ITO, DELHI vs. S P JEWELLERS PVT LTD, DELHI

It transpires during the course of hearing that the Revenue/appellant herein is aggrieved against the CIT(A)/NFAC’s findings reversing the Assessing Officer’s action treating the assessee’s cash deposits during demonetization of Rs. 3,09,12,925/- in his assessment order dated 16.12.2019.

It is in this factual backdrop that both the learned representatives reiterate their respective stands against and in support of the impugned addition. There is no dispute between the parties that the assessee is engaged in sale and purchase of jewellery business wherein it had made total cash deposits of Rs. 3,94,50,000/- during demonetization. It appears to have submitted the corresponding details as well as books of account explaining source thereof to regular business sales only prior to and during demonetization. A perusal of the assessment order; and, more particularly, assessing officer’s findings in para 8 onwards reveals that he went on to grant credit of the assessee’s cash in hand as on 1.4.2016 amounting to Rs. 13,42,415/- , average sales of Rs. 41,42,660/- and Rs. 30.52 lakhs cash sales with PAN respectively to add the remaining amount in question of Rs. 3,09,12,925/- as unexplained and liable to be assessed u/s 115BBE of the Act.

The assessee appears to have preferred it’s appeal wherein the learned CIT(A)/NFAC has primarily gone by the audited book results to hold that it had satisfactorily discharged its onus in proving source of the foregoing cash deposits as representing jewelerry sales during demonetization. This is what leaves the Revenue aggrieved.

We have given our thoughtful consideration to the Revenue and assessee’s respective submissions. Learned counsel submits that not only the assessee has filed all the relevant details but also its corresponding book results have not been disputed or rejected u/s 145(3) of the Act. We put a specific question as to pinpoint the reason of the assessee’s all cash sales; and, that too abnormal increase thereof during demonetization wherein no satisfactory reply has come as it was the factual position before the learned Assessing Officer. Be that as it may, the fact also remains that the assessee’s entire sales pre/during demonetization could not also be SP Jewellers P Ltd. simply brushed aside on mere conjectures and surmises. It is thus deemed appropriate in larger interest of justice that a lump sum addition of Rs. 15 lakhs only would be just and proper in the given facts with a rider that the same shall not be treated as a precedent. Learned CIT(A)’s detailed findings deleting the balance portion of the total impugned addition amounting to Rs. 2,94,12,925/- (supra) do not warrant any interference on our part. Necessary computation shall follow as per law.

So far as the assessee’s assessment u/s 115BBE is concerned, the revenue could hardly dispute that hon’ble Madras high court in SMILE Microfinance Ltd. v. ACIT in WP(MD) No. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) has already settled the issue that Section 115BBE applies on transactions on or after 01.04.2017 only. The ld. AO is directed to ensure that the assessee shall be assessed under normal provisions qua the above addition of Rs. 15 lakhs (supra).

This Revenue’s appeal ITA 937/el/2025 is partly allowed in very terms.