PIYUSH JAIN,INDORE V. INCOME TAX OFFICER-4(4), INDORE , ITO, INDORE

ITA 368/IND/2024

AI Insights

The case revolves around an appeal by Piyush Jain against the order of the CIT(A) National Faceless Appeal Centre, which sustained an addition of Rs. 70,00,000 to the assessee's income under Section 68 of the Income Tax Act, 1961. This addition was initially made by the Income Tax Officer, Indore, alleging that the cash deposits made during the demonetization period were unexplained. The assessee argued that these deposits were from legitimate sales of gold and silver, supported by audited books of account, sales invoices, and stock registers. The Tribunal, after considering the submissions and evidence, concluded that the additions made were unjustified as the sales and corresponding cash deposits were adequately documented and legitimate.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31806 (ITAT-INDORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Pancham Dass Jain, Shree Sanand Textiles vs. DCIT, M. Wire Industries vs. CIT, CIT vs. Jindal Dyechem Industries P. Ltd., Fine Gujaranwala Jewellers vs. ITO, SKI HIMALAYAS ROPEWAYS PVT. LTD. vs. ACIT, New Pooja Jewellers vs. ITO, Agons Global (P.) Ltd. vs ACIT, CIT vs. Devi Prasad Vishwanath Prasad, Kishore Jeram Bhai Khaniya Vs Income Tax Officer, CIT vs. Vishal Exports Overseas Limited, CIT vs. Pink City Developer
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FORTHEASSESSEEASTOWHETHERTHEREWASANYREQUIREMENTINLAW; FORTHEREVENUESTATEDTHATTHEREWASNOSUCH; FORTHEASSESSEETOPROVE
• Assessee Lawyers: INVOKINGTHE; INVOKINGTHEPROVISIONSOFSECTIONOF
• Keywords: Set aside; Business income; Question of law; Unexplained cash credit; Rejection of books of accounts; Income from undisclosed sources; Bogus purchase; Onus to prove; Assessment record; Bogus
• Section: 143(3); 250; 64; 68; 205; 69A; 145; 72; 145(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SH. BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER AND SH. UDAYAN DASGUPTA, JUDICIAL MEMBER I.T.A. No. 368/Ind/2024 Assessment Year: 2017-18 Piyush Jain, 43, Ramchandra Bagar Extension, Indore Madhya Pradesh - 452009 [PAN: AFWPJ 2204G] (Appellant) Vs. Income Tax Officer-4(4), Indore, ITO, Indore (Respondent) Appellant by Respondent by : : Sh. Gagan Tiwari & Ms. Priyal Jain, ARs Sh. Ashish Porwal, Sr. D. R. Date of Hearing Date of Pronouncement : : 27.01.2025 07.03.2025 ORDER Per Udayan Dasgupta, J.M.: This appeal is filed by the assessee against the order of the ld. CIT(A) National Faceless Appeal Centre NFAC (Delhi), passed u/s 250 of the Income Tax Act, 1961 dated 21.03.2024 which has emanated from the order of the ITO, Ward 4(4), Indore passed u/s 143(3) of the I.T. Act, 1961 dated 26.12.2019. 2 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 2. The grounds of appeal taken by the assessee in Form 36 are as follows: “1. That addition of Rs. 70,00,000/- u/s 68 on account of SNB notes deposited during demonetization period is on the facts and in the circumstances of the case unjustified, improper, arbitrary and bad in law. 2. That the appellant has head office at Indore and branch office at Satna and Katni. Cash is withdrawn at Indore as centralized purchases are made at Indore. Sales are effected at branches at Satna and Katni. Such cash is retained at these places and deposited in bank at these places. Thus, cash was not available at Indore but was available at Satna and Katni. Cash was withdrawn from bank account at Indore for purchase of goods. Such explanation is not an after thought as cash at branches has been deposited in bank at Satna and Katni regularly. 3. That rejection of cash book and application of section 68 is unjustified and improper. Section 68 has no application when cash is received on account sales consideration. If trading results have been accepted, then purchases/sales can not be added u/s 68 as held in case of CIT vs. Pancham Dass Jain (2006) 205 CTR 0444 and other cases. 4. That cash balance of the assessee shown in its books was sufficient to cover the value of SBN notes and trading results have been accepted as genuine. High denomination notes could not be treated as income from undisclosed sources and assessee could not be required to prove the source of receipt of high denomination notes. Burden of proof that the high denomination notes encashed on their demonetisation constituted suppressed income of assessee, is on the Department. Neither cash sales nor the genuineness of account books were doubted. High denomination notes were legal tender at the relevant time and the assessee was neither required to record the identity of persons from whom these notes were received nor was required to prove the source of receipt of the notes. 5. That the appellant explained source of said cash deposits as sales of jewellery, produced sale bills and admitted same as revenue receipt as well as offered it to tax and assessee also represented outgo of stocks which was matching with sales. Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. 6. That the appellant declared Rs. 5,00,000/- under Prime Minister Garib Kalyan Yojna. He filed declaration under section 199C of the Finance Act, 2016 disclosing income of Rs. 5,00,000/- under Prime Minister Garib Kalyan Yojna Rules 2016. He paid tax of Rs. 2,49,500/- on 29-03-2017 and deposited Rs. 1,25,000/- with UCO Bank as per the scheme. Thus, addition to the extent of Rs. 5,00,000/- on account of SBN notes is unjustified and improper. 