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4.4. The AO examined the year-wise details furnished by the assessee relating to turnover, cash sales, and cash deposits. The AO noted that for AY 2016-17 the turnover was Rs. 12,20,63,947/- with cash sales of Rs. 75,89,080/- and cash deposits of Rs. 55,00,000/-, whereas for AY 2017-18 the turnover was Rs. 28,01,01,580/- with cash sales of Rs. 1,64,53,253/- and cash deposits of Rs. 1,88,57,500/-. He observed that though the cash sales as compared to the turnover were decreased from 22% in the AY 2016-17 to 5.87% in the AY 2017-18, whereas, the cash deposits in comparison to the cash sales have considerably increased The AO computed the excess cash deposit during the year under consideration as compared to the earlier year by taking total cash deposits during AY 2017-18 of Rs. 1,88,57,500/-, less expected cash deposits Pankaj Jewellers Pvt.Ltd. vs. ITO Asst.Year : 2017-18 at 4.5% of turnover being Rs. 1,26,04,571/-, arriving at excess cash deposits of Rs. 62,52,929/-. The AO treated the amount of Rs. 62,52,929/- as unexplained cash credit and made addition to the income of the assessee under Section 68 of the Act. The addition was taxed under Section 115BBE of the Act at the rate of 60%.

9. We have heard the rival contentions and gone through the record. The entire case of the revenue is built upon the basis of suspicion regarding the cash deposits based on a comparative analysis of ratios. The AO has made the addition merely because there was a variation of 2.28% in the ratio of cash deposits to turnover between two years.

9.1. A perusal of the record reveals that the assessee has maintained regular books of account which have not been rejected by the AO. The AO has also not pointed out any discrepancy in the stock register or the purchases made by the assessee. We find that the assessee has demonstrated a clear source of cash by way of opening cash balance and cash sales. The Ld. AR has shown that the cash balance available as on 08.11.2016 was Rs. 1,35,60,884/-, which was accumulated from business operations and duly recorded in the cash book. It is a matter of record that the sales and purchases have been accepted as genuine. Once the trading results and the stock are not disputed, the cash flowing out of such recorded transactions cannot be treated as non-genuine. The sales have been recorded in the books and the profit arising therefrom has been offered to tax. Moreover, the peculiar fact to be noted in this case that the ratio of cash sales to the turnover has decreased from 6.2% to 5.87% which means there was no increase in cash sales as compared to the turnover during the year under consideration. The total turnover of the assessee has considerably increased and so as the receipts by banking channel. Therefore, it is not the case of the AO that the cash sales during the year under consideration are abnormal. The assessee has duly explained the reasons for deposits of the cash out of the opening balance as on 08/11/2016 due to the announcement of demonetization scheme resulting into increase in ratio of cash deposits to turnover in the year under consideration as compared to the earlier assessment year. Nonetheless, in no circumstances, it can be held to Pankaj Jewellers Pvt.Ltd. vs. ITO Asst.Year : 2017-18 be a case of cash deposits out of undisclosed sources of income and, therefore, the additions made/confirmed by the lower authorities u/s 68 of the Act are not sustainable and the same are, accordingly, ordered to be deleted.