SATYA PAL SHIV KUMAR,NEW DELHI V. ACIT CIRCLE-47(1), NEW DELHI

ITA 3736/DEL/2023

AI Insights

The case involves an appeal by the partnership firm Satya Pal Shiv Kumar against the order of the Commissioner of Income-tax (Appeals), which upheld the addition of Rs.2,20,91,722 as unexplained cash credit. The addition was based on the Assessing Officer's rejection of the firm's books of account and the suspicion that the cash sales reported during the demonetization period were inflated to justify unaccounted income. The Tribunal examined the evidence, including the firm's audited books, VAT, and Service Tax returns, and found no specific deficiencies or inaccuracies that would justify the rejection of the books. The Tribunal concluded that the cash sales were consistent with the firm's business activities and the economic context of demonetization.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474530 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: K. SAMPATH
• Keywords: Business income; Unexplained cash credit; Rejection of books of accounts; Competent authority; Reason to believe
• Section: 143(3); 142(1); 68; 131; 145(3); 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3736/Del/2023 Assessment Year: 2017-18 Satya Pal Shiv Kumar, 7/355, Naya Bans, New Delhi – 110 006. PAN: AABFS3785K Vs ACIT , Circle-47(1), New Delhi. (Appellant) (Respondent) Assessee by : Shri K. Sampath, Advocate Revenue by : Shri Sahil Kumar Bansal, Sr. DR Date of Hearing : 13.02.2025 Date of Pronouncement : 12.03.2025 ORDER PER ANUBHAV SHARMA, JM: This is an appeal preferred by the assessee against the order dated 25.10.2023 of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as ‘the ld. First Appellate Authority or ‘the ld. FAA’, for short) in Appeal No.CIT(A), Delhi- 16/10645/2019-20 arising out of the appeal before it against the order dated 30.12.2019, respectively, passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT, Circle-47(1), Delhi (hereinafter referred to as the Ld. AO). ITA No.3736/Del/2023 2 2. Heard and perused the record. The necessary background to the case it that the assessee, M/s Satya Pal Shiv Kumar, a partnership firm, filed the return of income for AY 2017-18 on 30,10.2017 declaring taxable income at Rs. 5,80,82,670/-. Subsequently, the case was selected for complete scrutiny. Specific issue to examine was large value of cash deposited during demonetisation. Mandatory notices including a summon was also issued u/s 131 of the Act. The ld. AO examined that during the year under consideration, the assessee firm is engaged in both trading and manufacturing packing and dispatch of chewing tobacco from its manufacturing unit in Delhi at D-33 SMA Industrial Area, GT Karnal Raod and trading of chewing tobacco and perfumery products at its 7/355, Naya Bans New Delhi unit. Ld. AO examined, during the year under consideration, between 09.11.2016 and 31.12.2016, the assessee deposited Rs 83,50,990/- in one bank account and Rs 7,69,86,751/- in another bank account. Ld. AO issued notice u/s 142(1) of Act, and the assessee was asked to explain the source of these cash deposits. In response to the same, the assessee submitted that the main source of cash deposits is cash sale. Further ld. AO called information with respect to cash deposit pattern and cash sale for FY 2016-17. Information was also called for with respect to FY 15-16 and FY 17- 18 to ascertain the business pattern of the assessee. Then in order to verify the authenticity and genuineness of the claim of the alleged cash sales, the assessee was asked to produce month wise sales details bifurcated as cash sale and other ITA No.3736/Del/2023 3 sale. Month wise cash balance along with maximum cash balance for F.Y 2015- 16, 2016-17 and 2017-18 vide notice u/s 142(1) was called for by the ld. AO. Assessee replied to the notice issued and furnished the sales details and cash balance details. Based on the comparative analysis of the sales table for FY 15- 16 and FY 16-17, Ld. AO observed that the assessee has a very robust turnover and his business is largely cash based. He also observed that it is evident that the assessee has witnessed a phenomenal growth in turnover in the last two years. Therefore, a comparative chart of turnover, gross profit and net profit was drawn to chart the growth in turnover of the firm over FY 14-15, FY 15-16, FY 16-17 and FY 17-18. The result is tabulated as under: Head FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 Turnover 13,80,70,899 22,20,89,817 41,71,85,857 42,90,04,888 Gross Profit/ Turnover 35.56% 26.32% 20.51% 18.34% Net Profit/ Turnover 23.24% 16.35% 13.9% 10.2% Gross Profit 4,90,98,011 5,84,45,061 8,55,51,210 7,86,73,242 Net Profit 3,20,87,676 3,63,11,369 5,79,72,086 4,37,63,623 3. Ld. AO concluded that “from the above chart, it can be seen that from the last two financial years, the turnover from FY 2014-15 to FY 2015-16 increased by 60.85% and from FY 2015-16 to FY 2016-17 increased by 87.84%. ITA No.3736/Del/2023 4 This growth is actually quite spectacular. So the assessee was asked to explain the same vide notices issued u/s 142(1) of the Income Tax Act, 1961 in the context of his business.” 