Income Tax Appellate Tribunal - Amritsar
Assistant Commissioner Of Income Tax ... vs Shri Ashwani Chadha, Jalandhar on 6 June, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH, AMRITSAR
BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER
AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER
I.T.A. No. 199/Asr/2023
Assessment Year: 2017-18
The Asstt. Commissioner of Vs. Sh. Ashwani Chadha,
Income Tax, Central Circle-1, Prop. Calcutta Jewellers
Jalandhar /Jalandhar Jewellers, Bazar
Kalan, Jalandhar City-144001,
Punjab
[PAN: AFIPC 6382C]
(Appellant) (Respondent)
Appellant by : Sh. Ashray Sarna, CA
Respondent by : Sh. Rajiv Wadhera, Sr. DR
Date of Hearing : 30.04.2024
Date of Pronouncement : 06.06.2024
ORDER
Per Dr. M. L. Meena, AM:
The captioned appeal has been filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-5, Ludhiana dated 21.04.2023 in respect of Assessment Year: 2017-18 which is arising out of 2 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha the Assessment Order passed u/s 143(3) of the Income Tax Act, 1961 dated 30.12.2019 by the Income Tax Officer, Ward-3(1), Jalandhar.
2. The revenue has raised the following grounds of appeal:
"1. That on the facts and in the circumstances of the case, Ld. CIT(A) has erred in deleting the addition of Rs. 1,69,87,391/- made on account of unexplained cash deposits u/s 69A of the Income-tax Act, 1961 chargeable to tax u/s 115BBE of Income-tax Act, 1961.
2. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in granting relief of addition made on account of unexplained cash deposits ignoring the facts brought out by the Assessing Officer in the Assessment Order
3. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in allowing appeal of the assessing ignoring the fact that there was abnormal growth in sales during the demonetization period for which there was no explanation with the assessee.
4. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the AO by holding that no specific defects were pointed out by the Assessing Officer while rejecting the books of account u/s 145(3) of Income-tax Act, 1961 ignoring the fact the there has been abnormal growth in sale during the year under consideration as compared to the last F. Y and that the genuineness of such increased cash sales could not be proved in as much as no documentary evidence could be produced to substantiate the identity of huge number of customers.
5. That on the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the AO by ignoring the facts that the assessee failed to qualify the test of human probabilities in terms of settled legal position as held by Hon'ble Supreme Court in of Sumati Dayal Vs CIT 214 ITR 301 and CIT Vs. Durga Parsha More 82 ITR 540."3 ITA No. 199/Asr/2023
3. The sole issue challenged through multiple grounds pertains to deletion of addition of Rs. 1,69,87,391/- made on account of unexplained cash deposits u/s 69A of the Income-tax Act, 1961 chargeable to tax u/s 115BBE of Income-tax Act, 1961.
4. Briefly the facts of the case, are that the AO made an addition of Rs. 1,69,87,391/- on account of cash deposits in the bank accounts of the assessee by treating the amount received towards cash sales as unexplained money. The assessee being a jeweller has two concerns i.e. M/s Calcutta jewelers and M/s Jalandhar Jewellers while making the said addition the AO has observed that the addition on account of cash deposits was made base on the following:
1. There was abnormal increase in cash sales of the assessee in Financial Year 2016-17 compared to Financial Year 2015-16.
2. During the Financial Year 2015-16, no cash sales were made in the months of October & November, in hands of M/s Calcutta Jewellers but cash sales are there during the Financial Year 2016-17.
3. The assessee has not been able to provide the identity, address or contact number of the persons to whom cash sales of jewellery has been made.
4. The AO made an analysis of the cash sales vis-a-vis turnover pertaining to Financial Year 2015-16 as compared with Financial Year 2016-17 and reached the conclusion that the extra cash sales in comparison to the last year should be treated as unexplained and the same were added to the income of the assessee.4 ITA No. 199/Asr/2023
5. Simultaneously, the AO rejected the books of accounts and reduced the GP on account of excess cash deposits from the return income.
5. In appeal, while deleting the addition and granting relief to the assessee, the Ld. CIT (A) has analyzed the facts and enquiries conducted by the AO, and examined the applicability of section 145(3) of the act on rejection of books, as under:
Analysis In this case, the AO has questioned the genuineness of sales made by the assessee concern by applying ratio & proportion to the cash sales made during the Financial Year 2015-16 and applying the same rate to the turnover for FY 2016-17. The AO by using the said formula has ended up making an addition of Rs. 1,69,87,391/- on account of unexplained cash deposits in the bank accounts of the assessee concern. The AR has contended that the AO has not questioned the genuineness of purchases and opening & closing balances of the stock, then how can the sales be questioned.
A perusal of the assessment order reveals that the AO has not given any finding to the effect that the purchases, the opening stock and the closing stock of the assessee firm is questionable. The AO has reached the conclusion that the sales of the assessee concern are bogus and the assessee has introduced his own cash into the bank accounts. In case, the AO had any doubts regarding the sales being bogus, then genuine efforts should have been made to prove the purchases to be bogus as well. In the present case, no such enquiries have been done. To examine the genuineness of purchases of the assessee, enquiries were initiated by this office.
Enquires u/s 133(6) To verify the above contentions of the AR, enquiries were initiated with the of the assessee concern from whom major purchases were made during Financial Year 2016-17. Enquiries were made u/s 133(6) with various creditors of the assessee concern for confirmation of purchases made (total 10 in number). The results of the enquiry in 8 cases is tabulated below:5 ITA No. 199/Asr/2023
Asstt. CIT v. Ashwani Chadha Result of enquiry Sr. Name & Address of the Creditor / person No. from whom purchases were made during FY 2016-17 M/s. Swaran Sarita Ltd., XVI/2634, PVT No. The creditor has confirmed the 1 103, 1st Floor, Bank Street, Naiwala Estate, sales made to the assessee Karol Bagh, New Delhi. concern.
nd M/s. Kama Schachter Jewellery Pvt. Ltd., 2 The creditor has confirmed the
2. Floor, Western Express Highway, Goregaon sales made to the assessee East, Mumbai-400063 concern.
M/s. Rakesh Jewellers (Regd.), Gold Bar,
3. Bazar Kalan, Jalandhar City-144001.
The creditor has confirmed the sales made to the assessee concern.
Avinash Jewellers, 14-Janak Market, Bazar The creditor has confirmed the sales
4. Kalan, Jalandhar-144001 made to the assessee concern.
M/s. Miglani Jewellers, B-IV-364, Sarafan The creditor has confirmed the sales
5. Bazar, Ludhiana-141008. made to the assessee concern.
Ram Lai Kimat Rai, Cemetery Road, Civil The creditor has confirmed the sales
6. Lines, Ludhiana-141001. made to the assessee concern.
M/s. J M Diamond, 108-Paras JusabThe creditor has confirmed the sales
7. Centre, Soparwala Estate, Opera House, made to the assessee concern.
Mumbai-400004.
Jewelex India Pvt. Ltd., Plot No. 48/1, The creditor has confirmed the sales
8. Central Road, Andheri East, Mumbai- made to the assessee concern.
400069.
There were only two creditors from whom responses were not received in consequence to which a show-cause was issued to the assessee vide this office letter dated 31.01.2023. In response the AR clarified the reasons for non-receipt of reply from said concerns which is tabulated below for ready reference:
Sr. Name & Address of the Reply of the assessee Result of No. Creditor / person from enquiry u/s whom purchases were 133(6) made during FY 2016-17 & no response was received against enquiry u/s 133(6) 6 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha
1. Pancham Jewellers Pvt. Closed operations since long. It Left as per Ltd., Rajpura was further submitted that report of assessee made purchases from Postal Office this concern on 10.01.2017 and 27.01.2017 i.e. after demonetization and made the payment from its bank account.
The copy of ledger has been enclosed. It was further submitted that the addition in the present case relates to cash deposits during the demonetization period which was made out of sales incurred till 08.11.2016 whereas the purchases from pancham was made after the aforesaid period.
2. Neha Chain Co. Closed operations since long. It Left as per was submitted that assessee report of made purchases from this Postal Office concern on 19.12.2016 and 07.01.2017 and made the payment from its bank account.
The copy of ledger has been enclosed. It was further submitted that the addition in the present case relates to cash deposits during the demonetization period which was made out of sales incurred till 08.11.2016 whereas the purchases from Neha Chain co. was made after the aforesaid period.
