KULBHUSHAN SAHTANI,NEW DELHI V. ITO,WARD-51(5), NEW DELHI

ITA 4066/DEL/2024

AI Insights

The case involves Kulbhushan Sahtani, a sole proprietor of M/s. B. Bhushan Gems, who appealed against the order of the Commissioner of Income Tax (Appeals) which upheld the addition of INR 43,50,250 to his income for the assessment year 2017-18. This addition was made by the Assessing Officer under section 68 of the Income Tax Act, 1961, alleging that the cash deposits made during the demonetization period were unexplained. The Tribunal examined the records, including the sales and stock registers, and found no discrepancies that would justify the addition. The Tribunal noted that the cash sales and corresponding deposits were consistent with the assessee's business activities and were duly recorded in the books of account.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717562 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 03-09-2024
• Other Referred Cases: CIT v. Simon Carves, Shiv Raj Gupta Vs. Commissioner Of Income Tax, Kailash Jewellery House, Ramesh Chander Rajput, Satya Pal Shiv Kumar, Aditi Gems N Jewellery, S. Balaji Mech-Tech Pvt. Ltd., ACIT Central Circle-5, New Delhi vs Shiv Naresh Sports Pvt. Ltd., Rakesh Malhotra, Delhi vs ITO, Fine Gujranwala Jewellers, New Delhi vs ITO, Hirapanna Jewellers
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: R.K. GOYAL; SHERRY GOYAL
• Keywords: Business income; Opportunity of being heard; Income from undisclosed sources; Bogus purchase; Commercial expediency; Principle of natural justice; Bogus
• Section: 143(3); 68

Judgement Text

"ITA No.4066/Del/2024 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “C” BENCH: NEW DELHI BEFORE SHRI SUDHIR KUMAR, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.4066/Del/2024 [Assessment Year : 2017-18] Kulbhushan Sahtani, 2525/7, Bedanpura, Karol Bagh, New Delhi-110005. PAN-BKNPS5543L vs ITO, Ward-51(5), New Delhi APPELLANT RESPONDENT Appellant by Shri R.K.Goyal, AR & Ms. Sherry Goyal, Adv. Respondent by Shri Om Prakash, Sr.DR Date of Hearing 22.05.2025 Date of Pronouncement 14.08.2025 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by the assessee against the order dated 05.07.2024 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No.CIT(A), Delhi-17/10746/2019-20 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 29.12.2019 passed u/s 143(3) of the Act pertaining to assessment year 2017-18. 2. Brief facts of the case are that the assessee is an individual and is sole proprietor of M/s. B. Bhushan Gems and engaged in the business of trading of jewellery. The assessee has filed the return of income for the year under appeal on 03.11.2017, declaring total income of INR 9,26,020/-. The case of the assessee was Printed from counselvise.com ITA No.4066/Del/2024 Page | 2 selected for scrutiny for the reason that huge cash was deposited during demonetization in SBN. The AO issued notices from time to time asking the assessee for filing certain information with respect to the source and genuineness of the cash deposited in SBN during the period of demonetization and after considering the replies by assessee, the AO observed that there was abnormal increase in sales in the month of October, 2016 which is not possible looking to past history of assessee and therefore, he made the addition of INR 43,50,250/- being 25% of cash deposit of INR 1,74,01,000/- in SBN during the demonetization as unexplained cash deposits u/s 68 of the Act and further invoked the provision of section 115BBE of the Act. 3. Against this order, the assessee filed appeal before Ld.CIT(A) who dismissed the appeal of the assessee. Therefore, the assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. “On the facts and circumstances of the case, the order passed by the Ld. Commissioner of Income Tax (Appeals) ('CIT(A)') and Assessing Officer ('AO') is ex-facie arbitrary, illegal and bad in law, without affording proper opportunity of being heard, also against the provisions of the Income Tax Act, 1961 ('The Act'), decision of the Hon'ble Courts, CBDT instructions and principle of natural justice and thus forcing the Appellant into frivolous litigation. 2. Ld. CIT(A)/AO erred in not framing assessment order like a quasi- judicial authority as per principles laid down by the Hon'ble Supreme Court in the case of CIT v. Simon carves (105 ITR 205) that held that the taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not a partisan manner. 3. The CIT(A)/AO has grossly erred on facts as well as in law in assessing the income at Rs.52,76,270 as against the returned income of Rs.9,26,020. Printed from counselvise.com ITA No.4066/Del/2024 Page | 3 4. On law, facts and circumstances of the case, the Ld. CIT(A)/AO has grossly erred in making addition of Rs. 43,50,250 under section 68 r.w.s. 115BBE of the Act in respect of cash deposit in bank merely on possibility of manipulation in the figures of cash sales recorded in the books of accounts 5. The CIT(A) erred in making his observations on Pages 52 to 56 without rebutting the detailed submission given vide letter dated 01.05.2024 in the paperbook filed before CIT(A). (i) The CIT(A) erred on Page 52 of his order observing that \"a prudent businessman in the course of business shall deposit money in the Bank in one-go whereas it was deposited in piece meal\" without realizing that it is his commercial decision as when to deposit or not and moreover, it is a common knowledge, that there were long queues after demonetisation for depositing cash, a fact ought not to be ignored by the CIT(A) (ii) The CIT(A) erred in giving his observation on Page 53 of his order that \"the above explanation is very general in nature and the sales should have been uniform throughout the year\" whereas the Appellant gave specific reasons like attending prestigious international fair on gem and pearl fair held at Hongkong in March 2016; obtaining certificate from Principal CCIT, Delhi as Govt Approved valuer in October, 2016 (month of sales which have been doubted without disbelieving purchases and accepting that stock got reduced after sales(item wise stock register) (iii) The CIT(A) erred in giving his observation on Page 53 of his order that \"when the AO did not accept that there is an adverse or abnormal increase in sales during the demonetisation when compared to earlier period, the Appellant could not prove its case with necessary evidence\" without appreciating that principally no addition can be made merely on comparing the results with earlier year and without placing on record any incriminating material and in the business there is always a variation from year to year and such an addition is in the realm of conjecture and surmise. (iv) The CIT(A) erred in giving his observation on Page 53 of his order that \"recording of cash balance in the cash book on 09.11.2016 is an afterthought\" merely on comparing the sales with earlier years and other observations on Para of Page 53 & 54 defies any logic and challenging the business decision of the Appellant and the decisions of Hon'ble Supreme court Shiv Raj Gupta Vs. Commissioner Of Income Tax(Supreme Court) 425 ITR 420 (SC) who held \"The test of commercial expediency would have to be adjudged from the point of view of the businessman.\" and the case laws relied upon on pages 54 and 55 of his/her order are out of context that have no bearing on the case of the Appellant. (v) The CIT(A) has erred in making observations at Pg 55 of his/her order that \"the undoubted fact involved in this whole exercise of the appellant is bringing in unaccounted cash in the form cash sales into their books of account, whether such cash belongs to the appellant or to others. Printed from counselvise.com ITA No.4066/Del/2024 Page | 4 By bringing in, such unaccounted money into books the appellant tried to give the transaction a colour of trading in gold, and caused loss to the exchequer to the extent of taxes on such unaccounted cash,\" purely based on assumptions, conjectures and surmises, and without considering the fact that the cash deposited is out of sale proceeds that have been recorded in the Appellant's books of account and have been offered to tax. (vi) The CIT(A) has erred in making observation at Page 55of order that \"the appellant could not establish that the source of such deposit was the sales receipts. This amount was received in cash and there was no third- party evidence to justify his claim and further that the assessee has not furnished the details relevant stock register entries, cash book, purchase ledger, purchase bills and sales invoices etc.\"whereas requisite details were uploaded before Ld. AO on 11.12.2019 and also before CIT(A) on 01.05.2024 and thus both AO and CIT(A) and further the CIT(A) made erroneous observation that\" the assessee did not place on record any evidence to controvert the finding of the AO\" without pinpointing what kind of evidence was required to be furnished by the assessee after submission of all details on 11.12.2019 and also before CIT(A) on 01.05.2024and hence, did not act like a quasi-judicial authority that calls for considering the submission filed by the assessee, before passing the order instead of saying that no details were furnished. (vii) The CIT(A) at Pg 56 of the order has erred in arriving at a wrong conclusion by observing that \"there is booking of sales which is non- existent and thereby unaccounted money of the appellant in old currency notes (SBN) have been pumped as unaccounted money\" without noticing that in case of cash sales within the limits permissible by law in any trade or business, there isneither any legal requirement nor any customer can be forced to submit proof of identification and thus violated the decision of jurisdictional High Court in the case of CIT-II vs. Jindal Dyechem Industries Pvt. Ltd. ITA 283 of 2011 and ITA 343 of 2011, though relied upon before the AO. (viii) The CIT(A) has erred in arriving at a conclusion at Page 56 that \"there is increase in sales in the month of October 2016 and justifying the addition\" without noticing that there is no certainty in any business about spurt in sales in any of the month and moreover, there is no reason to make an addition on such understanding and without prejudice to above, the Appellant gave sufficient reasons before AO and thus ignoring the details submitted by way of a paper book dated 01.05.2024 and by not appreciating the steps taken by the assessee to increase the business which included getting registration as a Govt. Registered Valuer with effect from 04.10.2016, participation in International Diamond, Gem and Pearl Fair held at Hongkong, introduction of new design and variety of jewellery, advertisement, establishing social contacts, and increasing credibility which are very crucial in trade of Jewellery and hence, CIT(A) erred in calling the explanation as general in nature without understanding the nature of business of the Appellant. Printed from counselvise.com ITA No.4066/Del/2024 Page | 5 (ix) The CIT(A) has erred in ignoring the chart of year wise cash sales and gross sales mentioned in Para viii on page 8 of written submission dated 18.12.2019 which has been reproduced by CIT(A) that even prior to the demonetization, the percentage of cash sales to gross sales varied between 31 percent to 60 percent in A.Y. 2013-14 to 2016-17 while in the year under consideration it was only 26 percent and duly supported by the verified purchases and stocks. (x) The CIT(A)/AO has erred, in presuming 25 percent of the amount of cash deposited by the Appellant during the demonetization period as bogus sales on estimate basis without rebutting the documents and details furnished by the Appellant and it is illogical and illegal to make addition on estimate basis. (xi) The AO has erred in ignoring that there cannot be any sales without stock and purchases and in the case of assessee all the purchases are duly supported by proper bills of purchases and accounted for in books of accounts and all the details of purchases, sales and stock with copies of ledgers accounts were submitted vide letter dated 10.12.2019before the AO and vide Paperbook dated 01.05.2024 before the CIT(A). (xii) The CIT(A)/AO has erred in ignoring that quarterly return of VAT or Service tax or GST filed by the assessee do not lead to the conclusion that the Appellant had managed cash sales before October 2016 and no motive could be attached without placing any material on record. (xiii) The CIT(A)/AO has grossly erred in invoking provisions of section 68 in respect of alleged unexplained source of cash deposit in bank account even when section 68 can only be invoked for a cash credit found in the books of accounts whereas a deposit in bank account cannot be said to be a cash credit in books of accounts. (xiv) The CIT(A)/AO erred in making addition under section 68 despite that no defect in books of accounts, submissions and documents filed during assessment proceedings, have been pointed out in the impugned order. 6. The Appellant craves leave to add to, amend, alter, delete, modify or substitute any of the above grounds.” 4. Before us, Ld.AR for the assessee submits that the assessee has maintained complete books of accounts and during the course of assessment proceedings, all the details as called for were filed before the AO. For this, he drew our attention to page 117 to 180 of the Paper Book which contained detailed submissions filed on various dates alongwith Annexures. According to Ld.AR, the Printed from counselvise.com ITA No.4066/Del/2024 Page | 6 assessee has filed the sale ledger accounts of the parties from whom purchases of above INR 5 Lakhs was made, GST returns, tax audit report and the stock details etc. which were filed from time to time. He further submits that the assessee got registered with the Income Tax Department registered valuer in terms of certificate of registration issued by Ld. Pr. CIT, New Delhi dated 04.10.2016 and accordingly, after getting this registration, the assessee made extensive advertisement through public media which has inspired confidence of the customers and thus, resulted into higher sales in the month of October, 2016 & November, 2016 upto the date of demonetization. He further submits that the assessee was on pleasure trip with his family during the period from 6th to 9th November, 2016 during which the demonetization was announced and therefore, it cannot be said that there was substantially high sales on the day when demonetization was announced by the Hon’ble Prime Minister. He submits that during the course of assessment proceedings vide reply dated 11.12.2019, the assessee has also filed the stock summary, copy of the same is placed at page 44 and submits that there was sufficient stock available as and when the sales were made. Regarding the abnormal cash sales, Ld.AR brought to our attention to the chart submitted before the AO wherein the assessee has tabulated the sales in the year under appeal and four immediately preceding years, as per the same cash sales was ranging between 31% to 60% of the total sales made and during the year under appeal, the cash sales was of 46% of the gross sales which is not higher as compared to preceding years where such sales were never doubted by the Revenue. Ld.AR Printed from counselvise.com ITA No.4066/Del/2024 Page | 7 lastly submits that the AO has accepted the trading results and sales has not been doubted however, the cash deposited out of the sales realization was held as unexplained money as 25% of the same is added which is contrary to the facts that once the sales is admitted, the realization of the such sales could not be doubted. Ld.AR also filed a detailed submission wherein reliance is placed on the following judgements:- (i) ITO, Ward-51(5), Delhi vs Ramesh Chander Rajput in ITA No.1189/Del/2022 [AY 2017-18] dated 03.05.2024; (ii) Satya Pal Shiv Kumar, New Delhi vs ACIT, Circle-47(1), New Delhi in ITA No.3736/Del/2023 dated 12.03.2025; (iii) CIT vs Kailash Jewellery House in ITA No.613/2010 (Delhi High Court); (iv) ITO vs Aditi Gems N Jewellery in ITA No.3748/Del/2023 (AY 2017-18) dated 09.05.2024; (v) S. Balaji Mech-Tech Pvt.Ltd. vs ITO, Ward-22(1), New Delhi in ITA No.556/Del/2024 [2024] 116 ITR (Trib) 31 dated 25.09.2024; (vi) ACIT Central Circle-5, New Delhi vs Shiv Naresh Sports Pvt.Ltd., New Delhi in ITA No.2665/Del/2022 dated 12.03.2025; (vii) Rakesh Malhotra, Delhi vs ITO, Ward-36(4), Delhi in ITA No.3571/Del/2023 [AY 2017-18] dated 17.05.2024; (viii) Fine Gujranwala Jewellers, New Delhi vs ITO in ITA No.1540/Del/2022 (AY 2017-18) dated 27.03.2023; Printed from counselvise.com ITA No.4066/Del/2024 Page | 8 (ix) ACIT vs Hirapanna Jewellers [2021] 189 ITD 608 (Visaks). He thus, submits that the addition made deserves to be deleted. 5. On the other hand, Ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and stated that AO in para 7 of the assessment order has given the detailed reasons for making the additions according to which the assessee has failed to file date-wise details of invoices, month-wise details and stock and it is observed by the AO that cash sales in the month of October is increased in unusual manner. He thus, requested for the confirmation of the addition made. 6. Heard the contentions of both the parties and perused the material available on record. In the instant case, AO has doubted cash sales during the month of October, 2016 claim at INR 1,71,99,974/- as against cash sales of 4,23,067/- declared in the preceding years. It was the allegation of the AO that this exorbitant high cash sales in the month of October, 2016 was a makeup affair to support the cash deposited in SBN, during the period of demonetization which is nothing but the unexplained cash of the assessee. On the other hand, it was submitted by the assessee that the sales was made for the reasons that he has received registration from the Income Tax Department which inspired confidence in the public and further submits that the AO has accepted, the sales as well as the profits declared, based on the books of accounts wherein Printed from counselvise.com ITA No.4066/Del/2024 Page | 9 such cash sales was recorded. Overall perusal of the facts, it is seen that the assessee had regularly shown the cash sales ranging between 31% to 60% of the total sales as has been tabulated in the chart filed before the lower authorities. The assessee also filed the copy of the sales register, ledger accounts of the parties from whom purchase was made, summary of stock however, from the perusal of the orders of the lower authorities, we do not find any findings given or the observations made with respect to the any entry contained therein which was doubted by the lower authorities. Nor any evidence was brought on record to support the allegation that unexplained cash was deposited during demonetization. Rather the AO has not only accepted the trading results and the sales declared but also accepted cash sales declared by the assessee in the month of October, 2016 to the extent of 75% of the total cash deposits in SBN during demonization and no reasons is given as to why he has accepted the 75% of the cash as genuine. It is also seen that the AO has made the addition by invoking the provision of section 68 of the Act. 7. The realization of cash sales is duly recorded in the cash book maintained on day to day basis The AO is required to consider the records of the assessee such as stock register, bank statement, monthly sales summary, possibility of back-dating of cash sales or fictitious sales etc. before making any allegation about the genuineness of the sales and cash deposited in SBN during the demonetization period. The AO had not doubted the availability of stock with the assessee prior to cash sales. When the assessee has Printed from counselvise.com ITA No.4066/Del/2024 Page | 10 submitted complete details and thus discharges its onus, whereas no contrary material whatsoever was brought on record by the AO to disprove the details filed by the assessee. As observed above, assessee has already included the entire cash sales in the total sales and the profits have been derived which were offered for tax, thus taxing the same income twice once in the sales and by holding the sales of two months as unexplained without reducing the same from the total sales declared. At this juncture provisions as contained in section 68 is reproduced as under: 68. “Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.” 8. From the perusal of the provisions of section 68 of the Act it is very clear that assessing officer can make addition u/s 68 only under two circumstances, i.e. (i) Appellant does not offer any explanation about nature and source of such credit; or (ii) Explanation offered by Appellant is not upto the satisfaction of Ld. AO. 9. In other words, whenever Appellant provides explanation, before rejecting the same ld. AO has to record dissatisfaction as to why the explanation furnished by Appellant is not acceptable. As is evident that assessee not only offered explanation regarding nature and source of such credits but also substantiated the same with documentary evidences in the shape of Audited Financial Statements, Sale Register, Purchase Register, Stock Register and Printed from counselvise.com ITA No.4066/Del/2024 Page | 11 Cash book. No specific defects whatsoever has been brought out on record by the ld. AO in those evidences and books of accounts so furnished. Therefore, addition so made u/s 68 of the Act without finding out any specific defects in books of account and also without rebutting the evidences produced is unjustified. Thus provisions of section 68 of the Act are not applicable. 10. The Co-ordinate bench of Mumbai ITAT in the case of ACIT v. Ramlal Jewellers (P.) Ltd. Reported in [2023] 154 taxmann.com 584 (Mumbai - Trib.) under similar circumstances, deleted the addition made u/s 68 on account of cash deposit in SBN during the demonetization into bank by making following observations: “Section 68 of the Income-tax Act, 1961- Cash credit(Cash deposit in bank)- Assessment year 2016-17- Assessee-company was engaged in jewellery business - During assessment proceedings, Assessing Officer noted that immediately after demonetization assessee had shown inflated cash sales and also made deposits in bank account which was completely abnormal as compared to earlier year and also subsequent year - He, therefore, taxed cash deposits under section 68 - It was seen that assessee had maintained regular books of account which was subject to audit and had produced entire sale bills, stock register and purchases and also quantitative tally of sales and corresponding stock - Addition undersection 68 on account of cash deposits could not be made simply on reason that during demonetization period, cash deposits vis-a-vis cash sales ratio was higher - Whether once, it had been established that sales representing outflow of stocks was duly accounted in books of account and there was no abnormal profit during year, then there was no justification to treat deposits made in bank account out of cash sales to be income from undisclosed sources - Held, yes Whether, therefore addition made under section 68 was to be deleted -Held, yes [Para 14] [In favour of assessee]” 11. The Hon’ble Delhi High Court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 (Delhi High Court) has held as under: Printed from counselvise.com ITA No.4066/Del/2024 Page | 12 “In the facts of above case cash of Rs.24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs.24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon’ble High Court dismissed the appeal filed by the Department.” 12. The Co-ordinate Bench of ITAT Delhi in the case of S. Balaji Mech-Tech Private Ltd Vs. ITO in ITA No. 556/Del/2024 vide order dt. 25.09.2024 has observed as under: 18. “Coming to the issue of stock movement and excess sales, we observed that the assessee has submitted relevant stock reconciliation and auditors report of stock movements and there is no negative stock movement which will indicate that the assessee has booked excess sales without there being proper purchases. 19. In our considered view, there are chances that during the demonetization period the regular customers may have choose to buy the spare parts and bearing by making payment by cash so that their excess SBN is transferred. We noticed that the credit sales has come down during this period and the sales of the assessee is more or less maintained during this period. Therefore, it shows that the changes in the patterns recorded in the sales are not abnormal. 20. Whether the recording of cash sales which is already declared in the books of account will attract the deeming provisions of sec.68 or 69A of Act. We observed that the assessee has declared all the cash transactions in its books of account and merely because the cash deposits are more during the demonetization period, whether the CIT(A) can invoke the provisions of section 69A of the Act. As per provisions of the section, it is necessary that the assessee be found with the money, the same is not recorded in the books accounts maintained by it for any source and not offers any explanation or Printed from counselvise.com ITA No.4066/Del/2024 Page | 13 such explanations are not found to be satisfactory to the AO. In this case, the assessee has already declared the cash sales in its books of account and offers the explanation as cash sales, which the lower authorities has accepted it as regular business transactions because they have not rejected the book results and brought to tax the total sales declared by the assessee in its books. Since the cash were already recorded and explanation is already part of the book results, there is no avenue for the CIT(A) to reject such explanations. This expression \"explanation is found not satisfactory to the AO\" is purely relates to the money found with the assessee which are not recorded in the books of account. In this case, the above expression has no relevance since the assessee had already declared the cash sales in its books. In the similar situation, the coordinate bench has held in the case of J.R.Rice India (P) Ltd as under: \"At the cost of repetition, to the extent of sales made, the stock position is also correspondingly reduced by the assessee which goes to prove the genuineness of the claim of the assessee. On examination of the cash book of the assessee, it is found that the assessee had cash balance of Rs. 55.94 lakhs as on 8-11- 2016, i.e., the date on which demonetization was announced, which sufficiently explains the source of deposit of Rs. 52.60 lakhs in specified bank notes. Apart from this, the assessee had duly furnished the month wise details of sales, month wise details of purchase, corresponding freight charges incurred month wise, month wise power and fuel expenses and month wise selling expenses in the form of rebate and discount. The assessee also furnished the quantitative details of goods month wise for rice, sugar, chana dal and wheat flour before the Assessing Officer. All these facts clearly go to prove the genuineness claim made by the assessee that cash deposits of Rs.52.60 lakhs has been made out of cash balance available with the assessee and, hence, there is absolutely no case made out by the revenue for making addition under section 68.\" 13. Further, in the case of Fine Gujaranwala Jewellers Vs. ITO (ITA No. 1540/Del/2022) dated 27.03.2023, wherein it was held as under: 22. “In the case in hand the reason for disbelieving the cash deposit is that the assessee has been deposited below Rs. 2 lakh in every transactions that lead to the conclusion of the Assessing Officer that the same has been done to avoid the application of provision of section 285BA read with Rule 114E of the Act. The said observation made by the Assessing Officer without any material in his hand. Printed from counselvise.com ITA No.4066/Del/2024 Page | 14 There is no prohibition under law to make sale transaction below Rs. 2 lakhs as such the assessee had at liberty to manage his own affairs. From the action of the assessee in raising the sales bill below Rs. 2 lakhs the Assessing Officer cannot interpret as the sale are bogus only to give colour to non-genuine transaction as genuine transaction. The evidence brought on record by the Assessing Officer are not enough to hold that sales were not genuine. More so, the other wing of the Govt has already accepted the sale transaction under VAT, hence, the Assessing Officer is precluded from making contrary findings on the issue when the sales are not doubted. The other contention of the ld. DR is that the assessee has not maintaining stock register properly and date wise stock position are not given. The Assessing Officer made the said observation without rejecting the books of account form which true profit and loss accounts could be ascertained and there is no quarrel on this issue. The lower authorities cannot place reliance on the circumstantial evidence which is only conjectures and surmises and the said approach of the ld CIT(A) is devoid of merit it deserves to be rejected. Further, the income of the assessee has to be computed by the Assessing Officer on the basis of available material on record and it is very important to have a direct evidence to make an addition rather than circumstantial evidence. When the assessee gives any reply or submission or any documents to the Assessing Officer, it is duty of the Assessing Officer to examine the same in the light of the available evidence. In the present case the Assessing Officer and the ld CIT(A) have concluded the findings on the basis of conjectures and surmises. The Assessing Officer has to establish the link between the evidence collected by him and the addition to be made. The entire case has to be dependent on the Rule of evidence, the assessee in this case explained the source of bank deposits are from cash sales. The Assessing Officer proceeded to disbelieve the explanation of the assessee on the presumption basis without bringing the corroborative material on record. The Assessing Officer is required to act fairly as reasonable person and not arbitrarily capriciously. The assessment should have been made based on the adequate material and it should stand on its own leg. The Assessing Officer without examining any parties to whom the goods are sold by the assessee, came to conclusion that the sales are not genuine, without even rejecting the books of account which is in our opinion is erroneous. 23. Respectfully, following the above decisions, we are inclined to allow the grounds raised by the assessee with the observation that the AO/CIT(A) cannot invoke the provisions of section 68 or 69A when the assessee is already declared the source for cash deposits in the books of accounts and the lower authorities without their being any material to support on their contrary view, the provisions of section 68 or 69A cannot be invoked. Printed from counselvise.com ITA No.4066/Del/2024 Page | 15 24. In the result, appeal filed by the assessee is allowed.” 14. The Co-ordinate Benches of ITAT, in the following case laws has held as under: [i] M/S Godwin Tourism Pvt. Ltd. V. DCIT 2024 (8) TMI 1173 (ITAT, Delhi), dated- August 21, 2024, held that- 19. “Considered the rival submissions and material placed on record, we observed that the assessee has submitted cash book in the Paper Book wherein assessee has received share application money on various dates and received the same by way of cash on verification of the cash book submitted before us. We observed that on various dates, the assessee has maintained sufficient cash which are out of share k withdrawals and it is substantiated that sufficient source application money and some bank of cash available with the assessee to make the bank deposit of Rs. 8 lacs. After considering the facts on record, we observed that assessee has sufficient cash in hands to make above said dash deposit. Accordingly, additions made by the Assessing Officer is deleted.\" [ii] ITO V. M/s J.K. Wood India Pvt Ltd, 2024 (1) TMI 1262, dated 03.01.2024, Hon'ble ITAT Delhi held that- 14. “We have given thoughtful consideration to the factual matrix discussed hereinabove The undisputed fact is that there is not even a whisper of any defect, error or infirmity in the books of account maintained by the assessee which were audited both under the Companies Act and under the Income tax Act. The books of account have been maintained in the regular course of business and cash deposits in the books of account are duly reflected in the books of account 15. Sales made by the assessee and shown in the regular books of account have been accepted as such by VAT authorities while framing the VAT assessment. The assessee was having sufficient stock in hand for making the impugned sales during the demonetization period and it is not the case of the Assessing Officer that the assessee has shown bogus purchases to show bogus sales to cover up cash deposited during the demonetization period\" JCIT V. M/s Pari Agencies Pvt Ltd. ITA No. 2006/DEL/2023, dated 14.12.2023, Hon'ble ITAT Delhi heid that- Printed from counselvise.com ITA No.4066/Del/2024 Page | 16 11. Nowhere in the assessment order the Assessing Officer has mentioned that after inflating the alleged cash sales the assessee has frequently revised its VAT returns. It is not the case of the Assessing Officer that the assessee has shown alleged cash sales without having sufficient stock in hand during that period. Not a single instance of defect is pointed out in the audited books of account. The entire assessment is based on assumptions/presumptions, surmises and conjectures de hors of the facts on record.\" 17 ITA No.3168/Del/2023 Shagun Jewellers (P) Ltd. vs. DCIT ,” 15. Further reliance in this regard is being placed on the Judgment of ITAT Visakhapatnam in the case of ACIT, CC-1 Visakhapatnam V. M/S Hirapanna Jewellers And (Vice-Versa), 2021 (5) TMI 447, dated: 12-5-2021 held as under:- \"9. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to the sales and we do not find any defect in ccoun effect the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishel Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld.\" 16. In view of the above discussions and considering the facts that the AO has not doubted the trading results declared by the assessee which are duly supported by the audited books of accounts comprising of ledger register, stock inventory, relevant details and for the years, duly audited by the auditors and therefore, we find no reason to doubt the cash sales made during the month of October, 2016. Accordingly, the total cash deposit Printed from counselvise.com ITA No.4066/Del/2024 Page | 17 during the demonetization is held as out of the cash available with the assessee in the books of accounts and therefore, no addition could be made for the same. Thus, we direct the AO to delete the addition made of INR 43,50,250/- being 25% of the total cash deposits during demonetization in SBN. 17. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 14.08.2025. Sd/- Sd/- (SUDHIR KUMAR) JUDICIAL MEMBER *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "