Cash Deposit During Demonetization Explained as Sales Proceeds; Addition Deleted

By | February 27, 2025
0 Comment

Cash Deposit During Demonetization Explained as Sales Proceeds; Addition Deleted

Issue: Whether the Assessing Officer (AO) was justified in treating a cash deposit of Rs. 50 lakhs during demonetization as unexplained cash credit under Section 68 of the Income-tax Act, 1961, and rejecting the assessee’s book results under Section 145(3).

Facts:

  • The assessee deposited Rs. 50 lakhs in cash during the demonetization period, claiming it to be proceeds from cash sales.
  • The AO, unconvinced by the explanation, invoked Section 145(3) to reject the book results and made an addition under Section 68 for Rs. 37.96 lakhs, representing part of the cash deposit.
  • The assessee provided invoices, a cash book, and details of customers to support the claim of cash sales.
  • The AO did not conduct any independent inquiry and accepted part of the sales as genuine while rejecting the rest based on the same set of records.

Decision:

  • The court held that the AO was not justified in rejecting the books of account under Section 145(3) and making the addition under Section 68.
  • The assessee had provided sufficient evidence to support the claim of cash sales, including invoices, a cash book, and customer details.
  • The AO’s “pick and choose” approach of accepting some sales as genuine while rejecting others based on the same evidence was not valid.
  • The court also noted that the AO had not given the required notice before rejecting the book results.
  • Furthermore, the profit from the sales was already taxed as part of the sales income, so adding it again would be double taxation.

Key Takeaways:

  • This case highlights the importance of proper scrutiny and consideration of evidence before rejecting book results and making additions under Section 68.
  • When the assessee provides supporting documents and explanations, the AO must conduct a thorough examination and cannot arbitrarily reject the claims.
  • The AO’s approach should be consistent and not based on selective acceptance or rejection of evidence.
  • Proper notice must be given before rejecting book results under Section 145(3).
  • Double taxation should be avoided, and income should not be taxed twice.
IN THE ITAT JAIPUR BENCH ‘SMC’
Jitendra Kumar Tahilramani
v.
Income-tax Officer
RATHOD KAMLESH JAYANTBHAi, Accountant Member
and Narinder Kumar Sood, Judicial Member
IT Appeal No. 928 (JP) of 2024
[Assessment Year 2017-18]
JANUARY  21, 2025
Rohan Sogani, CA for the Appellant. Gautam Singh Choudhary, JCIT-DR for the Respondent.
ORDER
Rathod Kamlesh Jayantbhai, Accountant Member.- By way of the present appeal the above named assessee challenges the order of National Faceless Appeal Centre, Delhi [for short ‘CIT(A)/ NFAC’] dated 06/10/2023 for assessment year 2017-18. The said order of the ld. CIT(A) arose because the assessee challenged the order of assessment passed u/s. 143(3) of the Income Tax Act [for short Act] by ITO, Ward 2(1), Jaipur [for short AO] before him.
2. At the outset of hearing, the Bench observed that there is delay of 210 days in filing the appeal by the assessee for which the ld. AR of the assessee filed an affidavit stating the reasons for delay and prayed for condonation of delay, the content of the affidavit reads as under :-
“I, JITENDRA KUMAR TAHILRAMANI, aged 51 years, residing at 24, Khatipura Road, Vaishali Nagar, Jaipur, 302021 do hereby declare on oath as under: –
1. That I am aged 52 years, engaged in jewellery business in Jaipur.
2. That I have given my email address on the portal of the Income Tax Department. However, being not convers ant with technology, I normally do not check my emails. All my correspondences are through my mobile phone or in physical manner only. I seldom use my email ID.
3. That during the course of first appellate proceedings, apart from getting emails of the notices issued, I also used to get SMS on my mobile phone the number of which was also given by me on the Income Tax portal.
4. That upon receiving such messages from the Income Tax Department during the appellate proceedings, I immediately used to intimate my Chartered Accountant who was handling my case before NFAC.
5. That the present order passed by the Id. CIT(A) was not intimated to me on my mobile number by way of SMS. As a result, I was not aware of such order having been passed in my case by the CIT(A)/NFAC.
6. That while preparing to file my return of income for FY 2023-24, when my Chartered Accountant logged on to the Income Tax Portal, he came to know of the order having already been passed by Id. CIT(A). Thereafter, it was also intimated to me.
7. That subsequently, I filed the appeal before the Hon’ble Bench, resulting in a delay of 208 days in filing the appeal.
8. That the delay in filing the appeal was neither intentional nor due to any negligence or mala fide intention on my part but was caused due to the reasons mentioned above, which were beyond my control.
9. That the contents of my Condonation application are true and correct.”
3. The ld. AR of the assessee vehemently argued that the assessee was not conversant with checking the email and that usually, Revenue sends the SMS of passing the order, but it was not done so in his case. While filling the ITR, CA came to know of passing of the order and therefore there was a delay in filling the present appeal, which may be considered.
4. The ld. DR did not dispute the facts stated in the condonation petition so filed and prayed that the bench may decide the prayer of the assessee as deemed fit.
5. We have heard the contention of the parties and perused the materials available on record. The prayer by the assessee for condonation of delay of 210 days has merits, as assessee claims that the email ID mentioned was not in regular use, and since no SMS was delivered, intimating that order had been passed and this was the reason for the delay in filling the present appeal. The fact finds support from an affidavit duly executed before Notary Public. Even as regards the affidavit nothing to the contrary has been submitted by the department. In the given situation, we deem it a fit case to condone the delay before this Appellate Tribunal.
6. Now coming to the merits of the dispute, the assessee has raised following grounds: –
“1. In the facts and circumstances the case and in law, Id. CIT(A)/National Faceless Appeal Centre (NFAC) has erred in confirming the action of Id. AO in making additions of Rs.37,95,560/- as unexplained cash deposits u/s 68. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the additions of Rs.37,95,560/- made u/s 68 of the Income Tax Act, 1961.
2. In the facts and circumstances of the case and in law, Id. CIT(A)NFAC has erred in confirming the action of the Id. AO, in invoking provisions of Section 115BBE of the Income Tax Act, 1961. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by quashing the invocation of Section 115BBE, as being not in accordance with the relevant law.
3. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing.”
7. Succinctly, the facts as culled out from the records are that the assessee is engaged in the business of trading of manufacturing and trading of gold and diamond jewellery in the name and style of M/s Jai Jagdish Jewellers.
Assessee filed return showing total loss at Rs. 4,93,455/- on 28.09.2017, which was processed u/s 143(1) of the IT Act. Subsequently, the case was selected for complete scrutiny manually to examine the issue of abnormal increase in cash deposits during demonetization period from 09.11.2016 to 30.12.2016. Accordingly statutory notice u/s 143(2) was issued on 29.09.2018 which was duly served upon the assessee through ITBA portal. Notice u/s 142(1) along with questionnaire dated 11.11.2019 was issued to the assessee electronically for filling the reply/details on 15.11.2019.
In response to the notice so issued, the assessee filed all the details on the ITBA portal which was verified by the ld. AO. On going through the details so filed ld. AO noted that the assessee deposited cash of Rs. 50,00,000/- during the period of demonetization from 09.11.2016 to 30.12.2016 in his bank accounts. Ld. AO also observed that there was an abnormal increase in cash deposit in the bank account in November 2016. Therefore, the assessee was issued a show cause notice dated 25.12.2019 asking the assessee to justify in detail, covering each aspect, the sudden increase in cash deposit in the bank account in comparison to cash deposit made during the earlier year.
The assessee submitted written reply on 26.12.2019 contending the cash so deposited are the sale proceeding. The assessee submitted all documents and information from time to time including the details of sales with all the invoices with ledger and cash book for the whole year. The assessee also submitted name(s), address(es) and telephone number(s) of the persons to whom the cash sales were made. The assessee also submitted the comparison of sale and cash deposited into the bank account with the last year for each month. As per that information the cash deposited during the financial year 14-15, was Rs 1,26,73,900/-, as compared to the financial year 15-16 which was Rs 1,30,84,000/-, thereby increasing the cash deposited into the bank account by an amount of Rs 4,10,100/-. Thus, assessee contended that cash deposits of Rs. 50,00,000/- were proceeds of the cash sales and were supported by the sales invoices reflected in the books of accounts, which were audited.
Ld. AO observed that the submissions and evidence filed were not acceptable. While holding so, he noted that before depositing of Rs. 50,00,000/- in his bank account in SBN on 13.11.2016, the opening cash balance with the assessee as on 01.10.2016 was Rs. 4,04,200/- only. The source of the cash is claimed to have been generated as per cash book was out of the alleged cash sale proceeds which was shown to have risen drastically from the month of October, 2016 till 8th November, 2016 in comparison to corresponding months of the FY 2015-16 as well as earlier month of FY 2016-17. Ld. AO extracted figures of cash in hand and cash deposited out of it on various dates during October and November, 2016, as listed herein below :
DateCash in hand (in Rs.)Cash deposited (in Rs.)
12.10.201611,38,953/-2,00,000/-
17/10/20169,48,173/-65,000/-
19/10/20169,75,3531,27,000/-
31/10/201614,43,326/-
2/11/201620,99,220/-1,35,000/-
3/11/201625,72,205/-1,50,000/-
5/11/201629,76,815/-5,90,000/-
7/11/201626,71,165/-1,10,000/-
8/11/201653,10,622/-–
13/11/201653,10,622/-50,00,000/-

 

Ld. AO from the above chart observed that despite having a considerable amount of cash in hand on different dates, assessee had deposited a meager amount in comparison to what was claimed to be available cash on hand; that the assessee had hardly made any cash purchases; that this fact further gets momentum from the fact that during the AY 2016-17, the average cash in hand was Rs. 2.78 lac and during AY 2017-18, up to September 2016 the average cash on hand was Rs. 3.03 lac while alleged cash in hand on 31.10.2016, it was 14.43 Lac which rose as high as up to Rs. 53,10,622/- on 08.11.2016 (evening); that in morning of 07.11.2016, it was Rs. 26.71 Lac, but the assessee deposited only Rs. 1.10 lac out of cash claimed to be available on that date which apparently looks unreasonable considering the fact that the assessee had been maintaining average cash balance of approximately Rs. 3 lac. Therefore, ld. AO noted that the assessee failed to explain the source of huge cash deposited of Rs. 50,00,000/- on a single day 13.11.2019, which was considered as colourable device of the assessee trying to explain the source of the huge cash deposited in the bank account as discussed above which is in fact the income of the assessee from undisclosed sources and not form the actual sale made. While holding so he also observed that all sale bills were below Rs. 2 Lac and hardly any details of the purchasers were mentioned on the sale bills except a few; that the sale bills also did not bear the mobile numbers / contact number / land line number of the purchasers; that the signature of the purchaser at the time of taking the delivery of the goods sold were also not found on the sale bills; that no complete description of the goods claimed to have been sold was found on the sale bills like name of the item, complete description of the stone used, purity of metal, gross/ net weight, details of the item in most of the sale bills. Ld. AO also observed that the ratio of cash sale to the total sale during the entire A.Y. 2016-17 was 66.34%, while during the A.Y. 2017-18 it was 86.34% hence, during the year under consideration cash sale was shown to have increased in comparison to credit sale by appox. 20% over the last year the reason thereof was quite apparent and obvious. As regards the contention of the assessee while submitting the comparison of sales on account of Deepawali and other auspicious occasions for the months of Oct & Nov of each year, ld. AO noted that there was an acute abnormal increase in sales especially during the month of October and November 2016 over corresponding period of last FY 2015-16 was not considered as acceptable reasons.
Ld. AO observed that the source of cash deposits in bank account during demonetization period cannot be held to be entirely from alleged cash sale. Ld. AO noted that assessee claimed having cash in hand as on 12.10.2016 Rs. 11.38 Lac which kept on rising till 8th Nov, 2016 but the assessee never deposited the same in the bank account or deposited a nominal amount which was not in consonance with the cash balance he used to maintain in hand during FY 2015-16 and earlier months of FY 2016-17. Considering that enormous factors as discussed by AO, he had considered sales as unverifiable alleged sale, the trading results declared by the assessee was not considered for verification and thereby he invoked the provision of section 145(3) of the Act and rejected the book results.
As regards the contention of the assessee for verification of the sales by invoking the provision of section 133(6) [calling for any information from any person or any officer], section 131 [Summons enforcing attendance of any person or any officer and examine him on oath] and Section 131(1)(d) [Issuing commission to any authority to conduct any investigation] not considered as the assessee failed to discharged the initial onus by providing the name, complete address, contact number / mobile number / landline number, PAN etc., the genuineness of the sales made to parties to whom goods were claimed to have been sold, were not considered.
But, at the same time, ld. AO also noted that the assessee was engaged in the regular business of jewellery and hence, the cash deposited during the demonetization period, being a peculiar period, must be inclusive of his genuine sale proceeds as well. Therefore, he considered that cash sale shown during October and till 8th November, 2015 as this period of Year 2015 and 2016 covered most of big festivals / auspicious occasions like deepawali, marriages, etc and such festivals/ occasions fell in these two FYs also during October and November and further allowing thereon weightage on account of overall inflation, changes in price of diamond/ gold etc. @ 5%. Assessee’s sale in October 2015 was Rs. 21,13,210/- and from 1st November to 8th November 2016 same was Rs. 2,56,354/- totaling to Rs. 23,69,564/-, hence, this way the cash earned by the assessee out of genuine cash sale was worked out at Rs. 24,88,042/-after allowing weightage of 5% over last year turnover shown during this period and thereby ld. AO did not consider the sales to the tune of Rs. 37,95,560/- out of the cash deposited by the assessee between 01.10.2016 to 13.11.2016. 8. Aggrieved by the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:
“5.0 Decision:
5.1 Ground no. 1: Vide this ground of appeal, appellant has stated that AO has grossly erred on law as well as on facts while making addition of Rs. 3795560/-as unexplained cash deposit into the Bank account u/s 68 r.w.s 115BBE of the IT Act 1961.
5.2 I have duly considered the facts of the case, findings of the AO in his assessment order and reply along with documentary evidence supported by judicial pronouncement and case laws cited during the appellate proceedings. From the perusal of assessment order it is seen that appellant is engaged in selling of jewellery during the year under consideration. The appellant has deposited an amount of cash of Rs. 5000000/- during the period of demonetization in his bank account. Based on these information AO has sought explanation along with documentary evidence to justify the source of cash deposited in his bank account during the assessment proceedings. The AO has analysed the information and explanations given by the appellant during the assessment proceedings in details in his assessment order. AO has also made comparative analysis of the sale proceeds and cash deposit month wise in his assessment order. Considering that appellant is a businessman engaged in jewellery business where cash/ cheque sales are norms of the business, has given his detailed analysis of the sale proceeds corresponding to cash deposit in his bank account. The AO has noted that since the appellant is engaged in regular business of jewellery and hence cash deposited during the demonization period, being a peculiar period must be inclusive of his genuine sales proceeds. Accordingly in order to ascertain the cash earned on account of genuine cash sale, the AO has taken into account cash sale shown during October and till 8th November 2015, at this period of year 2015 and 2016 covered most of big festivals/ auspicious occasions like Dipawali, Merriages etc. during these months. Further AO has also given weightage on account of overall inflation, changes in price of Gold & diamond etc. at the rate of 5%. The AO has given his finding that sale shown 2015 during October was Rs. 2313210/- and from 1st November to 8th November 2016 was Rs. 256354/- totalling Rs. 2369564. Hence AO has concluded that in this way cash earned by the appellant out of genuine cash sale is worked out at Rs. 2428042/- after giving weightage 5% over last year turn over shown during this period. Based on his cash sale over the last 2 years, the appellant has concluded that an amount of Rs. 3795560/- is held to be undisclosed income available with appellant in the form of cash prior to demonetization period and the same has been added to the total income u/s 68 of IT Act.
5.3 I have carefully examine the reply of the appellant along with case laws and judicial pronouncement cited during appellate proceedings from the perusal of reply it is seen that appellant has categorically denied the findings of the AO with regard to unexplained income u/s 68 of IT Act. The appellant has explained that the cash has been deposited out of his sale proceeds from the business, which is duly recorded in his books of accounts. Demonetization being the peculiar period, there was large scale cash sale of the jewellery which has been duly recorded in his books of account and therefore there is valid source of cash deposit in the bank account during the period of demonetization. The appellant has also objected several findings of the above contain in his assessment order and has alleged that the AO has not duly appreciated the relevant documentary evidences and explanation filed during assessment proceedings with regard to source of cash deposit of Rs. 5000000/- in his bank account. The appellant has submitted that there cannot be month to month comparison with the sale and has argued that annual cash deposit compared to the previous year is more or less same. The appellant has also raise objection with regard to invocation of section 68 of IT Act on the ground that all the sale proceeds whether in cash or cheque has been duly recorded in his books of accounts which are well explained. The appellant has also argued that rejection of books of accounts by the AO without any specific defects is not justified. Therefore invocation of section 68 is not valid. In support of his contention he has cited several case laws and judicial pronouncement passed by ITAT/High Courts.
5.4 I have duly examined and evaluated the findings of the AO and reply/explanation of the appellant filed during appellate proceedings. There is no doubt that cash of Rs. 5000000/- has been deposited by the appellant in his bank account on 9th November 2016. The explanation of the appellant with regards to source of cash deposit has been properly examined by the AO. It is seen that a proper scientific method has been employed by the AO for proper evolution of the cash deposits and business proceeds by the appellant. The AO has given due benefit to the appellant for genuine cash sale during the period. On the proper examination of the present case in the light of findings of the AO contained in his assessment order and explanation submitted by the appellant, I am inclined to concur with the findings of AO with regard to addition u/s 68 amounting to Rs. 3795560/- as unexplained income of the appellant for the assessment year 201718. Hence I hereby confirmed the addition of Rs. 3795560/-. Therefore this ground of appeal is dismissed.
5.5 Ground no. 2: vide this ground of appeal the appellant has challenged the imposition of interest u/s 234B of IT Act. In view of the findings contained in the paragraph 5.4 above, there is no need to separate adjudication.
6.0 In the result, the appeal is dismissed.”
9. Feeling dissatisfied the assessee preferred present appeal on the grounds as reproduced hereinabove. To support the various grounds so raised by the ld. AR of the assessee, has filed the written submission in respect of the grounds raised by the assessee. The written submission so filed reads as under:
I. The assessee engaged in the business of manufacturing and trading gold and diamond jewellery under the name and style of M/s Jai Jagdish Jewelers, filed return of income, declaring loss of Rs. 4,93,455 on 28.09.2017, for the relevant previous year.
II. Assessment u/s 143(3) was completed vide order, dated 26.12.2019, by making additions of Rs. 37,95,560 u/s 68 of Income Tax Act, 1961, on account of cash deposited in bank account, during the period of demonetization.
III. Against order passed by ld. AO, assessee preferred appeal before the National Faceless Appeal Center (“NFAC”/ “ld. CIT(A)”). NFAC, vide order dated 06.10.2023 dismissed appeal of the assessee. Against the order passed by NFAC, the present appeal has been preferred by assessee before Hon’ble ITAT, Jaipur Bench.
GROUNDS OF APPEAL
GROUND NO 1-2: ADDITION OF RS 37,95,560 U/S 68 AND INVOCATION OF SECTION 115BBE
1. ASSESSING OFFICER AND NFAC
1.1. Ld. AO made addition amounting to Rs. 37,95,560 under Section 68 for the cash deposited in the bank, generated from the sales made in cash. Additions made by the ld. AO were upheld by the NFAC.
2. SUBMISSIONS
2.1. Written submissions as filed by the assessee before the NFAC, which are also reproduced by the NFAC in its order from Pages 2 to 10 may be considered in correct perspective.
2.2. The assessee reiterates that cash deposited during the demonetization period was sourced from cash sales recorded in the books of accounts, backed by stock registers, VAT return. Also, assessee maintained regular books of accounts, which were also Audited under Section 44AB. Also, there are no adverse remarks of the auditor regarding cash sales recorded in the books of accounts.
2.3. Assessee has consistently followed the same method of accounting in earlier years, and assessments under Section 143(3) for preceding years were accepted without any such additions. The assessee has consistently deposited cash generated from sales into the bank account. In this regard, it is submitted during the year under consideration the assessee has deposited Rs.1.30 crores cash, in total, out of cash sales, whereas, for the immediately preceding year the assessee had deposited Rs. 1.26 crores. The fact is undisputed and noted by the ld. AO at Page 5 of his order. Accordingly, it is not that the assessee only on account of demonetization deposited the amount.
2.4. During the course of proceedings before the lower authorities, assessee submitted all requisite details and supporting documents pertaining to the cash sales made during the relevant previous year. These submissions included complete address of the buyers involved in the cash transactions, as recorded in the sales bills.
Despite the submission of these comprehensive details and supporting evidence, the lower authorities failed to point out any specific discrepancy or irregularity in the information provided by the assessee.
2.5. Ld. AO erred in stating that identity of persons from whom cash payment have been received has not been proven by the assessee. Ld. AO did not invoke Section 131 (summoning purchasers) or Section 133(6) (calling for information) to substantiate the allegation that sales were fabricated or non-genuine.
2.6. Ld. AO simply stated that the assessee did not provide the phone numbers of the person to whom sales were made. Also, that no confirmation was received of the sales having been made. It is submitted that there was no requirement for the assessee to collect the phone number of the buyers and also to take a confirmation from them. The same practice had been followed by the assessee in the proceeding years as well, which had not been accepted by the department in the past.
2.7. Initial onus with respect to the transactions undertaken was duly discharged by the assessee by submitting all relevant evidences, including sale bills, details of purchasers, and supporting documentation. However, ld. AO failed to discharge corresponding onus by conducting any further inquiry or bringing on record any evidence to disprove the genuineness of the transactions or the explanations provided by the assessee.
2.8. The jewellery business is predominantly cash-driven, with sales influenced by seasonal factors like festivals, weddings, and auspicious occasions. Ld. AO failed to account for these dynamics while assessing the source of cash deposits.
2.9. It is submitted that all the purchases made by the assessee are through banking channel and has not been doubted by the lower authorities. Purchases and sales are interlinked and inseparable. Every purchase amount to increase in stock and every sale decreases the stock. However, in the present case, the purchases has not been doubted by the lower authorities.
2.10. Cash sales are one of the common practices in jewellery sector. The law nowhere prohibits cash sales. The assessee by selling the same in cash has not violated any of the provisions of the Act.
2.11. Ld. AO rejected the books of accounts without pointing out any specific defects in the records, stock registers, sales bills, or vouchers. These books were duly audited and verified during the assessment proceedings.
2.12. Reliance is placed on following judgements of jurisdictional ITAT:

■ Mahesh Kumar Gupta v. ACIT

Respectfully following the consistent view and after considering the factual matrix of the cash on hand in our considered view the addition made cannot sustain and therefore, we vacate the addition of Rs. 80,00,000/- made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO.

■ ACIT Central Circle-1 v. Shri Mahendra Kumar Agarwal ITA No. 172/JP/2022

We agree with the findings of ld. CIT(A) that the AO has not brought any material on record to establish that the sale bills are bogus nor any evidence indicating that such sales was bogus and merely having some doubt by twisting the data and giving some findings which are not alone sufficient to justify the addition the income so assessed in not tenable in the eye of law. In fact, the AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account Similar observations were made by ITAT, Jaipur Bench, in the case of Raj Kumar Nowal, ITA No. 165/JP/2022, Jaipur Bench,

2.13. Attention is drawn towards Hon’ble ITAT, Vishakhapatnam Bench in the case of Hirapanna Jewellers, I.T.A. No. 253/Viz/2020. The facts in this case are that the assessee firm was engaged in the business of trading of jewellery. During the period of post demonetisation period, it had deposited Rs. 5.72 crores (SBN) in its bank account. Out of above, Rs. 4.72 crores pertained to sales before demonetisation period. The AO, treated the sales as unexplained cash credits, as no details of sales were provided, and made addition of Rs. 4.72 crores u/s 68 r.w.s. 115BBE. Hon’ble Bench held that where assessee has admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. The relevant para 9 is reproduced hereunder:

“In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon’ble Delhi High Court in the case of Kailash Jewellery House (supra) and the Hon’ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld.”

2.14. Attention is drawn towards Hon’ble ITAT, Delhi Bench in the case of Agson Global Pvt Ltd v. ACIT. The facts in this case are assessee company was engaged in purchase and sale of dry fruits and other grocery items. It deposited Rs.180.53 crore post-demonetization in its Bank accounts, out of sale proceeds. During the course of assessment proceedings, assessee submitted details of closing stock, list of debtors, details of purchases and sales party-wise for year, VAT returns etc. However, AO made an addition of Rs. 150.53 crore as income u/s 68. CIT (A), restricted addition to Rs. 73.13 crores. Hon’ble Bench deleted the addition. The relevant para 126 (vii) is reproduced hereunder:

“It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer. The assessee has maintained the complete stock tally in its accounting software. Such books of accounts are audited, quantitative records produced before the tax auditor, such quantitative records are certified by tax audit and no questions have been raised by the assessing officer. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details.”

The said decision has also been upheld by Hon’ble Delhi High Court in Agson Global (P.) Ltd
2.15. Attention is also invited towards the decision of the Hon’ble Bombay High Court in the case of R.B. Jessaram Fatehchand v. CITwherein the Hon’ble High Court at Para 2 of the order held as under:

“In these circumstances, the reason given by the Income-tax Officer for rejecting the book results shown by the assessee’s accounts or for not accepting the cash transactions as genuine cannot be accepted as good and sufficient unless there was an obligation on the part of the assessee to keep a record of the addresses of the cash customers. It could not, therefore, be said that the failure on his part to maintain the addresses was a suspicious circumstance giving rise to a doubt the genuineness of the transactions entered into by the assessee.”

The Hon’ble High Court at Para 3 of the order further held as under:

“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 Hon’ble High Court at Para 4 of the order finally held as under:

“Since, having regard to the nature of the transaction and the manner in which they had been effected, 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. The Tribunal, therefore, was not right, in our opinion, in setting aside the order of the Appellate Assistant Commissioner and restoring that of the Income-tax Officer. There are no circumstances disclosed in the case nor is there any evidence or material on record which would justify the rejection of the book results.”

2.16. Ld. AO, unnecessarily emphasising the need of complete identity of buyers in respect of cash sales, held the same to be non-genuine (contrary to the legal provisions) and further erred in invoking the provisions of Section 68 in respect of such cash sales. Attention is drawn towards the judgment of the Hon’ble Jurisdictional High Court in the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 (Rajasthan) wherein the Hon’ble High Court held as under:

“So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise.” “We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them.”

2.17. Attention is invited towards the recent decision of the Hon’ble ITAT, Mumbai bench in the case of R.S. Diamonds India Private Limited v. ACIT, Mumbai, ITA No 2017/Mum/2021 wherein it was held as under:

“The facts that the deposit made into the bank account is from out of the books of accounts and the said deposits have been duly recorded in the books of account are not disputed. It is the submission of the assessee that it had received advance money from walk in customers for sale of jewellery over the counter and the amount so received was duly recorded in the books of account. The said amount alongwith other cash balance available with the assessee was deposited into the bank account after announcement of demonetization by the Government of India. He also submitted that the assessee has raised sale bills against the said advances in the name of respective customers. Since the transaction was less than Rs.2.00 lakhs, it was stated that the assessee did not collect complete details of the customers. Thus, it is seen that the advance amount collected from customers, the sales bill raised against them etc., have been duly recorded in the books of account. The impugned deposits have been made from cash balance available with books of account. I also notice that the Assessing Officer has not rejected the books of account.

When cash deposits have been made from the cash balance available in the books of account, in my view, there is no question of treating the said deposits as unexplained cash deposit as opined by the Assessing Officer. 5. The Ld A.R relied on certain case laws which are relevant to the issue under consideration. In the case of Lakshmi Rice Mills [1974] 97 ITR 258 (Patna), it has been held that, when books of account of the assessee were R.S. Diamonds India Private Limited 3 accepted by the revenue as genuine and cash balance shown therein was sufficient to cover high denomination notes held by the assessee, then the assessee was not required to prove source of receipt of said high denomination notes which were legal tender at that time. In the case of M/s. Hirapanna Jewellers (ITA No. 253/Viz/2020 dated 12.5.2021), it was held that when the cash receipts represented the sales which has been duly offered for taxation, there is no scope for making any addition under section 68 of the Act in respect of deposits made into the bank account”.

2.18. Reliance is placed on the judgment of the Hon’ble Supreme Court in the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) in which judgment is delivered in the background of promulgation of High Demonetization Bank Notes (Demonetization) Ordinance, 1946, with effect from January 12, 1946. The Hon’ble Apex Court laid down a ratio that accepting an explanation or books in part and rejecting the same for the remaining part is not justified. It is submitted that in the present appeal, same explanation was accepted for cash sales of Rs15,00,000/-and remaining amount of Rs 72,25,000/- was held to be non-genuine sales rejecting the same explanation. The Hon’ble Apex Court, in the case of Lalchand Bhagat (supra) further laid down a ratio that various probabilities on a macro level should not influence the decision of the AO in believing that on those macro reasons, the assessee might also be having black money. In the case before the Hon’ble Supreme Court, the ld. AO had made additions in the background of the following facts noted by the ld. AO, which find mention in the order of the Hon’ble Supreme Court at page 7 of the order:

“The Income-tax Officer found that the appellant’s food grains licence at Nawgachia had been cancelled for the accounting year for its failure to keep proper stock accounts and that the appellant was prosecuted under the Defence of India Rules but had been acquitted having been given the benefit of doubt. The Income-tax Officer also had regard to the fact that the appellant was a speculator and that as a speculator the appellant could easily have earned amounts fair in excess of the value of the high denomination notes encashed. He considered that even in the disclosed volume of business in the year under consideration in the head office and in the branches, there was possibility of his earning a considerable sum as against which it showed a net loss of about Rs. 46,000. The Incometax Officer also noticed that notwithstanding the fact that the period was very favourable to food grains dealers, the appellant had declared a loss for the assessment year 1944-45 up to 1946-47, though it had the benefit of a large capital on hand. The Income-tax Officer further took into consideration the circumstances that Nawgachia and Dhulian were very important business centres and Sahibganj the principal place of business had gained sufficient notoriety for smuggling foodgrains and other commodities to Bengal by country boats. Dhulian which was just on the Bengal-Behar border was also reported to be a great receiving centre for such commodities. Having regard to all these circumstances, the Income-tax Officer rejected the appellant’s explanation that the high denomination notes formed part of its cash balances and treated the sum of Rs. 2,91,000 as the appellant’s secreted profits from business and included it in its total income and assessed the appellant for the said assessment year on the income of Rs. 1,39,117. Dealing with the excess profits tax assessment, he also held that the said income was derived from the business of the appellant and hence it was liable to excess profits tax also.”

2.19. Ld. AO invoked provision of Section 68 in respect of sales. Section 68 deems nonincome to be income. In the instant case, the credits by way of sales were already offered for tax. Hence, Section 68 per se cannot be invoked. Provisions of Section 68 can only be invoked in cases where an assessee is unable to explain the source of a particular receipt to the satisfaction of the Assessing Officer. These provisions have no application in case where an amount already disclosed by the assessee as his income, while filing the Return of Income on which no further addition has been made by the ld. AO, during the course of assessment proceedings.
2.20. Section 68 creates deeming fictions, whereby certain amounts which are not considered as income by the assessee, are deemed to be income of the assessee. A deeming fiction of income cannot apply to an item which is already treated as income by the assessee himself. The question of deeming an item to be income can only arise if the item is not otherwise an income. Section 68 converts non-income into income and has no application where income is already offered for tax.
2.21. Hon’ble Delhi High Court, in the case of Keshav Social and Charitable Foundation considered a situation where the assessee, a charitable trust, had disclosed donations received by it as its income, and claimed exemption u/s. 11. The Assessing Officer, on finding that the assessee was unable to satisfactorily explain the donations and the donors were fictitious persons, held that the assessee had tried to introduce unaccounted money in its books by way of donations and, therefore, the amount was to be treated as cash credit u/s. 68. The Delhi High Court held that section 68 did not apply, as the assessee had disclosed such donations as its income.
2.22. If the contention of the lower authorities is accepted that the same income would be taxed twice, once when being offered for tax by the assessee as part of cash sales and subsequently as addition under Section 68, which is impermissible in law.
2.23. Reliance is placed on the below mentioned judicial pronouncements, wherein, under identical set of facts, as in the present case, additions made under Section 68 on account of alleged bogus cash sales were deleted: –
■ ITAT Chandigarh in the case of Smt. Charu Agarwal & M/s. Kalanidhi Jewellers v. DCIT ITA No. 310 & 311/Chd/2021 order dated 25/03/2022
The findings of Hon’ble ITAT is in para 10 of the order. Hon’ble ITAT after considering the decision of the Hon’ble Delhi High Court in the case of Pr. CIT (Central)-3 V/s. M/s. Agson Global Pvt. Ltd. In ITA No. 68-73/2021 and various other High Courts and decision of Hon’ble ITAT Vishakhapatnam Bench on identical issue in the case of ACIT v/s. Hirapanna Jewellers MANU/ITL 120 (Karnataka) held that the assessee was maintaining complete stock tally, the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was no justified. Sales made by the assessee to cover the cash deposited in the bank post demonetization, was sufficient source of the cash deposited i.e.; the sales from the existing stock available with the assessee and was well explained, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. -Decided in favour of assessee.
■ ITAT, Jaipur Bench, in the case of Motisons Jewellers Ltd., ITA Nos. 161 and 178/JP/2022, vide order dated 29.09.2022, dismissed the appeal of the Department. Hon’ble ITAT relied upon the decision of Hon’ble Rajasthan High Court in the case of Smt. Harshil Chordia v. ITO reported at MANU/RH/0851/2006 :

“… Thus, the fact of the case on hand is similar to the jurisdictional high court decision cited by the Ld. AR of the assessee. The Ld. AR of the assessee also relied upon the coordinate Jaipur ITAT decision also on the issue and the revenue not prove the sale made by the assessee which is executed after giving the goods to the customer, duly reflected in the invoice issued, assessee having sufficient stock in the books, sales is duly reflected in the books of accounts supported by payment of VAT. Therefore, the contention of the revenue based on the facts and circumstance of the case is not accepted and we see no reason to find any fault in the detailed reasoned finding in the order of the Ld. CIT(A). Thus, we sustain the order of the Ld. CIT(A) and based on these observations the appeal of the revenue in IT A No. 161/JPR/2022 stands dismissed…”

■ITAT, Jaipur Bench, in Chandra Surana, ITA No. 166/JP/2022 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.”
■ITAT, Chandigarh Bench in the case of Roop Square Pvt Ltd ITA No. 198 and 249/Chand/2021
■ITAT, Kolkata Bench in the case of Senco Alankar, ITA No. 10/Kol/2021
2.24. In view of the above, since Section 68 is not applicable in the instant case, the very invoking of the provisions of section 115BBE is illegal and deserves to be quashed.
2.25. Ld. AO has erroneously relied upon judicial pronouncements mentioned on Pages 7 and 8 of the order, which are not relevant to the facts of the present case. It is reiterated that the assessee had provided the complete addresses of the buyers who purchased jewellery from him, accordingly, the onus on the part of the assessee stood completely discharged. As far as the applicability of Section 68 is concerned, it has been submitted that the section is inapplicable to the present case, as per the legal position already set out above. Further, reliance on the case laws cited by the ld. AO is misplaced, as they do not align with the facts of the present case.
2.26. NFAC has also disregarded the submissions filed by the assessee, and without any cogent basis, has passed upheld the order of the ld. AO.
In view of the above, application of Section 68, read with Section 115BBE, by the ld. AO, to the amount of Rs. 37,95,560 accounted for sales by the assessee, is illegal and deserves to be quashed.”
10. To support the contention so raised in the written submission reliance was placed on the following evidence and records:
Sr. No.ParticularsPage No.
1.Copy of Vat return for the period FY 2016-171-4
2.Copy of sale bills from 01.11.16 to 08.11.2016 (Bill no. 10645 to 10665)5-25

 

11. The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee has sourced the cash so deposited out of the sale proceeds and said sales were duly reflected in the books of accounts maintained; that books of accounts so maintained were duly audited by an independent chartered accountant and there is no adverse remark by them in that audit report; that the assessee maintains stock records and the same was not disputed. Ld. AR submitted that the cash deposits made in the year under consideration were comparable with that of the previous year. There is no dispute about the purchase so made by the assessee and duly recorded in the order of the assessment. If cash is generated out of the sale reflected in the books of account, then in that case without rejecting the books of account with a specific show cause notice no separate addition can be made in the hands of the assessee for the amount of cash deposited into the bank account. The assessee has submitted all the details, such as Name(s), address(es), invoice(s) PAN number(s) of the person(s) to whom the sales were made. Ld. AO did not issue any notice u/s 133(6) to verify the sales and ld. AO merely by doing guess work made the addition, which also confirmed by the ld. CIT(A) without considering the facts stated herein above.
12. The ld DR has relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). Ld. DR has submitted that the assessee deposited cash during demonetization period and therefore, the sales made by the assessee are required to be seen from the angle and the purpose of demonetization. As further submitted the assessee deposited a huge sum of money into the bank account and ld. AO given the due benefit to the assessee and invoked the provision of section 145(3) of the Act. Even the ld. CIT(A) noted that the ld. AO has given the benefit of doubt to the assessee by scientific method and therefore, ld. DR relied upon the orders of the lower authorities.
13. We have heard the rival contentions and perused the material placed on record. In this appeal vide ground no. 1 assessee challenged finding of the National Faceless Appeal Centre (NFAC) while confirming the addition of Rs.37,95,560/- made by the ld. AO as unexplained cash deposits u/s 68.
As the brief facts of the case have already been discussed herein the above paras and therefore, the same are not being repeated. The broad issue raised before this Tribunal is as to whether the cash sales recorded and supported by the sale invoice be considered as unexplained money and that too when the profit derived from those sales proceeds is already taxed as part of sales.
The bench notes that on 13.11.2016 i.e. after the five days of the demonetization, the assessee deposited a sum of Rs. 50,00,000/- in the bank account. The assessee claimed before the lower authority that the said cash deposit was derived from the sale proceeds i.e., received on account of the sales made by the assessee. In support of the sales so made, the assessee submitted all the invoice with complete year cash book, names, addresses and telephone numbers of the person to whom the cash sales was made and that cash collected from them had been deposited into the bank account [page 3 of the order of the AO]. The assessee also submitted the comparison of sales and cash deposited into the bank account with last year for each month. From that, the assessee submitted that for the financial year 2014-15 cash deposited was for an amount of Rs. 1,26,73,900 whereas in the year under consideration i.e. 2015-16 at cash deposited was Rs. 1,30,84,000/- thereby increasing trend of Rs. 4,10,100/- only and that too not abnormal.
The bench notes that on the one hand at page 3 ld. AO noted the submission of the assessee where in it was written that the assessee has submitted all the invoice with complete year cash book, name, address and telephone number of the person to whom the cash sales was made whereas at page 4 para 6.4 contended that the assessee has not submitted the contact details of those purchasers this is contrary to the facts. At the time of hearing of the appeal, ld. DR did not controvert said aspect argued by the ld. AR of the assessee. As regards the signature on the invoice when the sale is supported by the invoice, there is no necessity to obtain the signature of the purchaser of goods. In support of the cash sales, ld. AR of the assessee also submitted that the assessee has maintained all the records that sales are duly reflected in the VAT return and also in the books of accounts. Thus, ld. AO could not make an addition on ill-founded assumption and presumption and without understanding and appreciating the books of accounts. Ld. AO simply mentioned about the invocation of section 145(3), but the mandatory notice was not given mentioning the defects in the books of accounts based on the provision of section 145 of the Act. Section 145(3) provides that;
(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144.
Thus, it is clear from the above provision of the Act that the ld. AO or ld. CIT(A) may proceed under Section 145(3) under any of the following circumstances :
■Where he is not satisfied about the correctness or completeness of the accounts; or
■Where method of accounting cash or mercantile has not been regularly followed by the assessee; or
■Accounting Standards as notified by the Central Government have not been regularly followed by the assessee.
Based on the facts, as discussed above, it is not a case of the Revenue based on second and third reason, but based on the first reason as ld. AO was not satisfied about the correctness of completeness of the accounts. But the situation would not be same when the assessee has produced all the records that was required by the AO. The bench notes that before the ld. CIT(A), the assessee made a submission to explain as to why the provision of section 145(3) could not be invoked in the case of the assessee. The assessee submitted that AO cannot reject the books of accounts and apply the provisions of section 145(3) of the Act unless any material record has been brought on record to hold that books are not reliable, when those are maintained, and audited by an independent Chartered Accountant. In the audit report, no adverse observations were made by the lower authorities. The ld.AO has not given required notice before rejection of book results, as required under law. Even the ld. CIT(A) has simply supported finding of the ld. AO without dealing with said contention of the assessee. Therefore, in such circumstances and facts of the case, the Assessing Officer was not justified in rejecting the books of account by invoking the provisions of section 145(3) of the Act, and the additions made by the Assessing Officer are liable to deleted. To drive home to this contention, we get support from the decision of our jurisdictional High Court rendered in the case of Commissioner of Income Tax v. Ceramic Industries wherein our Hon’ble High Court has held that ;
7. Taking into consideration the tribunal has observed as under:—
We have perused the facts of the case. The Id. AR Mr. H.M. Singhvi argued that assessee has produced all the books of account, vouchers and the assessee’s accounts are audited and all the production is subject to Excise Duty and not even a single unit of production can go out of the factory without recording the same in the Excise Registers which are regularly and continuously verified by the excise Department and are under their control. The AO has not pointed out any defect in the purchases, sales, opening stock and closing stock and as explained before the AO and the ld. CIT(A) that M/s. Bharat Potteries Ltd. i.e. a sister concern is manufacturing more of maximum stoneware crockery and the assessee is manufacturing more of bone china crockery and the difference in yield and the wastage and the gross profit had been explained vide our letter dated 26.03.2004 before the AO and similarly the output/input ratio has also been explained before the AO through the same letter and the AO has not commented upon the same and has not found out any difect in our explanation. The assessee has also filed before the AO following documents/publications to support the wastage declared by the assessee is reasonable and according to the standard practice adopted in the country as under:-
1.C.G.C.R.I., Khurja (PB No.13 to 1)
2.Publication of Articles in while wares (P.B. No.18)
3.Photocopy of Hand book of Ceramics-Volume 2 (Editor S. Kumar) showing typical composition of Bone china.
4.Photocopy of the Chapter 5 of stoneware in the books published by the Institute of Materials (P.B. No.21 to 22).

 

In the report of CGCRI, Khurja, (refer P.B. No.17), the waste worked out to 28.31% to 38.7% interest he bone china crockery and in the case of stoneware crockery it worked out to 24% to 34.8%
We agree with the arguments of the ld. AR that the main objection raised by the AO was that input/output ratio in various months has the inconsistency which has been duly explained by the assessee vide letter dated 26.03.2004 and the second objection by the AO was that the sister concern M/s. Bharat Potteries Ltd. has declared more yield and more gross profit, has also been explained by the assessee vide the same letter dated 26.03.2004. Therefore, the inconsistency in the input/out ratio in various months the reasons for which has been explained by the assessee, cannot be the basis for rejection of books of account. The yield and gross profit rate declared by the assessee can also not be the basis for rejection of books of account since M/s. Bharat Potteries Ltd. is manufacturing maximum of stoneware crockery and for many other reasons which were explained by the assessee vide its letter dated 26.03.04 which was ignored by the AO and the AO has not pointed out any specific defects in the purchases, sales, opening stock and closing stock of the assessee and the AO has not brought on record any cogent material to prove that the assessee has sold the underproduction out of the books of account. Therefore, in such circumstances and facts of the case, the AO is not justified in rejecting the books of account by invoking Provisions of Section 145(3) of the Act and the additions made by the AO are liable to the deleted. The objection of the ld. DR that the ld. CIT(A) has not relied upon the CGCRI Report, Calcutta, the ld. AR has pointed out that the in the same report it has been mentioned that the said organization is not involved production practice and the are not sure to what extent their opinion will be useful for the purpose of the assessee and in such circumstances and facts of the case, the report of CGCRI, Calcutta alone cannot be the basis for rejection of books of account and making an estimation of wastage and the ld. CIT(A) was not justified in ignoring other material which was placed before him as mentioned hereinbefore. Therefore, the ld. CIT9A) was not justified in sustaining the applicability of Section 145(3) of the Act and addition of Rs. 11,15,087/-. Thus Ground No.1 of the assessee is allowed and the solitary ground of the Revenue is dismissed.
8. In our considered opinion the argument which has been canvassed by Mr. Mathur that the stone average loss as 29.4 should not be 30.1 as per Khurja is also 23.1.
9. Taking into consideration that the bones china crockery of the delicate nature, the report of Khurja for the specific industry has been accepted by the tribunal, no error is committed in doing so.
10. Both the issues are answered in favour of assessee and against the Department.
10.1 It is made clear that we have only decided the matter which is pending before this court but for the next year, it will be open for AO or the Department to look into improvement of industries, machinery and assesss the same every year loss.
11. All the appeals are dismissed.
Having held so that the books results cannot be rejected based on the surmises and conjectures. Now coming to the sales recorded in the books of account, the bench notes that the assessee furnished all the invoices with complete year cash book, names, addresses and telephone numbers of the person to whom the cash sales was made. On this information Ld. AO has not made any independent inquiry. He considered part of the sales as genuine and on the same set of records, part of the sales were not considered as genuine. This pick & chose approach was not correct on same set of evidence. Once ld. AO accepted part of the sales as genuine, why not the other part, on the same set of evidence placed on record. The bench notes that to drive home to this contention ld. AR of the assessee relied upon the decision of our own Jurisdictional Hon’ble Rajasthan High Court in the case of Smt. Harshila Chordia v. ITO [[2008] 298 ITR 349 (Rajasthan)] wherein it has held that;
So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise.
We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them.
Question No. 2 relates to the directions given by the Tribunal for adjustment of Rs. 6,98,000 found in paragraph 36 to be part of unexplained cash credits in the books of account of the assessee by the comparative reading of audited and unaudited books of account. However, we find that wh0e a categorical finding has been reached in paragraph Nos. 36 and 23, the Tribunal has curiously found that while repayment of the aforesaid amount after December 31, 1991, would not affect the peak of cash credit but this amount is liable to be considered while considering the assessee’s explanation by the Assessing Officer to whom the issue about the receipt of cash money from the customers and the delivery of the vehicles against such receipts has been remanded back. In our opinion, the two findings are contradictory in terms, if Rs. 6,98,000 could form the part of consideration received from the customers and paid to the dealer M/s. Ganesh Automobiles, it could not form the part of the unexplained cash credit. Therefore, the finding in respect of Rs. 6,98,000 should necessarily depend upon the outcome of the consideration to be made by the Income-tax Officer in pursuance of the directions issued by the Tribunal and cannot be outrightly rejected at this stage and to that extent the order of the Tribunal is set aside and ultimate decision in that respect would depend on the consideration by the Income-tax Officer about the issue relating to the unexplained cash credit in the light of the Tribunal’s order. Until then no additions in respect of Rs. 6,98,000 or lesser amount can be sustained.
Accordingly, while we set aside the Tribunal’s order to the extent it sustains the addition of Rs. 40,13,000, we modify the directions of the Tribunal relating to addition Rs. 6,98,000 as part of the cash credit and hold that it should also be part of consideration by the Income-tax Officer in respect of other unexplained cash credits unembellished by any observation made in that regard.
No costs.
Thus, when the cash sales were duly recorded in the books of account and even part of the sales were already considered and part was not considered only due to the fact that the assessee had deposited cash of Rs. 50,00,000/- on demonetization on single day on 13.11.2016. In support of the sales the assessee had submitted all the details as required under law and the ld. AO based on the same details accepted the part of the sales on same set of records. Thus, we see no reason to sustain the addition of the amount recorded as sales i.e., for an amount of Rs.37,95,560/- as “unexplained cash deposits” u/s 68 and thereby direct the ld. AO to delete the same. Based on these observations, ground no. 1 raised by the assessee is allowed. Since we have considered and decided ground no. 1 in favour of the assessee ground no. 2 becomes infructuous and does not require any finding, because when the addition u/s. 68 is deleted charge of tax at special rate ground does not require any finding.
Resultantly, the appeal filed by the assessee is allowed