From the above discussion, it is seen that confirmations have been received from 8 creditors out of 10 with whom enquiries were initiated. In the two creditors from where no response was received, it is seen that both the postal authorities and the assessee have confirmed that the said creditor has "left --the said address"/"closed operation since long". Moreover, in the said two cases mentioned in table above, the AR has submitted that the purchases pertain to a 7 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha period of December & January, 2016 which is beyond the period which the AO has utilized for making the proportionate calculations of excess cash deposits in the bank accounts of the assessee.
In above circumstances, it is seen that the purchases of the assessee concern have been verified by the major creditors of the assessee. Once the purchases of the assessee have been confirmed, the stock register is well maintained, the VAT returns have been filed, the AO having brought no evidence on record to prove that the sales are bogus, then considering the sales as bogus shall not stand the test of law. The details of the above enquiries were shared with the AO vide email dated 20.02.2023 and the AO was given an opportunity to furnish comments, if any, on the same. Reminder emails were sent dated 06.03.2023 & 28.03.2023 but no response has been received from the AO till the day of finalization of the order.
Rejection of books of accounts:-
It is a fact that the assessee is engaged in the manufacturing & trading of jewellery and has been maintaining proper books of accounts and the returns have been filed on the basis of audited books of accounts. It is also on record that w the assessee is maintaining day to day 'stock register'. It is also an undisputed fact that the assessee had sufficient stocks out of which sales have been made and the sales have been recorded in the regular books of accounts and the stock has reduced correspondingly and the profit has been declared in the return of income. The rejection of books of accounts u/s 145(3) by the AO has been made only on presumption that the assessee has deposited unaccounted cash in his accounts. The purchases made from the various parties, details of which have been filed before the AO have been examined and confirmed by issuance of letters u/s 133(6) of the Income Tax Act, 1961. The AR has submitted that the assessee has maintained his books in a proper manner and there was no material with the AO to indicate that they were defective. The AR has questioned the rejection of books of accounts u/s 145(3) by the AO. The AO has rejected the books of accounts only on presumption that unaccounted cash has been deposited in the bank accounts by applying comparative ratios to the cash deposited vis-a-vis turnover for FY 2015-16 & 2016-17.
It has been held by the Hon'ble Andhra Pradesh High Court in the case of CIT vs. Margadarsi Chit Funds Pvt. Ltd. [1985] 155 ITR 442 that "the AO must refer to inherent defect in the books and record a clear finding." The AO in this case has not recorded any clear findings for rejection of books of accounts.8 ITA No. 199/Asr/2023
Asstt. CIT v. Ashwani Chadha It has further been held by the Hon'ble Supreme Court in the case of CIT vs. British Paints India Ltd., reported in [1991] 188 ITR 44 that "it is duty of the AO to consider whether or not the books disclose the true state of accounts and ^r._: correct income of the assessee."
As the AO has not followed the legal precedents as cited above and has not pointed out any defect in the books of accounts, the rejection of books of accounts is held to be improper.
Addition u/s 69A:-
As regards, the addition of Rs. 1,69,87,391/- u/s 69A and invoking the provision of Section 115BBE is concerned, the order of the AO and the detailed submissions of the assessee along with the case laws have been thoroughly perused and various case laws as relied upon by the assessee have also been gone through. The contentions of the assessee had been that it is not a case of 'unexplained money' having been deposited in the bank account of the assessee and it is sales of the gold ornaments etc. which have been deposited in the bank account and such entries have duly recorded in the audited books of accounts.The submissions of the assessee about the filing of the VAT returns has also been considered. No defects have been pointed by the AO in respect of the purchases made by the assessee, the stock maintained by the assessee "then the cash realized on account of sales of the stock cannot be held to be 'unexplained money' and, as such, the addition of Rs. 1,69,87,391/- is devoid of any valid reason".
The Hon'ble High Court of Delhi in the case of Principal CIT vs. Agson Global Pvt. Ltd. reported at [2022] 441ITR 550 has held as under:
"Assessee-company was engaged in business of selling dry fruits - Post demonetization, assessee deposited cash amounting to Rs. 180.53 crore in its bank accounts - Assessing Officer held that cash deposits made by assessee represented unaccounted income and accordingly, made additions - Tribunal analyzed data pertaining to cash sales and cash deposits made in relevant assessment year as against two earlier assessment years and noted that in year of demonetization percentage increase in sales was less than earlier year - He, thus, held that growth in sales compared to earlier two years showed similar trend, and it could not be said that assessee had booked non-existing sales in its books post-demonetization - Furthermore, revenue made no allegation that assessee had backdated its entries - Whether since assessee placed material on record that cash deposits made with banks more or less corresponded with cash 9 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha sales, it could only be concluded that there was growth in assessee's business and impugned addition was to be deleted - Held, yes [Paras 16.9 and 17.6] [In favour of assessee]"
On a similar issue the Ld. ITAT Chandigarh Third Member Bench in the case of Bansal Rice Mills vs. ITO reported at [2002] 120 Taxman 155 (Chd Trib.) (TM) has held as under:
"Since the sales proceeds 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 complete stock tally was there".
The judgment of Hon'ble Delhi High Court in the case of Pr. CIT Vs Akshit Kumar in ITA No. 348 of 2019 as reported in 197 DTR 121, decided on 17th of November, 2020 and judgment of Ld. Tribunal Bench of Delhi in the case of Agsons Global P Ltd. vs. ACIT (Appeal No 3741 to 3746/Del/2019) order dated 31.10.2019 are applicable to the facts & circumstances of the case and these two judgments have been relied upon by the Hon'ble Chandigarh Bench of ITAT in a detailed judgment of Ld. Tribunal Bench of ITAT in the case of "Kalaneedhi Jewellers" reported in (2022) 96 ITR Trib. 66 (Chd) and the following relevant paragraph from the judgment is being reproduced as under:
"10.11 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 closing 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 in the quantum figures of the stock at the time of search on 12/04/2017, 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.
10.12 On an identical issue the Coordinate Bench of the ITAT Visakhapatnan.
Bench in the case of ACIT, Central Circle-1, Visakhapatnam Vs. Hirapanna Jewellers [2021] 128 taxmann.com 291 (supra)held as under: "7. We have heard both the parties and perused the material placed on record. In the instant case, the assessee has admitted the receipts as sales and offered for taxation. The assessing officer made the addition u/s 68 as unexplained cash 10 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha credit of the same amount which was accounted in the books as sales. In this regard, it is worthwhile to look into section 68 which reads as under:
68. Where any sum is found credited in the books of an assessee maintained for any previous year, and he 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:
From the perusal of section 68, the sum found credited in the books of accounts for which the assessee offers no explanation, the said sum is deemed to be income of the assessee. In the instant case the assessee had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock registers. Both the DDIT (Inv.) and the AO have conducted the surveys on different dates, independently and no difference was found in the stock register or the stocks of the assessee.
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 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 however strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence.11 ITA No. 199/Asr/2023
Asstt. CIT v. Ashwani Chadha 7.2 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 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. 10.13 In the present case also the cash deposited post demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax A/AT 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, we are of the view that the impugned addition made by the AO and sustained by the Ld. CIT(A) was not justified, accordingly the same is deleted."
Also, the Ld. ITAT Bench Vishakhapatnam in the case of ACIT Central Cirlce-1, Vishakhapatnam vs. Hirapanna Jewellers in ITA No. 253/Viz/2020 in para 9 of its order, 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 effect 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 12 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld."
The judgment of Ld. Tribunal Bench 'B' of Chandigarh in the case of DCIT, Central Circle-1, Ludhiana vs. M/s. Roop Fashion, Ludhiana in ITA No. 136/Chd/2021, it has been held by the Bench, as under:
9. We have considered the submissions of both the parties and material available on the record. In the present case it is not in dispute that the books of accounts maintained by the assessee in the regular course of its business were audited and accepted by the AO while framing the assessment through deep scrutiny under section143(3) of the Act. The AO did not point out any specific defect in the books of account maintained by the assessee, no inflated purchases or suppressed sales were found. In the instant case, even the Investigation Wing asked the assessee to furnish the details which were submitted, copy of which is placed at page no. 75 to 123 of the assessee's compilation, on those details, no adverse comment was made by the Investigation Wing. It is also noticed that the assessee is having cash sales in all the years which is evident from page no. 4 of the impugned order passed by the Ld. CIT(A). For the year under consideration the assessee was having cash sales of Rs. 4,12,59,227/- out of total sale of Rs. 13,82,27,373/-, the cash sale was about 1 /3rd of the total sales, similar was the position there in the preceding year. The assessee was also having cash realized from the debtors and it was not the case of the AO that the debtors of the assessee were bogus or those, were not related to the business of the assessee. The cash deposited in the bank by the assessee during the demonetization period was out of the cash sales and the realization from the trade debtors duly shown in the book of accounts which were accepted by the A.O. The assessee had deposited Rs. 2,47,50,000/- during the demonetization period in the bank account, the AO accepted Rs.
1,50,00,000/- as cash sale on estimated basis but no basis or method was adopted for that estimation, in other words the AO considered the aforesaid estimated sales only on the basis of surmises & conjectures which is not tenable in the eyes of law. In the present case, in the month of October 2016 and November 2016 the assessee was having cash sales of Rs. 1,04,97,098/- and Rs. 62,00,849/- which had not been doubted by the AO who had also not commented on the claim of the assessee that the balance of the amount which was deposited in the bank account was out of the realization of cash from the debtors which for the year under consideration was at Rs. 3,09,78,586/-. In the present case the AO accepted the trading results and had not doubted opening stock purchase sales and closing stock as well as GP rate shown by the 13 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha assessee. Therefore, the addition of Rs. 97,50,000/- made by the AO on the basis of surmises and conjectures was rightly deleted by the Ld. CIT(A). We do not see any valid ground to interfere with the detailed and logical findings given by the Ld. CIT(A) in the impugned order."
Also, the Hort'ble High Court of Patna in the case of Lakshmi Rice Mills vs. Commissioner of Income-tax reported at [1974] 97 ITR 258 (PAT.) has held as under:
"It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law. What has to be disclosed and established is the source of the income or the receipt of money, not the source of the receipt of the high denomination notes which were legal tender at the relevant time".
This view is also supported by the decision of Hon'ble Delhi High Court in the case of CIT vs. Kailash Jewellery House (Del HC) in ITA 613/2010 dated 09.04.2010 in which it has been held as under:-
4. The Tribunal also noted that the departmental representative could not challenge the factual finding recorded by the Commissioner of Income-tax (Appeals). Nor could he advance any substantive argument in support of his appeal. The Tribunal also observed that it is not in dispute that the 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. It is in these circumstances that the Tribunal observed that the cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same.
5. The findings of the Commissioner of Income-tax (Appeals) and the Tribunal, which are purely in the nature of the factual findings, do not require any interference and, in any event, no substantial question of law arises for our consideration. The appeal is dismissed."
In view of the above discussion and stated legal position, the source of the deposit in the bank accounts is adequately explained being sale of the gold 14 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha ornaments & jewellery and the same having been recorded in the regular books of accounts and thus, Section 69A is not applicable at all and no case has been made out that the assessee is found to be owner of money, which is not recorded in the books of accounts and rather the assessee has valid explanation that there was available cash in hand, out of the sale of jewellery and in view of the various judgments discussed above invoking of Section 69A r.w.s. 115BBE by the AO is not correct.
In view of the foregoing discussion and taking into consideration all the facts and the circumstances of the case, it appears that cash deposits in bank account represent the sales which the assessee has rightly offered for taxation. No defect in the trading account and the stocks of the assessee has been pinpointed by the AO. Also, the major creditors of the assessee concern have been verified during the appellate proceedings. The AO has also not spotted any specific defect in the books of account, sales, purchase and stock. The addition was made by the AO by application of ratio and proportion to the cash vis-a-vis turnover of the assessee firm. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 69A or tax the same u/s 115BBE again. Hence, the action of the Assessing Officer in rejecting the books of accounts u/s 145(3), and addition of Rs. 1,69,87,391/- is not justified and same is therefore deleted."
4. The ld. DR supported the assessment order and submitted that the ld. CIT(A) was not justified in deleting the addition made by the ld. Assessing Officer u/s 69 r.w.s. 115BBE of the Act. The Ld. DR contended that Ld. CIT(A) has erred in deleting the addition of Rs. 1,69,87,391/- made on account of unexplained cash deposits u/s 69A of the Income-tax Act, 1961 chargeable to tax u/s 115BBE of Income-tax Act, 1961, in granting relief of addition made on account of unexplained cash deposits ignoring the facts brought out by the Assessing Officer in the Assessment Order; that the Ld. CIT(A) has ignored the fact that there was abnormal growth in 15 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha sales during the demonetization period for which there was no explanation with the assessee; that the Ld. CIT(A) has erred in holding that no specific defects were pointed out by the Assessing Officer while rejecting the books of account u/s 145(3) of Income-tax Act, 1961 ignoring the fact that there was abnormal growth in sales during the year under consideration as compared to the last Financial Year and that the genuineness of such increased cash sales could not be proved in as much as no documentary evidence could be produced to substantiate the identity of huge number of customers and that the Ld. CIT(A) has erred in deleting the addition made by the AO by ignoring the facts that the assessee failed to qualify the test of human probabilities in terms of settled legal position as held by Hon'ble Supreme Court in of Sumati Dayal Vs CIT 214 ITR 301 and CIT Vs. Durga Parsha More 82 ITR 540.
5. Per contra, the ld. AR for the assessee has supported the impugned order contending that the ld. CIT(A) has passed a detailed and well- reasoned order covering all the issues discussed by the AO. The Ld. AR contended that the increase in sales during a particular period/year in comparison to earlier period does not lead to the absurd conclusion that the sales were not genuine when the sales were supported with the VAT returns, sale & purchase bills, quantitative stock details to prove the 16 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha genuineness of the transactions of the assessee. Further, the assessee had sufficient stock in hand for the sale of jewellery made during the relevant period and when the AO has accepted the purchases, debtors & creditors, then how can sales be questioned without bringing on record any evidence to show that the sales are not genuine. The AR at the time of the hearing pleaded that considering the submissions and case law cited by the assessee, the order of the ld. CIT(A) may kindly be upheld. In support, he filed a brief synopsis which reads as under:
"Sir, the source of entire cash deposit was out of sales incurred during the year and in order to prove/substantiate the source of cash deposits during the assessment proceedings and Appellate proceedings before Worthy CIT(A), assessee filed various evidences in the form of month wise opening cash in hand, cash sales details, cash withdrawals details, cash deposits details, closing cash in hand details, cash book reflecting cash in hand of Rs.2,32,28,420/- as on 08.11.2016, all the ledgers purchase register, sale register, bank statements, complete books of accounts containing all the ledgers like Cash book, complete purchase account, complete sale account, creditor accounts, debtor accounts, bank ledgers, unsecured loan accounts for the year under consideration. The evidences filed during assessment proceedings and Appellate proceedings are as under:
1. Copy of details of cash deposits in different bank accounts.
2. Copy of Complete Audited Balance Sheet for the preceding year i.e. AY 2016-17 reflecting opening cash in hand, debtors, creditors etc.
3. Copy of Complete Audited Balance Sheet for the Current year i.e. AY 2017- 18 reflecting opening cash in hand, debtors, creditors etc.
4. Quantitative Stock Trading Details for the year under consideration.
5. Sales Account/Register along with sale bills for the year under consideration.
6. Purchase Account/Register for the year under consideration.
7. Copy of VAT Returns for all the quarters of Jalandhar Jewellers and Calcutta Jewellers.17 ITA No. 199/Asr/2023
8. Confirmed purchase accounts from parties.
Sir the above evidences filed, without any doubt, prove the fact that sales executed were genuine and the same were accounted in the books of accounts and declared in the VAT returns and income tax return filed by the assessee u/s 139(1) of the Act on 27.03.2018.
Sir, the assessee duly co-operated with the Ld.AO and provided him the details as required by him. There is no violation of law if assessee incurred cash sales to number of persons. Further Ld. AO has not brought on record any evidence which proves that the sales are not genuine. The contention of Ld. AO is purely based on assumptions, conjecture and surmises.
Sir, assessee has furnished the entire information which proves the genuineness of the sales and the source of cash deposit. Only because there is sudden increase in sales does not lead to the conclusion that the sales are not genuine.
Sir, increase in sales during a particular period or in comparison to the earlier period doesn't lead to the conclusion that the sales executed were not genuine, more so when the same was substantiated by overwhelming evidences placed on record such as Income tax Returns, VAT Returns, sale and purchase bills along with their respective accounts/registers, quantitative Stock Trading Details, Audited Balance Sheets.
Further this sale is self declared/ voluntarily declared by the assessee and is not earthed during the assessment proceedings. Also purchases are accepted, debtors and creditors are accepted, opening balances are accepted, these things beyond any doubt proves that sales incurred by the assessee are genuine and cash deposited is from these genuine sales.
Sir, it is a settled law that onus of proving the source of a sum of money found to have been received by an assessee is on him and in the present case assessee has voluntarily disclosed the cash deposits in the bank account as it sale and declared the same in his return of income and paid taxes on the profit embedded in the sale receipts. Thus assessee himself accepts the fact that the receipt is taxable and explained the nature and source of cash deposits and they are substantiated by VAT Return, Income tax Return, Stock Quantitative Trading details, Purchase/Sale Accounts, Purchase/Sale Bills, Complete Audited Balance Sheet etc. Sir, it is stated that purchases are accepted, opening balances are 18 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha accepted, these things beyond any doubt proves that sales incurred by the assessee are genuine and cash deposited is from these genuine sales.
Sir, the Worthy CIT(A) has also given its decision in the favour of the assessee and has deleted the addition made by the Ld. Assessing Officer for the following reasons:
The source of the deposit in the bank accounts is adequately explained being sale of the gold ornaments & jewellery.
The sale has been recorded in the regular books of accounts and thus, Section 69A is not applicable at all and no case has been made out that the assessee is found to be owner of money, which is not recorded in the books of accounts.
The assessee has valid explanation that there was available cash in hand, out of the sale of jewellery and in view of the various judgments discussed in Appellate order, therefore, invoking of Section 69A r.w.s. 115BBE by the AO is not correct.
Cash deposits in bank account represent the sales which the assessee has rightly offered for taxation.
No defect in the trading account has been found and the stocks record of the assessee has been accepted.
The major creditors of the assessee concern have been verified during the appellate proceedings.
The AO has also not spotted any specific defect in the books of account, sales, purchase and stock.
The addition was made by the AO on assumption basis. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 69A or tax the same u/s 115BBE again. Hence, the action of the Assessing Officer in rejecting the books of accounts u/s 145(3), and addition of Rs. 1,69,87,391/- is not justified and same is therefore deleted.
That the entire addition is made on assumption, presumption and surmises and there is no material on record that could show that assessee made unexplained cash deposits.
Sir, reliance is placed on the recent decision of ITAT Amritsar, in the case of Himalaya Spinning Mills v/s ITO dated 20.02.2023 ITA 88/ASR/2022 in which it was held as under:19 ITA No. 199/Asr/2023
Asstt. CIT v. Ashwani Chadha Income--Cash credit--Genuineness--Assessee explained the sources for the cash deposits in the bank account totaling to Rs. 27,00,000 during the demonetization period as cash sales--AO did not accept the explanation given by the assessee and added Rs. 27,00,000 under s. 68 --Admittedly, the assessee has made cash sales out of the opening stock and purchases made during the year duly supported with audited statement of account and VAT return--Authorities below has neither pointed out any discrepancy in the audited books of account nor rejected assessee's books--Further, the CIT(A) has made contradictory observation in one para that there was no cash sale in the earlier year financial year 2015-16 whereas in another paragraph he observed that there was cash sale of Rs. 5,60,204 in financial year 2015-16--Merely, making a comparison of cash sales with the preceding assessment year in hypothetical manner buses on assumption, surmises and conjectures -without supporting corroborative documentary evidence to disprove disputed cash sales as bogus sales cannot be approved--Assessee explained that the goods were sold out of balance stock of shoddy yarn and even at the year end, the unsold stocks of shoddy yarn was 2,960 kgs with the support of documents . 7 record--Disputed cash sales of Rs. 27,00,000 by the appellant assessee were made out of opening stocks of Rs, 44,61 ,j 30 and purchases made during the year which are offered for taxation as revenue receipts as per audited books of accounts and financial statements filed before the authorities below and before the Tribunal, duly supported with CAT return--As such, (here is no case for making the addition under s. 6R or tax the same under s. I15BBE again--Therefore, the addition of Rs. 27,00,000 is deleted--Principal CIT vs. Akshit Kumar (2021) 197 DTP (Del) 121: (2021) 318 ( 7 R (Del) 26, Anantpur Kalpana vs. ITO (2022) 138 taxmann.com 141 (Bang)(Trib) and Asstt. CIT vs. Hirapanna Jewellers (2021) 202 I)TR ( Visakha)(Trib) 337: (2021) 212 TTJ (VI: ah ha) 117 followed.
The above stated facts and submissions along with evidences and case laws cited above, beyond any doubt proves that sales incurred by the assessee are genuine and cash deposited is from these genuine sales. Thus, when sales/purchases are genuine it means cash deposits are from explained source, therefore it is requested that the order of the Worthy CTT(A) may kindly be affirmed."
6. Heard both the sides, perused the record, impugned order and written submission and paper book filed before us. It is undisputed fact that the sales were supported with the VAT returns, sale & purchase bills, 20 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha quantitative stock details to prove the genuineness of the sale transactions of the assessee. It is noted that the assessee had sufficient stock in hand for the sale of jewellery made during the relevant period and when the AO has accepted the purchases, debtors & creditors, then how can sales be questioned without bringing on record any corroborative evidence to disprove the genuineness of sales.
7. It is noted that the AO has not given any finding to the effect that the purchases, the opening stock and the closing stock of the assessee firm is questionable. it is seen that confirmations have been received from 8 creditors out of 10 with whom enquiries were initiated where the purchases pertain to a period of December & January, 2016 which is beyond the period which the AO has utilized for making the proportionate calculations of excess cash deposits in the bank accounts of the assessee. Once the purchases of the assessee have been confirmed, with the stock register maintained, and the VAT returns, the AO having brought no evidence on record to prove that the sales are bogus, then genuineness of the sales stands proved to the test of law. Further, the details of the enquiries conducted by the Ld. CIT(A) were shared with the AO vide email dated 20.02.2023 and further the AO was given an opportunity to furnish comments, if any, on the same vide reminder emails dated 06.03.2023 & 21 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha 28.03.2023 but no response was received from the AO till the day of finalization of the impugned order.
8. In view of that matter, the Ld. CIT(A) after considering the factual matrix and judicial precedent, rightly held that the purchases and sales of the assessee concern stands verified and that the cash sales made by the assessee were out of the existing stock to explain the deposit of cash, (realised out of the cash sales) in the bank account and it cannot be treated as undisclosed income of the assessee u/s 69A of the Act.
9. The Ld. CIT(A) has rightly observed that it was not a case of 'unexplained money' having been deposited in the bank account of the assessee and it is cash sales of the gold ornaments etc. which have been deposited in the bank account and such entries have duly recorded in the audited books of accounts duly supported with the filing of the VAT returns and further no defects have been pointed by the AO in respect of the purchases made by the assessee, and the stock maintained by the assessee "then the cash realized on account of sales of the stock cannot be held to be 'unexplained money' and, as such, the addition of Rs. 1,69,87,391/- is devoid of any valid reason.
10. In view of the above discussion and judicial precedents, the source of the deposit in the bank accounts is adequately explained being sale of the 22 ITA No. 199/Asr/2023 Asstt. CIT v. Ashwani Chadha jewellery and the same having been recorded in the regular books of accounts and thus, Section 69A is not applicable.
11. Since, in the present case, there has been no case made out that the assessee was found to be owner of money, which is not recorded in the books of accounts and rather the assessee has valid explanation that there was available cash in hand, out of the sale of jewellery and accordingly, in view of the various judgments discussed above invoking of Section 69A r.w.s. 115BBE by the AO is not correct.
12. In the result, the appeal filed by the revenue is rejected.
Order pronounced in the open court on 06.06.2024
Sd/- Sd/-
(Udayan Dasgupta) (Dr. Mitha Lal Meena)
Judicial Member Accountant Member
*GP/Sr.PS*
Copy of the order forwarded to:
(1)The Appellant:
(2) The Respondent:
(3) The CIT concerned
(4) The Sr. DR, I.T.A.T.
True Copy
By Order