ABDHI JEWELS PRIVATE LIMITED,AHMEDABAD vs. ITO, WARD-1(1)(1),, AHMEDABAD

The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2017-18 on 15.08.2017 declaring total income of Rs. 7,88,810/-. The case of the assessee was selected for scrutiny under CASS. The AO noticed that the assessee had made cash deposits of Rs.63,00,000/- in his bank account during the demonetisation period from

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.

Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:

Per Contra, Shri Abhijit, the Ld. SR-DR supported the orders of the lower authorities.

We have considered the rival submissions. There is no dispute to the fact that the cash sales is a regular feature of business activity of the assessee. Before the AO, the assessee had furnished month wise details of cash sales made in the current year as well as in the preceding financial year, which is reproduced in the assessment order. The Assessing Officer did not dispute these cash sales. We deem it proper to reproduce the

The AO had rejected the explanation of the assessee for the reason that the cash sales in the month of October’16 was much higher compared to the cash sales of earlier months. On this basis he had concluded that the cash sales figure was manipulated to explain the cash deposits in the bank accounts. Merely because the cash sales in the month of October’16 was higher, the authenticity of the sales cannot be doubted. As per normal trend in the jewellery business, the sales are higher during the festive months of October and November. In fact, the cash sales of Rs.35,91,476/- in the month of October 2016 was correspondingly lower than the cash sales of Rs. 42,11,955/- made in the month of October 2015. Thus, the conclusion of the AO that the cash sales in October’16 was abnormally high, is not found to be correct considering the cash sales made during the festive months in the preceding year. Apart from this observation, no other evidence was brought on record by the AO to dispute the authenticity of the cash sales shown by the assessee. In fact, the total cash sales shown in the current financial year was Rs.99,25,617/- only, which was much less than the cash sales of Rs. 4,92,09,552/- in the preceding financial year. Thus, the basic premise on which the cash

The next ground pertains to addition of Rs. 14,96,530/- made u/s. 40A(3) of the Act. In the course of assessment, the AO found from the cash book that the assessee had made certain cash payments exceeding Rs. 20,000/-. Further the AO was also not satisfied with authenticity of cash vouchers, as signature of the recipient was not appearing in many of the vouchers. Therefore, after excluding the salary payments made in cash, the balance cash expense of Rs. 14,96,530/- was disallowed u/s. 40A(3) of the Act. Shri Parin Shah, the Ld. AR of the assessee explained that as per the software utilized by the assessee, all the cash payments made on a particular day were clubbed together and entered in the accounts under voucher. Thus, the amount of cash payment of a particular date as per voucher was found in excess of Rs. 20,000/-. However, the individual payment made to the different persons under the common voucher was less than Rs. 20,000/- and thus the payments were not hit

Per contra, Shri Abhijit, Ld. Sr. DR supported the order of the lower authorities. He submitted that the AO had disallowed the cash expense of Rs.14,96,530/- not only under the provision of section 40A(3) of the Act, but also for the reason that he was not satisfied with the authenticity of the payments. The Ld. SR-DR submitted that the complete details of the parties to whom the payments were made as well as the purpose of payment, was not explained by the assessee. He, therefore, supported the order of the AO on this issue.

We have considered the rival submissions. Copy of certain vouchers which were hit by the mischief of section 40A(3) of the Act, has been brought on record in the paper-book filed by the assessee. It is found therefrom that though a particular voucher is for an amount exceeding 20,000/-, the individual payment made to different persons is below Rs. 20,000/-. For example, the voucher No. CP/340 dated 10.09.2026 is found to be as under:

The above voucher for Rs. 47,500/- was in respect of payment made to four different persons for amounts below the limit of Rs. 20,000/-. Thus the contention of the assessee that the individual payment made to different persons in the voucher for a particular date was below Rs. 20,000/-, is apparently found to be correct. However, the complete address of the parties and the purpose of payment is not found appearing in the vouchers. Since the AO had also doubted the authenticity of the expenses, we deem it proper to set aside the matter to the file of AO with a direction to allow another opportunity to the assessee to produce evidence in respect of authenticity of the cash expenses. The assessee is also directed to furnish complete name and address of the parties to whom the cash payments were made and also to explain the nature of expense. The assessee is free to produce any other evidence to establish the authenticity and genuineness of the cash expenses. The AO will have liberty to conduct inquiry in respect of evidences brought on record by the assessee, as deemed fit and thereafter to decide the matter in accordance with the provisions of law. In the result, the ground taken by the assessee is allowed for statistical purpose.

The appeal of the assessee is allowed for statistical purpose.