4. Then taking note of the business of the assessee firm has two components- manufacturing of “Rashmi” brand of tobacco and trading of tobacco and perfumery products from their retail outlet in Naya Bans, in order to ascertain the composition of the turnover reported by the assessee firm, a break up of the manufacturing and trading turnover of the assessee was called for from the assessee, vide notice issued u/s 142(1) of the income Tax Act, 1961. 5. The break-up of the turnover of the assessee firm for FY 2015-16, FY 2016- 17 and FY 2017-18, as submitted by the assessee, Ld. AO has tabulated the same in assessment order, as under: Head FY 2015-16 FY 2016-17 FY 2017-18 Manufacturing 4,49,90,993.49 2,04,61,113.14 5,30,24,089.15 ITA No.3736/Del/2023 5 6. Accordingly ld. AO concluded that the turnover of the assessee is largely trading based. He further concluded that from FY 2015-16 to FY 2016-17, manufacturing as a percentage of turnover has gone down from 20.25% to around 5%. The trading turnover percentage has gone up from 79.75% in FY 2015-16 to 95.09% in FY 2016- 17. 7. The response of the assessee explaining this changing composition of business was that while the turnover was registering a robust growth, the sale of tobacco was falling day by day. Therefore, the assessee firm started the business of trading perfumes from their showroom in 7/355 Naya Bans. The assessee Turnover Trading Turnover 17,70,98,823.46 39,67,24,743.51 40,61,27,922.63 Total Turnover 22,20,89,816.95 41,71,85,856.65 45,91,52,011.78 Manufacturing Gross Profit 56.66% 46.28% 40.76% Trading Gross Profit 18.61% 19.00% 13.86% Total Gross Profit 26.32% 20.51% 16.8% Manufacturing Net Profit 15.60% -42.13% -13.71% Trading Net Profit 16.57% 17.80% 12.94% Total Net Profit 16.35% 13.90% 9.50% ITA No.3736/Del/2023 6 submitted that during the previous two years, the growth in turnover is being driven by the trading and sale of perfumery. The assessee stated as follows: “As you are well aware that Delhi State Government and more than 20 states have banned the storage, sale & manufacturing of chewing tobacco on public places and schools which are within 500 meter distance. Moreover, the youngsters in this generation are refraining from consumption of chewing tobacco. Hence, the assessee firm is also concentrating more on pushing sales of perfumery and has also succeeded in it.” 8. As the basis for selection in scrutiny was large value of cash deposits during demonetisation, the assessing officer analysed the pattern of the business of the assessee firm to understand the regular cash trend of the business. It was observed that the assessee firm has a huge cash turnover. However, a quantum jump in the cash sales has been observed in November 2016. The entire cash sale for the month of October is Rs 26,157,572/-. However, the sale for the first 8 days of November 2016 is shown at Rs. 3,23,51,657/-. Therefore, the sale of 8 days of November is 23.67% more than the entire sale of October 2016. 9. Ld. AO concluded that the timing and quantum jump in cash sales as a proportion of total sales is highly suspect and merits deeper investigation as the alleged cash sales seems to have taken place immediately prior to demonetisation. Therefore, the cash sales booked by the assessee firm in November 2016 were analysed and based on the analysis of the monthly cash sales for FY 2016-17, ld. AO concluded that the month in which the maximum pre demonetisation cash sales was observed is October 2016. The cash sales in ITA No.3736/Del/2023 7 October 2016 stands at Rs 2,61,57,572/-. The maximum post demonetisation cash sales in FY 16-17 was observed in December 2016. Then based on the cash sale chart for FY 16-17, the ld. AO observed as follows; • The maximum monthly pre demonetisation cash sale has happened in October 2016 at Rs 26,157,572/-. • The total cash sale in November 2016 is Rs 3,70,23,002/- • Out of this Rs 3,70,23,002/-, Rs. 32,351,657/- was done in the first 8 days of November. • All cash sale has happened in amounts of less than Rs 2,00,000- thus obviating the need to record the PAN of the buyer. This is the general trend in the assessee’s cash sale business. • Such a trend in cash sale has only been observed in FY 16-17. Because, in FY 2015-16, the sale in the first 8 days of November was Rs 16,74,072. Even in FY 17-18, the entire cash sale in November 2017 is Rs 4,91,96,212. This implies that the proportionate sale for the first 8 days of November works out to Rs 1,31,18,989/-. • Therefore, the cash sale in the first 8 days of November in FY 2016-17 is disproportionate. It is out of trend in comparison to the previous year and the subsequent year. • It is also out of trend compared to the sales of FY 2016-17, if the average sale of first 8 days of each month is taken into account. ITA No.3736/Del/2023 8 To explain this unusual jump in cash sale in the first 8 days of November 2016, the assesse was issued the show cause on 25.12.2019 as to why the books of accounts should not rejected. The assesse’s submissions were considered and were found not acceptable because the assessee’s cash sales weree not found to stand the test of human probability and the ld. AO alleged as follows; • Even though the business of the assessee is cash sale based, the unprecedented cash sale in the first 8 days of November 2016. • The sale in the first 8 days of November 2016 is more than the entire sale in October 2016. 10. In this context the ld. AO observed as follows:- “It can be clearly seen that the cash sales in the first 8 days of November 2016 i.e. 01st to 08th November 2016 has seen a unprecedented growth and even unrealistic. There was no major market/economic change that would serve as an inflection point for change in the buyer behaviour. Particularly, given the nature of products being sold by the assessee which caters to a specific set of customers, it is unlikely that it would see a spurt in the cash sales without any specific change.” 11. Then taking up the issue of rejection of books of accounts u/s 145(3) of the Act, the ld. AO held as follows:- “On a careful perusal of the facts, figures and submissions on record, the assessing officer is of the considered opinion that the books of accounts of the assessee need to be rejected. On the basis of the arguments and figures advanced above, the undersigned is of the considered opinion that the books of accounts of the assessee do not give a true and fair picture of the business of the assessee. The reasons for the same are as under: ITA No.3736/Del/2023 9 • As per the submissions of the assessee, the turnover growth of his business is driven by over the counter cash sales of tobacco and perfumery products • These over the counter sales are of retail nature. • Despite the growth in turnover being driven by over the counter retail cash sales of perfumery and tobacco products, the assesse has shown a decrease in gross profit ratio from 26.32% in FY 15-16 over a turnover of Rs 22,20,89,817/- to 20.51 % over a turnover of Rs. 41,71,85,857/- • The market for these products are largely unaffected by the periodic variable factors like holidays, festive season, marriage etc. which is \"usually prevalent during the last quarter of the calendar year. Therefore, the business is less likely to see periodic up cycles in sales. Yet, from the figures on record, it appears that the assessee witnessed an astronomical increase in sales in November 2016 cannot be justified by normal market forces. • The assesse claims that the turnover has largely increased on amount of the retail sales of perfumery products. This has to be noted that the retail sales of tobacco and perfumery products will not see a sudden spike because of a largely fixed customer base in a particular territory. On the contrary, a consistent increase in indirect taxes on these products will shrink the customer base/sale frequency. • On a similar line, the perfumery products will not see a huge spike owing to the aforementioned reasons. The very nature of retail transactions of a product of special nature will not see a significant change in sales unless there is no product or territorial diversification in terms of sales. ° Therefore, the astronomical increase in sales in November 2016 cannot be justified by normal market forces. • As noted above, the sale booked in the first 8 days of November 2016 is disproportionately high when compared to the same time period last year. Even from the figures submitted by the assessee, it can be seen that an 1832% year on year growth is beyond human probability in the case of the assessee. It is pertinent, that such growth does not stand the test of human probability • In fact, even taking into account the trend growth rate of cash sales and yearly growth in the cash sales, the alleged cash sales of the first 8 days of November 2016 is highly disproportionate. ITA No.3736/Del/2023 10 • Assessing officer is of the opinion that the cash sales in any business follows a larger trend in the year with minor variations. In this case, the average of 8 days cash sales over the entire year excluding the period in contention (i.e. 01-08th November 2016) is Rs. 78,92,257/-. The cash sales should have been in the range of this figure itself. • However, cash sales in the first 8 days of November 2016 are of Rs 3,23,51,657/- as per the submissions of the assessee. Compared to the same time period last year, this indicates a year on year growth of more than 1800% which is beyond human probability. This increase is all the more pertinent because the base on which this 1800% plus growth is being observed is huge. • Therefore, the assessing officer is of the opinion that the cash sales of the assessee firm have been concocted. This is an attempt to bring in unaccounted income of the assessee in the garb of fictitious cash sales. The assessee has earned income from unexplained sources which he tried to inject in his books of account to justify his cash deposit during demonetization period. If demonetization would not have happened, this income would not have come in the eyes of the department. By showing cash sales in a short span the assessee tried to bring his income from unexplained sources into his books of account. For the reasons, figures and the arguments stated above, I am satisfied that the books of accounts of the assessee needs to be rejected 5.5 The books of accounts of the assessee do not present a true and fair picture of his business affairs. To verify the purchases and the stock, the item wise day wise stock register and purchase register was called for. However, the assessee could not submit the same. 5.6 The assessee has not been able to substantiate his purchases and stock from the submissions made. The sale figures, as shown above, are inflated beyond human probability. The internal controls of the book keeping have also been found to be weak. I am not satisfied about the correctness of the accounts of the assessee and hence, by the power conferred upon me by the section 145(3) of the Income Tax Act, 1961, I hereby reject the books of accounts of the assessee. 12. Thus the ld. AO has concluded as follows:- “6. Decision 6.1 The arguments, facts and figures quoted above show that the assessee firm never made the alleged quantum of cash sales as claimed by them. The assessee has earned income from unexplained sources which he ITA No.3736/Del/2023 11 tried to inject in his books of account to justify his cash deposit during demonetization period. If demonetization would not have happened, this income would not have come in the eyes of the department. By showing such inflated cash sales in a short span, the assessee firm tried to bring his income from unexplained sources into his books of account. 6.2 The quantum of cash sales of entire FY 2016-17 is suspect. Even the segregated stock and purchase details of traded and manufactured items have not been provided by the assessee firm. 6.3 Yet, even if the submitted sale figures are taken as genuine, then on an average, Rs 78,92,257/- is coming as the average 8 day sale of the month. This figure is arrived at by multiplying the total sales in a month by 8/30 i.e average sale of 8 days of each month in FY 2016-17 is taken into account. This does not include the month of November 2016. This method also gives the benefit of increased turnover in the subsequent months to the assessee. A premium of 30 percent can be allowed to the assessee on this amount to account for any human, unforeseen factors and circumstances beyond the market fundamentals. A sale of the period pertaining to 01.11.2016 to 08.11.2016 should be a maximum of Rs. 1,02,59,935/- 6.4 Therefore, the sale of Rs. 3,23,51,657/- shown from 01.11.2016 to 08.11.2016 is not accepted as genuine. As calculated above, the maximum allowable cash sale is computed to be Rs. 1,02,59,935/-. 6.5 Therefore, it is held that the assesse has injected his unexplained money in the garb of fictitious sales. The same is added u/s 68 of the Income Tax Act, 1961.” 13. Accordingly, the difference of Rs.2,20,91,722/- was added to the income of the assessee u/s 68 of the Actas unexplained cash credit. The same stands sustained by the ld. CIT(A) for which the assessee in appeal raising following grounds; “On the facts and in the circumstances of the case and in law the Ld. CIT(A) at NFAC, Delhi erred in – 1. dismissing the appeal holding – a. that the cash sales of the assessee are not found to stand the test of human probabilities; ITA No.3736/Del/2023 12 b. that the assessee is not able to prove the genuiness of the transactions or is unable to explain the cash sales; 2. confirming the following actions of the Assessing Officer – a. making an addition of Rs. 2,20,91,272/- being the amount of cash deposited in bank out of available cash balance in the regular books of accounts, wrongly invoking section 68 of the I.T. Act, 1961 r.w.s. 115BBE ; b. rejecting books of accounts by applying provisions of section 145(3) of the Act rejecting the Audit Report as well as the facts that the assessee is regularly maintaining the books of accounts, stock records and other required documents. The above action being arbitrary, fallacious, unwarranted and illegal must be quashed with directions for appropriate relief.” 