3 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 7. That the Id. CIT(A) has observed that the appellant has uploaded a copy of the Gold ornaments wherein, there is an outward entry for 40.083 grams on 18/10/2016. Thereafter, there is both an inward and an outward entry for the same quantity i.e. 1074.610 grams on 26/10/2016 and then there is no inward or outward entry upto 21/11/2016. When gold ornaments have not been sold between 26/10/2016 and 21/11/2016, then the claim that the huge inflows of cash on 7th and 8th Nov 2016 were out of sale proceeds has no merit. The Id. . CIT(A) concluded that the appellant has failed to establish that the entries in cash book are from sale proceeds. The factual position is that the appellant filed four stock registers namely Stock register for Gold Bars, Stock register for Gold Ornaments, Stock register for Silver Bars and Stock register for Silver Ornaments. However, the Id. CIT(A) verified stock register for Gold Ornaments only and did not verify Stock register for Gold Bars, Stock register for Silver Bars and Stock register for Silver Ornaments. The movement of gold was clearly reflected in Gold Bar stock register, which was not verified by the Id. CIT(A). 8. That purchases and sales were not inflated. Such purchases and sales were accepted by sales tax department. The sales have declined as compared to AY 2016-17. The appellant has maintained quantitative record of purchases and sales and copy thereof was also filed during assessment proceedings. It was also explained that the rates of gold as on 08-11- 2016 were lowest in the month of November 2016 and therefore sale s increased on 08-11- 2016. The appellant is not a retailer but a wholesale dealer in gold and silver ornaments and bullion. 9. That the appellant further carves leave to add, to alter and/or to amend any of the foregoing grounds of appeal as and when necessary.” 3. The brief facts of the case are that the appellant is trading in gold and silver ornaments and bullion on wholesale basis under the trade name of M/s ‘Rajshree Enterprises’. Return declaring income of Rs.4,78,900/- filed in normal course has been assessed at a total income of Rs.74,78,900/- u/s 143(3) of the Act, 1961 thereby making an addition of Rs.70,00,000/- on account of bank deposit of SBN notes during the demonetization period. The appellant has got his head office at Indore and his branch office at Satna and also at Katni. Sales made in cash are deposited in bank accounts at Indore, Satna and also at Katni and purchases are centralized at Indore 4 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO only. During the course of assessment proceedings, books of account duly audited and supported by purchases and sales invoices along with necessary documentary evidences were produced before the Assessing Officer, against which the AO raised several queries in response to which explanations and submissions has been filed by the assessee. It is seen from the record that on 10th November, 2016, an amount of Rs.60,00,000/- has been deposited in cash in Axis Bank Ltd. in A/c No. xxxxxx48637 and an amount of Rs.10,00,000/- has been deposited in UCO Bank, in A/c No. 00939. The allegations of the Assessing Officer was that there were numerous bank withdrawals in cash on various dates and despite the availability of cash balance in the cash book, the withdrawals from bank accounts was not necessary for the purpose of business which according to the AO does not reflect the true picture of the business and only goes to show that in reality the purchases and sales has been inflated to justify the cash deposits and withdrawals. The Assessing Officer further observed that there is a opening cash balance of Rs.44,58,276/- on 8th Nov., 2016 and huge cash sales has been shown on the said date and as such he has arrived at a conclusion that the cash book is incorrect and he has proceeded to reject the said cash book. It was further alleged by the AO, in spite of having three different places of business, the assessee has not maintained branch-wise cash books and it was also not possible to believe that cash available in Satna and Katni branches has been brought to Indore for depositing the same in bank account at Indore. As such, he 5 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO arrived at a conclusion that the cash book of the assessee is not reliable and same has been specifically rejected u/s 145(3) of the Act and has proceeded to make an addition of Rs.70 lakhs u/s 68 of the Act as cash credit and applied tax rates as prescribed u/s 115BBE of the Act, 1961. 4. The matter was carried in appeal before the first appellate authority and the le. CIT(A) has sustained the additions dismissing the appeal by observing in para no. 6.2 of the appellate order as follows: “6.2 Ground no. 1, 2, 3, 4 and 5 are regarding addition of Rs. 70,00,000/- u/s. 68 of the Act. The appellant stated before the AO that the remittances in SBNs were sourced from sales affected at Satna and Katni in cash and this cash is deposited in various bank accounts at Indore, Satna and Katni. It is also submitted that all transactions are duly recorded in the books of accounts. The sales are also duly reflected in the VAT monthly returns and the sales were done in the normal course of business. The said Sales Tax returns have been accepted by the tax authorities is also submitted. The AO did not accept the explanation that cash deposits in SBNs emanated from sale transactions. During the appeal proceedings, the appellant has furnished the same details which were also furnished to the AO. As noted by the AO also, cash book produced is only of the head office at Indore. Huge inflows are reflected in this cash book on 7th and 8th Nov., 2017. However, this cash book is not supported by the details of sales made on 7th and 8th Nov, 2016. The appellant has also uploaded copy of the Gold ornaments monthly summary containing daily inward and outward quantities and values of gold ornaments. However, in this summary, there is an outward entry for 40.083 grams on 18/10/2016. Thereafter, there is both an inward and an outward entry for the same quantity i.e. 1074.610 grams on 26/10/2016 and then there is no inward or outward entry upto 21/11/2016. 6 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO When gold ornaments have not been sold between 26/10/2016 and 21/11/2016, then the claim that the huge inflows of cash on 7th and 8th Nov 2016 were out of sale proceeds has no merit. Thus the appellant has failed to establish that the entries in the cash book are from sale proceeds.” 5. In course of appeal before the Tribunal, the ld. AR of the assessee reiterated the same submissions which has been made before the ld. CIT(A), explaining the datewise requirements and utilization of the cash and the source of deposits of cash in Bank A/c’s as per queries raised by the AO as under: 7 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 8 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 6. He further submitted that the assessee has derived income from trading of gold and silver ornaments and bullion on wholesale basis. Purchases are made from Indore through bank channel and sales are though RTGS and also in cash. It was explained that cash deposit in bank are out of cash sales and the copies of cash books for the entire year has been filed before the Assessing Officer during assessment proceedings. He further submitted that the assessee is registered under the VAT Act and VAT return has been regularly filed disclosing total sales of Rs.38,80,68,799/- 9 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO (excluding VAT) which exactly matches with audited accounts and copies of such VAT returns were also submitted before the Assessing Officer. He further submitted that the assessee has maintained quantitative records of purchase and sales of stock traded and copies of the same has also been filed before the AO in course of assessment proceedings. He further referred to a break up of cash deposits in bank account for the period from 1st Nov., 2016 to 9th Nov., 2016 to submit that the deposits of cash by the assessee in the bank accounts has been a regular feature and he points out that even on the date of demonetization on 08.11.2016 an amount of Rs.51,80,000/- has been deposited in cash in bank account within the banking hours. The said date-wise chart of cash deposit from 1st Nov. to 8th, Nov., 2016 are reproduced for read reference: Date Opening Cash Balance Cash Sales Cash deposited in bank Closing Cash Balance 01-11-2016 5,62,700 17,04,264 17,50,000 5,16,964 02-11-2016 5,16,964 61,68,975 60,00,000 6,85,939 03-11-2016 6,85,939 29,51,009 30,50,000 5,86,948 04-11-2016 5,86,948 31,16,936 31,60,000 5,13,884 05-11-2016 5,13,884 16,85,625 15,20,000 7,09,509 06-11-2016 7,09,509 Sunday closed Sunday closed 7,09,509 07-11-2016 7,09,509 53,00,117 15,51,350 44,58,276 08-11-2016 44,58,276 77,82,132 51,80,000 /70,60,408 10 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 7. He further submitted that the purchases of goods made by him has been accepted and there is no dispute regarding the said purchases and he refers to the bills and invoices issued in course of his sales to prove that his sales to the customers are all genuine and are open for verification, and there is no single instances of any bogus purchase or bogus sales which are brought on record by the Assessing Officer and as such, he says that in the instant case, there is no ground for rejection of the books of account and as such the applicability of section 145(3) of the Act by the AO is legally not valid and the book results should be accepted and the addition made by the AO may please be deleted. In support of his contention he has relied upon the number of judicial precedents. He further refers to the VAT records of the assessee to submit that the total turnover disclosed under VAT of Rs.38,80,68,799/- (net after deducting VAT from sales) as per audited trading account has been accepted by the VAT Authority, and the quantity of sales for the year under appeal has declined in comparison to the assessment year 2016-17. He further submitted that the assessee is a wholesale dealer in gold, silver and bullions and the sales on 08.11.2016 were on the higher side because the market rate of the gold was lower and he also refer to a chart showing the rates of gold from 2nd Nov., 2016 to 9th Nov., 2016 substantiate his point on the rates of gold per 10 grams which are reproduced for ready reference: 11 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO He further explained that regarding the allegations of the Assessing officer regarding inflation of sales and purchases during the year, it was clarified that the sales have infact declined during the year under appeal and there has been no inflation as such which are incorrectly stated by the Assessing Officer and in support he furnished comparative charts which are reproduced: 12 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 8. He further submitted that the rejection of cash book u/s 145(3) and application of section 68 in the instant case is legally unjustified and improper because section 68 has no application when cash is received on account of sales consideration. He further states that since trading results have been accepted then purchases and sales cannot be added u/s 68 as held in the case of CIT v. Pancham Dass Jain [2006] reported 250 CTR 444. He further pointed out that cash balance of the assessee as shown in the books of account was sufficient to cover the value of SBN notes deposited in bank and trading results have been accepted as genuine. As such he prays before the Bench that the addition made by the AO u/s 68 of the Act and sustained by the first appellate authority amounting to Rs. 70 lakhs on account of cash deposited in Bank post demonetization may please be deleted. 9. In support of his argument, the assessee relied upon various judicial precedents as follows; 13 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO “9. In Shree Sanand Textiles vs. DCIT ITA no. 1166/AHD/2014, it was held that provisions of section 68 cannot be applied in relation to sales receipts shown by the assessee in its books of account. It is because the sales receipts have already been shown in the books of account as income at the time of sales only. It was also accepted that there is not even an iota of evidence having any adverse remark on the purchases shown by the assessee in the books of account. Once the purchases have bene accepted, then the corresponding sales cannot be disturbed without giving any conclusive finding/evidence. In view of the above, the order of CIT(A) was set aside and AO was asked to delete the additions. 10. In case of M. Wire Industries vs. CIT Reference no. 96 of 1989 (Delhi High Court), the assessee has made sale of Rs. 3.00 lakhs to one Sandeep Wire industries and the same was included in sales. On making enquiries, it was gathered that no such entity existed, hence sale was not accepted as genuine and the said amount was treated as undisclosed income. On appeal , it was demonstrated before the CIT(A) that even if the sales are treated as undisclosed income, there cannot be any addition in undisclosed income, since the said amount has already been included in sales and hence in total income. The honourable Delhi High Court accepted the contention of the assessee. 11. In case of CIT vs. Jindal Dyechem Industries P. Ltd. ITA 283/2011 & ITA 343/2011 April 18, 2012 (2012) 81 CCH 0025 DelHC, The Assessing Officer, while making the assessment in respect of the assessment year 2004-2005, inter alia, made an addition of Rs 1,19,07,201/- on account of the alleged understatement of sale of bullion (gold and silver) by invoking the provisions of Section 69A of the Income Tax Act, 1961. AO's basic reason was that there were cash sales which were not verifiable. All the requisite books and records are maintained and the same are duly audited and no specific defect in the same has been pointed out. The Tribunal correctly noted that in the present case, the Assessing Officer had not come across any evidence or material to show that the assessee had received something over and above what was reflected in the books of accounts in respect of the sale of the said bullion. Consequently, it was held that the Tribunal, being the final fact finding authority, has come to the correct conclusion on facts and no perversity has been pointed. As such, no substantial question of law arises for consideration of the High Court. The honourable High Court held “We may also point out that we had enquired from the learned counsel for the assessee as to whether there was any requirement in law of recording the names of the purchasers of the bullion to whom the cash sales of gold and silver were made. The learned counsel for the revenue stated that there was no such requirement in law at the relevant time. Consequently, no adverse inference could have been drawn by the Assessing Officer on account of the fact that the assessee was not in a position to furnish the names of the persons to whom the cash sales of the bullion were made.” 14 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 12. It is true that there are some sale bills where no name of buyer is mentioned. In this regard, kind attention is invited to decision of Honourable Bombay High Court in case of R.B. Jessaram Fatehchand (Sugar Deptt.) v. CIT [1970] 75 ITR 33 wherein, it was observed that in the case of a cash transaction where delivery of goods is taken against cash payment, it is hardly necessary for the seller to bother about the name and address of the purchaser. The honourable Court further held that there was no necessity whatsoever for the assessee to have maintained the addresses of cash customers, the failure to maintain the same or to supply them as and when called for cannot be regarded as a circumstance giving rise to a suspicion with regard to the genuineness of the transactions. 13. It was held by the ITAT Visakhapatnam in case of ACIT vs. Hirapanna Jewellers reported in [2021] 128 taxmann.com 291 that impugned addition be deleted where AO made addition under section 68 on account of huge cash amount deposited by assessee -jeweller in its bank account since assessee had explained source of said cash deposits as sales of jewellery, produced sale bills and admitted same as revenue receipt as well as offered it to tax and assessee also represented outgo of stocks which was matching with , sales. It was observed that Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stocks. He has not disturbed the .closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& L account and the honourable Tribunal observed that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of. accounts and trading account, P&L account and the financial statements and failed to disprove the condition of the assessee. Suspicion however strong it maybe, it should not be decided against the assessee without disproving the sales with tangible evidence. In the instant case the assessee has established the sales with the bills and representing outgo of stocks. The sales were duly accounted for in the books of accounts and there were no abnormal profits. The honourable Tribunal held that there was no reason to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in the span of 4 hours, non availability .of KYC documents for sales, non writing of tag of the jewellery to the sale bills. 15 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 14. In case of Fine Gujaranwala Jewellers vs. ITO (2023) 67 CCH 0287 DelTrib, the assessee filed declaring NIL income. Case of assessee was selected for scrutiny. Assessment order came to be passed by making an addition u/s 68 as unexplained cash credit. CIT(A) dismissed appeal filed by assessee. It was held that specific case of assessee is that sale proceeds of jewellery were source of cash deposited in bank and of entries are supported by books of accounts, purchase vouchers, sales invoice, stock register, VAT records, bank statement etc. at no point of time books of accounts of assessee was rejected and same has been accepted in VAT. In present case, department has not rejected books of accounts of Assessee accepted in VAT. Regular books of accounts were maintained in normal course of business irtwhich no flaw, fallacy or deficiency was pointed out by AO. It is well settled law that once assessing officer accepts books of accounts and entries in books of accounts are matched, there is no case for making addition as unexplained. The reason for disbelieving cash deposit is that assessee has been deposited below Rs. 2 lakh in every transactions that lead to conclusion of Assessing Officer that same has been done to avoid application of provision of section 285BA read with Rule 114E. Said observation made by Assessing Officer is without any material in his hand. There is no prohibition under law to make sale transaction below Rs. 2 lakhs as such assessee had at liberty to manage his own affairs. From action of assessee in raising sales bill below Rs. 2 lakhs Assessing Officer cannot interpret as sale are bogus only to give color to non-genuine transaction as genuine transaction. Evidence brought on record by Assessing Officer are not enough to hold that sales were not genuine. More so, other wing of Govt has already accepted sale transaction under VAT, hence, Assessing Officer is precluded from making contrary findings on issue when sales are not doubted. Lower authorities cannot place reliance on circumstantial evidence which is only conjectures and surmises and said approach of Id CIT(A) is devoid of merit it deserves to be rejected. Further, income of assessee has to be computed by Assessing Officer on 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 assessee gives any reply or submission or any • documents to Assessing Officer, it is duty of Assessing Officer to examine same in light of available evidence. In present case Assessing Officer and Id CIT(A) have concluded findings on basis of conjectures and surmises. Assessing Officer has to establish link between evidence collected by him and addition to be made. Entire case has to be dependent on Rule of evidence, assessee in this case explained source of bank deposits are from cash sales. Assessing Officer proceeded to disbelieve explanation of assessee on presumption basis without bringing corroborative material on record. Assessing Officer is required to act fairly as reasonable person and not arbitrarily capriciously. Assessment should have been made based on adequate material and it should stand on its own leg. Assessing Officer without examining any parties to whom goods are sold by assessee, came to conclusion that sales are not genuine, without even rejecting books of account which is in our opinion is erroneous. Assessee’s was thus appeal allowed. 16 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 15. In case of SKI HIMALAYAS ROPEWAYS PVT. LTD. vs. ACIT ITA No. 1582/Chd/2019 dated February 10, 2022(2022) 64 CCH 0101 Chd Trib, assessee company was engaged if) running of Passenger Ropeway Project ‘and has maintained its books of accounts and has reported cash in hand in its books of accounts, a day prior to date when vehicle was intercepted and cash was found and seized belonging to assessee company. Assessing officer has partly accepted assessee’s contention regarding sum of Rs 57,25,000/- and has not accepted assessee’s contention regarding sum of Rs 18,75,000/-. Cash so found and seized amounting to Rs 57,25,000/- has been duly recorded in its books of accounts in its cash book. Where a substantial part of cash seized representing non-operational receipts has been accepted as cash in hand prior to date of seizure, when it comes to remaining cash representing operational receipts, reasoning adopted by Assessing officer that keeping such huge cash of Rs 18,75,000/- is not normal where bank is locally available cannot be accepted. There is no finding recorded by Assessing officer regarding any fictitious sale entries recorded by assessee in its books of accounts. Therefore, findings recorded by Assessing officer that documents so produced in support of sale receipts from tickets sales are not reliable cannot be accepted in absence of any findings recorded either by Investigation wing or any independent findings recorded by Assessing officer himself. In light of same onus which has been cast on Assessing officer to record a categorical finding that cash so found has not be recorded in assessee's books of accounts has not been satisfied in instant case and therefore, second condition for invoking provisions of section 69A cannot be held to be fulfilled in instant case. In any case, there is no reasonable and justifiable basis for restricting credit for just one day merely on basis of finding that there are regular cash deposits in bank account from 1.11.2016 to 8..1.1.2016 fnore so in light of fact that assessee has shown cash in hand of Rs 81.64 lacs as on 8.11.2016 in its bobks of accounts and which are represented by corresponding revenues which have been accepted and brought to tax. ln light of aforesaid discussions and in entirety of facts and circumstances of case, addition so made by Assessing officer invoking provisions of section 69A and confirmed by Id CIT(A) is hereby set- aside and directed to be deleted. 16. In case of New Pooja Jewellers, vs. ITO (Kolkota ITAT) ITA no. 1329/Kol/2018, the assessee received advances which were subsequently recorded as sales. These sales were accepted as income by the AO. When a receipt is accounted as income, no separate addition of the same amount can be made as income of the assessee under any other section of the IT Act as it would be double addition. 17. Hon’ble ITAT in the case of Agons Global (P.) Ltd. vs ACIT [Appeal No 3741 to 3746/Del/2019] has held that mere addition made on this ground that there is deviation in ratio is not proper. When the assessee had regular cash sale and deposit of cash in bank accounts and if nothing incrementing is found contrary then addition u/s 68 of such cash 17 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO sale would tantamount to clouble taxation. Deartment appeal was dismissed by the honourable High Court in case of PCIT (Central) vs. Agson Global P. Ltd. (Delhi High Court) appeal number ITA 68/2021 and CM no. 9319/2021 order dated 19-01-2022. Reliance can also be placed on the decision of Hon'ble Supreme Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 that \"It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed”. The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot ‘be taxed again 18. It was held in case of Kishore Jeram Bhai Khaniya Vs Income Tax Officer (ITAT Delhi) (ITA No. 1220/Del/2011) that once the amounts have been credited in the sales account and have been duly included while computing the profit, the same cannot be added under section 68 of the Income Tax Act, 1961. The aforesaid principle has been upheld in the following decisions: Delhi High Court - CIT vs Kailash Jewellery House (ITA613/2010) ITAT Delhi - Kishore Jeram Bhai Khaniya Vs ITO (ITA No. 1220/Del/2011) Gujarat High Court - CIT vs Vishal Exports Overseas Limited (fax Appeal No. 2471 of 2009) ITAT Kolkata - New Pooja Jewelers vs ITO [ITA NO. 1329/Kol/2018] Madhya Pradesh High Court - CIT vs Jaora Flour and Foods (P) Ltd., [2012] 344 ITR 294 19. It was observed in case of CIT vs. Vishal Exports Overseas I imited, (Guj HC) rendered in Tax Appeal No.2471 of 2009 and allied matters wherein this court agreed with the view adopted by the Income Tax Appellate Tribunal that when the assessee had already offered sales realisation and such income is accepted by the Assessing Officer to be the income of the assessee, addition of the same amount once again under section 68 of the Act would tantamount to double taxation of the same income. 20. ITAT, Jaipur Bench, in Chandra Surana, ITA No. 166/JP/2022 [CLC Page 94- 105] held that\"... It is also observed from the assessment order>that the AO had not rejected the books of account of the assessee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition of Rs. 2,90,93,500/- made by the AO by applying the provisions of Section 68 of the Act, it is noted that provisions of Section 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P & L account. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act....’’ The honourable Bench further held as under :- 18 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO “We have heard both the parties and perused the materials available on record. From the assessment records, it is noted that the AO made an addition of Rs.2,90,93,500/- in declared income by holding that said amount of cash deposited by the assessee in his bank account during the demonetization period is nothing but the undisclosed income of assessee which was shown under the garb of cash sales and thus it is liable to be added u/s 68 of the Act and taxable @ 60% under the provision of Section 115BE of the Act. It is also noted from the order of the Id. CIT(A) at para 4.1 wherein the Id. CIT(A) has described para 1.4 of assessee written submission that complete regular books of accounts, bill, vouchers and day to day stock register having complete quantitative details have been maintained by the assessee. The said books of accounts are audited. A copy of audited statement of account alongwith complete quantitative details have been submitted alongwith the return of income. The assessee maintained manual item-wise stock register. The said stock register was bulky and so could not be produced in e- proceedings but was produced before the AO in course of hearing as is evident from submission dated 27-09- 2019. The fact of maintenance of stock register manually is stated in Tax Audit Report also. Thus the cash sales transaction is recorded in regular books of accounts, sales are made out of stock-in-trade. The assessee also filed copies of sales invoice No. 82 to 158 of Bangaluru and 110 to 216 of Koklata outlets before AO which were of 28-10-2016 and these were earlier produced before Investigation Wing in F.Y. 2016-17 i.e. after the sales were made and same were verified by the Investigation Wing also. This view of the Id. CIT(A) indicates that the assessee has maintained regular books of accounts, bills, vouchers and day to day stock register having complete quantitative details and said books of accounts are audited. The assessee vide submission dated 27-09-2019 had produced stock record during the course of hearing. The cash sales transactions are recorded in regular books of accounts and the sale are made out of stock in trade for which no adverse finding had been observed by the AO except for the change in the methodology in issuing bills as mentioned at page 7 to 8 of the assessment order. Further the Id. CIT(A) observed that the AO had treated the cash deposited in the bank during the demonetization period in demonetized currency as unexplained cash credit u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales etc. was evident from the entries in the audited books of accounts of the assessee. In this case, the books of account of the assessee had been audited by an independent auditor. The cash sales and receipts are duly supported by relevant bills which were produced in the course of assessment proceedings before the AO and it is not the case of the AO that the assessee did not have sufficient stock for making the sales. Hence, it cannot be said that the figures of sales and purchases are not supported by the quantitative details and the AO did not make any enquiry on the material supplied by the assessee. Thus the AO neither brought any material on record to establish that the sale bills are bogus nor provided any evidence that such sales are bogus. It is also an open fact that the demonetization of Rs.500/- and Rs.1000/- note was declared by the Hon’ble Prime Minister at 8 PM on 8-11-2016 and 19 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO after this announcement the persons reached the jewellery shop to buy jewellery in exchange of notes. Thus all such scenario indicates that the assessee had duly substantiated its claim from the documentary evidences and also with the facts. It is also observed from the assessment order that the AO had not rejected the books of account of the assessee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition of Rs.2,90,93,500/- made by the AO by applying the provisions of Section 68 of the Act, it is noted that provisions of Section 68 are not applicable on the sale transactions recorded in the books of accounts as sales are already part of the income which is already credited in P&L account. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act. In view of the above deliberations and case laws relied upon by both the parties, we find that the AO was not justified in making an addition of Rs.2,90,93,500/- u/s 68 of the Act which has rightly been deleted the Id. CIT(A) and we concur with his findings. Thus the appeal of the Revenue is dismissed.” 21. Cash generated from Sales and duly recorded in Books of Account can’t be treated as Unexplained Cash Credit u/s 68 of Income Tax Act: ITAT Abhishek Prakashchand Chhajed vs Income Tax Officer 2023 TAXSCAN (ITAT) 2449 The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the cash generated from sales and duly recorded in the books of account cannot be treated as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The Bench held that the assessee has duly shown the cash receipt from the sale of gold/gold ornaments duly recorded in audited books of the account supported by sales bill and stock details. The Assessing Officer has not pointed out any defect in the books of accounts. Therefore, the Assessing Officer cannot treat the cash generated from sales duly recorded in books of account from unexplained/unaccounted sources unless books of account are rejected based on valid reasons. The order of the Commissioner of Income Tax (Appeal) [CIT(A)] was set aside and the Assessing Officer was directed to delete the addition made by him. Thus, the appeal of the assessee was allowed.” 10. Per contra, the ld. DR relied upon the order of the ld. CIT(A) and submitted that the assessee has failed to explain the source of the cash deposited during the demonetization period more so due to reasons that the withdrawals and deposits of cash as reflected in the cash book only relates to the Head office at Indore and there 20 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO are huge inflow of cash on 7th & 8th Nov., 2016 which according to the AO is not supported by details of sales made on the same date. As such, the ld. DR submitted that the assessee has failed to establish the entries in the cash book or from the sale proceeds, and has prayed for the first appellate order to be upheld. 11. We have heard the rival submissions and considered the material on record and the contents of the paper book filed before us. It is seen that the assessee is engaged in wholesale trade of gold, silver ornaments and bullions and regular books of account has been maintained by the assessee supported by purchase and sales invoices, bank accounts, day to day stock registers and the purchase of gold, silver and bullions are all through banking channels and the sales are effected in cash and also through bank from the shop showroom at Indore, Satna and Katni. The copy of cash book has been filed (uploaded) in course of assessment proceedings and it is the case of the assesseee that the cash has been deposited in the bank accounts out of the cash sales recorded in the said books of account the same cannot be treated as cash credit u/s 68 of the Act, 1961. It is also seen that one of the allegations raised by the Assessing Officer that in spite of cash balance available in the cash book, cash has 21 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO been withdrawn from the bank account and it has also been alleged that the sales reported by the assessee for the financial year 2016-17 is more than the sales of the immediately preceding year. However, it is noted by us that the sales for the year under appeal are in fact less in comparison to the immediately preceding year and it is also noted that the rate of gold on 08.11.2016 was marginally lower in comparison to the rate of gold on other dates in the month of November, 2016. 12. The assessee has filed copies of daily summary of trading of gold bar, gold ornaments, stock register of silver bar, and silver ornaments and stock registers of bichchia to submit that the entire cash that has been deposited in the bank accounts in the month of November has come out of regular sale proceeds, and deposits of cash in bank account is the normal trend in this business where cash amounting to Rs.51,80,000/- has been deposited on 08.11.2016 itself (within the banking hours). 13. It is further noted by us that the cash has been deposited in bank account out of regular sale proceeds on regular basis as evident from the summary of sales and cash deposits that is submitted for the period of 1st Nov., 2016 to 8th Nov., 2016. It is seen that the total opening cash balance as on 08.11.2016 was 44.58 lakhs and the total sales of the said date was 77.82 lakhs out of which Rs.51,80,000/- has been deposited 22 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO in the bank on the same date, leaving a closing balance of Rs.70,60,408/- as on 8th Nov., 2016 at the end of the business hours out of which Rs. 70 lakhs has been deposited in bank on 10.11.2016 (that is next day of demonetization, 9th Nov. being bank holidays). We find that the cash balance as per the books was sufficient to cover the value of SBN Notes deposited in bank on the 10th Nov. Moreover, the trading results have been accepted as genuine and there is no adverse finding on record as far as the sales and purchase, shown by the assessee is concerned. 14. Regarding the observation of the ld. CIT(A) in paragraph 6.2 of the appellate order, with reference to the daily inward and outward quantity and value of Gold ornaments , it is seen that his observation is in respect of gold ornaments only, and it seems that the inward and outward summary of Gold Bars (contained in PB page 50) has been overlooked by the first appellate authority, which reflects outward movement of gold bars in quantity and value reflected on the 7th November and 8th November, 2016 , was 1725.670 grams (on 7th Nov ) and 2530.741 grams ( on 8th Nov) which works out to Rs. 52.47 lakhs and Rs. 77.05 lakhs respectively , and the same is part of recorded sale proceeds , which are matching. (Relevant portion of the stock inward and outward summary is reproduced for ready reference. 23 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 24 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO Moreover, we also note that the reason put forth by the AO for the purpose of rejection of books of accounts being cash drawn from bank by the assessee, in spite of cash availability in the cash book, is no ground for rejection of books in absence of any adverse findings regarding the entries in the books of accounts because how the assessee runs his business is his prerogative and in the instant case there is no evidence on record indicating incorrect entries. As such, we are of the opinion that the cash book of the assessee which has been rejected by the AO by taking recourse to section 145 (3) of the Act is not at all legally justified, (CIT v. Pink City Developer [2017] 398/ITR 153, Rajasthan) 15. Moreover, it is also seen that in the computation part of the order, the ld. AO has considered the declared income of Rs.4,78,900/- as disclosed by the assessee in the return of income, which is the result arising out of the net profits (after considering of all expenditure as per the audited profit and loss account) and the total turnover disclosed by the assessee as per return (is matching with the total turnover as per the books of account) and this cash deposit of Rs.70 lakhs in bank account, is also part of the gross turnover as disclosed in the audited accounts. Since this cash deposit is a part of the sale proceeds which has formed a part of the gross turnover and duly recorded in the regular books of account and accepted by the AO, the same cannot be treated as unexplained cash credit u/s 68 of the Act. 25 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO 16. As such, going through the entire records of assessment and submissions of the assessee and the supporting judgments relied upon by the assessee and considering the arguments of the ld. AR and the DR, we are of the opinion that in the instant case, there is no reason to treat the sale proceeds as bogus or unacceptable and the ld. AO has not pointed out any specific defects or wrong entries in the books of account or in the stock register that has been produced before him for examination. 17. In absence of any gross alimony in the books of account and the supporting documents, the books of account cannot be arbitrarily rejected and we find that in the instant case, the AO has not made out a case for rejection of books of account u/s 145(3) of the Act and we hold that the rejection of regular books of account are not as per the provisions of law. As such, we also find that there is sufficient cash balance available at the close of business hours as on 8th Nov., 2016 good enough to cover the cash deposit of Rs.70 lakhs on 10th November, 2016 and as such, the addition u/s 68 is not legally justified and hence the same is deleted. 18. In the result, the appeal filed by the assessee is allowed. Order pronounced in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 as on 07.03.2025 Sd/- Sd/- (Bhagirath Mal Biyani) (Udayan Dasgupta) Accountant Member Judicial Member 26 I.T.A. No. 368/Ind/2024 Piyush Jain v. ITO *GP/Sr.PS* Copy of the order forwarded to: (1)The Appellant: (2) The Respondent: (3) The CIT concerned (4) The Sr. DR, I.T.A.T True Copy By Order Date Initial 1. Draft dictated on 11/13.02.2025 Sr.PS/PS 2. Draft placed before author 12/17.02.2025 Sr.PS/PS 3. Draft proposed & placed before the Second Member JM/AM 4. Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr. P.S./P.S. Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8. Date on which file goes to the Head Clerk 9. Date on which file goes to the AR 10. Date of dispatch of Order "