JCIT, (OSD) CENTRAL CIRCLE-26, NEW DELHI V. SHRI RAM HARI RAM, DELHI

ITA 1543/DEL/2021

AI Insights

The case involves the appeal by the Deputy Commissioner of Income Tax, Central Circle-26, New Delhi against M/s. Shri Ram Hari Ram concerning the assessment year 2017-18. The primary issues in the appeal were the deletion of an addition of Rs. 2 crores on account of estimated cash sales of gold and silver during the demonetization period, and the deletion of an addition of Rs. 16,06,335 treating interest paid as unexplained expenditure. The Assessing Officer had made these additions based on the suspicion that the sales were not genuine and were only recorded to cover up cash deposits made during the demonetization period. However, the CIT(A) deleted these additions, a decision which was upheld by the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314346 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: Agson Global (P.) Ltd. Vs Assistant Commissioner of Income Tax, Central Circle-28, New Delhi [2020] as reported in 115 taxmann.com 342
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAYAINDER SINGH SINDHU
• Assessee Lawyers: ASHOK JAIN
• Keywords: Business income; Unexplained cash credit; Unexplained expenditure; Income from undisclosed sources; Principle of natural justice; TDS; Search and seizure; Accommodation entries; Loose papers; Bogus
• Section: 143(3); 132; 153A; 68; 131; 69C; 133A

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 1543/Del/2021 (Assessment Year: 2017-18) DCIT, Central Circle-26, New Delhi Vs. M/s. Shri Ram Hari Ram, 1568-59, Dariba Kalan Chandni Chowk, Delhi (Appellant) (Respondent) PAN: AADFS7036D Assessee by : Shri Ashok Jain, CA Shri Ashu Goel, CA Shri Naman Gupta, Adv Revenue by: Shri Dayainder Singh Sindhu, CIT DR Date of Hearing 10/03/2025 Date of pronouncement 07/05/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.1543/Del/2021 for AY 2017-18, arises out of the order of the Commissioner of Income Tax (Appeals)-29, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 10352/2019- 20 dated 27.08.2021 against the order of assessment passed u/s 153A r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 31.12.2019 by the Assessing Officer, DCIT, Central Circle-26, New Delhi (hereinafter referred to as „ld. AO‟). 2. The first issue to be decided in this appeal is as to whether the ld CIT(A) was justified in deleting the addition made in the sum of Rs. 2 crores on account of estimated cash sales of gold and silver during demonetization period in the facts and circumstances of the instant case. The 2nd issue ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 2 involved is deletion of addition made u/s 69C of the Act in the sum of Rs. 16,06,335/- treating interest paid as unexplained expenditure. 3. We have heard the rival submissions and perused the material available on record. The assessee is engaged in the business of sale/ purchase of gold and diamond jewellery. The assessee filed return of income for AY 2017-18 on 01.11.2017 declaring total income of Rs. 97,91,450/-, which was duly processed u/s 143(1) of the Act. A survey u/s 133A of the Act was conducted at the business premises of the assessee firm on 10.11.2016. Subsequently, a search u/s 132 of the Act was conducted at on the assessee firm on 23.03.2018. Pursuant to the search, notice u/s 153A of the Act stood issued to the assessee on 15.07.2019. The assessee filed the return u/s 153A of the Act on 08.08.2019 disclosing the return of income of Rs. 97,91,450/-. During the course of survey operation on 10.11.2016, wherein, discrepancies were found with regard to sales of gold on 08.11.2016 to cover up unexplained cash of Rs. 2,00,97,526/- and cash sales of silver during October 2016 to cover up unexplained cash of Rs. 2,41,51,751/-. The ld AO observed total cash of Rs. 5.90 crores stood deposited by the assessee in Specified Bank Notes (SBNs) during the demonetization period. The assessee gave the date wise cash sales together with the daily cash balance available with it to explain the source of cash deposited. The assessee also gave the details of customers to whom the sales were made from 01.11.2016 to 10.11.2016 in respect of sale of gold, silver and diamond. The ld AO observed that around 312 people had purchased jewellery from the assessee on 08.11.2016 which is very abnormal when compared to sales made on other date i.e. 05.11.2016. Accordingly, the ld AO concluded that the sale proceeds shown by the assessee is not genuine and the same is shown only to cover up cash deposits made during demonization period, consequently, resulting in an ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 3 estimated addition of Rs. 90 lakhs on account of cash sales of gold, and Rs. 1.10 crores on account of cash sales of silver as unaccounted business income. The ld AO having treated the same as unaccounted business income sought to tax the same u/s 68 r.w.s. 115BBE of the Act. 4. The ld AO during the course of assessment proceedings noticed that as per tally data seized during the course of search operation, the assessee firm has shown amount of Rs. 16,06,335/- on account of interest to be paid to M/s. Fitworth Constructions Pvt. Ltd against receipt of unsecured loan of Rs. 1.70 crores in earlier years. The ld AO concluded that this interest expenditure of Rs. 16,06,335/- is nothing but unexplained expenditure as M/s. Fitworth Constructions Pvt Ltd was found to be providing accommodation entry which got unearthed during the course of search operation in the case of Luv Kush Group on 23.03.2018. With this observation, the ld AO proceeded to treat the interest expenditure of Rs. 16,06,335/- as unexplained expenditure u/s 69C read with section 115BBE of the Act. 5. The ld CIT(A) deleted the addition made on account of estimated cash sales of gold and silver in the sum of Rs. 2 crores by observing as under:- “9. Ground Nos. 5 to 8 pertain to the addition of Rs. 2,00,00,000/- made u/s 68 of the Act on account of cash sales of gold and silver. A Survey u/s 133A of the Act was carried on the premises of the appellant on 10.11.2016 Subsequently, a search & seizure operation u/s 132 of the Income-tax Act, 1961 was carried out on 23.03.2018 on Luv Kush Group of cases. The case of the assessee was also covered u/s 132 of the Income tax Act, 1961. The Assessee is engaged in the business of jewellery. During the course of search operation at the business premises of the assessee, the value of jewellery found at the Business premises of M/s. Shri Ram Hari Ram, 1658- 59, Daribakalan, Chandni Chowk, Delhi, came to Rs. 60,51,48,590/-. At the time of recording of statement u/s 132 of the Income Tax Act, 1961 on 23/03/2018, Shri Rajat Gupta, one of the partners of M/s Shri Ram Hari Ram stated that the aforesaid items of jewellery found at the business ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 4 premises at the time of search and seizure operation on 23/03/2018 belonged to M/s Shri Ram Hari Ram. However, minor difference of stock was detected during the time of valuation vis-à-vis the books of accounts found in the business premises. During the course of assessment proceedings the assessee explained the minor difference in the stock. Also cash of Rs. 52,63,250/- found at the office cum Business premises of M/s Shri Ram Hari Ram at 1658-59, DaribaKalan, New Delhi, ShriRajat Gupta stated in his statement recorded u/s 132(4) of the Income Tax Act, 1961 on 23/03/2018 that the cash found belonged to M/s. Shri Ram Hari Ram and that as per the books of accounts of the firm cash was Rs.49,80,551/-only. For the cash difference of Rs. 2,82,699/-(Rs.52,63,250 (-) Rs.49,80,551) he explained that the reconciliation statement will be submitted in due course. The assessee Firm could not submit any reconciliation statement during the post search investigation. However, during the course of assessment proceedings, necessary details reconciling the same were filed. 9.1 As mentioned above, a Survey u/s 133A of the IT Act was conducted prior to the search on 10.11.2016 at the business premises of the assessee firm and bill books, bunch of loose papers, hard disks and DVRs for Gold Section and Silver Section were found and impounded. As per the assessment order the assessee firm deposited cash in its bank account. During the course of survey operation certain observations have been made by the AO regarding to the cash sales of gold on 08/11/2016 and cash sales of silver in October, 2016. That there was an abnormal increase in silver sale from 25.10.2016 to 30.10.2016 and gold sale on 08.11.2016. As per the assessment order, the AO has mentioned that the assessee has shown its own unaccounted cash of Rs. 2,00,97,526/- as cash from cash sales of gold on 08/11/2016 and has shown its own unaccounted cash of Rs. 2,41,51,751/- as cash from cash sales of silver in October, 2016. The AO has mentioned that the assessee has shown huge cash sale of Rs. 2,40,08,589/ on 08.11.2016, that the number of customers shown to have made purchases on 08.11.2016 i.e. 312 was also abnormally very high and that the average cash purchase by each customer is Rs.76,951/- which was also very high as compared to normal days. Further, the AO has mentioned that this amount of cash sale Rs. 2,40,08,589/- made on 08.11.2016 was almost 10 times the highest sale of Rs. 23,86,718/ the assessee has made in the month of November, comparing it to sale on 04.11.2016 and has made statistical comparisons, as mentioned in assessment order supra. The AO has concluded that the sale on 08.11.2016 did not reflect normal business trend of the assessee, that 08.11.2016 was a normal day like any other day and there was no reason for such a huge increase in cash sale and that the only extra-ordinary thing that happened on the day was demonetization. Further the AO has discussed the analysis of the impounded material of the Survey and has mentioned that the bills of the appellant for 08.11.2016 did not have the name, address or mobile number of the buyer, that all the said bills were of cash sales and were on average ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 5 of higher amount as compared to the sale prior to the date. In the concluding Para of the assessment order, the AO has stated that on consideration of all the facts of the case and explanation of the assessee, entire sale of Silver of Rs.2,41,51,751/- and Gold of Rs 2,00,97,526/- could not be considered as bogus only on the ground of unusual pattern of invoices. That the Diwali and the day of announcement of demonetization were unusual events and possibility of higher sale of gold and silver on such occasion could not be overruled. However, as per the AO, the sale of silver to the extent of Rs. 2,41,51,751/- and Gold of Rs. 2,00,97,526/- appeared on higher side and were unverifiable, which were introduction of unaccounted business income of the assessee in the form of cash sales in the books. On the basis of the analysis from various tabular charts, the AO has made an estimated addition of Rs. 90,00,000/- on account of cash sales of gold and an estimated addition of Rs. 1,10,00,000/- on account of cash sales of silver treating the same as unaccounted business income of the assessee introduced during demonetization period. 