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

5.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.”

5. 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: 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. ACIT Vs. Ramlal Jewellers Pvt. Ltd., ITA 1600/Mum/2023, dt. 26.07.2023. g. DCIT Vs. Bawa Jewellers Pvt. Ltd., ITA 352/Del/2021, dt. 09.06.2023.

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:-

“4. That the assessee had received the amount in cash from the various sundry parties for the amount of Rs.

4,65,04,106/- during 01.10.2016 to 31.10.2016 and Rs. 4,75,18,653/- during 01.11.2016 to 08.11.2017 on different dates on Delhi Head office and same Rs.30,58,590/- &Rs. 24,40,416/- on Rohtak Branch on same corresponding period. The detail of the all sundry sales from which the payment was received can be verified from copies of all retail invoices already submitted at your office physically with earlier reply. The goods to these parties were sold on different dates on or before the payment were received.

8. That the assessee is dealing in consumable Indian Gold and Diamond Jewellary for ladies and gents. As per

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...

12.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/-

13.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..."

7. 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:

10.1 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 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.

10.2 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.

10.2.1 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.

6. 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.

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

10.2.2 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 ITAT Visakhapatnam Bench vide order dated 12.05.2021 in the case of ACIT VS HirapannaJewellers [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:-

"Purchases, sales Land inseparable. insep Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& L account in page No. 7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed to disprove the condition of the assessee. Suspicion howeverstrong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence."

Similar issue was also decided in the favour of the assessee by the Hon'ble ITAT Indore bench in the case of Asstt. CIT v. Dewas Soya Ltd. [IT Appeal No. 336 (Ind.) of 2012, dated 31-10-2012] wherein on identical facts of the case it was held that the claim of the assessee that such addition resulted into double taxation of the same income in the same year because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit & loss account) and on the other hand amounts received from above parties has also been added u/s. 68 of the Act. This view is also supported by the decision of Hon'ble Delhi High Court in the case of CIT vs. KallashJewellery House in Appeal No. in ITA 613/2010.

10.2.3In the present case, the AO never raised doubt for the purchase or the stock during the year. Also, the appellant submitted the copies of VAT returns filed by him during the period under consideration in which the sales made by him were reflected. Despite the above facts, the AO added the same cash sales as unexplained cash credit u/s 68.

10.2.4It 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.

10.2.5 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

10.2.6 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 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.

10.2.7 (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 Court in the case of Umacharan Shaw and Bros vs CIT (1959) 37 ITR 271 held that suspicion however strong cannot take the place of evidence.

(b) Raising of presumption itself does not amount to proof. Presumption however strong, cannot take the place of evidence. Reliance is placed on the decisions of Pooja Bhatt 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

(c) It is equally well settled that the Courts decision must rest not upon suspicion but upon legal grounds established by legal testimony. Mere suspicion, however strong, cannot take the place of proof. Reliance is placed upon State v. Gulzari Lai Tandon AIR 1979 S.C. 1382 and J.A. Naidu v. State of Maharashtra AIR 1979 S.C. 1537. Similar view was also taken in by the Hon'ble Supreme Court in the case of Chuharmal v. CIT [1988] 172-ITR-250 wherein it was stated:-

"what was meant by saying that the Evidence Act did not apply to proceedings under the Income-tax Act, 1961, was that the rigour of the rules of evidence contained in the evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so."

(d) Further reliance is placed upon the following judgements on this issue:- Krishnand v. State of Madhya Pradesh: AIR 1977 SC 796 JayadayalPoddar v. Mst. BibiHazra: AIR 1974 SC 171 CIT v. K MahimUdma [2000] 158 CTR (Ken) 100: [2000] 242 ITR 133 (Ker.) Dhakeshwari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775 (SC) Omar Salay Mohamed Sait v. CIT [1959] 37 ITR 151 (SC)

Asstt. CIT v. Jindal Saw Pipes Ltd [2008] 118 TTJ 228: [2008] 11 DTR (Delhi) (Trib.) 281

DhirajLalGirdhariLalVs. CIT 26ITR 736

LalehandBhagatAmbika Ram VS. CIT 37 ITR 288

10.2.8 It is also seen that the total cash-sales during the year was Rs.10.27,91,367/- which was only 10,04% of the total sales made during the year i.e. Rs. 102,37,32,242/. As per the unusualy high cash sales during the period from 01.10.2016 to 08.11.2016 are concerned, the appellant submitted that in the month of October, he had started a newly range of jewellery under the name "Patil's" on the occasion of festive season. Also, on 08.11.2016, the demonetization of notes of denomination 100 & 500 was announced due to which, there was undue rush in the jewellery shops immediately after the announcement and huge cash sales were made.

10.2.9 It is also seen that the AO accepted the cash sales of the period from 01.04.2016 to 30.09.2016 and from 09.11.2016 to 31.03.2017 and rejected the cash sales only for the period from 01.10.2016 to 08.11.2016. This shows that the AO accepted some part of the book of account and rejected some part which is wrong as the same documents cannot be accepted as well as rejected at the same time.

10.3 In view of the above discussion, it is inferred that the cash sales made by the appellant during the period from 01.10.2016 to 08.11.2016 were genuine. Thus, the addition of Rs.9,84,10,877/- made by the AO is hereby allowed.”

“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 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.”

“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: “3. We have heard both the parties and perused the records. At the time of hearing, Ld.Counsel for the assessee submitted that once the purchases declared in the books of account were accepted, there is no basis to treat the sales made out of such purchases as unexplained cash credits taxable under section 68 of the Act. It was further submitted that the cash deposits which has already declared in the return of income as part of total sales and that it amounts to double taxation of the same amount. It was further submitted that even assuming that the additions were warranted under section 68 of the Act, the Ld. CIT(A) has erred both on facts and in law in confirming the demand computed in accordance with rate specified in section 115BBE of the Act as amended by Taxation Laws (Second Amendment) Act, 2016. Ld. DR relied upon the orders of the authorities below. We find that Ld. CIT(A) has not disputed the sales made which were duly disclosed in V AT 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 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.

5.2 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.”

Accordingly, we dismiss the Ground No. 1 to 4 of the Revenue as the same are devoid of merits.

Therefore, sought for allowing the Ground No. 5 of the Revenue’s Appeal.

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.