demonetization period and not satisfied with the entries made in the books of account to the extent of bogus cash sales/ receipts booked from 1.10.2016 to the date of announcement of demonetization on 8.11.2016 and also the cash sales/receipts shown just before demonetization period was bogus/non-genuine cash sales/receipts and was used as a device to legalize unaccounted money lying with the assessee before demonetization. 8. We, for the sake of convenience, reproduce below section 68 of the I.T. Act:

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"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:"

As per section 68 of the Act, the sum found to have been credited in the books of account, for which, the assessee offers no explanation, is deemed to be the income of the assessee, whereas in the instant case, the assessee had duly explained the source of sales, produced the sale bills and had admitted the same as revenue receipt. Once there is no defect in the purchases and sales and the same are matching with the inflow and the outflow of stock and cash, there is no reason to disbelieve the sales. The Assessing Officer had examined the requisite details furnished by the assessee and did not point out any mistake therein. The Assessing Officer had not doubted the Sales made by the Assessee, which sales stand duly disclosed in the monthly VAT Returns too. The VAT assessment of the assessee firm has been completed by VAT Officer, wherein the Sales, Purchases and Stock of the Assessee have been duly accepted. The Assessing Officer had not doubted the availability of Stock of Gold ornaments. The entries in the books of account of the assessee were found to be genuine by the Assessing Officer and the Balance in Cash and Sales were found matching with the books of accounts. The source and nature of cash had been duly explained by the assessee. There is no law which prohibits a trader or a manufacturer in making cash sales. The assessee himself offered the amount of cash sales as his income by duly including it in his total sales. The Assessing Officer made the

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addition merely on pure guess-work, without bringing on record any contrary evidence in support of his view that the amount of Rs.1,50,00,000/- deposited during the month of November, 2016, was generated in old SBNs during the demonetization period and the source of which was not explained by the assessee. 10. At this stage, it is necessary to consider certain judicial precedents on this issue. The ld. counsel for the assessee has placed reliance on the decision of the ITAT Chandigarh Bench in the case of Smt. Charu Aggarwal vs. DCIT [2022] 140 taxmann.com 588, wherein also the assessee was engaged in the business of sale of jewellery, diamond and other related items. The Chandigarh Bench of the Tribunal in that case held that the cash deposited post demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the Assessing Officer, there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October 2016 prior to the making of the cash deposit in the bank account out of sales. The Bench relying on various decisions of the Hon'ble High Court and Coordinate Benches of ITAT, deleted the addition made by the Assessing Officer. 11. The Lucknow Bench of the Tribunal, on a similar issue, in the case of Sita Ram Rastogi vs. ITO (supra), deleted the addition made under section 68 of the Act. The relevant part of the order dated 8.9.2022 of the Tribunal (paragraph 18) is reproduced as under: “18. In the case at hand, we find that the assessee has established the sales with the bills. The sales were duly accounted for in the books of account. Therefore, the

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addition of Rs.19,10,000/- made under section 68 of the I. T. Act is not justifiable, as the amount was available with the assessee as opening balance of cash-in-hand as per cash book and cash received from the sales. Since these were Revenue Receipts, the same had also been offered to tax and due taxes had already been paid. The Assessing Officer had randomly made the addition, without pinpointing any abnormality therein. As such, the addition made by the Assessing Officer and confirmed by the ld. CIT(A) is not sustainable in the eye of law. Accordingly, I delete the same and allow Ground no.1 taken by the assessee.”

12.

In the case of Anantpur Kalpana vs. ITO (supra), on a similar issue, the Bangalore Bench of the Tribunal deleted the addition, observing as under: “9. I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It is also on record that the assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. Hon'ble Kolkata Tribunal in the case of Associated Transport (P.) Ltd. (supra) on identical facts took the view that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from

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undisclosed sources. The Hon'ble Vishakapatnam Tribunal in the case of Hirapanna Jewellers (supra) on identical facts held that when cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee 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. I am of the view that in the light of the facts and circumstances of the present case, the addition made is not sustainable and the same is directed to be deleted.”

13.

In other cases also, on which reliance has been placed by the assessee, it has been held that the cash receipts represent the sales which the assessee therein had rightly offered for taxation. Since the assessee had already admitted the sales as revenue receipt, there was no case for making the addition under section 68 of the I.T. Act. 14. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the Assessing Officer is erred in making addition towards cash receipts received for sale of jewellery, which was deposited in the bank accounts of the assessee, as unexplained cash credits taxable under section 68 of the Act. As such, the addition made by the Assessing Officer and confirmed by the ld. CIT(A) is not sustainable in the eyes of law. Accordingly, we delete the same and allow Grounds no.1 to 5 taken by the assessee. 15. So far as Ground no.6, relating to addition of Rs.40,00,000/- is concerned, the assessee did not press this ground. Accordingly, ground No.6 of the appeal is rejected as not pressed.

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16.

Ground No.7 is general in nature, which requires no specific adjudication. 17. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 04/09/2024.

Sd/- Sd/- [G. D. PADAMAHSHALI] [SUBHASH MALGURIA] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:04/09/2024 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR By order Assistant Registrar

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW BEFORE SHRI G. D. PADAMAHSHALI, ACCOUNTANT MEMBER AND SHRI SUBHASH MALGURIA, JUDICIAL MEMBER ITA No.198/LKW/2024 Assessment Year: 2017-18 Pradeep Kumar v. The ACIT-1 A-1/46, Vikas Khand Lucknow Gomti Nagar Lucknow PAN:ABLPK8392B (Appellant) (Respondent) Appellant by: Shri Vijay Prakash Agrawal, Adv. Respondent by: Shri Sanjeev Krishna Sharma, D.R. Date of hearing: 10 07 2024 Date of pronouncement: 04 09 2024 O R D E R