9.2 During the appellate proceedings the appellant has submitted that during the course of Survey u/s 133A of the Act on the appellant on 10 .11.2016 and during the course of Search u/s 132 of the Act on the appellant on 23.03.2018, no incriminating material relating to the transactions as per the Audited Financial Transactions were found. The appellant has pleaded that the estimated addition of Rs. 90,00,000/- on account of cash sales of gold and an estimated addition of Rs. 1,10,00,000/- on account of cash sales of silver were not based on the incriminating material found during the course of search or survey. 9.3 I have carefully gone through the standard operating procedures laid down by the CBDT regarding verification of cash transaction relating to demonetization. The said Instructions are: Ist instruction issued on 21/02/2017 vide number 03/2017, 2nd instruction issued on 03/03/2017 vide number 4/2017, 3rd instruction issued on 15/11/2017 vide F.No. 225/363/2017-ITA.II and the last on 09/08/2019 vide F.no.225/145/2019- ITA.II. The above instructions provide guidance to the kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases The instructions speak about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of wide variation be found between these statistical analyses. The instruction dated 21/02/2017 provides that the assessing officer will look into the basic relevant information eg. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction has also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the sales during the period November to December 2016 as compared to earlier year. ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 6 Non- availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Therefore, it is imperative to examine as to whether the case of the assessee falls into these parameters are not. 9.4 The appellant has submitted that comparative charts were called for by the Assessing Officer during the assessment proceedings in order to analyse the business pattern viz a viz cash sales. The appellant has filed its written submissions, which were also submitted during the assessment proceedings. From the said submissions the comparative charts are reproduced below and the trend emerging from the said charts is also analysed hereunder: Chart No. 1.: Percentage of cash turnover viz a viz total turnover over the past 5 years. Details of Trend of Sale of Jewellery/Bullion on Cash Basis during last 6 year F.Y. SECTI ON UNDE R WHICH ASSES SMENT MADE TOTAL SALES CASH SALES % of Cash Sales CASH DEPOSITED IN BANK ASSESSMENT ORDER F.Y. 2011- 12 143(3) 33,64,47,39 6 20,97,91,686 62.35 20,22,38,535 Copy of Assessment Order & CIT(A) Order enclosed F.Y. 2012- 13 143(3) 32,84,22,56 3 20,80,00,742 63.33 19,99,87,000 Copy of Assessment Order & CIT(A) Order enclosed F.Y. 2013- 14 143(1) 34,31,32,60 8 22,19,14,941 64.67 21,32,69,000 F.Y. 2014- 15 143(1) 32,02,42,49 1 20,58,81,699 64.29 19,90,12,000 F.Y. 2015- 16 143(1) 31,96,43,53 6 21,50,89,847 67.29 19,94,95,000 F.Y. 2016- 17 143(1) 47,47,63,05 9 21,54,30,223 45.38 19,76,84,300 The above chart depicts that cash sales are a regular feature of the assessee company‟s business and that the cash sales are incurred in all the years, since the inception of business. The average cash sales since FY 2011-12 till FY 2016-17 have been around Rs 21 Crores. It is seen that in earlier years the cash sales of the assessee was as high as 67% in the AY 2016-17 and average cash sales during the previous 5 years has always remained above 60% of the total sales. During the impugned financial year 2016-17 the percentage of cash sales to total sales is only 45% of the total sales. Chart No. 2 Total turnover for the quarter ended Dec. 2015 and Dec. 2016. Total Cash Sales for the Month of Oct to Dec 2015 8s 2016 ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 7 Particulars Cash Sales Credit Sales Total Sales Sales during Oct to Dec 2015 7,81,69,280 3,02,56,845 10,84,26,125 Sales during Oct to Dec 2016 9,54,23,959 8,57,51,618 18,11,75,577 From the above table it is seen that the total sales have increased in the quarter October to December in the impugned year from 10,84,26,125 to 18,11,75,577 i.e by 67.1% whereas the cash sales have increased from 7,81,69,280 to 9,54,23,959 which is an increase of 22%. Thus , during the said quarter of AY 2017-18, the cash sales as a percentage, of total sales has declined. Chart No. 3 : Comparison of month wise average daily sales during F.Y. 2015-16 & 2016-17. DETAILS OF TOTAL SALES AND AVERAGE SALES PER MONTH MONTH 2016-17 2015-16 TOTAL SALES AVG SALES PER DAY TOTAL SALES AVG SALES PER DAY APRIL 1,34,26,520 4,47,551 2,44,19,379 8,13,979 MAY 2,09,48,884 6,75,770 2,23,90,273 7,22,267 JUNE 1,90,62,151 6,35,405 2,33,84,843 7,79,495 JULY 1,70,82,587 5,51,051 2,79,66,139 9,02,134 AUGUST 2,41,66,248 7,79,556 2,19,15,896 7,06,964 SEPTEMBER 1,92,51,668 6,41,722 2,84,77,524 9,49,251 OCTOBER 7,45,43,048 24,04,614 3,55,17,715 11,45,733 NOVEMBER 6,32,69,371 21,08,979 4,02,28,859 13,40,962 From the above chart it is seen that the assessee company has reported turnover for the financial year 2016-2017 (Upto November, 2016) which is comparable with the turnover of the immediately preceding previous year both in terms of monthly sales as well as average daily sales. Further the net sales in the months of October 2016 are more than the sales in the month of November 2016. Thus it is not the case wherein the sales are high only in the month of November 2016. Chart No. 4 Comparative data of Cash Sales and Cash Deposits Oct. Nov. 2016 and 2015. Month Op. Cash in Hand Cash Sales Cash Deposited In Bank Cash Withdrawn from Bank Closing Cash in hand October’2016 22,35,318 5,59,94,787 2,20,50,000 3,21,23,720 Till 08.11.2016 3,09,88,398 45,00,000 - 5,83,44,623 ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 8 From the comparative of cash sales made by the assessee during Nov till 08.11.2016, it can be seen that it is not unusual for the assessee to make sales in cash and deposit the said cash into the bank account in so far as the cash sales during October 2016 was Rs. 5,59,94,787/- which is much more than cash sales during Nov ember 2016 till 08.11.2016 which was Rs. 3,09,88,398/-. This is a usual trend for the jewellers who have cash sales during the festive months/ marriage season from Durga Pooja till New Year. Chart No.5 : Comparative charts of Silver Purchased and Silver Sales during the last six years F.Y. SECTION UNDER WHICH ASSESSMENT MADE TOTAL SILVER PURCHASE TOTAL SILVER SALES F.Y. 2011-12 143(3) 8,25,12,160 9,15,41,330 F.Y. 2012-13 143(3) 4,76,37,812 7,51,60,105 F.Y. 2013-14 143(1) 4,82,45,730 7,61,15,267 F.Y. 2014-15 143(1) 6,79,16,392 6,89,72,515 F.Y. 2015-16 143(1) 5,07,53,256 4,77,49,671 F.Y. 2016-17 143(1) 5,97,18,813 8,64,89,478 The above chart reflects that during the year under consideration, silver sales were Rs. 8,64,89,478/- which were lower than the silver sales for the F.Y 2011-12 which were Rs. 9,15,41,330/-. The silver sales have been almost consistent from FY 2012-13 to 2014-15. Therefore, silver sales were Rs. 8,64,89,478/- during the impugned year and the silver cash sales for Rs. 2,41,51,751/- made in the month of October 2016 are not exceptional.. Chart No. 6 : Details of Opening and Closing Stock of Gold and Silver during last six years. A.Y Stock as on Gold Silver 2017-18 31.03.2017 37,43,24,695 6,92,80,138 2016-17 31.03.2016 34,50,91,887 6,35,55,837 2015-16 31.03.2015 32,13,83,235 4,78,65,508 2014-15 31.03.2014 29,87,14,833 3,67,76,390 2013-14 31.03.2013 27,54,85,342 8,54,34,487 2012-13 31.03.2012 23,33,76,141 11,10,86,554 From the above chart it is seen that the assessee has regularly maintained stocks of gold and silver at Quantity and Value , and for the year under consideration is more than the sales made in October 2016. The appellant has submitted the details of Gold and Silver Purchase and Sales during the year along with copies of Sale and Purchase Bills and the copy of VAT Returns along with copy of trading account as on 01.10.2016. The stock of silver as per trading account for the period 1.04.2016 to 01.10.2016 shows silver stock valuing Rs. 5,24,81,022/- i.e. 1181.631 kg. Thus the sales of Silver of Rs. 2,41,51,751/- in October 2016 were out of stock of silver of Rs. ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 9 5,24,81,022/- ie 1181.631 kg available with the assessee which was duly accounted for in the books of accounts and verified by the survey team . Chart No.7 : Comparative sale and cash deposit of assessee are as under:- CASH DEPOSITS IN BANK 1.1 (a) Total cash deposit in Bank in F.Y. 2015-16 199,495,000 (b) Total cash deposit in Bank from 01.04.2015 to 08.11.2015 110,545,000 (c ) Total cash deposit in Bank from 09.11.2015 to 31.12.2015 88,950,000 1.2 (a) Total cash deposit in Bank in F. Y. 2016-17 198,234,300 (b) Total cash deposit in Bank from 01.04.2016 to 08.11.2016 98,524,300 (c) Total cash deposit in Bank from 09.11.2016 to 31.12.2016 62,510,000 From the above chart it is evident that during the current year , the total cash deposit in the bank was of Rs 19,82,34,300/- which was slightly less than the cash deposit in the AY 2016-17 of Rs 19,94,95,000/-.It is a usual practice in the business of the assessee to deposit cash generated out of cash sales into the bank account. The assessee had deposited cash as high as Rs. 20,22,38,535/- in Assessment Year 2012-13. Chart No.8 Month wise cash sales and cash deposits from 01.04.2015 to 08.11.2015 Month wise Op. Cash in hand Cash Sales Cash deposited in Bank Cash withdraw alfrom the Bank Closing cash on hand April, 2015 3,469,556 16,107,343 17,800,000 - 791,631 May, 2015 791,631 13,400,249 11,950,000 - 1,685,527 June, 2015 1,685,527 10,890,055 8,075,000 - 4,157,959 July, 2015 4,157,959 17,462,015 19,560,000 - 1,580,346 August, 2015 1,580,346 14,984,692 14,600,000 - 1,454,946 September, 2015 1,454,945 20,634,265 16,300,000 - 2,860,931 October, 2015 2,860,931 25,924,787 20,260,000 - 4,935,452 November till 08.11.2015 4,935,452 7,259,593 2,000,000 - 9,512,549 Month wise cash sales and cash deposits from 01.04.2016 to 08.11.2016 Month wise Op. Cash in hand Cash Sales Cash deposited in Bank Cash withdraw al from the Bank Closing cash on hand April, 2016 4,083,773 8,930,691 4,884,000 7,513,949 May, 2016 7,513,949 14,047,908 17,750,000 3,663,799 June, 2016 3,663,799 11,911,109 10,800,000 450,000 4,717,346 July, 2016 4,717,346 11,322,922 7,150,000 600,000 9,366,937 ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 10 August, 2016 9,366,937 10,930,004 13,300,000 6,440,877 September, 2016 6,440,877 15,528,640 18,090,300 2,235,318 October, 2016 2,235,318 54,334,657 22,050,000 32,123,720 November till 08.11.2016 32,123,720 30,818,571 4,500,000 58,344,623 The above Chart reflects the month wise deposit of cash in the Bank by the appellant comparing the periods April to 8th November of the years 2015 and 2016. Duirng the period 01.04.2015 to 08.11.2015 total amount of Rs 11,05,45,000/- and for the period 01.04.2016 to 08.11.2016 total amount of Rs 9,84,24,300/- was deposited. The amounts deposited in the year 2015 for the months of August, September, October and November were Rs. 1,46,00,000/-, Rs. 1,63,00,000/-, Rs. 2,02,60,000/- and Rs. 20,00,000/- respectively. The amounts deposited in the year 2016 for the months of August, September, October and November were Rs. 1,33,00,000/-,Rs. 1,80,90,000/-, Rs. 2,20,50,000/- and Rs. 45,00,000/- respectively. Thus the figures reflect fairly comparable trends for the corresponding periods of both the years. 9.5 From the analysis of the above charts it is observed that cash sales are a normal part of business in the assessee's trade, that in the assessee's trade there are both lean and peak periods therefore comparison of per day sales gives misleading results, that quarter ending December every year sees a lot of festivals as well as marriages and the assessee's business gets almost 40% of its business during this period, that comparative data of cash sales / collections during similar periods / dates compares favourably from year to year with normal business fluctuations and that the assessee company's account properly record and reflect these sales. The charts reflect that the appellant is regularly incurring cash sales. It is a normal business practice in the business of jewellery that part sales are done in cash. The percentage of cash sales to the total turnover which was 67.29% for the period ended 31.03.2016 have come down to 45.38% for the period ended 31.03.2017 i.e. in the AY 2017-18. Further the total sales have increased in the quarter October to December in the impugned year from Rs. 10,84,26,125/- to Rs. 18,11,75,577/- i.e by 67.1% whereas the cash sales have increased from Rs. 7,81,69,280/- to Rs. 9,54,23,959/- which is an increase of 22%. Thus, during the said quarter of AY 2017-18, the cash sales as a percentage of total sales has declined. Again it is seen from the above charts that the sales during the month of November 2015 amounted to Rs. 4.02 crores whereas the sales during the month of November 2016 were of Rs 6.32 crores, the increase in sales is due to the extraordinary demand for the jewellery on the night of 8.11.2016 due to demonetisation. It may also be seen that the turnover for the FY 2015-16 was Rs. 31.96 crores whereas the turnover for the FY 2016-17 was of Rs. 47.47 crores. ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 11 Thus, taking into account the increase in turnover during the current year to the year 2015-16, there is no extraordinary spike of sales in November 2016 as compared to November 2015. The analysis of all the charts do not reflect any wide variation in the sales or cash sales incurred by the appellant in the month of November 2016. Thus it cannot be inferred that the appellant has booked non existing sales in its books post demonetisation. 9.6 The method of estimation adopted by the AO to determine the unexplained sales is also not correct. It is a matter of fact that jewellery buying in India is high during the festival and marriage season and turns lull otherwise. The cash sales versus non cash sales are also totally dependent on the nature of the customer. The principle of law is that when primary evidence is available, it cannot be discarded to prefer an estimate. In this case, the primary evidence as banked upon by the Assessee to support his entries is not contradicted. No evidence or inaccuracy has been brought on record by the Assessing Officer before rejecting the same. It is a matter of fact that the transactions of sales which are a part of the returns submitted by the appellant to the other taxation authorities. 9.7 The Hon'ble ITAT Delhi in the case of Agson Global (P.) Ltd. Vs Assistant Commissioner of Income Tax, Central Circle-28, New Delhi [2020] as reported in 115 taxmann.com 342 has dealt with the similar facts and has pronounced that where cash was deposited by the assessee, who was engaged in purchase and sale of dry fruits etc., in the bank post demonetization, which was treated by the AO as unaccounted income; on the basis of comparative sales with earlier years, no discrepancy in stock, details of purchases and sales, filing of VAT returns etc. the said deposit cannot be added u/s 68 of the Act. 9.8 The AO has made an ad-hoc estimated addition of Rs. 90,00,000/- on account of unaccounted business income as cash sales of gold u/s 68 which is not based on incriminating material found during the course of search or survey. From the sales chart of the assessee as reproduced supra, it is seen that