DCIT, Circle 22(2), Delhi vs Sehgal Jewels Pvt. Ltd.

1.

On the facts and in law, the Ld. CIT(A)/NFAC erred in deleting the addition of Rs. 26250619/- made u/s. 68 of the Act, without appreciating that the assessee had failed to satisfactorily explain the nature and source of substantial cash receipts, particularly those received during the pre demonetization and demonetization period, and had not discharged the primary onus cast upon it under the Act.

2.

The CIT(A) erred in accepting the assessee’s explanation without proper verification and contrary to the material on record, thereby passing an order which is perverse, contrary to law, and based on incorrect appreciation of facts, ignoring surrounding circumstances and settled legal principles applicable to unexplained cash credits under section 68 of the Act.

7.1.

The Assessment order, Ground of Appeal, Statement of Facts, Submissions of the appellant, and law in this regard is considered.

7.2.

I had a thoughtful consideration of the order of AO and the submission made by the appellant. As per his grounds of appeal the appellant is a resident company. The Appellant is a company primarily engaged in the jewellery business. The return for A.Y. 2017-18 was selected for scrutiny due to an abnormal increase in cash deposits during the demonetization period. The Appellant deposited a total cash amount of Rs. 3,54,91,000/- in Specified Bank Notes during the demonetization period. This fatal turnover for the year was Rs. 28,30,08,792/-, and the Appellant consistently maintained that the cash deposited was out of its cash sales and opening cash-in-hand, which are duly recorded in the books of account. The AO rejected the explanation primarily based on a comparison of sales trends (increase in cash sales and decrease in credit sales) and the high cash-in-hand figures preceding demonetization. The AO then made an arbitrary allowance of Rs. 62,40,381/- (based on a six-month average of cash sales plus opening cash) and, after subtracting the amount disclosed under PMGKY, added the balance amount of Rs. 2,62,50,619/- as unexplained credit under Section 68 r.w.s. 115BBE.

7.3.

On perusal of the details filed, it is noted that:

1.

The sales during the year under consideration are duly reflected in the Profit & Loss account and correspond with the VAT returns filed for the period.

2.

The appellant has maintained regular books of account, and the cash book produced reconciles the daily cash receipts and payments with the corresponding bank deposits.

3.

The AO has not pointed out any specific defect or inconsistency in the books of account or in the cash book maintained by the appellant.

4.

No instance of suppression of sales or inflation of expenses has been brought on record.

5.

The books of account have not been rejected u/s 145(3) of the Act

7.4.

The scrutiny was based on cash deposits made during the demonetization period. The Assessing Officer did not accept the submission made by the appellant that the source of cash deposits is from the cash sales of the appellant. The appellant has submitted the details of sales/ receipts and purchase/ payments for the year under consideration as also the comparison and justification of cash generated and deposited during the relevant years. The appellant has also submitted the comparative details of purchases, sales, and stock position during the relevant period. The appellant had also submitted copies of VAT returns along with the reconciliation of turnover.

7.5.

The provisions of Section 68 can be applicable where any sum is found credited in the books of the assessee and the assessee offers no explanation about the nature and source of the same or the explanation offered by the assessee is not satisfactory in the opinion of the Assessing Officer. In the instant case, the Assessing Officer did not believe in the explanation filed by the assessee in respect of the Cash Deposits made by the assessee. But the Assessing Officer has not discharged the onus of proving how the submission made by the assessee is not satisfactory. The case of the Assessing Officer is on a very weak footing and is based on conjectures and surmises. If the Assessing Officer is not satisfied with the submission made by the assessee, then the burden lies on him to point out evidence to support his decision. The Assessing Officer has not discharged the onus/ The AO has not made out a case based on any concrete findings. The appellant has also relied on various case laws which are squarely applicable in the case of the assessee.

7.6.

We further observed that the Vishakhapatnam Bench of the Tribunal in the case of ACIT vs. Hirapanna Jewellers (189 ITD 608) held, as under:

"Purchases, sales and the Stock are interlinked and inseparable. 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 dosing 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 assesses. Suspicion however strong it may be, it should, not be decided against the assessee without disproving the sales with tangible evidence, (para 7) In the instant case the assessee has established the sales with the bills and representing outgo of stocks. The sales were duly accounted for in the books of accounts and there were no abnormal profits. In spite of conducting the survey ITA No.- 92 7/Del/2023 Himachal Fibres Ltd., the AO did not find any defects in sales and the stock. Therefore, we do not find any reason to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in the span of 4 hours, non-availability of KYC documents for sales, non-writing of tag of the jewellery to the sale bills, non-availability of CCTV footage for huge rush of public etc. The contention of the assessee that due to demonetization, the public became panic and the cash available with them in old denomination notes becomes illegal from 9-11-2016 and made the investment in jewellery, thereby thronged the jewellery shops appear to be reasonable and supported by the newspaper clippings such as The Tribune, The Hindu etc. It is observed from the newspaper clippings that there was undue rush in various jewellery shops immediately after announcement of demonetization through the country. In view of the foregoing discussion and taking into consideration all the facts and the circumstances of the case', we have no hesitation to hold, that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and found that there was sufficient stock to affect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has 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. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld. CU(A) and the same is upheld., (para 9)"

7.7

In the case at Smt. Charu Aggarwal vs. CIT (140 taxmann.com 588) the Chandigarh Tribunal held, as under:

"10.3

In the instant case the assessee maintained the proper books of account in regular course of business which were duly audited by the independent Chartered Accountant under section 44AB of the Act, all the sales & purchases and stocks were recorded in the books of account which had not been doubted by the AO. The sates shown by the assessee had been accepted by VAT/ Sales Tax Department, the book result shown by the assessee were in the same line as had been accepted by the Department in the preceding years, the cash sales made by the assessee had been credited in the books of account and reduction in the stock has not been doubted, even during the course of search just after the dosing of the year under consideration, neither excess nor shortage of stock was found in the stock register maintained by the assessee, the identity of the purchasers to whom cash sales had been made was disclosed in the sale bills where the name, address and PAN was mentioned. It is also not a case that there was sudden spurt in the sale only in the month of October 2016 as the chart furnished by the assessee before the Ld.. CIT(A) clearly revealed that the cash sales were on higher side in another months of different preceding years. The AO made the addition on the basis of difference in the cash sales from 01- 10-2016 to 29-10-2016, only on this basis that the said difference was there in ITA No.-927/Del/2023 Himachal Fibres Ltd., the computer and the pen drive found from the residential premises of the part time accountant of the assessee but no opportunity to cross examine the said accountant was given to the assessee and moreover, no specific defect was pointed out in the proper books of account maintained by the assessee in the regular course of business and nothing is brought on record to substantiate that the sales from 01-10-2016 to 29-10-2016 were not made, out of the existing stock available with the assessee. In the present case the assessee explained that the exhibitions were held, in every year and the sales were normally higher In certain month and that in the month of October 2016 the cash sales were on the higher side as lots of festivals like Diwali, Dhanteras, Bhaiya Duj and Karwa Chauth etc. fell in that period. The said explanation cannot be brushed aside considering the trend of the society in India wherein people make the purchases of jewellery during the festive season.

7.8.

On a similar issue the !TAT Chandigarh Third Member Bench in the case of Bansal Rice Mills (supra) held, that “since the sales proceed have already been accounted for in the trading account no addition could be sustained even if the said deposits could, be treated as bogus sales as the complete stock tally was there".

7.9.

Further sales made by the assessee to cover the cash deposited in the bank post demonetization, was sufficient source of the cash deposited i.e. the sales from the existing stock available with the assessee and was well explained, therefore, the addition made by the AO was not justified.

7.10.

in the present case also the opening stock, purchases & sales and closing stock, declared by the assessee has not been doubted, the sales were made by the assessee out of the opening stock and purchases and the resultant dosing stock has been accepted, the sales had not been disturbed either by the AO or by the sales tax/VAT Department and even there was no difference. Therefore, the sales made by the assessee out of the existing stock were sufficient to explain the deposit of cash (obtained from realization of the sales) in the bank account and cannot be treated as undisclosed income of the assessee. 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 AO. 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 the sales. So, respectfully following the aforesaid referred to orders by the various Hon'ble High Courts and the Coordinate Benches of the ITAT, I am of the view that the impugned addition made by the AO was not justified.

7.11.

We further observe that the decision of the Delhi Tribunal in the ease of Agson Global Pvt. Ltd. vs. ACIT (supra) has also been affirmed by the Delhi High Court in the case of PCIT vs. Agson Global Pvt. Ltd. (441 ITR 550), wherein the Hon'ble High Court at para 17.6 held, as under:

"17.6

Having regard to the extensive material which has been examined by the Tribunal, in particular, the trend of cash sales and corresponding cash deposited by the assessee with earlier years, we are of the view that there was nothing placed on record-which could, have persuaded the Tribunal to conclude that the assessee had, in fact, earned unaccounted income i.e., made cash deposits which were not represented by cash sales. Therefore, in our opinion, the Tribunal correctly found in favour of the assessee and deleted the addition made by CIT(A) of Rs. 73.13 crores, under section 68 of the Act."

7.12.

In the present case, I have carefully considered the submissions of both AO, the appellant and also the judicial precedents, hence it is evident that the appellant had duly substantiated the source of cash deposits with complete documentary evidence. The explanation that the deposits arose from genuine cash sales during the peak festive and marriage season—when demand for gold and jewellery customarily surges manifold—is both commercially and socially consistent. The AO’s rejection of such explanation without identifying any defect in the books of account, stock records, or VAT returns is untenable in law. Once sales have been recorded, accepted for VAT purposes, and reflected in audited financials, the corresponding realization in cash cannot be re-characterized as unexplained income. The AO has not disputed 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. 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 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 affect 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.

7.13.

Hence, it is surmised that the AO has made the addition merely on suspicion, without disproving the genuineness of the sales or the correctness of the books of account. Since the source of cash deposits has been properly explained and supported by contemporaneous records, the addition made u/s 68 is not sustainable. Accordingly, the addition of Rs. 2,62,80,819/- made by the AO u/s 68 of the Act is hereby deleted.“

“6.

We have heard the rival submissions and perused the materials available on record. In the instant case, the books of accounts of the assessee are subject to audit and from the perusal of the financial statement, we find that neither the auditor has pointed out any deficiency in the maintenance of the books of accounts nor the Assessing Officer has pointed out any defects in the same who has accepted the books of accounts and had not disturbed the trading results declared by the assessee. It is also seen that the assessee is having substantially amount of cash sales throughout the year under appeal as well in preceding year also. During the course of assessment proceedings, assessee had filed the copies of the stock register along with the details of sales and daily cash book according to which sufficient cash was available with the assessee as on the closing hours of 08.11.2016 when the demonetization was announced by the Hon’ble Prime Minister. We find that the AO has not pointed out any defects in the date to day stock records maintained by the assessee. Copies of the sales bills were also produced before AO for examination during the course of assessment proceedings who except stating that all the bills were issued below Rs.2 lacs and no PAN was available of the buyer was available which is not requirement of the Act, failed to point out any defect nor it is the allegation of AO that sales were made without stock. It is also seen that the assessee has filed regular returns under the VAT Act where the sales declared by the assessee were accepted. Once the Assessing Officer has accepted the books and not raised any doubts on the day to day stock register maintained and sales made thereon, it is not correct to say that the cash deposited out of such cash sales which duly reflected in the books of accounts is unexplained. The Assessing Officer failed to find any error in the details and evidences filed by the assessee.

7.

The realization of cash sales is duly recorded in the cash book maintained on day to day basis which is evident from the perusal of the cash book submitted during the course of assessment proceedings. Assessee has deposited cash during the demonetization on various dates out of the cash available as on date with assessee as on the closing hours of 08.11.2016 i.e. the date when the demonetization was announced by the Hon’ble prime minister and was the last day upto which the SBN could be accepted as valid currency. The AO is required to take into consideration the record of the assessee such as stock register, bank statement, monthly sales summary, possibility of back-dating of cash sales or fictitious sales etc. before making any allegation about the genuineness of the cash deposited in SBN during the demonetization period. No such adverse observations were made by the AO or by the ld. CIT(A) that the assessee’s records are not in conformity with the accepted accounting principles. Neither the AO nor the CIT(A) have doubted the availability of stock prior to sales. When the assessee has submitted complete details and thus discharges its onus, whereas no contrary material whatsoever was brought on record by the AO to disprove the details filed by the assessee. As observed above, assessee has already included the entire cash sales in the total sales and the profits have been derived which were offered for tax, thus taxing the same income twice once in the sales and other when the sale consideration was realised and deposited in the bank account which is doubted on conjectures and surmises.

8.

At this juncture provisions as contained in section 68 is reproduced as under:

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.

9.

From the perusal of the provisions of section 68 of the Act it is very clear that assessing officer can make addition u/s 68 only under two circumstances, i.e.

(i)

Appellant does not offer any explanation about nature and source of such credit; or

(ii)

Explanation offered by Appellant is not upto the satisfaction of Ld. AO.

10.

In other words, whenever Appellant provides explanation, before rejecting the same ld. AO has to record dissatisfaction as to why the explanation furnished by Appellant is not acceptable. As is evident that assessee not only offered explanation regarding nature and source of such credits but also substantiated the same with documentary evidences in the shape of Audited Financial Statements, Sale Register, Purchase Register, Stock Register and Cash book. No specific defects whatsoever has been brought out on record by the ld. AO/ ld. CIT(A) in those evidences and books of accounts so furnished. It is not understood as to how the addition has been made by the lower authorities when the source of such cash deposits, being cash sales, was duly accepted by him. Even no discrepancy was pointed out by the VAT department in respect of purchases and sales made by the assessee. Therefore, addition so made u/s 68 of the Act without finding out any specific defects in books of account and also without rebutting the evidences produced is unjustified and be deleted.

11.

The Co-ordinate bench of Mumbai ITAT in the case of ACIT v. Ramlal Jewellers (P.) Ltd. Reported in [2023] 154 taxmann.com 584 (Mumbai -Trib.) under similar circumstances, deleted the addition made u/s 68 on account of cash deposit in SBN during the demonetization into bank by making following observations:

Section 68 of the Income-tax Act, 1961- Cash credit(Cash deposit in bank)- Assessment year 2016-17- Assessee-company was engaged in jewellery business - During assessment proceedings, Assessing Officer noted that immediately after demonetization assessee had shown inflated cash sales and also made deposits in bank account which was completely abnormal as compared to earlier year and also subsequent year - He, therefore, taxed cash deposits under section 68 - It was seen that assessee had maintained regular books of account which was subject to audit and had produced entire sale bills, stock register and purchases and also quantitative tally of sales and corresponding stock - Addition undersection 68 on account of cash deposits could not be made simply on reason that during demonetization period, cash deposits vis-a-vis cash sales ratio was higher - Whether once, it had been established that sales representing outflow of stocks was duly accounted in books of account and there was no abnormal profit during year, then there was no justification to treat deposits made in bank account out of cash sales to be income from undisclosed sources - Held, yes - Whether, therefore addition made under section 68 was to be deleted -Held, yes [Para 14] [In favour of assessee]

12.

The Hon’ble Delhi High court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 (Delhi High Court) has held as under:

In the facts of above case cash of Rs.24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs.24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department.

13.

The Co-ordinate bench of ITAT Delhi in the case of S. Balaji Mech-Tech Private Ltd Vs. ITO in ITA No. 556/Del/2024 vide order dt. 25.09.2024 has observed as under:

18.

Coming to the issue of stock movement and excess sales, we observed that the assessee has submitted relevant stock reconciliation and auditors report of stock movements and there is no negative stock movement which will indicate that the assessee has booked excess sales without there being proper purchases.

19.

In our considered view, there are chances that during the demonetization period the regular customers may have choose to buy the spare parts and bearing by making payment by cash so that their excess SBN is transferred. We noticed that the credit sales has come down during this period and the sales of the assessee is more or less maintained during this period. Therefore, it shows that the changes in the patterns recorded in the sales are not abnormal.

20.

Whether the recording of cash sales which is already declared in the books of account will attract the deeming provisions of sec.68 or 69A of Act. We observed that the assessee has declared all the cash transactions in its books of account and merely because the cash deposits are more during the demonetization period, whether the CIT(A) can invoke the provisions of section 69A of the Act. As per provisions of the section, it is necessary that the assessee be found with the money, the same is not recorded in the books accounts maintained by it for any source and not offers any explanation or such explanations are not found to be satisfactory to the AO. In this case, the assessee has already declared the cash sales in its books of account and offers the explanation as cash sales, which the lower authorities has accepted it as regular business transactions because they have not rejected the book results and brought to tax the total sales declared by the assessee in its books. Since the cash were already recorded and explanation is already part of the book results, there is no avenue for the CIT(A) to reject such explanations. This expression "explanation is found not satisfactory to the AO" is purely relates to the money found with the assessee which are not recorded in the books of account. In this case, the above expression has no relevance since the assessee had already declared the cash sales in its books. In the similar situation, the coordinate bench has held in the case of J.R.Rice India (P) Ltd as under:

"At the cost of repetition, to the extent of sales made, the stock position is also correspondingly reduced by the assessee which goes to prove the genuineness of the claim of the assessee. On examination of the cash book of the assessee, it is found that the assessee had cash balance of Rs. 55.94 lakhs as on 8-11-2016, i.e., the date on which demonetization was announced, which sufficiently explains the source of deposit of Rs. 52.60 lakhs in specified bank notes. Apart from this, the assessee had duly furnished the month wise details of sales, month wise details of purchase, corresponding freight charges incurred month wise, month wise power and fuel expenses and month wise selling expenses in the form of rebate and discount. The assessee also furnished the quantitative details of goods month wise for rice, sugar, chana dal and wheat flour before the Assessing Officer. All these facts clearly go to prove the genuineness claim made by the assessee that cash deposits of Rs.52.60 lakhs has been made out of cash balance available with the assessee and, hence, there is absolutely no case made out by the revenue for making addition under section 68."

14.

Further, in the case of Fine Gujaranwala Jewellers Vs. ITO (ITA No. 1540/Del/2022 dated 27.03.2023, wherein it was held as under:

22.

In the case in hand the reason for disbelieving the cash deposit is that the assessee has been deposited below Rs. 2 lakh in every transactions that lead to the conclusion of the Assessing Officer that the same has been done to avoid the application of provision of section 285BA read with Rule 114E of the Act. The said observation made by the Assessing Officer without any material in his hand.

There is no prohibition under law to make sale transaction below Rs. 2 lakhs as such the assessee had at liberty to manage his own affairs. From the action of the assessee in raising the sales bill below Rs. 2 lakhs the Assessing Officer cannot interpret as the sale are bogus only to give colour to non-genuine transaction as genuine transaction. The evidence brought on record by the Assessing Officer are not enough to hold that sales were not genuine. More so, the other wing of the Govt has already accepted the sale transaction under VAT, hence, the Assessing Officer is precluded from making contrary findings on the issue when the sales are not doubted. The other contention of the ld. DR is that the assessee has not maintaining stock register properly and date wise stock position are not given. The Assessing Officer made the said observation without rejecting the books of account form which true profit and loss accounts could be ascertained and there is no quarrel on this issue. The lower authorities cannot place reliance on the circumstantial evidence which is only conjectures and surmises and the said approach of the ld CIT(A) is devoid of merit it deserves to be rejected. Further, the income of the assessee has to be computed by the Assessing Officer on the basis of available material on record and it is very important to have a direct evidence to make an addition rather than circumstantial evidence. When the assessee gives any reply or submission or any documents to the Assessing Officer, it is duty of the Assessing Officer to examine the same in the light of the available evidence. In the present case the Assessing Officer and the ld CIT(A) have concluded the findings on the basis of conjectures and surmises. The Assessing Officer has to establish the link between the evidence collected by him and the addition to be made. The entire case has to be dependent on the Rule of evidence, the assessee in this case explained the source of bank deposits are from cash sales. The Assessing Officer proceeded to disbelieve the explanation of the assessee on the presumption basis without bringing the corroborative material on record. The Assessing Officer is required to act fairly as reasonable person and not arbitrarily capriciously. The assessment should have been made based on the adequate material and it should stand on its own leg. The Assessing Officer without examining any parties to whom the goods are sold by the assessee, came to conclusion that the sales are not genuine, without even rejecting the books of account which is in our opinion is erroneous.

21.

Respectfully, following the above decisions, we are inclined to allow the grounds raised by the assessee with the observation that the AO/CIT(A) cannot invoke the provisions of section 68 or 69A when the assessee is already declared the source for cash deposits in the books of accounts and the lower authorities without their being any material to support on their contrary view, the provisions of section 68 or 69A cannot be invoked.

22.

In the result, appeal filed by the assessee is allowed.

15.

Further Co-ordinate Bench of ITAT, in the following case laws has held as under:

•

ITAT Delhi in the case of M/S Godwin Tourism Pvt. Ltd. V. DCIT 2024 (8) TMI 1173, dated- August 21, 2024, held that-

19.

Considered the rival submissions and material placed on record, we observed that the assessee has submitted cash book in the Paper Book wherein assessee has received share application money on various dates and received the same by way of cash on verification of the cash book submitted before us. We observed that on various dates, the assessee has maintained sufficient cash which are out of share k withdrawals and it is substantiated that sufficient source application money and some bank of cash available with the assessee to make the bank deposit of Rs. 8 lacs. After considering the facts on record, we observed that assessee has sufficient cash in hands to make above said dash deposit. Accordingly, additions made by the Assessing Officer is deleted."

•

In the case of ITO V. Mis J.K. Wood India Pvt Ltd, 2024 (1) TMI 1262, dated 03.01.2024, Hon'ble ITAT Delhi held that-14. We have given thoughtful consideration to the factual matrix discussed hereinabove The undisputed fact is that there is not even a whisper of any defect, error or infirmity in the books of account maintained by the assessee which were audited both under the Companies Act and under the Income tax Act. The books of account have been maintained in the regular course of business and cash deposits in the books of account are duly reflected in the books of account

15.

Sales made by the assessee and shown in the regular books of account have been accepted as such by VAT authorities while framing the VAT assessment. The assessee was having sufficient stock in hand for making the impugned sales during the demonetization period and it is not the case of the Assessing Officer that the assessee has shown bogus purchases to show bogus sales to cover up cash deposited during the demonetization period"

•

In the case of JCIT V. M/s Pari Agencies Pvt Ltd. ITA No. 2006/DEL/2023, dated 14.12.2023, Hon'ble ITAT Delhi heid that-

11.

Nowhere in the assessment order the Assessing Officer has mentioned that after inflating the alleged cash sales the assessee has frequently revised its VAT returns. It is not the case of the Assessing Officer that the assessee has shown alleged cash sales without having sufficient stock in hand during that period. Not a single instance of defect is pointed out in the audited books of account. The entire assessment is based on assumptions/presumptions, surmises and conjectures de hors of the facts on record."

•

Further reliance in this regard is being placed on the Judgment of ITAT Visakhapatnam in the case of ACIT, CC-1 Visakhapatnam V. M/S Hirapanna Jewellers And (Vice-Versa), 2021 (5) TMI 447, dated: 12-5-2021 held as under:-

"9.

In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to the sales and we do not find any defect in ccoun effect the stock as well as the sales. Since, the assessee has 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. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishel Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld."

•

ITAT Delhi in the case of M/S. Fine Gujaranwala Jewellers V. ITO, 2023 (3) TMI 1196-ITAT Delhi, dated- March 27, 2023, where Hon'ble Tribunal observed that where assessee has filed its submissions and placed evidence on record, then it is the duty of AO to act fairly as a reasonable person and examine the fact of the case in the light evidence available and should not come to a conclusion on the basis of surmises and conjectures. Tribunal further held that AO without rejecting the books of accounts, cannot come to a conclusion that sales are not genuine, relevant finding are as under-

"When the assessee gives any reply or submission or any documents to the Assessing Officer, it is duty of the Assessing Officer to examine the same in the light of the available evidence. In the present case the Assessing Officer and the Id CIT(A) have concluded the findings on the basis s of conjectures and surmises. The Assessing Officer has to establish the link between the evidence collected by him and the addition to be made. The entire case has to be dependent on the Rule of evidence, the assessee in this case explained the source of bank deposits are from cash sales. The Assessing Officer proceeded to disbelieve the explanation of the assessee the presumption basis without bringing the corroborative material on record. The Assessing Officer is required to act fairly as reasonable person and not arbitrarily capriciously. The assessment should have been made based on the adequate material and it should stand on its own leg. The Assessing Officer without examining any parties to whom the goods are sold by the assessee, came to conclusion that the sales are not genuine, without even rejecting the books of account which is in our opinion is erroneous"

16.

Thus, by respectfully following the ratio laid down in above cases and also looking to the facts that Assessing Officer has tried to support his finding merely on the basis of incorrect comparison of daily cash sales and cash deposits in the bank accounts in the year before us as well as in preceding year and such observations have already been answered by the assessee and not controverted by Revenue. Under these circumstances, we are of the considered view that when the AO has accepted the entire sales no addition could be made on account of cash deposit in the banks which is part of such sales and is tantamount to double taxation of income which has already been offered to tax sales. In view of these facts, the addition of Rs.4,07,89,150/-made u/s 68 of the Act on account of unexplained income towards the cash deposit in the bank account during demonetization is hereby deleted.”