M/s. Zinzuwadia & Sons, Ahmedabad V. The ACIT, Central Circle-2(3), Ahmedabad

ITSSA 45/AHD/2021

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7281 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-05-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 08-05-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 20-04-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase; Gross profit estimation; Unexplained investment; Income from undisclosed sources; Valuation report; Set aside; Bogus
• Section: 68; 145; 40A(3); 80HHC; 133A; 133(6); 69B; 250; 69A; 48; 20

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘B’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER IT(SS)A No.45/Ahd/2021 Assessment Year : 2017-18 M/s. Zinzuwadia & Sons GF & FF-106, Venus Amadeus, Jodhpur Gross Road, Satellite, Ahmedabad 380 015. PAN : AAAFZ 9398 Q Vs ACIT, Cent.Cir.2(3) Ahmedabad. IT(SS)A No.50/Ahd/2021 Assessment Year : 2017-18 ACIT, Cent.Cir.2(3) Ahmedabad. Vs M/s. Zinzuwadia & Sons GF & FF-106, Venus Amadeus, Jodhpur Gross Road, Satellite Ahmedabad 380 015. PAN : AAAFZ 9398 Q. (Applicant) (Responent) Assessee by : Shri S.N. Soparkar, Sr.Advocate & Shri Parin Shah, AR Revenue by : Shri Sudhendu Das, CIT-DR सुनवाई क琉 तारीख/D a t e o f H e a r i n g : 02/02/2024 & 09.05.2024 घोषणा क琉 तारीख /D a t e o f Pr o n o u n c e m e n t: 10/05/2024 आदेश आदेशआदेश आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER These are cross appeals filed by the assessee and Revenue against the order of the ld. Commissioner of Income-tax (Appeals)-12, Ahmedabad dated 22.02.2021 under section 250 of the Income Tax Act, 1961 (“the Act” for short) for the assessment year 2017-18. IT(SSA No.45 and 50 /Ahd/2021 2 2. It was common ground that the primary issue for adjudication in the present cross appeals pertained to the addition made by the Assessing Officer to the income of the assessee on account of alleged bogus sales amounting to Rs.7,88,85,082/-, treating the transaction as a modus operandi adopted by the assessee to justify the cash deposited in its bank account out of its unaccounted income in the wake of the de-monetization exercise carried out by the Government beginning from 8.11.2016. Besides, a survey action was conducted on the assessee, during which excess stock and cash was found, and addition made on account of the same by the AO amounting to Rs.1,14,24,765/- and Rs.13,33,961/- respectively. 3. The ld. CIT(A) deleted the entire addition made on account of bogus sales, holding that the Revenue had not made out a case for treating the sales as bogus, but at the same, he rejected the books of accounts of the assessee, finding discrepancies in the same, and made addition on account of gross-profit amounting to Rs.96.00 lakhs. The addition on account of excess stock was restricted by the ld. CIT(A) to Rs.95,41,057/- as against Rs.1,14,24,765/- made by the AO, while the addition made on account of excess cash was of Rs.13,33,961/- was deleted. Further, the addition on account of GP amounting to Rs.96 lakhs made by the ld. CIT(A), was telescoped against the addition on account of excess stock of Rs.95,41,057/- and no separate addition on account of excess stock was held by the ld. CIT(A) to be made. Thus in all the Ld. CIT(A) made addition of Rs. 95,41,057/- on account of Gross Profit and telescoped it against excess stock addition confirmed by him of the same amount, while he deleted addition made by the AO on account of bogus sales of Rs. 7,88,85,082/- and excess cash of Rs. 15,96,561/-. 4. Aggrieved by the same, both the assessee and the Revenue, have come up in appeal before us, raising the following grounds; IT(SSA No.45 and 50 /Ahd/2021 3 The grounds raised by the assessee in its appeal read as under: 1. On the facts and in the circumstances of the case, the learned CIT(A) has erred in holding that books of account of the appellant are liable to be rejected u/s 145 of the Act and thereby made addition of Rs. 96,00,000/- on account of low gross profit. 2. On the facts and in the circumstances of the case, the learned CIT(A) has erred in upholding addition u/s 69B of the Act of Rs.95,41,057/- towards alleged excess stock found during the course of survey proceedings. The AO and CIT(A) ought to have appreciated that appellant has already submitted reconciliation statement along with evidences which clearly prove that there is no excess stock as alleged by AO. 3. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. While the grounds raised by the Revenue in its appeal read as under: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that AO was not justified in making addition of bogus sales of Rs.7,88,85,082/- in the hands of the assessee and granting relied of Rs.6,92,85,082/- (Rs.7,88,85,082/- -96,00,000/-) to the assessee. 2. On the facts and circumstances of the case and in law, the Ld. ClT(A) has erred in deleting the addition of Rs.1,14,24,765/- for unexplained investment in the stock and shortage of cash of Rs.13,33,961/- aggregating Rs.1,27,58,726/- made by the AO under section 69B as unaccounted investment. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent. 5. We shall first take up the Revenues appeal since the major issue for adjudication in both the appeals relates to the addition made on account of bogus sales amounting to Rs.7,88,85,082 which was deleted by the Ld. CIT(A). IT(SSA No.45 and 50 /Ahd/2021 4 IT(ss) 50/ Ahd/21 Departments Appeal Ground No.1 challenges the order of the Ld. CIT(A) deleting the addition of Rs.7.88 Crs made by the AO on account of bogus sales made by the assessee during demonetization period. 6. Brief background of the case is that the assessee is a jeweler and in the wake of de-monetization exercise carried by the Government, demonetizing high denomination currency notes of Rs.500 and Rs.1000 on 08/11/2016, and on the basis of subsequent information which came in the possession of the department, the Department was in the know that certain persons had adopted unscrupulous means to introduce their unaccounted income in cash in the banks during the de-monetization period. The assessment orders notes that while in some cases, fake bank accounts were opened to introduce cash of other persons in the said account; in other cases, especially jewelers, had resorted to selling their jewellery at highly inflated prices in cash to absorb unaccounted incomes of various persons held in cash. In the case of the assessee, it came to the notice of the Department that there was substantial cash deposited during de-monetization period in its books of accounts, and these transactions were allegedly masked by treating it as a bullion and jewellery sales. Consequently, search and survey action was conducted at the residential and business premises of the assessee, and its partners on 24.1.2017. The search action was carried out at the residential premises of the partners, and survey action was carried out at the business premises of the assessee. During the course of survey a digital device was found in the premises which was impounded, and thereafter, data was extracted and as per forensic report it was concluded that sales for the period prior and during demonetization had been recorded through back dating so as to justify the cash deposited during the demonetization period i.e. 8.11.2016 to IT(SSA No.45 and 50 /Ahd/2021 5 31.12.2016, in illegal tender notes. The quantum of such alleged backdated sales was noted to be Rs.7,88,85,082/-. Accordingly, during assessment proceedings, necessary inquiries and investigation was done by the AO. These inquiries in turn revealed certain pertinent information and facts based on which, the AO concluded that all these back-dated sales were bogus. The facts so noted by him, briefly put, are as under:– i) That on 8.11.2016, the assessee had made sales of Rs.3.5 crores mostly in demonetized notes, serving 223 customers in the process from 8:00pm to 12 midnight. This quantum of sales made in a single day was noted to be 40 to 50 times higher than the daily average. It was noted that it was virtually impossible to serve 223 customers in a short span of 240 minutes from 8:00pm to 12 midnight and further CCTV footage of the said day, as evidence of the sales so made to so-many customers, was not produced by the assessee; ii) That imaging of the digital data impounded during survey was carried out, its forensic analysis done and as per the forensic report, it was found that the sales entries made between 8.11.2016 and 22.1.2017 were back-dated to present that they pertained to earlier period. The total value of the such sales was of Rs.7,88,85,082/-; iii) Cash sales during the de-monetization period in the month of October and November showed abnormally high increase – percentage wise when compared with that in the same period in the preceding year, showing an increase of 1673.10% in the month of October, and 1128.66% in the month of November, 2016, as compared to the sales made IT(SSA No.45 and 50 /Ahd/2021 6 in the month of October and November, in the immediately preceding year i.e. 2015. 7. The assessee offered explanation of each of the anomalies/ discrepancies noted by the AO and the ld. CIT(A) found merit in the same, and by way of a detailed and speaking order, he held that the addition made on account of bogus sales was not tenable. 8. Before us, the ld.DR relied on the order of the AO, while the ld. Counsel for the assessee relied heavily on the finding of the ld. CIT(A). 9. We have heard both the parties, and gone through the orders of the Revenue authorities, and also taken note of various documents referred before us during the course of hearing, as also case laws relied upon by both the parties. 10. After considering all the above, and considering the entire facts and circumstances leading to the addition made of bogus sales we are in complete agreement with the ld. CIT(A) that there is no case made out by the Revenue for holding sales made by the assessee during demonetization period of Rs.7.88 Crs as bogus. 11. At the cost of repetition, it is stated that the case of the Revenue is that the assessee being a jeweler, had indulged in bogus billing of sales and thus generated cash in its books so as to justify cash deposited in its bank accounts during the de-monetization period; that in truth or in reality, this cash was not generated out of the actual sales done by the assessee, but was its unaccounted income, which was introduced in its books as bogus sales, and unaccounted income IT(SSA No.45 and 50 /Ahd/2021 7 available with it in cash which the assessee had allegedly routed back in its books as bogus cash sales. 12. We are of the view that on first principles itself, this addition is not justified. As stated above, the case of the Revenue is that the assessee had routed back its unaccounted income by way of bogus sales. The fact of the matter is, even this bogus sales has been reflected by the assessee in its books of accounts as income. Whether this is sales or whether it is unaccounted income of the assessee, both are entitled to the same treatment of being subjected to tax, which the assessee has already done by treating it as cash sales. So nullifying the cash sales, treating it as bogus sales, and then subjecting it to tax, is in effect a sum-zero exercise. 13. Without prejudice to the above, the basis for treating the cash sales of Rs.7,88,85,082/- as bogus is, we find, based merely on circumstantial evidence. The case of the Revenue in treating this sales as bogus is, as noted at para 10.2 to 10.5 of his order, on the basis of : • improbability of the assessee having made sales of Rs.3.5 crores in one day i.e. on 8.11.2016 which was 40-50 times the daily average, catering in all 223 customers in 240 minutes with no evidence of the aforesaid facts being demonstrated through CCTV footage of the said date.( page 11 and para 10.2 page 46) “10.2 Further on observation of the forensic report it is noticed that the assessee has shown exorbitant rise in cash sales post-demonetization. On 8/11/2016 when demonetization was declared at 08:00 pm, they have shown to make sales to 223 customers within 4 hours i.e. One sales per 1.07 minutes within which the entire sales cycle mentioned as under right from the decision of customer to purchase product, generation of bills and receipt of cash is not possible to be handled by 2 accountants deputed during that period. Further 223 customers can not be served in such short time is established as the retail sale process involves the following steps: IT(SSA No.45 and 50 /Ahd/2021 8 (i) According to retail sale process, a retail purchaser who is willing to purchase bullion / jewellery shall first enter shop. (ii) After that he will inquire about gold/silver rate and / or specific design he is looking for and then finalize the rate. (iii) After finalizing rate, he will look multiple pieces for making informed decision with the assistance the employee (s). (iv) Then retail customer will select the piece. (v)There is no MRP printed in jewelery items (as it is in day to day items) and fixing of price takes time where relevant calculations are done by the concerned employee. The employee will weigh and then determine price as per rates. (vi) After final weighing, quantity and rate will be communicated and negotiations are made. Subsequently the price is finalized. (vii) Then the cash memo of retail sale will be generated from computer and print out of the same shall be taken. (viii) Then after print of cash memo one copy will be handed over to customer and in one copy the customer signs acknowledging the delivery. (ix) Thereafter customer shall make the payment which shall be verified and counted by the seller. The entire process shall take at least minimum of about 15 to 20 minutes. It is impossible to serve 223 customers from 8 pm to 12 midnight on the 8 th November, 2016.” • drastic increase in the quantum of cash sales reflected by the assessee in the month of October-November2016, 1673% and 1128%, as compared to the sales made in the preceding year in the same two months and as compared also to sales made in the preceding month of the impugned year, i.e. 871% increase in the month of October 2016 and 72% increase in the month of November 2016.(para 10.3 page 47-48) “10.3 The past profile of the assessee analysed on the issue of sales and amount deposited in bank account which is reproduced as under:- period: Month Amount Month Amount Nov’15 45,12,000 Nov’16 705,00,000 Dec’15 68,95,000 Dec’16 2,00,000 Percentage rise in cash sales (%) IT(SSA No.45 and 50 /Ahd/2021 9 Month 2015-2016 2016-2017 Cash Cash Percentage rise in cash sales (%) April 1938114 858515 -55.70 May 1711231 855860 -49.99 June 2567400 480250 -81.29 July 2494875 3675799 47.33 August 3326281 3297467 -0.87 September 2195722 3688615 67.99 October 2020595 35827263 1673.10 November 5029122 61790604 1128.66 December 6890317 1130919 -83.59 January 8627922 2310527 -73.22 February 991105 1224549 23.55 March 0 14350263 NA It is evident that the cash sales made in the demonetization period has increased drastically when compared with the similar period in preceding month. The same is detailed below: Month 2016-2017 Cash Percentage rise in cash (%) base considered as preceding moth July 3675799 August 3297467 -10.29 September 3688615 11.86 October 35827263 871.29 November 61790604 72.47 December 1130919 -98.17 January 2310527 104.31 February 1224549 -47.00 March 14350263 1071.88 • Identity of parties who made these purchases not revealed since the bills contained only their names (para 10.4 page 48) “10.4 The facts and circumstances leads to the conclusion that the assessee has not done actual sales on and before 8/11 / 2016 as claimed but has manipulated the opportunity and generated sales bills of cash sales to accommodate OHD Currency which were not recorded in regular books of However, majority of sales invoices generated on and after 8/11 / 2016 contains only name of the purchaser. Further the parties to whom additional sales were disclosed without have their identity, creditworthiness and genuineness of transaction. The facts and circumstances leads to the conclusion that the assessee has not done actual sales on 8/11 / 2016 as claimed but has manipulated the opportunity and generated sales bills of cash sales to accommodate OHD Currency.” IT(SSA No.45 and 50 /Ahd/2021 10 • forensic report and digital data showing that backdated sales was recorded between 08/11/2016 and 22/11/2017 totalling in all Rs.7,88,85,082/-(page 13-32 and para 10.5 page 48 of AO’s order), “10.5 In addition to that forensic report of impounded digital data reveals that some entries made were of a previous invoice date but with actual time stamping of a later date. So, appearing at trailing record numbers / position in database. Further the data was entered in a FoxBASE Database using the Application named Ornet. The Ornet Database file was found in Party AS-11 Zinzuwadia Showroom satellite/Zinzuwadia servers_Shwrm/ junjunwadian sons hdd 2/img.junjunwadia n sons hdd 2.EO1/Vol_vol4/ORN2008/DATA/ZINZUWAD/16-17/folder. The foxBase data of different segments like Sales, Vouchers and Others was exported in excels. As per forensic experts after analysis of these data, suspicious entries were found which are out of order and are not in correct sequence. As per standard, in FoxPro Database, the entries are appended sequentially as a record number which is automatically system generated based on actual timestamping. Meaning that, whenever any entries are made from front end screen of the application to the database, such entry is always added the end (bottom) of the existing data in the database file. However, it was found that in this database, some entries (Highlighted in yellow) made were of a previous date but with actual timestamping of a later date. So, appearing at higher record numbers in a database. Such lots or groups / bunches of entries are repeated continuously until 22/1 / 17 Therefore, it is concluded that all these entries as shown below, have been made between 8/11 / 16 and 22/1 / 17 but through backdating attempt has been made to present that these pertain to earlier period. The total value of such non-sequential entries for Sales is Rs.7,88,85,082/-. In view of the above, a sum of Rs. 7,88,85,082/- is added to the total income of the assessee as bogus sales through backdating entries in (OHD).” 14. Therefore, evidently, the entire case of the Revenue rests on surrounding facts and circumstances, while the facts on record in relation to these sales have remained undisturbed and accepted. If sales is bogus, it is reflected in some way in the books also with no corresponding purchases booked or bogus purchases booked to substantiate the bogus sales. If corresponding purchases are not booked it impacts stock position either by way of negative stock appearing in the books stock record and/or physical stock not tallying with the book stock position. This is elementary and logical. And it is based on this actual data that the finding of bogus sales should have arrived. The factum of bogus sales could have been established as a IT(SSA No.45 and 50 /Ahd/2021 11 matter of fact by finding bogus purchases also made by the assessee and /or excess stock being found physically to the same extent with the assessee. 15. On the contrary, we find, there is no anomaly noted on the above counts by the AO. He has not found any bogus purchases recorded by the assessee to justify bogus sales. The AO in fact has accepted all purchases made by the assessee. There is no finding of any anomaly in the stock position also. No negative stock is found disclosed in the records of the assessee. More pertinently even survey action conducted by the Department did not reveal any excess stock with the assessee commensurate with bogus sales alleged to have been made by the assessee. While the allegation of bogus sales levelled in the assessee is to the tune of Rs.7.88 Crs all allegedly made during the demonetization period from 08-11-2016 to 31-12-2016, the survey conducted on the assessee immediately thereafter on 24-01-2017, which ought to have revealed excess stock to the said extent of bogus sales, revealed only excess stock of Rs.1.14 Crs, restricted to Rs.95 lakhs by the ld. CIT(A). 16. All books of accounts including stock records, purchase and sales register, ledger journal and cash and bank book were maintained by the assessee which finds mention by the tax auditor in his report in Form 3CD submitted along with the return of income and placed before us at P.B 55-73. The complete quantitative tally of principal items traded in by the assessee, giving opening stock, purchases, sales and closing stock of each item was disclosed in the Tax audit Report, which we have noted at page 65 of the paper book. Daily stock statement of items traded in, for the period 01-04-16 to 24-01-17 was filed to the AO placed before us at P.B 187-188. Counter wise item report of all items traded across the counter during this period was also filed to the AO, placed at P.B 189-194. Even before us IT(SSA No.45 and 50 /Ahd/2021 12 Trading Stock ledgers of all items traded in were filed when the Ld. Counsel for the assessee was specifically asked to do so at bar. 17. Despite all records placed before the AO no bogus purchases were found to have been made by the assessee. No negative stock was reported either by the tax auditor, nor found by the AO, nor pointed out to us by the Ld. DR from the stock ledgers submitted during the course of hearing before us and no corresponding excess stock was found during survey conducted on the assessee by the department. 18. The ld. CIT(A) at para 6.20-6.21 of his order has also noted the fact of no excess stock being found with the assessee, during survey in consonance with the bogus sales alleged to have been made by the assessee, and purchase and availability of stock not having been disputed, the sales could not be held to be bogus sales as under: “6.20 It is pertinent to note that during the course of assessment proceedings, appellant has provided relevant books of account including cash book, sales register, purchase register, stock register etc and AO has not proved that appellant was not having adequate stock for making sales. Once AO has not disturbed purchase nor doubted availability of stock, sales already recorded in books of account cannot be held to be bogus sales. Further, the value of excess stock found in possession of appellant, i.e. physical stock over the accounted stock, as on the date of search and survey i.e.24.01.2017 was as per the valuation done by department itself as can be seen from page no. 52 of the Order of the AO and such excess stock has already been treated by the AO as investment not fully disclosed for the purpose of Section 69B of the Income Tax Act and added to the total income of appellant. Therefore, where during the course of search and survey, which took place after such a short period of 2.5 months of the demonization period having started and within 24 days of the said period having ended, the excess stock was found in possession of appellant as against the alleged bogus sale of Rs.7,88,85,082/- and where the said amount of excess stock has already been treated as not fully disclosed investment u / s 69B of the Act and added to the total income of appellant, no incriminating material can be said to have been found and brought on record to support the claim of such bogus sale of 6.21 Therefore, in absence of any doubt raised on the genuineness of purchases, adequacy of stock and reduction of stock in accounts corresponding to the alleged bogus sale and in absence of any incriminating IT(SSA No.45 and 50 /Ahd/2021 13 material found in possession of appellant during the course of search and survey action either in form of stock or any other asset confirming the bogus sale of such a huge amount of Rs. 7, 88,85,082/-, it shall be unfair and unjustified to uphold the contention of the AO that the appellant has generated cash bills to accommodate the OHD currency. Therefore, the addition made based on such contention in absence of any incriminating material is not tenable in eyes of law. Clearly the AO has miserably failed to make out a case of bogus sales to the tune of Rs.7,88,85,082/-, on facts which were all there before him and his entire case is based merely on surrounding facts and circumstances. 19. Further even these facts and circumstances, we find, were adequately addressed by the assessee before him and also before the ld. CIT(A). The ld. CIT(A) has taken note of the explanation of the assessee on each anomaly noted by the AO, and given a detailed finding accepting the explanation of the assessee in his order. 20. Taking up first the anomaly noted by the AO that it was not possible to make sales to 223 customers in short span of 240 minutes on 08/11/16, the CIT(A) has dealt with the same at para 6.11 of his order as under: “6.11 On perusal of assessment order, it is observed that AO has proceeded to make addition of treating accounted sales in books of account as bogus sales through backdating on assumption that it was not possible to make such sale of huge jewellery post announcement of demonetization. In the present case, sales on 08/11/2016 was claimed to have been made for Rs 3.58 crore out of aggregate addition of Rs 7.88 crore. The following is the. few video and news items available in public domain justifying that post declaration of demonetization till the midnight of 8th November, 2016, there were huge rush of people to buy the jewellery all over the India. Sr. No Headline of News/video Link of Youtube Video 1 People rush to goldsmiths in Jalandhar to convert black currency into gold at midnight! https://www.voutube.com/wat ch?v=mep1rEP1rENTuKiW IT(SSA No.45 and 50 /Ahd/2021 14 2 People rush to buy gold jewellry after 500 & 1000 notes banned https://www.youtube.com/wat ch?v= bLfxEyWXVU 3 People take 'note' of 'change', rush to ATMs " and jewellery shops_Daijiworld Television https://www.voutube.com/wat ch?v=A 97EQ8RQ-Y0 The AO has observed that it was impossible to cater such huge customers in very short time, appellant has provided its modus operandi of doing sales on a particular day, how accounting was made etc., The reasons provided by appellant from the perspective of a prudent and pragmatic businessman as well as based on the advanced billing technology adopted by appellant, that due to unprecedented rush of customers post-demonetization the appellant realized a huge business opportunity and decided to keep showroom open till 12 o'clock of the night on 8th November 2016. The appellant realized that it would not be possible to cater such huge crowd of customers if the option of selection of ornaments of their choice is provided and such option of selection could also increase the risk of theft/ defalcation of Gold Ornaments from showroom and therefore the appellant decided not to give option of selection of jewellery but to give readily prepared packet of Gold Ornaments only; that the administrative staff and family members were instructed to keep aside all other work and to prepare such small package of gold ornaments, two persons were exclusively allotted the work of preparing and handling the bills to the customers through the computerized billing process, due to barcode labels on each and every jewellery/ornaments of showroom with all the requisite details of Jewellery for preparing bills mere scanning the barcode through barcode reader would fetch all the details of the jewellery on the ORNET Software for billing purpose and there is no need to enter the details of the jewellery and therefore billing process was quick and easy. The circumstantial evidences as referred supra and billing processes adopted to cater huge rush, AO's contention that it was not possible to make sale to 223 customers cannot be accepted. 21. As is evident from a bare perusal of the above he found the assessee’s explanation plausible of having managed its affairs in such a manner so as to grab the opportunity of huge rush of public to jewellers on account of demonetization announced by the Government which was acknowledged by reports in the public domain. No infirmity in the explanation of the assessee has been pointed out to us during the course of hearing, neither do we find any in the same. Therefore we find no infirmity in the order of the Ld. CIT(A) accepting the assesses explanation with regard to allegedly unusually large number of customers catered to by the assessee on one single day. IT(SSA No.45 and 50 /Ahd/2021 15 22. As for the anomaly noted by the AO finding the sales made in the months of demonetization being abnormally/unusually high as compared to that in the corresponding months of the preceding year or preceding months of the same year, the ld. CIT(A) has dealt with the same at para 6.18 of his order as under: 6.18 So far as comparison of sales made by AO in current year as well as preceding year including month to month comparison, The contention of the AO is not found tenable for the fact that comparability of previous year's data of appellant's business with the current year's data is not possible as the full- fledged retail business of the appellant was started from July, 2016 only. The said fact has not been denied by AO as well. Such retail sale business usually takes a period of 2 to 3 months for the sales to pick up. Further, as has already been held earlier, because of such unprecedented and unpredicted move of the government declaring demonetization of OHD (Old High Denomination) notes of Rs.500 and Rs. 1,000, the lack of immediate clarity with regard to the said scheme and the rife of rumors all over social and other medias, a large section of people all around the nation, in the fear of losing the value of money held by them in form of cash, rushed to the ornament showrooms for purchasing the gold ornaments / bullion so as to maintain the value of their cash in form of investment in gold. This peculiar aspect of the F.Y. 2016-17 makes the cash sales data of the demonetization period i.e. 08- 11-2016 to 31.12.2016 incomparable to the said data of corresponding period of F.Y.2015-16 along with the fact that the retail sales was started by the appellant only from July 2016. The said historic and peculiar aspects of F.Y.2016-17 do not make the increase in cash sales during the demonization period, in any manner, implausible and beyond belief. Furthermore, on perusal of the comparative data of Month of March for F.Y. 2016-17 and F.Y. 2015-16 as provided in the show cause notice dated 11.10.2018 as well as the Assessment Order, it is deduced that during the Month of March 2016 there was not a single amount of cash sales made by the appellant whereas in the Month of March 2017, the cash sales was Rs.1,43,50,263/-. Further, the hike in cash sales for the March'17 when compared to the preceding Month of February'17 was 1074.88%. However, no explanation was required by the AO with regard to the hike in the Month of March'17 in the show cause notice whereas the highest hike is witnessed in the said month of March'17 only based on both yearly and monthly comparison. This, calling a spade a spade, shows the selective approach that has been adopted in course of the assessment. Addition made based on such selective approach, if sustained, would be unjust, unfair and infirm in the eyes of law and therefore, such ground of addition is not found lawful and hence is not tenable. 23. The above anomaly was noted by the Ld.CIT(A) to be adequately explained by the unusual rush of public to buy jewellery during demonetization, which was acknowledged by reports in public IT(SSA No.45 and 50 /Ahd/2021 16 domain. We see no infirmity in the same nor was the Ld.DR was able to point out why the explanation of the assessee was unacceptable. Therefore the order of the Ld.DR accepting the explanation of the assessee for abnormally high sales made by the assessee during demonetization period is found to be in order. 24. As for the allegation of the AO of back-dating of the entries of sales resorted to by the assessee, which was based on forensic report of the digital data found during survey, the same was dealt with in para 6.22 to 6.26 of his order as under: 6.22 So far as allegation of back dating entries in ORNET Software and reliance placed on forensic report, AO has mainly contended that as per the standard, in FoxPro Database using the application named ORNET, the entries are appended sequentially as a record number which is automatically system generated based on actual time stamping and therefore, whenever any entries are made from front end screen of the application to the database, such entry is always added to the end (bottom) of the existing data in the database file. However, as further stated by the AO, the forensic report of the impounded data revealed that some entries of cash sales made were of a previous invoice and previous date but with actual time stamping of a later date. Such entries were considered as suspicious and not in correct sequence. AO further stated that such entries are repeated in the database till 22/01/2017 and therefore, he went on to make addition of such suspicions entries appearing in the Ornet Software from 08.11.2016 to 22.01.2017 the aggregate amount of which came to Rs. 7,88,85,082/-. 6.23 The AO had, with the same contention on the basis of which the impugned addition has been made, issued the show cause notice on 11.10.2018 against which appellant has filed its written submission dated 17/12/2018 as reproduced herein above. The appellant in reply to same had submitted that it is not only when the new i.e. fresh entry is made from front end screen of the application to the database that the addition to the end (bottom) of the existing data in the database file takes place and new transaction ID is generated but it is also when any old voucher is opened and "save" or "Print" button is clicked, under modification mode in order to give appropriate effects, ORNET, the software used by appellant for accounting purpose, adds new records in the same database which in turn creates new transaction ID in the table by deleting the old records. Further, in case if voucher is reopened and "print" button is pressed for the purpose of reprinting, the effect of "save" button will be generated, causing generation of a new record number and thus, its sequencing will also get changed as explained above. From this, the appellant made it clear that sequencing of sales entry IT(SSA No.45 and 50 /Ahd/2021 17 changes as and when any sales entry is either printed/Viewed or opened/closed after recording it in the ORNET database/software. In nutshell, it has been contended by the appellant that after the last made entry in the ORNET, the next entry/record can take place not only by making a new / fresh entry but the same can also take place by reopening and then saving or printing the already made i.e.old entry as well. This results in the change of sequence of entries and the old entry that has been reopened and saved later on is then viewed below the new/fresh entries that were made in the software actually after such old entry was reopened and resaved/printed. 6.24 The appellant has also provided an example in the Para 2.3(b) of the reply submitted to AO on 17.12.2018 so as to bring understating about the said situation. It has been demonstrated to the AO in the assessment proceedings that in first situation, the Voucher Number S/1 is recorded on date 1/5 / 2018 S/2 on 2/5/2018 S/3 also on 2/2/2018 S/4 on 3/5/2018 and S/5 on 5/5/2018 in that sequence. Thereafter, when in the second situation, the Voucher number S / 2 was reopened and then saved a new sequence was generated whereby Voucher number S / 2 which was reopened and saved got placed below Voucher Number S/5 with no change arriving in their date of record. Further, all the above contentions of appellant have been supported by the letter dated 14.12.2018 of D'soft Infotech Pvt Ltd i.e Developer of ORNET software/database wherein the above mentioned functionality of the Database/software is confirmed by the Developer. On understanding of the above facts and technical aspects of ORNET software, I am satisfied with the contentions provided by the appellant especially where no specific contradiction to the contentions of appellant has been made in the forensic report. The peculiar and exceptional aspects of the software have not been commented upon by the forensic audit team and only general aspects of the functionality of the software have been dealt with by them. Further, the software developer itself has provided the functionality details of the software which clearly corresponds with the contentions of appellant. The AO has neither considered the contentions of the appellant nor the letter/report submitted by the software developer at the time of passing order. It is observed on perusal of the AO's order that the submission of appellant dated 17.12.2018 has been reproduced by the AO in the said order, but no reason whatsoever has been provided as to why such explanations and contentions of appellant were not acceptable especially in view of the fact that the same was confirmed by the software developer itself. No reason was provided in the order as to why the functionality details of the software as provided by the software developer itself in letter dated 14.12.2018 confirming the contentions of appellant were not acceptable. If there was any doubt about the authenticity of the letter of software developer in the mind of AO or if there was any confusion with regard to any aspect of the same, the AO could, in the interest of justice, have asked the software developer to provide further details and explanations through the power conferred upon u/s 133(6) of the Act as the letter of developer dated 14.12.2018 had all necessary contact details and address of the developer for the said purpose. By providing the letter of software developer confirming the contention and IT(SSA No.45 and 50 /Ahd/2021 18 view of appellant, the appellant had duly discharged the onus of proof cast upon it. The AO on the other hand failed to bring on record any proof or material that would have effect of outweighing and rebutting the contentions of appellant duly supported by the letter of software developer. Therefore AO did not discharge the onus of proof. Therefore, the addition made by the AO without discharging the onus of proof cast upon it cannot be said to have given effect to the correct position of law and hence is unjust and unfair. 6.25 Further, the act of AO of not providing any explanation and reason for not accepting the contentions of appellant which was backed by logical and technical reasoning as well as necessary evidence in form of confirmation of expert i.e. software developer cannot be said to be in line with the principle of natural justice. The Hon'ble High Court of Punjab and Haryana in the case of Anupam Kapoor 299 ITR 0179has held as under: "....There was no material before the AO, which could have lead to a conclusion that the transaction was simplicitier a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the AO merely on surmises and conjectures. In the absence of any cogent material in this regard, having been placed on record, the AO could not have reopened the assessment. It is settled law that suspicion, howsoever strong cannot take the place of legal proof." In the ITAT Delhi bench 'C' Pavitra Realcon (P.) Ltd. v. Assistant Commissioner of Income-tax, Central Circle-32, New Delhi [2017] 87 taxmann.com 142 (Delhi Trib.) it has been held that even if how strong is the presumption/assumption, it could not be basis for any addition. 6.26 Further, I find the explanations and contentions of appellant satisfactory for the reasons given in Para herein above and for the fact that the said logical and technical explanations are also supported by the software developer itself and also that no specific contradiction with regard to the same is found in the forensic report as has been stated earlier. Further, I also find favour with the contention of appellant that in the case of periodic review of the books of accounts and compliance purposes, many entries need to be reopened for checking purpose as well as the adjustment /pending/rectification entries need also be passed, that such act of reopening and saving old entries and passing the pending/rectification entries in its original date in the software cannot be taken to consider such entries as non genuine and that such non-sequential entries appear throughout the year and not only during demonetization period. Having regard to the above discussed facts and in absence of any incriminating material found during the course of search and survey action and any dispute with regard to the adequacy of stock as discussed in Para herein above, the addition is not sustainable on this ground. 6.27 It is observed that in present case, while passing the assessment order, AO has not doubted purchases recorded in books of account or closing stock shown at year end and only treated accounted sales as bogus sales and liable for tax u/s 115BBE. However, this contention cannot be accepted IT(SSA No.45 and 50 /Ahd/2021 19 for the reasons that once sales are recorded in books of accounts and corresponding purchases are not in doubt, it cannot be subject matter of addition u/s 68 r.w.s 115BBE of the Act. Hon'ble Ahmedabad ITAT in case of Vishal Export in ITA No. 1684/Ahd/2004 dated 07.08.2009 held as under: "The assessee had made export of goods to M/s Arina worth of Rs.70,00,000/- in the A.Y.1998-99. The AO having only such information that the assessee had also made so called bogus export to M/s Arina, he alleged that the assessee is also involved in such kind of bogus export of goods by over invoicing and receiving money from Russia on large scale. The assessee submitted that the AO has just made an assumption that the assessee has also made bogus export to Russia merely on the basis of information that some parties are involved to make bogus export to M/s Arina, Moscow, however as a matter of facts the name of the assessee is not found in the proceedings carried out by the DRI, New Delhi. For other years similar allegations were made for some other genuine parties. The AO on such basis made addition of Rs.70,00,000/-, Rs.64,00,000/-, Rs., 1,06,00,000/- Rs.72,00,000/- in the A.Ys. 1998-99, 1999-00, 2000-01 and 2001-02 respectively after holding that the bogus export proceeds are nothing but the receiving back of money of the assessee's own money initially sent abroad through hawala. The assessee submitted before us that it had shown Rs.70,00,000/-, Rs.64,00,000/-, Rs., 1,06,00,000/- and Rs. 72,00,000/- for the A.Y.1998-99, Α.Υ. 1999-00, Α.Υ. 2000-01 and A.Y.2001-02 respectively in the Profit & loss account as sales which has been offered for taxation. The assessee also submitted that the AO has even accepted such turnover for working out deduction u/s 80HHC of the Act. The assessee further submitted that when it had already offered sales realization of Rs.70,00,000/-, Rs.64,00,000/-, Rs., 1,06,00,000/- and Rs.72,00,000/- for the Α.Υ. 1998-99, Α.Υ. 1999-00, Α.Υ. 2000-01 and A.Y.2001-02 respectively as sales and such income is accepted by the AO to be the income of the assessee for respective years, addition of the same amount once again u/s 68 of the Act would tantamount to double taxation of the same income. Having regard to the facts of the case, it was argued that addition in these assessment years is based on some information gathered in some other party's case and without concrete evidences concerning the assessee. In any case, this amounts to double taxation of the same income, when the assessee has already offered the same income in the Profit & Loss account as sales. 5. After hearing the rival contentions and going through the facts of the case, it is a fact that the AO has accepted such turnover for working out deduction u/s.80HHC of the Act. We find that when the assessee has already offered sales realization as sales and such income is accepted by the AO to be the income of the assessee for respective years, addition of the same amount once again u/s.68 of the Act would tantamount to double taxation of the same income. Accordingly, we upheld the order of CIT(A) on this common issue. This common issue of the Revenue's appeals is dismissed." IT(SSA No.45 and 50 /Ahd/2021 20 The Hon'ble Gujarat High Court in above case in Tax Appeal No 2471 of 2009 dated 03.07.2012 has held as under: "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. Before closing, however, one issue needs clarification. As noted earlier, C.I.T. (Appeals) had allowed the appeal of the assessee in toto. He, in fact, reversed the Assessing Officer's finding that the sale was bogus and that no export was made. On this basis, he not only deleted addition under section 68 of the Act, but also directed that the assessee shall be entitled to deduction under section 80HHC of the Act for such disputed amount also. This aspect of the matter was not decided by the Tribunal though both sides presented their rival contentions. In fact the Tribunal's finding that Assessing Officer's order would amount to double taxation proceeds on the basis that such amount of Rs.70 lakhs is deleted while working out section 80HHC benefits. If C.I.T. (Appeals)'s conclusion that the amount in question represented genuine exports sale was sustained, there was no question of double taxation. Ordinarily, therefore, we would have been inclined to remand the proceedings before the Tribunal for a finding on this issue. However, learned counsel for the assessee clarified that the assessee does not claim any deduction under section 80HHC of the Act to the extent of such disputed amount of Rs.70 lakhs. In other words, he agreed that the Assessing Officer's working out of the deductions under section 80HHC of the Act on the export sale of the assessee of Rs.585.21 crores against the original claim of the assessee of such deduction of Rs.585.91 crores is correct. He submitted that, in fact, in the present case, such diminution of the assessee's eligibility for deduction under section 80HHC of the Act would have no bearing on the assessee's ultimate tax liability. With respect to this last submission, we express no opinion. However, in view of a clear stand taken before us and the statement made, we are not required to remand the proceedings before the Tribunal to the above limited extent also."” 25. The assessee’s explanation with regard to the allegation of backdating of entry was that the date noted in the transaction was the date when the transaction was last opened either for recording/ editing or any such purpose. Therefore date recorded of transaction in the digital data did not necessarily represent the date of recording the transaction but represented the date when the transaction was last viewed. And on the basis of this date no inference of backdating IT(SSA No.45 and 50 /Ahd/2021 21 of transaction could therefore be arrived at. This fact was demonstrated also by the assessee to the AO during assessment proceedings. The Ld. DR was unable to point out any infirmity in the assessee’s explanation. We therefore do not find any infirmity in the order of the Ld. CIT(A) accepting assesses explanation with regard to the allegation of the AO of backdating entries of sales. 26. In view of the above we do not find any infirmity in the order of the ld. CIT(A) finding merit in the explanation given by the assessee of the anomalies and discrepancies noted vis-à-vis sales made of Rs.7,88,85,082/- prior and during de-monetization, and we completely agree with the ld. CIT(A) that the purchases and stock available with the assessee having not been disputed by the AO, the question of bogus sales being made therefore, does not arise. As also the fact that no actual excess stock was found by the Department during survey conducted on the assessee post-demonetization commensurate to the bogus sales alleged to have been made by the assessee. We have no hesitation therefore in confirming the order of the ld.CIT(A) deleting the entire sales of Rs.7,88,85,082/- on account of bogus sales. Ground No.1 raised by the Revenue is dismissed. Ground No.2 raised by the Revenue challenges the order of the Ld.CIT(A) restricting the addition made by the AO on account of excess stock found during survey and deleting entirely the addition made on account of excess cash found during survey. 27. The facts relating to the issue are that on survey conducted on the business premises of the assessee on 24-01-2017 physical stock taking of various items traded in by the assessee was done and IT(SSA No.45 and 50 /Ahd/2021 22 compared with the stock as per books which revealed various anomalies, which were confronted to the partner Sh Kishore Soni as under: IT(SSA No.45 and 50 /Ahd/2021 23 28. On the basis of the aforestated data of excess stock and unaccounted sales of the assessee, the addition it entailed to the income of the assessee was worked out by the AO amounting to Rs.1,14,24,765/- and was again confronted to the partner of the assessee firm as under: IT(SSA No.45 and 50 /Ahd/2021 24 IT(SSA No.45 and 50 /Ahd/2021 25 After seeking explanation of the assessee the entire amount of Rs. 1.14 Cr. was added to the income of the assessee. 29. The ld.CIT(A) in turn found that addition made included that on account of unaccounted sale of 18Ct gold diamond jewellery weighing 1063.05 gms noted from the shortage of physical stock of the same from the first floor of the business premises of the assessee. He also noted that while the AO had noted shortage of such stock by 1063.05 gms, the Registered valuer, during survey, had noted excess stock of 1510.210 gms of 18Ct gold diamond jewellery from first floor. Therefore considering both the data he held that there was actually excess stock of such jewellery to the extent of difference between that noted by AO and the registered jeweller of 447.157 gms. And accordingly while the AO had made addition of Rs.23,34 464/- on account of unaccounted sale of such jewellery, the Ld.CIT(A) held addition to be made on account of unaccounted investment in excess stock, which was computed to the tune Of Rs.9,81,957/-. Further noting that the addition made by the AO of Rs.1.14 Cr. included that on account of unaccounted sales to the tune of Rs.5,31,201/- he held the same could be attributable to unaccounted investments made in excess stock by the assessee and further reduced the addition made by the AO to this extent. His findings in this regard at para 8.4 -8.8 of his order is as under: 8.4 On the basis of statement of partner recorded during the course of survey as referred above, the Assessing Officer has made impugned addition, and has worked out unaccounted sale of 18CT diamond jewellery (as per Sr.No.iv in above para) as under: Particulars Qty in Gms Unaccounted sale of jewellery found from first floor (6310.210 being stock as per books-5299.03 being physical stock) 1011.207 IT(SSA No.45 and 50 /Ahd/2021 26 Unaccounted sale of 14 CT found from first floor being stock as per books as no physical stock was found 51.846 Total 1063.053 It is seen that the Assessing Officer has made addition on two grounds i.e. in respect of excess physical stock found in respect of certain items of jewellery and other one on account of unaccounted sale of certain other type of jewellery. The addition on account of discrepancy in stock as per above extract of statement of a partner aggregating to Rs 1,14,24,765 has been worked out as per the difference between the physical stock found on the ground and first floor of the showroom and stock as per books on the date of survey. 8.5 Further the appellant has contended that 18 Ct. Gold jewellery of 1510.210 grams as physically found by the IT department appointed registered valuer Shri Kamlesh S Nahar on the first floor of the showroom on the date of survey has not been considered - by the Assessing Officer while counting physical stock at the time of making addition of the excess stock on this count. In support the appellant enclosed extract of the Valuation report of registered valuer namely Shri S Nahar which is reproduced herein under - IT(SSA No.45 and 50 /Ahd/2021 27 It is observed that while computing unaccounted sales referred supra and as mentioned in statement recorded during the course of survey, Assessing Officer has considered physical stock of 5299.03 Gms in respect of 18 CT gold ornaments. Further on perusal of physical stock inventory prepared by registered valuer as on the date of survey, there was stock of 1510.210 Gms of 18 CT gold jewellery in addition to 5299.03 Gms but Authorised officer at the time of survey has not considered such physical stock of 1510.210 Gms. while arriving at the figure of shortage of stock and consequently working of the unaccounted income and therefore, the same is required to be taken into account for adjudicating this ground of appeal of the appellant. This contention of the appellant is found correct factually and legally also in view of the decision of Hon’ble Agra ITAT in the case of ACIT Vs Maya Trading Co 34 Taxman.com 144 wherein it was held that "Where assessee was able to show that admission made during survey by surrendering income on excess stock was incorrect, on basis of seized material itself, addition was unjustified". Hon'ble Delhi High court in the case of CIT VsDhingra Metal Works 196 taxman 488 has held as under: "Section 133A of the Income-tax Act, 1961 - Survey - Assessment year 2005-06- Whether though an admission made during survey is extremely important piece of evidence, it cannot be said to be conclusive and it is open to person, who has made admission, to show that it is incorrect - Held, yes - During survey operation at business premises of assessee-firm, revenue noticed some discrepancies in stock - As partner of assessee was not able to explain difference in stock at that time, he offered certain income for assessment - Subsequently, assessee submitted that said statement about stock was incorrect, and that impugned discrepancy had been reconciled - Consequently, assessee withdrew offer of additional income for assessment - Assessing Officer did not accept assessee's plea and assessed income as per statement given by partner - Whether as assessee had been able to explain discrepancy in stock found during course of survey, Assessing Officer could not have made said addition solely on basis of statement made by partner on behalf of assessee - Held, yes 8.6 To make it clarify further considering the above working, it is once again noted that the Assessing Officer has assessed unaccounted sale of 1063.053 Grams in respect of the 18 Ct. Gold Jewellery meaning thereby the accounted stock of 18 Ct. Gold Jewellery in the books of the appellant on the date of survey was found more than that of physically found stock by 1063.053 Grams. However, as discussed above, the of the appellant of 1510.210 grams of 18 Ct. Gold Jewellery found on the first floor not considered and included in the physical stock found (although evident from the valuer's report reproduced above) by the Assessing Officer being found acceptable ipso facto results into excess stock (i.e. physical stock over book stock) of the 18 Ct. Gold Jewellery by 447.157 grams. [1510.210 grams of stock not considered in physical count (-) 1063.053 grams found short] as on the date of survey. Accordingly, the value of such excess stock of 447.157 gms of 18 CT gold jewellery comes to Rs. 9,81,956/- (447.157 Grams *21960 per 10 grams as on the date of survey). The same is unaccounted investment in the said jewellery. IT(SSA No.45 and 50 /Ahd/2021 28 8.7 Having regard to the above discussion and after taking effect of 1510.210 grams of physical stock of 18 ct Gold Diamond jewellery not considered in the physical count, the addition to be made in respect of excess stock/unaccounted sale is re-worked out as under: It is pertinent to note that in the case of appellant, as per the reworking made above there is excess stock as per Sr.No.i to iv of the table above as well as shortage of stock as per the Sr.No.v & vi of the above table. Accordingly the excess stock is re-worked out on the basis of above working at Rs.95,41,057(83,29,844+32,611+ 1,96,645+,9,81,957) and shortage of the stock being unaccounted sale reworked out to Rs 5,31,201(2,10,601+3,20,600). 8.8 In this regard the appellant has submitted that the unaccounted sale proceeds of Rs.5,31,201/- as noted above could be considered as invested in the excess stock found of the gold ornaments at Sr.No.i to iv of the above table. In other words, no double addition to the extent of Rs.5,31,201/- on account of unaccounted sale proceeds could be made, over and above to the unaccounted investment of Rs.95,41,057/- being excess stock of the items at Sr.No.i to iv of the table above. The submission of the appellant is found acceptable factully as well on law as there could not be the double addition of the unaccounted sale proceeds. Thus, working of excess stock found during the course of survey proceedings in case of appellant in the above mentioned table amounts to Rs 95,41,057/- in place of Rs.1,14,24,765/-. IT(SSA No.45 and 50 /Ahd/2021 29 30. Before us the Ld. DR was unable to controvert the factual finding of the Ld. CIT(A) resulting in restricting the addition made by the AO on account of excess stock of Rs.1,14,24,765/- to Rs.95,41,057/-. He was unable to controvert the fact noted by the Ld. CIT(A) that the registered valuer had found excess physical stock of 18Ct. gold jewellery from first floor of the business premises of the assessee of 1510.210 gms which the AO had noted to be short by 1011.207gms. In the light of the same we do not find any infirmity in the order of the Ld.CIT(A) adjusting the data of stock of gold jewellery found from first floor premises of the assessee to this extent resulting in addition being restricted only to the resultant excess jewellery found of 447 147 gms. Also we do not find any infirmity in the Ld.CIT(A)’s order telescoping the addition made of investments in excess stock against the addition of unaccounted sales found to have been made by the assessee. In the result, we hold that the Ld.CIT(A) has rightly restricted the addition on account of excess stock found during survey to Rs.95,41,057/- 31. As for the issue of addition made account of cash found during survey, the facts are that while the books showed cash balance of Rs.15,96,561/- the physical cash found during survey was Rs. 2,62,600/-. 32. The assessee explained the same as attributable to cash purchases made out of the Books of the assessee and cash withdrawals, both of which were duly accounted for post survey and the cash purchases disallowed u/s 40A(3) of the Act by the assessee in the return of income filed. The AO was not convinced with the same but the Ld. CIT(A) found merit in the contention of the assessee and IT(SSA No.45 and 50 /Ahd/2021 30 deleted the addition made. The explanation of the assessee is reproduced at page 59 of the AO’s order as under: “3.1 With regard to the cash difference of Rs. 13,33,961/- found at the time of survey, we wish to state that physical cash found at the time of survey was Rs.2,62,600/- whereas cash as per books of accounts was Rs. 15,96,561/- as is evident on page no.18 of the statement of Mr Kishore K Soni. Further, out of the said cash difference of Rs.13,33,961/-, amount of Rs.5,93,082/- pertains to unaccounted cash purchase which is duly recorded in books of accounts post survey and disallowed u/s 40A(3) of the IT Act in the return of Income of AY 2017-18. With respect to remaining cash difference of Rs.7,40,879/- we wish to state that the said difference is due to unaccounted cash withdrawals made by the partners which is duly recorded in the books of accounts by the firm post survey. To substantiate abovementioned fact, we are attaching herewith copy of capital account of partners and copy of relevant pages of the cash book highlighting the entries of withdrawal by the partners and entries of payment made towards purchase vide Annexure- 5. Hence, we submit that the difference of cash has been duly considered in the books of accounts and thereby the said difference in cash stands explained and accordingly, your good self is requested not to make addition on this count. 3.2 Without prejudice to above, we wish to state that cash as per booksof accounts exceeds physical cash and it is not the case where physical cash exceeds cash as per books of accounts. Accordingly, it is not the case of unaccounted cash and thus no addition should be made in the hand of the assessee firm on account of difference of cash.” 33. The Ld. CIT(A)’s order accepting assesses explanation is at para 9.1 – 9.4 of his order as under: “9.1 I have carefully considered assessment order and submission filed by appellant. During the course of assessment proceedings, AO observed that survey was carried out at the premises of appellant and on the date of survey, it was found that physical cash was found at Rs 2,62,600 whereas cash as per books of account was Rs 15,96,561 and such facts are evident from Page No 18 of statement of Mr Kishor K Soni. It was contended that physical cash was found less than cash recorded in books of accounts hence it is not the case of unaccounted cash. However, this contention of appellant was not accepted by AO on the ground that appellant has given general reply. The AO has referred to reply to question No 30 wherein Mr Kishok K Soni has admitted such difference as unaccounted income of current year. 9.2 During the course of appellate proceedings, appellant has reiterated contentions as were raised before AO and contended that reconciliation between cash found during the course of survey and cash recorded in books of account was already provided to AO which is not found to be incorrect. The appellant has duly explained that there was sufficient cash balance and the same was in excess of physical cash found during the course of search, hence even if cash expenses are incurred by the appellant, the same are out of explained sources. IT(SSA No.45 and 50 /Ahd/2021 31 9.3 On careful consideration of entire facts, it is observed that appellant has explained difference between cash found during the course of survey and cash already reflected in cash book and AO has not brought any other material on record to prove that such reconciliation is incorrect. The Assessing Officer has not provided any evidence to prove his contention and in absence of same addition cannot be made moreover when appellant has proved that expenses are incurred out of explained sources of cash. In support of above argument reliance is placed on the decision of Hon'ble Kolkata ITAT in case of Subhas Brothers Jewellers (P.) Ltd. Reported in 51 taxmann.com 422 wherein it has been stated that merely because shortages had been noticed as compared to books, it could not be said that any undisclosed investment/money was made by assessee. As regards cash shortages, shortage has been found as compared to books. The cash might have been used for making unaccounted purchases or other purposes for which no cogent material is available. In such circumstances merely on conjectures or surmises addition under section 69A of the Act cannot be made." Hon'ble Pune ITAT in case of M/s Kamble Gold vs ITO in ITA No. 899/PUN/2019 dated 24th September, 2019 has held that when there is no evidence to show that the short cash was utilized elsewhere, addition on account of same cannot be made. Following are the relevant findings: "7. After hearing both the sides and perusing the said order of the Tribunal (supra), I find the para 5 of the said order of the Tribunal (supra) is relevant for the legal proposition that the said cash shortage can be given against the unaccounted purchase of jewellery. For the sake of completeness, the said para 5 of the order of the Tribunal (supra) is extracted hereunder:- "5. From the above paras, we find that on the date of survey, stock was found in excess of book stock to the extent of Rs.24,10,868/-and the cash was found short as compared to cash balance as per cash book to the extent of Rs.1,82,527/-. The AO has noted that the assessee firm has declared additional income of Rs. 24.20 Lakhs in the P&L account whereas no additional income was declared in respect of short cash found of Rs. 1,82,527/- and therefore, the AO made addition of short cash found of 1,82,527/-. We fail to understand the basis of making this additions. In fact, in the absence of any other evidence regarding the user of such cash available as per book but not found physically at the time of survey, the same should have been considered as utilizer for purchasing goods which was found in excess of book stock and therefore, even in respect of excess book stock, extra income to be declared or added could have been reduced to the extent of short cash found. But it is seen that the assessee has declared total amount of excess stock found as additional income. Be that as it may but in our considered opinion, no addition is called for in respect of short cash found at the time of survey in the facts and circumstances of the present case and hence, we delete the same." 8. Thus, like in the above said case, the Revenue did not have any evidence to show that the short cash was utilized elsewhere. Considering the above and following the parity of reasoning, I am of the opinion that the said issue should be allowed in favour of the assessee. Therefore, it is directed to the Assessing Officer and the CIT(A) to delete the entire addition made on account of unaccounted IT(SSA No.45 and 50 /Ahd/2021 32 purchase of jewellery as well as cash shortage. Thus, the ground no.2 raised by the assessee is allowed." 9.4 It is observed that AO has made entire addition based upon admission by one of the partners during the course of survey. This is not the case that where physical cash was found higher than cash recorded in books of account. Appellant has submitted explanation of cash difference which is not found to be incorrect by AO. Hon'ble Delhi ITAT in the case of Sahil Study Circle (P.) Ltd. [2017] 88 taxmann.com 333 wherein it was held that "Where assessee had reconciled cash receipts found during survey and had explained receipt as that of inter-branch transfer, addition of such receipts solely on basis of statement made by assessee at time of survey was to be deleted." The decision of Hon'ble Gujarat High court in the case of Vipul Kumar Kittlal 33 taxman.com 470 relied upon by AO cannot be made applicable because in said case, assessee was unable to submit evidences in support of its claim whereas in present case, cash found actually was lower than cash recorded in books of accounts and in such cases, addition cannot be made as held by Hon'ble ITAT referred supra. Even appellant in present case has provided explanation for such difference which is not found to be incorrect by AO. Even appellant has already disallowed cash purchase u / s 40A(3) of the Act for Rs 5,93,082/- which was not accounted in books of account and once such amount is already disallowed while filing return of income, to that extent, addition of unexplained cash cannot be made.” 34. We do not find any infirmity in the order of the Ld. CIT(A) deleting the addition made on account of physical cash found short during survey. The Ld. CIT(A) has corroborated the assesses explanation of the utilization of cash being reflected subsequently post survey in the books of the assessee showing the withdrawal from partners account and utilizing cash for purchases which were disallowed u/s 40A(3) of the Act in the return of income of the assesse. Since the Ld. DR was unable to contradict the findings of the Ld. CIT(A) as above, we see no reason to interfere in the order of the Ld. CIT(A) deleting the addition of cash found short during survey. 35. In effect the order of the Ld.CIT(A) both on account of restricting addition of excess stock to Rs.95,41,057/- as well as deleting addition of cash found short of Rs.13,33,961/- is upheld by us. Ground of appeal No.2 is accordingly dismissed. In effect appeal of the Revenue is dismissed. IT(SSA No.45 and 50 /Ahd/2021 33 36. We shall now take up the assessee’s appeal for adjudication. IT(ss)45/Ahd/21 Assessees appeal Ground No.1 challenges the addition made by the Ld.CIT(A) on account of Gross Profit to the tune of Rs. 96lacs after rejecting the Books of accounts of the assessee u/s 145 of the Act. 37. Perusal of the order of the ld. CIT(A) at para 6.46 reveals that during appellate proceedings he asked the assessee to file break-up of GP ratio earned pre & post de-monetization period, and he found that the GP prior to de-monetization was much higher than as compared to post de-monetization. However, no cogent reason or justification were given by the assessee. Further, noting the fact that excess stock was found with the assessee during survey, he rejected the books of accounts of the assessee. Further, noting that the excess stock was found during the survey to the tune of Rs.1,14,24,765/-, which he found justified to the extent of approximately Rs.96 lakhs, he estimated the GP for the post-demonetization period to be Rs.96 lakhs, and made addition of the same to the income of the assessee. His finding in this regard are at 6.46 to 6.50 of his order as under: “6.46 During the course of appellate proceedings, as there was variation in gross profit rate in pre demonetisation period and post demonetisation period upto date of survey proceedings, appellant was asked to explain the decline in G.P. rate along with supporting evidences and to show cause as to why the books of account may not be rejected u/s 145 of I.T. Act. The appellant has provided break up of such GP ratio which is tabularised herein below: Period GP (Rs.) SALES (Rs.) RATIO 01-04-2016 to 07-11-2016 (Pre-Demonetization Period) 2,49,67,319 27,58,69,977 9.05% 08-11-2016 to 23-01-2017 (Post-demonetization Period and upto date of survey) 84,42,374 13,24,04,307 6.38% 01-04-2016 to 31-03-2017 (F.Y. 2016-17) 3,90,29,093 48,23,45,260 8.09% IT(SSA No.45 and 50 /Ahd/2021 34 On perusal of relevant facts on records, it was noticed that there is considerable decline in Gross profit rate during post demonetisation period and upto date of survey proceedings in case of appellant as compared to pre-demonitisation period. The appellant has provided details of GP Ratio of last years to prove that current year's GP ratio is better than earlier period but such GP ratio of current year is not comparable with earlier years for the reason that appellant has started retail sale only from July 2016 only and such retail sale was not there in earlier years as appellant was exclusively carrying on whole sale business. The appellant has not provided any cogent justification for variation in GP ratio for pre demonetisation period and subsequent period upto date of survey. The past and current year's data comparison based upon explanation as provided by appellant for justifying such GP rate reduction can be considered as nothing more than the sophistries and argumentative novelty on its part used to escape from its obligation of providing the factual reasons for such decline. 6.47 It is pertinent to note that during the course of survey, excess stock was found and same was admitted to be not accounted for in books of accounts which itself proves that books of account maintained by appellant is not showing true and correct picture of the financial affairs and the same is not reliable. 6.48 During the course of search proceedings carried out at the premises of appellant, no incriminating evidences were found which could prove that appellant had been carrying out any activity other than jewellery business or earned any undisclosed income from other sources to say that the income from such undisclosed sources had been utilized for investment in excess stock of jewellery found during the course of survey. 6.49 It is pertinent to note that during the course of assessment proceedings, AO has made addition of Rs 1,14,24,765 being excess stock found during the course of survey proceedings and such addition on merits is required to be restricted to Rs 96,00,000/- (excess stock found of Rs.95,41,057/- and the same is estimated to Rs.96,00,000/) for the reasons discussed in subsequent paras of this order. This unaccounted investment in the excess stock found is got further supported with the fact that the lower gross profit rate shown in the post demonetisation period was not correct and fair. Even during the course of survey proceedings, it was found that certain entries in cash book were missing which made available cash balance as per cash book higher than actual available cash at the time of survey. These facts clearly prove that books of accounts are not properly maintained and same are liable to be rejected u/s 145 of the Act and reasonable Gross profit need to be estimated. IT(SSA No.45 and 50 /Ahd/2021 35 6.50 As appellant has failed to provide cogent reasons for variation in GP ratio, coupled with the fact that certain entries were not found recorded in books of account as discussed supra and also that there was unexplained investment in excess stock found as on the date of survey for which appellant has failed to provide any credible explanation and considering this aspect, and other irregularities as pointed out in survey proceedings and assessment proceedings, it is reasonable to estimate Gross Profit of Rs 96,00,000/- for post demonetisation period to date of survey in addition to what has already been disclosed in books of accounts. Thus, the Gross Profit addition of Rs.96,00,000/- under the head of income from business' disclosed by appellant is made. In other words, the addition on account of low gross profit rate in post demonetization period to the tune of Rs.96,00,000/- linked with excess stock found during the course of survey is confirmed and relief is granted for the balance addition.” 38. The ld. Counsel for the assessee was unable to advance any convincing arguments before us to disturb the finding of the ld.CIT(A). 39. In view of the same, the ground of appeal No.1 raised by the assessee against the confirmation of the addition of Rs.96 lakhs on account of GP hereby stands dismissed. Ground of appeal No.2 challenges the order of the Ld.CIT(A) confirming the addition made on account of excess stock to the tune of Rs.95,41,057/- 40. We have exhaustively dealt with this issue in ground No.2 of the Revenues appeal above at para Nos. 27-30. 41. The ld. Counsel for the assessee was unable to point out any infirmity in the order of the ld. CIT(A) which was based on factual finding recorded by him of excess stock found during survey. We have noted that the Ld. CIT(A) has been just enough in allowing relief to the extent he found the excess stock duly explained by the assessee as noted by us above while dealing with the Revenues appeal on this issue. IT(SSA No.45 and 50 /Ahd/2021 36 In view of the same, we see no reason to interfere in the order of the ld. CIT(A) confirming the addition on account of surplus stock found amounting to Rs.96 lakhs, though telescoped in the addition made on account of GP to the said extent. Ground of appeal No. 2 is thus dismissed. The assessee’s appeal is accordingly dismissed. 42. In effect, both the appeals of the assessee and Revenue are dismissed. Order pronounced in the Court on 10 th May, 2024 at Ahmedabad. Sd/- Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 10/05/2024 vk* आदेश क琉 灹ितिलिप अ灡ेिषत आदेश क琉 灹ितिलिप अ灡ेिषतआदेश क琉 灹ितिलिप अ灡ेिषत आदेश क琉 灹ितिलिप अ灡ेिषत/Copy of the Order forwarded to : 1. अपीलाथ牸 / The Appellant 2. 灹瀄यथ牸 / The Respondent. 3. संबंिधत आयकर आयु猴 / Concerned CIT 4. आयकर आयु猴(अपील) / The CIT(A) 5. िवभागीय 灹ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड榁 फाईल / Guard file. आदेशानुसार आदेशानुसारआदेशानुसार आदेशानुसार/BY ORDER, उप उपउप उप/सहायक सहायक सहायक सहायक पंजीकार पंजीकारपंजीकार पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation- 25-4-2024 / 09.05.2024 2. Date on which the typed draft is placed before the Dictating Member 09.05.2024 3. Date on which the approved draft comes to the Sr.P.S./P.S. -09.05.2024 4. Date on which the fair order is placed before the Dictating Member for Pronouncement...10.05.2024.. 5. Date on which the file goes to the Bench Clerk :10.05.2024........... 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order..................... 8. Date of Despatch of the Order..................