majority of sales of appellant takes place as cash sales. In comparison to the average cash sales during the previous years have been above 60% of the total sales during the impugned financial year 2016-17 the percentage of cash sales to total sales is only 45% of the total sales. It is a matter of fact that on 08.11.2016 all jewelers kept their shops opened post announcement of demonetization, and there was huge rush of customers to buy jewellery to utilise the old currency lying with them. Thus the assessee was able to make sales of Gold Jewellery of Rs. 2,00,97,526/ on 08.11.2016. It is further seen that it is usual practice in the business of the assessee to deposit cash generated out of cash sales into the bank account. During the period 01.04.2015 to 08.11.2015 total amount of Rs 11,05,45,000/- and for ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 12 the period 01.04.2016 to 08.11.2016 total amount of Rs 9,84,24,300/- was deposited. During the course of survey bill wise details of cash sales of gold jewellery made by the assessee on 08.11.2016 which was impounded. The sales of Rs. 2,00,97,526/- made on 08.11.2016 of Gold was out of stock of gold available with the assessee. The chart of stock of gold and silver of the appellant has been mentioned in prepares. It is found that during the Financial Year 2016- 17 the assessee had regularly maintained stock of Gold at quantity and value much more than the sales made on 08.11.2016. During the course of survey the stock of Gold was valued and verified with reference to the books of accounts and was found to be in order. During the course of search, nothing incriminating was found regarding the purchases, stock and sales made by the assessee on 08.11.2016. The bills of cash sales of gold on 08.11.2016 and stock register of Gold were impounded by the survey team and after verifications nothing incriminatory has been brought on record to suggest that sales of Gold made on 08.11.2016 were unaccounted. 9.9 The AO has made an ad-hoc estimated addition of Rs. 1,10,00,000/- on account of unaccounted business income as cash sales of silver u/s 68 which is not based on incriminating material found during the course of search or survey. From the perusal of the Chart No.5 in pre paras, it is seen that during the year under consideration silver sales were of Rs. 8,64,89,478/- which were comparatively in tune to the trend from FY 2011- 12 to FY 2014-15. Thus the silver cash sales for Rs. 2,41,51,751/- made in the month of October 2016 out of total silver sales for FY 2016-17 of Rs. 8,64,89,478/- are not unusual. The assessee being in the business of jewellery had sufficient stock of Silver in the shop. The Stock maintained by the appellant for the 6 years has been tabulated at Chart 6 in pre paras. The sales of Rs. 2,41,51,751/- made in the month of October 2016 of Silver was out of stock of silver available with the assessee. The details of Silver Purchase and Sales during the year along with copies of Sale and Purchase Bills and the copy of VAT Returns along with copy of trading account as on 01.10.2016 have been submitted by the appellant. The stock of silver as per trading account for the period 1.04.2016 to 01.10.2016 shows silver stock valuing Rs. 5,24,81,022/-. This working is based on books of accounts as verified and impounded during survey 10.11.2016. During the course of survey on 10.11.2016 the stock of silver was valued and verified with reference to the books of accounts and found to be in order. ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 13 Regarding the search on the appellant nothing incriminating has been brought on record about the purchases, stock or sales made by the assessee in October 2016. Accordingly it is inferred that the sales of Silver of Rs. 2,41,51,751/- in October 2016 were out of stock of silver of Rs. 5,24,81,022/- available with the assessee which was duly accounted for in the books of accounts of the assessee and was verified by the survey team During the course of survey or search on the appellant, nothing incriminatory was found which has been brought on record in the assessment order to suggest that any sales of silver made in October 2016 was unaccounted. 9.10 It is common practice in the jewellery business to deposit cash generated out of cash sales into the bank account. This is evident from the Chart No.7 in pre paras. From the said it is seen that during the current year, the total cash deposit in the bank was of Rs. 19,82,34,300/- which was slightly less than the cash deposit in the AY 2016-17 of Rs 19,94,95,000/- It is a usual practice in the business of the assessee to deposit cash generated out of cash sales into the bank account. The assessee had deposited cash as high as Rs. 20,22,38,535/- in Assessment Year 2012-13, 9.11 It may be noted that it has not been proved that the appellant was backdating invoices. Also, no deficiency in stock was found either during the course of search or survey on the appellant. No incriminating documents were found during the course of search or survey to indicate that there was bogus billing of purchases. There is no finding of stock being short of the appellant. Books of Accounts are audited and all the purchase and sales are duly vouched and no defect was pointed out by AO and books of accounts have not been rejected by the AO. The Sales of the appellant match with the sales declared in the VAT returns. The VAT returns were not revised post demonetization. 9.12 Cash sales & corresponding cash deposits into the bank accounts of the Assessee have been a regular feature of the Assessee's business since the past several years. This is visible from the details of cash sales and cash deposits made by the Assessee in the past Financial Years viz. F.Ys 2011-12 to 2015-16 as reflected in Chart 1 on prepages. The same trend has continued after the demonetization period i.e. in January to March 2017. 9.13 In the case it is not that the cash deposited in the bank during the demonetization period was in excess of what was available in the cashbooks. Nothing contrary to the entries recorded in the cashbooks was found in course search or during the course of survey in the case of the assessee of the Assessee. The books of account of the Assessee have been audited and have not been rejected by the AO u/s 145(3) of the Act. The stock position depicted in the books of account has thus been accepted. ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 14 Thus the cash sales were made out of the accounted stock. It is not the case where the physical stock found in the course of search was in excess of the book stock, which could have probably indicated at the possibility of recording of bogus cash sales. The cash sales are duly supported by relevant vouchers and bill books, which were produced in course of the assessment proceedings and bill books, and gold and silver purchase register were also impounded during the course of survey, and nothing adverse was found. The figure of cash sales offered by the Assessee in its Return of Income for F.Y. 2016-17 has not been disturbed by the AO. Since the cash sales recorded in the books of the assessee have been accepted by the AO, the corresponding cash deposits made out of such cash sales cannot be rejected and deemed to have arisen on account of income from unexplained sources. Also no incriminating material was found in course of search or survey to suggest that the assessee had indulged in any other unaccounted business activity leading to generation of unaccounted cash. 9.14 In the practice of book keeping the purchases, sales and the stock are interlinked. 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 has accepted the sales and the stocks. Accordingly the sales already credited in the assessee's books of accounts as revenue receipt and offered for taxation cannot be taxed again u/s 68 of the Act as unexplained cash credit. 9.15 In view of the above facts and discussions and respectfully following the decision of ITAT Delhi in the case of Agson Global (P.) Ltd. Vs Assistant Commissioner of Income Tax, Central Circle-28, New Delhi [2020] as reported in 115 taxmann.com 342, the addition of Rs. 2,00,00,000/- is deleted and this ground of appeal of the assessee is allowed.” 6. None of the aforesaid factual findings could be controverted by the revenue with cogent evidence before us. The sales actually made by the assessee in cash as well as credit have been duly reflected by the assessee in its profit and loss account and in the income tax return. Hence, any addition made on account of cash sales with or without any basis including estimated additions would only result in double addition. Hence, we do not find any infirmity in the order of the ld CIT(A) in deleting the addition. ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 15 7. With regard to addition u/s 69C of the Act in the sum of Rs. 16,06,335/-, the ld CIT(A) deleted the addition by observing as under:- “8. Ground No. 4 pertains to the addition of Rs. 16,06,335/- made u/s 69C of the Act. The AO has mentioned in the assessment order that as per tally data seized during the course of search, the assessee had shown an amount of Rs. 16,06,335/ being interest to be paid to M/s Fitworth Constructions Pvt. Ltd. against receipt of unsecured loan of Rs. 1,70,00,000/- taken by it in the earlier year. The AO has stated that during the course of recording of statement Sh. Mahendra Sethia confirmed and admitted that M/s Vagmi Financials Pvt. Ltd. (earlier known as M/s Fitworth Constructions Pvt. Ltd.) was one of the paper companies which was operated by him for providing accommodation entries to the beneficiaries. Accordingly, an amount of Rs.16,06,335/- was treated as unexplained expenditure u/s 69C and added back to the total income of the assessee by the AO. 8.1 The unsecured Loan of Rs. 1,70,00,000/- was received by the appellant company during the earlier A.Y 2016-17 from M/s Vagmi Financials Pvt. Ltd. through account payee cheque which was refunded back in A.Y 2018-19. The said loan was accounted for in Audited Financial Statements and Return of Income of the appellant for the A.Y 2017-18. The appellant during the year under consideration has paid interest on the said loan amounting to Rs.16,06,335/- after deduction and deposition of applicable TDS. That the Loan was fully repaid during the FY 2017-18 through banking channel along with applicable interest @ 9% after deduction and deposition of TDS in F.Y 2017-18. 8.2 M/s Vagmi Financials Pvt. Ltd. had given unsecured loan amounting to Rs. 1,70,00,000/- to appellant company out of their Audited Net Worth comprising of their Share Capital and Reserves and Surplus. It is seen that Net Worth of the company as per the Audited Financial Statements of the company as on 31.03.2016 are multiple times more than the unsecured loan given to the assessee company. Further, it is seen from the submissions of the appellant that the company M/s Vagmi Financials Pvt. Ltd. is in business of giving loans and that the loan given to assessee company is small percentage of total loans and advances made by Vagmi Financials Pvt. Ltd. That the company M/s Vagmi Financials Pvt. Ltd. is assessed to Income Tax with PAN Number AAACF7741C and is active company as per Certificate obtained from Registrar of Companies, Ministry of Corporate Affairs. Regarding the genuineness of Unsecured Loan the appellant has submitted that the appellant company had paid Interest @9% on unsecured loan amounting to Rs. 16,06,335/-, that the appellant company had duly deducted and deposited the applicable TDS @10% on Interest Paid of Rs. ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 16 16,06,335 and that the said loan was fully repaid during the F.Y 2017-18 through banking channels. The appellant has submitted the documents regarding the Identity & Creditworthiness of lender Vagmi and genuineness of transaction. Regarding the Identity of Vagmı the appellant has submitted copies of its Income Tax Return, Bank Statement, Audited Financial Statements as on 31.03.2016 and Confirmation. Regarding the creditworthiness the appellant has further submitted the Audited Financial Statements alongwith Copy of Audited Balance Sheet and Copy of Bank Statement showing source of Money. About the genuineness of transaction the appellant has submitted that the said unsecured loan has been received from company through normal banking channel by way of account payee cheques which is duly reflected in the bank account of appellant company, interest has been duly paid @9% applicable market rates and Confirmation for F.Y 2017-18 that the said loan was repaid and interest @ 9% was duly paid in full along with due deduction and deposition of applicable TDS. 8.3 It is also a fact that during the course of search U/s 132 there was no incriminating material found indicating that cash formed basis of unsecured loan to assesse company or contribution from assessee formed sub-source of unsecured loan Neither did the lender Vagmi or its Director or Shareholder deposed during the course of search that the unsecured loan given to appellant company was bogus. Thus there is no adverse material to doubt the credibility and authenticity of documents/evidences available on record regarding the Identity and Creditworthiness of Vagmi and genuineness of transaction. 8.4 Further, the appellant has submitted that it is trite law that where since no incriminating evidence against assessee was found or seized during course of search so as to attract provisions of section 153A proceedings, no additions could be made on basis of statement which was recorded under section 131 much later after search. The appellant has relied upon the following judgements. i) Saumya Construction (P.) Ltd. [2017] 81 taxmann.com 292 (Gujarat) ii) Sunrise Finlease (P.) Ltd. [2018] 89 taxmann.com 1 (Gujarat) iii) Moon Beverages Ltd. ITA No. 115 to 118/Del/2018 dated 27.11.2020 (Del-ITAT) iv) Hi Tech Residency (P.) Ltd. [2011] 257 Taxman 390 (Del) 8.5 The appellant has denied having ever made any transaction with or through Mahender Lal Sethia or Praveen Aggarwal or any entity in which they were directors or shareholders. The statements of Praveen Agarwal and Mahenderlal Sethia were recorded u/s 131 after conclusion of search behind the back of the appellant company without providing opportunity to rebut, which have been retracted by the deponents. Since the statements were not confronted to the appellant and those people were not made available for cross examination it makes those statements inadmissible for ITA No. 1543/Del/2021 M/s. Shri Ram Hari Ram Page | 17 assessment in view of the judgment of Apex Court reported at Andaman Timber Industries vs. CCE Civil Appeal No. 4228 of 2006 wherein it is held that \"Failure to give the assessee the right to cross-examine witnesses whose statements are relied up results in breach of principles of natural justice. It is a serious flaw which renders the order a nullity\". 8. None of the aforesaid factual and legal findings could be controverted by the revenue with cogent evidence before us. We find that the ld CIT(A) has given a categorical finding that interest paid in the sum of Rs. 16,06,335/- is already recorded in the books of account of the assessee. We find that in order to treat the said expenditure as unexplained, it is bounden duty of the revenue to state that the said expenditure was incurred without having explainable source. It is not the case of the revenue in the instant case that the said interest expenditure has been incurred by the assessee outside the books or incurred without having explainable source. Hence, in our considered opinion, the provisions of Section 69C of the Act per se cannot be made applicable for the same. We do not find any infirmity in the order of the ld CIT(A) granting relief to the assessee in this regard. 9. In the result, appeal of the revenue is dismissed. Order pronounced in the open court on 07/05/2025. -Sd/- -Sd/- (ANUBHAV SHARMA) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/05/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "