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TMI Blog2022 (10) TMI 1187X X X X Extracts X X X X X X X X Extracts X X X X ..... Jewels Pvt. Ltd on the very same date. Consequent to the survey operations, the return of income filed by the assessee for the year under consideration was taken up for scrutiny. It was noticed by the AO that the assessee has deposited cash of Rs. 4.85 crores in its bank account kept with Bharat Cooperative Bank Limited and the said cash consisted of demonitised currency notes of Rs.1000/- and Rs.500/-. Hence, the Assessing Officer asked the assessee to explain the sources of cash deposit made during demonetisation period. 3. The assessee explained that the cash deposits were made out of cash sales effected by it prior to announcement of demonetisation of Rs. 500/- and Rs. 1000/- notes on 8.11.2016. The assessee submitted that it has sold gold bar and diamond ornaments to the retail customers by cash on 8.11.2006 and earlier dates. It was stated that the cash received on such sales have been deposited into the bank account. It was further submitted that the cash sales have been duly reflected in the books of account and stock register. It was submitted that the stock book and regular books of account have been audited by its auditor and they did not find any fault or error in them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer took the view that the assessee could not properly explain the source for the cash of Rs. 4.85 crores available with it and hence the same is assessable under section 69A of the Act also. 5. In the appellate proceedings, the Ld CIT(A) deleted the addition and hence the revenue has filed this appeal. 6. The Ld D.R submitted that the assessee has only fabricated sales bills and created source for the deposit of demonitised currency notes, which is proved by the fact that there has been sudden increase in cash sales just one week prior to the date of demonitisation. He submitted that the same is against human probabilities and hence the addition made by the AO is justified. In this regard, he placed reliance on the decision rendered by Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT (1995)(80 Taxman 89)(SC) and Durga Prasad More (1971)(82 ITR 540)(SC). He further submitted that the addition is sustainable if the genuineness of the transactions is not proved as held in the case of DCIT vs. Leena Power Tech Engineers (P) Ltd (2021)(130 taxmann.com 341)(Mum). The learned DR further submitted that the claim that the source for making deposits into the bank account can be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the customers. However, the observations of the AO that the customers did not respond to the notice issued by him nor did they file their return of income are not relevant in the assessment of the assessee, since the assessee has proved sale of gold/diamond ornaments visà-vis the stock register. In support of this proposition, the learned AR relied on the decision rendered by Hon'ble Bombay High Court in the case of R.B.Jessaram Fatehchand (Sugar Dept) Vs. CIT (75 ITR 33). 9. The learned AR further submitted that the decision rendered by Hon'ble Himachal Pradesh High Court in the case of J.M.J. Essential Oil Co. (supra) has been rendered under the peculiar facts of that case and hence that decision is not applicable to the facts of the present case. He submitted the assessee before Hon'ble Himachal Pradesh High Court was eligible for deduction under section 80IC of the Act and the said assessee was found to have claimed cash sales of huge amount across the counter, which was found to be unusual in that nature of business. The assessee also did not offer proper explanations in this regard. Further, it is not clear as to whether the assessee could prove the sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT (1967)(64 ITR 593)(Cal.). 12. We have heard rival contentions and perused the record. We notice that the Ld CIT(A) has deleted the addition with the following observations:- "9.3 Coming to the cash sales made by the assessee, I agree with the assessee that no discrepancy in the stock of the assessee as such was found by the investigating officer or by the AO. In fact, this group consisting of a few entities engaged in jewellery business was searched/surveyed and at the time of the search, no discrepancy in the stock of jewellery of any of the entities was found. If there was no discrepancy in the stock, the sales and purchases made by the aseessee till the date of search or the year end should have been in order. If the contention of the Ld. A.O. is to be accepted then there should have been some excess stock in possession of the assessee as on date of search, which the search team really did not find. 9.4 Further, it is not the case that the assessee did not have sufficient stock of gold and diamond jewellery to make the above sales. In fact, the assessee was maintaining huge stock of over 52078gm as on 31.03.2016, 54028gm as on 31.03.2017 and 48506gm of gold as on 08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales out of non-existing stock, which may attract addition of entire sales amount as income. With regard to the genuineness or veracity of entries made in the books of account and stock register, we notice that the survey officials who conducted survey in the hands of the assessee did not find any discrepancy either in the sales recorded in the books of account or in the entries made in the stock register with regard to the said sales. The auditors, who audited the accounts also did not find any fault with regard to these records. Accordingly, the Ld CIT(A) held that, if there was no discrepancy in the stock, the sales and purchases made by the assessee till the date of search or the year end should have been in order. We notice that the AO did not give credence to this important fact. 13. We notice that the assessee has obtained PAN number of its customers, wherever is required under the provisions of the Act and has also furnished those details to the assessing officer. We notice that the AO has given credence to the fact that the said customers did not file return of income nor did not they respond to the notices issued by him to them. As rightly contended by the Ld A.R, those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o maintain the addresses was a suspicious circumstance giving rise to a doubt about the genuineness of the transactions entered into by the assessee. 3. 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. In our opinion, therefore, the rejection of the results of the assessee's cash book by the Income-tax Officer was not at all justified and the Appellate Assistant Commissioner, therefore, was right in deleting the addition made by the Income-tax Officer. The Tribunal, it appears, has approached the matter on certain surmises and conjectures. It has referred to what it calls a matter of common knowledge that there is scarcity of sugar in certain months of the year and particularly in the months just before the new crushing season starts, which is in the month of October. Therefore, in the month of August, when the sale of sugar to the tune of Rs. 75,000 and odd was effected by the assessee, there might have been an occasion for the assessee to take advantage of the situation caused by the scarcity of sugar. Assuming that scarcity of sugar sometime ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The real question that arises in this case is whether the cash deposits made by the assessee into its bank account have been properly explained or not. The assessee has claimed the sources to be cash sales effected by it and the sales have been duly recorded in the books of accounts and stock register. We also notice that the survey officials have not found any discrepancy between physical stock and book stock. If the sales were not genuine, the survey officials would have found excess stock, which is not the case here. 15. The Ld D.R relied upon the decisions rendered in the cases of Sumati Dayal (supra), Durga Prasad More (supra) and submitted that the claim of cash sales is beyond the scope of human probabilities. First of all, the assessee has claimed sale of gold/diamond articles and it is proved that the said sales are supported by the stock register and sales bills. When purchase of stock has not been doubted, then there is no question of doubting the genuineness of sales bills and stock register, since the quantity of goods sold has been reduced from the stock shown in the stock register. The Ld A.R submitted that cash sales are not an unusual activity in any trade. Furt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: From the perusal of section 68, the sum found credited in the books of accounts for which the assessee offers no explanation, the said sum is deemed to be income of the assessee. In the instant case the assessee had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock registers. Both the DDIT (Inv.) and the AO have conducted the surveys on different dates, independently and no difference was found in the stock register or the stocks of the assessee. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cord that the assessee maintained the books of accounts according to the mercantile system and there was sufficient cash balance in its cash books and the books of account of the assessee were not challenged by the Assessing officer. If the entries in the books of accounts are genuine and the balance in cash is matching with the books, it can be said that the assessee has explained the nature and source of such deposit. In the case of Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.) Hon'ble Patna High court held as under: "It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law." All the decisions cited supra suggest that once, the assessing officer accepts the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh 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. 8. The Ld.DR placed reliance on various decisions. In the case of Sumati Dayal (supra), Durga Prasad More (supra), Durga Prasad More (supra) both the cases are related to the circumstantial evidences in the absence of direct evidence. In the instant case, the facts clearly support that the assessee has made the sales and there were sufficient stocks to meet the sales. Thus, the facts of the assessee's case are clearly distinguishable. The Ld.DR further relied on the decisions of Kale Khan Mohammad Hanif (supra), wherein, the Hon'ble Supreme Court held that the AO is permitted to make addition of unexplained cash credits even though the income is estimated on sales. In the instant case, the AO had accepted the sales and no unexplained cash credits were foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (ITA No.613/20109) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (ITA 2471 of 2009), Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld." 19. The above said decision rendered by ITAT, Visakhapatnam bench was followed by Chandigarh bench of ITAT in the case of Kalaneedhi Jewellers LLP (supra), besides following decisions:- (a) Bansal Rice Mills vs. ITO (Chd TM) (b) PCIT vs. Agson Global P Ltd (ITA No.68-73/2021 dated 19-01-2022) (c) Lakshmi Rice Mills vs. CIT (1974) (97 ITR 0258)(Patna) (d) PCIT vs. Akshit Kumar (Delhi HC) Taking support of all these decision, the Chandigarh bench of ITAT held as under:- "10.13 In the present case also the cash deposited post demonitisation by the assessee was out of cash sales which had been accepted by the Sales tax/VAT department and not doubted by the AO, there was sufficient stock available with the assessee to make cash sales and there was festive season in the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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