14. The ld. AR has reasserted the averments as made before the ld.CIT(A) and primarily the contention was that without any basis the books were rejected. The ld. AR has relied a catena of judgements for submitting that the books can be rejected only on the basis of deficiencies found in the books and not on the basis of mere presumptions. It was submitted that no infirmity in the audit report or the books as maintained was found and ignoring the evidences which were filed and recording incorrect fact of not filing necessary books of account, the same have been rejected. The ld. AR has submitted that the ld. AO has gone on the subjective standards and his individual opinion to reject the books of account. The ld. AR submitted that the ld. AO has failed to take notice of the fact that increase in turnover was genuine due to the introduction of products manufactured and sold by the assessee during the year. The ld. AR submitted that the ld. AO has failed to appreciate that the increased sales between November 1 to November 8 were genuine as the sales were deposited in the ITA No.3736/Del/2023 13 following day after the sales. The ld. AR pointed out that the AO has noted in the assessment order that a sum of Rs.2,26,50,000/- stood deposited in the bank by 08.11.2016 and that the further deposits between 09.11.2016 and 30.11.2016 were much lower at Rs.1,07,00,000/-. Thereafter, there was no ground or plausible reason to believe that the cash deposits in bank were out of concocted sales. It was pointed out that cash sales and consequent higher cash deposited in the bank had started much before 8 PM on 8th November. It was also submitted that having rejected the books of account, the ld. AO has relied the increase of sales to invoke the provisions of section 68 of the Act. 15. On the other hand, the ld. DR has heavily relied the orders of the ld. tax authorities below and it was submitted that the nature of manufacturing and trading business of the assessee is not such that due to demonetization the customers would have purchased more of the stock. It was submitted that for failure of the assessee to file necessary details with regard to purchase the books were rightly rejected. 16. We have given thoughtful consideration to the matter on record and the submissions of the ld. representatives. Admittedly, the assessee is a manufacturer of tobacco products and also is in the trading business of perfumery. It is an undisputed fact that the assessee was into substantial cash sales in the present financial year and also in the previous years. The ld. AO ITA No.3736/Del/2023 14 has accepted the fact of the assessee increasing its share of trading in recent years compared to manufacturing. 17. Then, it comes up that during the assessment proceedings, in response to notice u/s142(1) dated 07.11.2019, the assessee has provided copies of ledger account and the same are available at page 187 to 206 of the paper book. Pertinent to mention is that at page 172 to 173 of the paper book the covering letter to this reply is made available wherein the assessee had mentioned that ‘since the number of pages of cash books, stock register, sales register, purchase book for FY 2015-16, 2016-17 and 2017-18 are too bulky, therefore, it is humbly requested to give us another date to allow us to produce the same before you physically.’ As we go through these copies of the ledger account, we find that on page 96, the assessee had provided the copy of the ledger account for the relevant period of export sales amounting to Rs.53,70,349/-. The sales ledger shows that the sales are in accordance with the excise invoices. At page 207 to 237, the assessee had provided to the ld. AO the returned filed before the competent authority under the Service Tax Rules, 1994 and at page 237, the copy of VAT return is filed. Then, at page No.242 to 247 the assessee had provided to the ld. AO the details of 20 parties to whom sales including cash sales were made during the previous financial year 2015-16 and the present financial year 2016-17. The list of sundry debtors were also provided. ITA No.3736/Del/2023 15 18. Then we find that in furtherance to summons u/s 131 dated 04.12.2019 and notice u/s 142(1) of the Act dated 17.12.2019 available at pages 267 to 271 of the paper book the assessee had forwarded a reply to the ld. AO, the copy of which is available at page 272 to 276, wherein it was mentioned that the assessee had purchased raw tobacco from M/s Krishiv Tobacco Co. and Siraj Ahmad Sartaj Ahmad during the relevant previous year. 19. Further at pages 279 to 281 is the copy of reply to the show cause notice dated 25.12.2019 and therein the assessee specifically pleaded that all the stock details have been produced for verification earlier. It was submitted that the GP rate was as high as 46.2% in tobacco manufacturing and in trading of perfumes it was only 19%. The assessee had submitted that the purchase and sale of the assessee are fully vouched and open to verification. The books of account are maintained on day-to-day basis along with the details of daily stock position is available and is also open to verification. Accordingly, the assessee explained the fall in GP rate submitting that as trading business has increased which had lower GP rate, the overall GP rate also reduced. 20. The aforesaid discussion on the basis of evidences which were there before the Ld. AO, firmly establishes that as alleged by the ld. AO that the assessee has not been able to substantiate his purchases and stock is not based on any specific deficiency or inaccuracy found in the evidences filed by the ITA No.3736/Del/2023 16 assessee but on a very general basis and hypothesis of human probabilities, the cash sales have been disputed and the books of account rejected. 21. On perusal of the audited accounts, we find that the assessee had provided following books of account:- Annexure No.-3 ANNEXURE FOR BOOKS OF ACCOUNTS MAINTAINED S.No Books Maintained Address Line 1 Address Line 2 City or Town or District State Pin Code 1 Cash Book, Ledger, Sale And Purchase Register, Excise Records, Bank Book, Journal (Computerised) D-33, SMA Industrial Area, GT Karnal Road, Delhi Delhi 110033 2 Cash Book, Ledger, Sale And Purchase Register, Excise Records, Journal ( Computerised) 7/355, Naya Bans Delhi Delhi 110006 3 Cash Book, Ledger, Sale And Purchase Register, Journal (Computerised) 117, Bardia Mansion, Kapasia Bazar, Kalupur Ahmedabad Gujrat 380002 4 Cash Book, Ledger, Sale And Purchase Register, Journal (Computerised) 26B, A.D.Nagar Industrial Estate Agartala Tripura 799003 5 Cash Book, Ledger, Sale And Purchase Register, Journal 6/209C, Belanganj Agra Uttar Pradesh 282004 22. We are of the considered view that when the assessee had given details of the parties from whom purchases were made and the details of sundry debtors was given, the relevant statutory returns to the VAT and Service Tax authorities were filed, when the assessee had made available all the stock registers as maintained, then, by alleging that the stocks does not depict item-wise, day-wise inventory and on that basis alone to discredit the books of account is not justified. ITA No.3736/Del/2023 17 23. The assessee had furnished the audited books of account which included trading and profit & loss Accounts. Pertinent to mention is that assessee had manufacturing and trading units a various places and their separate accounting was part of the audited financial. The opening stock, sales and closing stocks have been duly disclosed, which has been accepted in audit. No deficiency or inaccuracy in the inventories is cited by the ld. AO. 24. Thus, without even going through the audited financial and raising queries on the basis of any inaccuracy and infirmity found in the audit report, the rejection of books of account is not sustainable. There seems to have been no inquiry on the part of the ld. AO with regard to the transactions which were reported in the audited books of account. So much so that the assessee’s justification for the overall fall in GP rate by providing segment wise trading result for manufacturing and trading activity was accepted. The ld. AO has failed to appreciate that in demonetization period there was every possibility of increase in sales as the assessee was a manufacturer and dealer of products which have high consumption, through may be the most exhaustive retailers. There was every possibility that retailers dealing with the nature of products, the assessee was manufacturing and trading, may have increased their own stocks and without making any effort to examine and verify the sales as reported to identifiable parties the ld. AO has considered the sales to be suspicious. 25. In any case, the rejection of books of account only qua a particular entry of cash deposits during the demonetization period is not justified while the other ITA No.3736/Del/2023 18 components of trading results and profit margins as reported have been accepted. There was inherent arbitrariness and adhocism in the conclusion of ld. AO by arriving at a figure of Rs. 1,02,59,935 as possible genuine cash sales out of total cash sales of Rs. 3,23,51,657.- during demonitisation as reported by the assessee. Ld. CIT(A) has merely endorsed the observations of ld. AO, without appreciating any of the submission of the assessee and for the aforesaid reasons we are inclined to sustain the grounds. Consequently, the appeal of the assessee is allowed and the impugned addition is directed to be deleted. Order pronounced in the open court on 12.03.2025. Sd/- Sd/- (MANISH AGARWAL) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 12th March, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "