ACIT, CIRCLE-49(1), NEW DELHI vs. PRADEEP PATIL, NEW DELHI

Whether the Ld. CIT (A) is correct in concluding that AO did not bring any material on record against assessee in respect of cash sales which was deposited by the assessee in the bank, when assessee itself did not cooperate during the course of assessment and failed to give complete reply during the course of assessment proceedings.

Whether Ld. CIT (A) has erred in concluding that books of accounts was accepted by the AO, when assessing officer specifically mentioned in the assessment order that month wise cash sales figures is more than the other FYs and the san same are concentrated exactly before the demonetization period [01.10.2016 to 8.11.2016].

The Ld. CIT(A) has erred in allowing the assessee to produce/adduce additional evidence under rule 46A when none of the conditions laid down in clause (a), (b), (c), or (d) of sub-rule (1) of rule 46A were satisfied.”

Brief facts of the case are that, the Assessee being proprietor of M/s Patil Enterprises, carrying out business of trading gold, silver, Kundan and diamond jewelleries/articles filed his ITR for Assessment Year 2017-18 declaring total income of Rs. 22,91,790/-. The case of the Assessee was selected for ‘Complete Scrutiny’ through CASS. An assessment order came to be passed u/s 143(3) of the Income Tax Act, 1961 ('Act' for short) by making an addition of Rs. 9,84,10,877/- on account of unexplained cash credit u/s 68 of the Act. Aggrieved by the assessment order dated 28/12/2019,Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 09/09/2022, allowed the Appeal of the Assesseeby deleting the said addition. As against the order of the Ld. CIT(A) dated 09/09/2022, the Revenue preferred the present Appeal on the grounds mentioned above. All the ACIT Vs. Pradeep Patil grounds of Appeal of the Revenue are against the deletion of addition of Rs. 9,84,10,877/- made u/s 68 of the Act.

The Ld. Departmental Representative arguing on Ground No. 1 to 4, vehemently submitted that though the Assessee failed to prove any justification for difference in cash sales for Assessment Year 2017- 18 from other Assessment Years i.e. 2016-17 and 2018-19, erroneously treated the cash deposits as sales. Thus, sought for reversing the order of the Ld. CIT(A).

Per contra, the Ld. Assessee's Representative submitted that the addition has been made by the A.O. without rejecting the books of accounts, the A.O. has not found any discrepancy in sale, purchase or stock. The entire sale declared by the Assessee was subject to tax and the addition made by the A.O. amounts to double taxation. The Ld. A.O. has not made any independent enquiry before making addition. Further submitted that, out of the total sale,only 10.04% was the cash sale which has been erroneously added by the A.O. Thus submitted that, the Ld. CIT(A) discussed all the above factual aspects and rightly deleted the addition, which requires no interference at the hands of the Tribunal. The Ld. Assessee's Representative has also relied on following judicial precedents: ACIT Vs. Pradeep Patil a. Deepak Sharma vs. ACIT, ITA 2886/Del/2022, dt. 26.03.2025. b. DCIF Vs. EP Electronics Paradise Pvt. Ltd., ITA 3566/Del/2023, dt. 05.05.2025. c. M/S Shagun Jewellers Vs. DCIT, ITA 3168/Del/2023, dt. 27.02.2025. d. Durga Fire Works vs. ITO, ITA 383/Del/2024, dt. 03.07.2024. e. ITO Vs. Ashapurna Petrochem Marketing Pvt. Ltd., ITA 511/Ahd/2020, dt. 18.10.2023. f. 1600/Mum/2023, dt. 26.07.2023. g. DCIT Vs. Bawa Jewellers Pvt. Ltd., ITA 352/Del/2021, dt. 09.06.2023. 6. We have heard both the parties and perused the material available on record. During the assessment proceedings, A.O. noticed that there were no cash sales from April 2016 to September 2016 and negligible cash sales of Rs. 32,69,602/- in the period from 09/11/2016 to 31/03/2017. Similarly observed that there were negligible cash sales during the complete Financial Year relevant to Assessment Year 2016-17 and 2018-19 in the corresponding period. Therefore, the A.O. show caused the Assessee as to ‘why the amounts so deposited during the demonization period in the bank accounts should not be added’ in his income u/s 68 of the Act. The Assessee submitted reply on 18/12/2019 to the queries of the A.O. The copy of the reply of the Assessee is reproduced as under:-

That the assessee introduced started a new segment/range in his shop of Gold and Diamond Jewellery named as "PATIL'S" during the year and started sale since 01:10.2016 on beginning of festival seasons of the year. The said segment was started in jewellery in Maratha Design for men and women. Advertisement material of regarding "PATIL" new segment of jewellery also printed during the year under assessment and expenditure of such material also included in our business promotion expenses as per books of account. Therefore in the last preceding year the sales of this new segment was less and resultantly, the cash sale from new segment was higher in the current year in comparison to the last year in the same period of 1st Oct. to 8th November...

During the year 2016 we were involved to start our new segment named "PATIL's", we got success and achieved as much sale from retail customers due to much more availability and liquidity of cash in the Indian markets. However after demonetization all cash available in market was deposited in respective bank accounts of holders and there was no cash available in the market for the long time after demonetization and also due to much success of "the campaign for cash less transaction economy" which was started by our respected Mr. Narendra Damodar DassModi, Indian consumers tendency of sales is increased and boost up during Dusshera, Dhanteras, Diwali Festivals and Marriage season. In calendar year 2015 Dussehera was in Oct. 2015 & Diwali was on dated 11-November-2015 and in this year 2016 Dushhera and Diwali was in October-2016. Therefore the sale in this year is more than the last year...

That reason of non mentioning name and complete address along with PAN on some retail sale invoices is not merely reason to assume that these was not actual/genuine sale and deemed as bogus or manipulated sale. For Justification of this we would like to inform that as we have already stated above that there was a festival season and due to this volume of customers is more than usual volume of customers and in general practice customer does not want to provide his complete details regarding security and privacy reason on invoices as they are also having knowledge to provisions of act that there was no requirement of PAN and complete detail of purchases made by him with amounting of less than of Rs.2,00,000/-

That after the announcement of demonetization scheme there was lot of events/cases happened in the market for snatching of cash and valuable. Citizens of India were on the road for the purpose of depositing his old currency notes and for withdrawal of new currency from bank account. Therefore citizens were in fear of snatching his valuable money by road side peddlers, hence there was the reason for not depositing all cash in one time and deposited in different dated so that he can minimize his carrying currency from office to bank..."

After considering the above reply of the Assessee, the Ld. A.O. added Rs. 9,84,10,877/- u/s 68 of the Act. The Ld. CIT(A) while deleting the said addition made by the A.O. held as under:- “10. Decision:

1 I have carefully considered the assessment order, submission of the appellant, remand report and rejoinder of the appellant. The brief fact of the case is that the appellant filed his return of income for AY 2017-18 on 01.11.2017 ACIT Vs. Pradeep Patil declaring total income amounting to Rs.22,91,790/-. The case was selected for Complete scrutiny through CASS. It was noted that the appellant deposited cash amounting to Rs.10,16,96,000/- during the demonetization period i.e. from 09.11.2016 to 31.12.2016 in bank accounts maintained by him. During the assessment proceedings the AO noted that the appellarit had cash sales amounting to Rs.9,95,21,765/- during the period from 01.10.2016 to 08.11.2016. However, the cash sales in preceding and succeeding years during the similar period were negligible. The AO further stated that the genuineness of the buyers was not established by the appellant. Hence, he established that the cash sales shown by the appellant during the period from 01.10.2016 to 08.11.2016 are not genuine, In result, the AO added Rs.9,84,10,877/- to the total income of the ncome of the appellant.

2 It is seen that the assessing officer declared the sales made by the appellant non-genuine because of following issues: 1. The appellant had negligiblet sales in preceding and succeeding years during the similar period.

The genuineness of the buyers was not established by the appellant.

2.1 It is seen that in the return of income filed by the appellant for AY 2017-18, he showed total sales of Rs.102,37,32,242/- including cash sales of Rs. 10,27,91,367/- during the year. The AO however, inferred that the cash sales shown by the appellant are not genuine as they were suspiciously high. In this regard, it is noted that the cash sales shown by the appellant were credited in the books of account of the appellant and the profit thereon was offered for taxation. It is also seen that the books of account of the appellant were audited u/s 44AB of the Act. The AO added the cash sales amounting to Rs.9,84,10,877/- under the head "income from other sources" without rejecting the books of account of the appellant which lead to double taxation. The simlar issue was decided upon by the Hon'ble Gujarat High Court in the case of CIT v. Vishal Exports Overseas Ltd. [IT Appeal No.2471 of 2009, dated 03.07.2012] wherein it was held as under: ……..5. Revenue carried the matter in appeal before the Tribunal. The Tribunal did not address the question of correctness of the C.I.T. (Appeals)'s conclusion that amount of Rs.70 lakhs represented the genuine export sale of the assessee. The Tribunal however, upheld the deletion of Rs.70 lakhs under section 68 of the Act observing that when the assessee had already offered sales realisation and such income is accepted by the Assessing Officer to be the income of the assessee, addition of the same amount once again under section 68 of the Act would tantamount to double taxation of the same income.

Having heard learned counsel for the parties and having perused the documents on record, we are in agreement with the above view of the Tribunal. According to the Assessing Officer, Rs.70 lakhs represented bogus sales and therefore the eligibility of the assessee's deduction under section 80HHC of the Act came to be reduced by such amount. Having done so, the Assessing Officer further proceeded to add the same amount under section 68 of the Act.

In view of the above situation, we do not find any reason to interfere with the Tribunal's order..

2.2 Further, it is also seen that the AO added the cash sales without pointing any discrepancy in either the purchases or the stock of the appellant during the year. Similar issue was discussed by Hon'ble [2021], 128 taxmann.com 291, wherein Hon'ble ITAT was seized with identical facts of the case related to exceptional cash sales during demonetization period. Hon'ble ITAT has observed as following:-

2.4It is noted that, in remand report dated 26.08.2022, the AO mentioned that during the assessment proceedings, notices u/s 133(6) of the Act were issued to major purchase/sales parties to submit relevant documents by the then assessing officer. The AO further mentioned that no response was received from any of the party. This fact about conducting the third party verification has not been mentioned in the assessment order. Even if any such enquiries were condücted during the assessment proceedings, the outcome of such enquiry should have been confronted been confronted with the appellant as the AO had taken a view against the assessee. In this case, it is apparent that the AO neither confronted the appellant about such enquiries nor did he mention about the same in the assessment order.

2.5 The AO further mentioned in the remand report that some frequent names in the purchase register are Amit Jain and Indu Shukla and the purchase amount against their name is between 9 lakhs to 10 lakhs every time, on consecutive dates. However, the AO once again did not make any effort to verify the genuineness of the purchases from any counterparties and declared the purchase as non- genuine merely on the basis of suspicion. In absence of any tangible evidence, having accepted the books of account and not finding any defect in the stocks or the purchases, the AO's inference regarding the sales remains unsubstantiated and based on mere suspicion and presumption

2.6 As per the genuineness of the buyers is concerned, it is seen thatthe appellant had submitted the sample sales invoices as well as the details of top 20 parties to whom the sales were made, during the assessment proceedings and then again during the appellate proceedings. However, the AO in assessment order mentioned that the appellant had not submitted details of the parties to whom cash sales were made. As per the assessment order, the AO did not make any effort to verify the sales prade by the appellant from the third parties to whom cash sales were made. As a matter of fact, the assessee was not required to maintain KYC details with PAN of the buyer for the cash sales of less than Rs. 2 lakhs as per the rules prevailing at the time. Also, It is the AO's duty to establish with evidences that the facts stated by the Appellant are not correct, since the law of burden is canonized in common law doctrine "incumbitprobatio qui ACIT Vs. Pradeep Patil dicit non qui negat", i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. In the instant case, the A.O. did not carry any of his doubts to a logical conclusion by converting them into hard facts on the basis of evidences during the assessment proceedings. I have also also taken note of the fact that the AO was given enough time to conduct relevant enquiries and investigation, during the course of Remand proceedings. However, the AO had failed to carry out the relevant enquiries and investigation during the Assessment as well as Remand Proceeding and without any such enquiry and investigation, the AO declared the cash sales made by the appellant non- genuine.

2.7 (a) It is well settled proposition of law that the Court should safeguard itself against the danger of basing its conclusions, on of basing its conclusions on suspicions, howsoever strong they may be. It is equally well settled that the Courts decision must rest not upon suspicion but upon legal grounds established by legal testimony. In this regard, the reliance is placed upon the decision of Hon'ble Supreme 66 TTJ (Mum) 817& D. M. Kamani (HUF) 65 TTJ (Pat) 504. It is well settled by the Hon'ble Supreme Court in more than one decision that Courts have to be watchful and avoid the danger of suspicion to take place of legal proof for some time, unconsciously it may happen to be a short step between moral certainty and legal proof. In this regard, reference may be made to the judgment in the case of Narendra Singh v. State of MP, 2004 SCC 1893

It is observed that the books of account of the Assessee were audited u/s 44AB of the Act. The A.O. added the cash sale amounting to Rs. 9,84,10,877/-under the heads of income from other sources without rejecting the books of account. Further at no point of time the A.O. found any discrepancy in the sale, purchase or the stocks of the Assessee. When the entire sale was subject to taxation as business income of the Assessee, in the absence of doubting the sale, purchase or stock, by the A.O., making addition u/s 68 of the Act is nothing but double taxation on the Assessee.

In an identical situation, the Co-ordinate Bench of the Tribunal in the case of Deepak Sharma Vs. ACIT in ITA No. 2886/Del/2022 vide order dated 26/03/2025 held as under:- “We find that Ld. CIT(A) has not disputed the sales made which were duly disclosed in VAT return and also in books of accounts maintained by the assessee audited and also under section 44AB of the Act, no adverse inference could be drawn in respect of the declared sales by the assessee. We ACIT Vs. Pradeep Patil further note that once the purchases declared in the books of accounts were duly accepted then no subjective assumption and presumption could be made a basis to assume, allege and conclude that sales made out of such purchases were unexplained cash credits taxable under section 68 of the Act. It is settled law that once the books of accounts, sales have been accepted, the same could not be regarded as unexplained credits. It is also noted that aforesaid sales as made by the assessee were supported by the availability of stock in the books of accounts whose availability is not disputed and is otherwise too supported by genuineness of creditors and also sales bills maintained. In view of the aforesaid peculiar facts and circumstances of the case, we are of the considered view that addition in dispute confirmed by the Ld. CIT(A) deserve to be deleted. We hold and direct accordingly. So far as assessee's assessment u/s. 115 BBE of the Act is concerned, Hon'ble Madras High Court in SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) has already settled the issue against the department that the law applies to the transaction on or after 01.04.2017 only. Ordered accordingly.”

The Co-ordinate Bench of the Tribunal in the case of DCIT Circle-7 91) Vs. EP Electronic Paradise in ITA No. 3566/Del/2023 vide order dated 13/08/2025 held as under:- “5.1 Upon careful consideration, we find that on identical facts this Tribunal in the case of Deepak Sharma vs. ACIT (Supra) has held as under:

2 We find that the aforesaid case law is squarely applicable in the facts of the present case. Moreover, Ld. CIT(A) has passed a reasonable order, wherein he has given a finding that AO has not rejected the books of account and sales during the festive seasons sales were on higher side. Furthermore, there was no iota of evidence having adverse remark on the purchases shown by the assessee in its books of accounts. Hence, we do not find any infirmity in the order of the Ld. CIT(A), thus, we confirm the same.”

Considering the above facts and circumstances, by following the ratio laid down by the Tribunal (supra), we find no error or infirmity in the order of the Ld. CIT(A) in deleting the addition made by the A.O. Therefore, sought for allowing the Ground No. 5 of the Revenue’s Appeal.

The Ld. Assessee's Representative submitted that the Assessee has produced additional evidence under Rule 46A of the Rules as at no point of time during the assessment proceedings the Assessee was asked to produce copy of the books of accounts or the cash book, therefore, the Assessee produced the additional documents before the Ld. CIT(A) strictly in accordance with Rule 46A of the Rules, which has been rightly considered by the Ld. CIT(A) and decided the Appeal of the Assessee on merits, therefore, submitted that order of the Ld. CIT(A) requires no interference at the hands of the Tribunal.

Heard and perused. As could be seen from the record, it was the specific case of the Assessee that the Assessee did not reply on various occasions filling the cash flow statement, bank statement, VAT return, month wise cash sale and deposits and purchase details and the A.O. ACIT Vs. Pradeep Patil has not asked the Assessee to produce the copy of the books of accounts or cash books, therefore, the Assessee could not file the entire document due to said bona-fide reason and filed additional evidence before the Ld. CIT(A) which have been rightly admitted. Considering the above facts and circumstances as the fair and reasonable opportunity should be given to the Assessee to produce additional evidences, which could not be submitted by the Assessee during the course of the assessment proceedings. Thus, we find no error or infirmity in the order of the Ld. CIT(A) in admitting the additional evidence. Accordingly, Ground No. 5 of the Revenue is dismissed.

In the result, the Appeal of the Revenue is dismissed.