SHALIN RAJENDRAKUMAR SHAH,AHMEDABAD V. THE ITO, WARD-5(3)(2), AHMEDABAD

ITA 1548/AHD/2025

AI Insights

The case revolves around the appeal by Shalin Rajendrakumar Shah against the order of the Commissioner of Income Tax (Appeals), which upheld the addition of Rs. 2,97,00,000 as unexplained cash under Section 69A of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer following substantial cash deposits made by the assessee on a single day during the demonetization period in India. The assessee argued that these deposits were from legitimate cash sales recorded in the books, supported by various documents including VAT returns and audit reports. The Tribunal, after considering the submissions and evidence presented, including comparative sales data and stock summaries, concluded that the additions made were not justified as the cash sales were legitimate and properly documented.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840063 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 07-08-2025
• Other Referred Cases: ACIT Vs Hirapanna Jewellers, ACIT vs. Zinzuwadia & Sons, Jaykumar Nemichand Jain HUF Vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Retrospective amendment; Question of law; Rejection of books of accounts; Onus to prove; Bogus
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: DR. BRR Kumar, Vice President And Shri T. R. Senthil Kumar, Judicial Member Shalin Rajendrakumar Shah U-G, 1-2, Atlanta Tower, Nr. Gulbai Tekra, Ellisbridge, Ahmedabad-380015 Gujarat, India PAN: AMKPS2819M (Appellant) Vs The ITO, Ward-5(3)(2), Ahmedabad (Respondent) Assessee Represented: Shri Biren Shah, A.R. Revenue Represented:Shri Rajenkumar M Vasavda, Sr. D.R. Date of hearing : 08-01-2026 Date of pronouncement : 24-02-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against appellate order dated 12-06-2025 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18. ITA No: 1548/Ahd/2025 Assessment Year: 2017-18 Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 2 2. Brief facts of the case is that the assessee is an individual engaged in the business of gold, diamond, silver Jewellery. For the Asst. Year 2017-18, assessee filed his Return of Income on 27-10- 2017 declaring total income of Rs. 56,67,840/-. The return was taken for scrutiny assessment since the assessee made substantial cash deposit of Rs.2,97,00,000/- in a single day on 12-11-2016 during the demonetization period which is 50.82% of the total cash deposited in one year. The assessee explained that these cash deposits originated from cash sales made in the ordinary course of business and due to public rush after the demonetization announcement, there was a surge in cash sales, however the same were duly recorded in the books of account, supported by cash book, invoices, VAT returns and audit reports. Further the assessee had opening stock of Rs.4,56,05,500/- as on 01-04-2016 and closing stock as on 07-11-2016 (i.e. one day before demonetization period) of Rs.5,82,38,482/-. Thus cash sales made was from the stocks available with the assessee. 2.1. This submission of the assessee was not accepted by the assessing officer on the ground that the cash in hand on 08-11- 2015 for A.Y. 2016-17 amounting to Rs.23.63 Lakhs, whereas for the present Asst. Year 2017-18 amounting to Rs.297.52 Lakhs, hence there is 1260% increase in cash on hand in comparison to previous year. Further, there is a steep fall in sales in subsequent period. The ratio of cash sales to credit sales was higher in pre- demonetization period as compared to previous year which shows unaccounted money was routed through cash sales. The assessee had made total cash deposit amounting to Rs.5.84 crores out of Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 3 which Rs.2.97 crores is deposited on a single day on 12-11-2016 which is 50.82%. Therefore the cash deposit of Rs.2.97 crores was considered as unexplained cash u/s. 69A of the Act and added as the income and taxed u/s. 115BBE of the Act. 3. Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A) who has confirmed the addition by observing as follows: “Accordingly, AO has compared appellant claim of cash sales in pre- demonetization period as compared to previous year of the same period and is again compared to post-demonetization period. On this analogy/ comparison appellant cash on hand is found to be increased abnormally in this year compared to previous year as the same is only at Rs.23.63 lacs as observed by AO in the previous year. Accordingly. AO observed that ratio of cash sales to credit sales was higher in pre-demonetization period as compared to previous year which shows unaccounted money was apparently routed through cash sales and details of cash sales as provided by the appellant could not give any such verifiable names / addresses, contact nos. etc. inspite of having cash deposits at Rs.5.8 crores as attributable to cash sales and out of which Rs.2.97 crores are deposited on a single day which is almost accounts for 50.83% of the total cash deposits in one year and thereby AO observed these apparent discrepancies involving arithmetic comparison having no verifiable evidences for cash sales as attributable to unexplained money to that extent of cash deposits of the period of demonetization. Accordingly, AO treated the same as squarely attracted by provisions u/s.69A r.w.s 115BBE of I.T Act. In the light of these facts, on perusal of appellant various contentions / GOA and submissions as advanced during appeal proceedings, it is noticeable that apparently appellant is re-iterating the same/ similar contentions/claims as advanced before AO holding that such findings of AO as compared as attributable to cash sales as not maintainable and thereby contended cash sales as involving explainable receipts of appellant business. Further appellant contended that these cash sale being retail sales, there exists no provision on necessity to maintain the name, address and other details of retail customers involved in cash sales and thereby such comparison of AO as attributable to cash sales data visa-a-visa cash deposits of pre-demonetization period/previous year with post-demonetization period/this year is contended as not maintainable and thereby pleaded to delete the addition as involving mere suspicions and presumptions of AO not to accept appellant claims. However, appellant as contended could not adduce any verifiable evidences to contradict the findings of AO as involving comparative analysis of cash sales as discussed supra. Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 4 Further, appellant is contending cash sales as to be considered as involving genuine cash sales inspite of having not adduced any further evidences to substantiate such huge cash sales resulting in accumulation of cash on hand till the date of demonetization and depositing the same huge cash on a single day i.e. 12.11.2016 as observed by AO on such analysis of appellant claims. Appellant ought to have made available few medium to high cash sale invoices with such supporting proofs and confirmations from such parties with due reconciliation of stock workings etc. so as to adduce such possibility of having huge cash sales in comparison to the previous year same period or prior to demonetization period to hold such claims of appellant as involving genuine claims of cash sales with abnormal/high cash receipts for its deposit during the period of demonetization. In the absence of such substantiations as needed to reconcile these cash sales as involving explainable sources with stock workings as available with the appellant on such each day of cash sales involved in accumulation of demonetization deposits, appellant mere contentions as advanced to hold the single day cash deposits of demonetization period as involving explainable sales contrary to the findings of AO is to be treated as not maintainable as per the facts of case as available on record on merits as analyzed by AO in the assessment order as discussed supra. Accordingly, appellant various contentions/ claims as advanced in the submissions/GOA is to be treated as not maintainable as the same are not substantiated with supporting proofs/evidences for its verification by AO as per law and thereby appellant all GOA as advanced on this analogy to hold the order of AO as bad in law is to be treated as not maintainable. Considering all these facts of case, apparently there exists no infirmity in the order of the AO as per the facts available on record and in view of the same, appellant various inter- related/over-lapping contentions as advanced in grounds of appeal needs to be treated as not maintainable as per law. In the result, appellant appeal is dismissed as not maintainable as per facts available on record on merits as appellant is failed to adduce any such supporting proofs/evidences as needed to advance the grounds of appeal contrary to the categorical findings/observations of AO in the assessment order as attributable to such abnormal non verifiable cash sales for its deposit in a single day on 12.11.2016 on announcement of demonetization. Accordingly, appellant appeal is dismissed as not maintainable as per law.” 4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal: 1. In law and in the facts and circumstances of the Appellant's case, the order passed by learned CIT(A) is bad in law and deserves to be quashed. 2 In law and in the facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in upholding addition made by AO for Rs. 2,97,00,000/- as unexplained money under Section 69A of the Act. Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 5 2.1 In law and in the facts and circumstances of the Appellant's case, the learned CIT(A) has grossly erred in upholding addition made by the AO without appreciating the fact that sales corresponding to cash deposited during the bank account is duly offered to tax in audited annual accounts. 3. In law and in the facts and circumstances of the case, the Assessing Officer has erred in computing demand after applying provisions of Section 115BBE of the Act when such provisions of the Act are not on statute on the date of depositing old SBN in bank account and such provisions cannot have retrospective effect. 4. The appellant craves leave to add, to alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal. 5. Ld. Counsel appearing for the assesse submitted a detailed Paper Book consisting of sales register, stock summary details of cash deposit and quantity records of Diamond, Gold, Silver jewels and VAT returns maintained by the assessee. It is submitted that the cash available as on 08-11-2016 was partly due to increase sales during the festival season including Diwali, Pushya Nakshatra and Dhanteras, which fell between 28th to 30th October, 2016. The assessee’s shop remained closed for Diwali vacation for six days after the festive period and reopened on 07-11-2016. The assessee could not deposit the cash generated during the high sales festive period and the amount remaining in hand. Thereafter on 09-11-2016 bank were closed and the assessee approached his bank on 10-11-2016 to deposit the collected cash, however bankers informed that prior notification was required for depositing large amounts of cash. Accordingly the assessee notified the bank on 11- 11-2016 of his intent to deposit cash on 12-11-2016. Because of the unavoidable banking restrictions, the cash remained with the assessee for few days after the declaration of demonetization Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 6 period. However the assessing officer has not rejected the books of account not verified the cash sales made by the assessee and not doubted the VAT returns filed by the assessee, simply made addition that the cash deposits as unexplained which is not permissible under the law. Therefore Ld. Counsel requested to delete the addition made the assessing officer. 5.1. The Ld. A.R. further submitted stock summary of the gold, diamond and silver for the period before demonetization and post demonetization period. Ld. Counsel also filed before us comparative sales during the previous Assessment Year and present Assessment Year as follows: A.Y. 2016-17 PAR 01-04-15 To 08-11-15 09-11-15 To 31-12-15 01-01-16 To 31- 03-16 Total Total sales(cash + cheque) 38,740,290 9,879,303 27,911,556 76,531,149 Cash sales 14,920,394 4,984,402 10,108,153 30,012,949 Cheque sales / Other Sales 23,819,896 4,894,901 17,803,403 46,518,200 Cash Deposited in Bank 11,698,000 6,500,000 7,258,000 25,456,000 A.Y. 2017-18 PAR 01-04-16 To 08-11-16 09-11-16 To 31-12-16 01-01-17 To 31- 03-17 Total Total sales(cash + cheque) 83,310,499 13,426,105 32,975,909 129,712,513 Cash sales 51,247,373 3,141,667 5,740,518 60,129,558 Cheque sales / Other Sales 32,063,126 10,284,438 27,235,391 69,582,955 Cash Deposited in Bank 22,073,267 29,700,000 6,204,000 57,977,267 6. Per contra, Ld. Sr. D.R. appearing for the Revenue supported the orders passed by the lower authorities and requested to uphold the same. Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 7 7. We have heard the rival submissions as well as paper books and case law compilation filed by the assessee. The assessee claims that the cash deposit is on account of demonetization and in fact cash sales was essentially generated on retail sales to various customers which is duly reflected in the cash book maintained by the assessee. A copy of the computerized cash book was submitted before the Assessing Officer, during the course of assessment proceedings, which are duly audited with Tax Audit Report. The Ld. A.O. has not found any defect or discrepancy in the audited books of accounts. The assessee has proved with reference to corroborative material evidence in the cash deposits with retail sales bill with name of the customers. Thus, the initial burden is fully discharged by the assessee. Whereas the Ld. A.O. without rejection of books of accounts and without enquiry with the purchaser of smaller denominations, made the additions which is not sustainable in law. 7.1. Further the sales are found recorded in the sales register, stock register, cash book, etc. The impugned sum also formed part of the overall sales credited in the Profit & Loss account and offered for taxation under the head “Business Income”. Perusal of the stock register along with sales register shows that the movement of the stock fully reconciles with the reported sale proceeds on the day of demonetization. The Ld. D.R. was also unable to controvert the fact that the A.O. had accepted the sales and the stocks in as much as he did not invoke provisions of Section 145(3) of the Act and rejected the books of accounts. The Ld. D.R. although emphasized on the suspicious features which were noticed by the A.O. casting Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 8 aspersions of the sales made on the day of demonetization and stock movement etc. But the fact remains that the Ld. A.O. ultimately did not reject the books of accounts and trading account, Profit and Loss account and the financial statements. We therefore agree with the Ld. Counsel for the assessee that once the book results and inter alia the sale proceeds has been accepted by the A.O. as assessee’s business income, it is not justified on AO’s part again to assess the same by way of unexplained cash u/s. 69A of the Act and taxing u/s. 115BBE. 7.2. On identical facts the decision of Vishakhapatnam Tribunal in the case of ACIT Vs Hirapanna Jewellers (128 taxmann.com 291) wherein sales made to 270 different customers was held to be plausible by observing as follows: “7.2 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. In spite of conducting the survey the AO did not find any defects in sales and the stock. Therefore, we do not find any 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, nonavailability of CCTV footage for huge rush of public etc. The contention of the assessee that due to demonetization, the public became panic and the cash available with them in old denomination notes becomes illegal from 9-11-2016 and made the investment in jewellery, thereby thronged the jewellery shops appear to be reasonable and supported by the newspaper clippings such as The Tribune, The Hindu etc. It is observed from the newspaper clippings that there was undue rush in various jewellery shops immediately after announcement of demonetization through the country.” Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 9 7.3. Similarly, the Co-ordinate Bench of this Tribunal in the case of ACIT vs. Zinzuwadia & Sons IT(SS)A no. 50/Ahd/2021 dated 10- 05-2024 observed the sales made on the demonetization day as under : “20. Taking up first the anomaly noted by the AO that it was not possible to make sales to 223 customers in short span of 240 minutes on 08/11/16, the CIT(A) has dealt with the same at para 6.11 of his order as under: “6.11. On perusal of assessment order, it is observed that AO has proceeded to make addition of treating accounted sales in books of account as bogus sales through backdating on assumption that it was not possible to make such sale of huge jewellery post announcement of demonetization In the present case, sales on 08/11/2016 was claimed to have been made for Rs 3.58 crore out of aggregate addition of Rs 7.88 crore. The following is the few video and news items available in public domain justifying that post declaration of demonetization till the midnight of 8th November, 2016, there were huge rush of people to buy the jewellery all over the India. Sr. No. Headline of News/video Link of Youtube Video 1 People rush to goldsmiths in Jalandhar to convert black currency into gold at midnight https://www.youtube.co m/watch?v=mep1rEP1rE NTuKiW 2 People rush to buy gold jewellry after 500 & 1000 notes banned https://www.youtube.co m/watch?v=bLfxEyWXV U 3 People take note of change rush to ATMS and jewellery shops Daijiworld Television https://www.youtube.co m/wat ch?v=A 97EQ8RO- YO The AO has observed that it was impossible to cater such huge customers in very short time, appellant has provided its modus operandi of doing sales on a particular day, how accounting was Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 10 made etc. The reasons provided by appellant from the perspective of a prudent and pragmatic businessman as well as based on the advanced billing technology adopted by appellant, that due to unprecedented rush of customers post-demonetization the appellant realized a huge business opportunity and decided to keep showroom open till 12 o'clock of the night on 8th November 2016 The appellant realized that it would not be possible to cater such huge crowd of customers if the option of selection of ornaments of their choice is provided and such option of selection could also increase the risk of theft/defalcations of Gold Ornaments from showroom and therefore the appellant decided not to give option of selection of jewellery but to give readily prepared packet of Gold Ornaments only, that the administrative staff and family members were instructed to keep aside all other work and to prepare such small package of gold ornaments, two persons were exclusively allotted the work of preparing and handling the bills to the customers through the computerized billing process, due to barcode labels on each and every jewellery/ ornaments of showroom with all the requisite details of jewellery for preparing bills mere scanning the barcode through barcode reader would fetch all the details of the jewellery on the ORNET Software for billing purpose and there is no need to enter the details of the jewellery and therefore billing process was quick and easy The circumstantial evidences as referred supra and billing processes adopted to cater huge rush, AO's contention that it was not possible to make sale to 223 customers cannot be accepted. 21. As is evident from a bare perusal of the above AO found the assessee's explanation plausible of having managed its affairs in such a manner so as to grab the opportunity of huge rush of public to jewellers on account of demonetization announced by the Government which was acknowledged by reports in the public domain. No infirmity in the explanation of the assessee has been pointed out to us during the course of hearing, neither do we find any in the same. Therefore we find no infirmity in the order of the Ld. CIT(A) accepting the assesses explanation with regard to allegedly unusually large number of customers catered to by the assessee on one single day.” 7.4. In view of the above facts, in our considered view, when the sale proceeds had been supported with book results & primary Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 11 evidences, which were not disproved by the AO, and that the same had already been assessed by the AO as revenue receipts from ‘Business’, then it was wholly improper for the AO to again tax these sale proceeds as unexplained cash u/s 69A of the Act, as it would amount double taxation of the same sum. This view is supported by the following decisions: a. CIT Vs Vishal Export Overseas Ltd [TA No. 2471 of 2009] (Guj HC) “5. ...... The Tribunal however, upheld the deletion of Rs.70 lakhs under section 68 of the Act observing 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. 6. Having heard learned counsel for the parties and having perused the documents on record, we are in agreement with the above view of the Tribunal.” b. CIT Vs Kailash Jewellery House [TA No. 613/2010] (Del HC) “The Tribunal also observed that it is not in dispute that the 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. It is in these circumstances that the Tribunal observed that the cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The findings of the Commissioner of Income-tax (Appeals) and the Tribunal, which are purely in the nature of the factual findings, do not require any interference and, in any event, no substantial question of law arises for our consideration.” 7.5. Further very recently, Co-ordinate Bench of this Tribunal in ITA No. 944/Ahd/2023 dated 30-10-2024 in the case of Jaykumar Nemichand Jain HUF Vs ITO wherein it was held as follows: Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 12 “8.1. The assessee relied on various judicial precedents, including Sobha Devi Dilipkumar vs. ITO, ACIT vs. Chandra Surana, ITO vs. J.K. Wood India (P.) Ltd., and ACIT vs. Hirapanna Jewellers. These decisions collectively emphasize that cash deposits during demonetization or otherwise, if duly recorded and substantiated, cannot be taxed under Section 69A unless the revenue demonstrates the unreliability of the books or evidence provided. 8.2. It is pertinent to note that mere cash deposits during the demonetization period do not automatically trigger the provisions of Section 69A of the Act, if the transactions are supported by proper documentation and the cash has been accounted for in the books. In cases where cash sales or deposits are accounted for and recorded in the regular course of business, the provisions of Section 69A of the Act are not attracted. The revenue must find defects in the assessee’s books of accounts to invoke Section 69A of the Act. The existence of stock records, sales invoices, and proper tax filings (VAT returns in this case) are sufficient to substantiate the cash deposits. Demonetization-related cash deposits should not be treated as unexplained merely because they occur during a sensitive period. Where all supporting documents are provided, the burden of proof shifts back to the department to demonstrate that the deposits are unexplained. 8.3. In light of the facts and the documentary evidence presented, it is evident that the assessee maintained regular books of account, recorded all sales, and provided sufficient evidence to substantiate the cash deposits during the demonetization period. The AO did not bring any concrete evidence to counter the claims of the assessee, nor did he reject the books of account. The sales were duly reflected in the VAT returns, and no discrepancies were found in stock records. Accordingly, the addition of Rs. 55,00,000 made by the AO under Section 69A is deleted, and the appeal of the assessee is allowed.” 8. Respectfully following the above judicial precedents, we have no hesitation in deleting the addition made u/s.69A of Rs.2,97,00,000/- by the Lower Authorities and the grounds of appeal raised by the assessee are hereby allowed. Printed from counselvise.com I.T.A No. 1548/Ahd/2025 A.Y. 2017-18 Page No Shalin Rajendrakumar Shah vs. ITO 13 9. In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 24-02-2026 Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT True Copy JUDICIAL MEMBER Ahmedabad : Dated 24/02/2026 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद Printed from counselvise.com "