- Assessee is an individual engaged in the business of retail trading of jewellery, filed the return of income on 31.03.2018 declaring income of Rs.11,44,200.
- In the course of assessment proceedings, the AO required the assessee to explain the source of cash deposits made into bank account during demonetization period. The assessee furnished the requisite details/documents on 16.10.2019. The AO on analyzing the cash sales during the assessment year 2016-17 and during the current assessment year i.e. 2017-18 was of the view that the cash sales made during the current assessment year were abnormally high while compared to the cash sales made during the assessment year 2016-17 . Therefore he required the assessee to show-cause as to why an amount of Rs.32,95,000 should not be added as income from undisclosed sources under Section 68 of the Act.
- In response to the show cause the assessee filed his reply on 16.12.2019 stating that the cash deposits of Rs.32,50,000 were made out of sale proceeds and past savings.The Assessing Officer taking note of the fact that the assessee having cash in hand of Rs.3,23,741 out of which Rs.3,00,000 was considered to be the cash available with the assessee as on 19.11.2016. The Assessing Officer also accepted part of cash sales to the extent of Rs.1,70,000 and concluded that the cash deposits aggregating to Rs.28,25,000 remained unexplained and accordingly addition was made.
- The assessee submits that the assessee furnished all the information called for by the Assessing Officer. The assessee furnished cash book, details of sales, purchases, stock register, month-wise cash sales and cash deposits from 01.04.2015to 31.03.2016 and also for the period from 01.04.2016 and also for the period 01.04.2016 to 31.03.2017. Learned counsel further submits that month-wise stock, giving opening stock, purchases and sales in each month along with details, statement of stock accounts were furnished. Learned counsel further submits that assessee has furnished copies of VAT returns for the period from 01.04.2016 to 31.03.2017 .The learned counsel submits that the Assessing Officer did not point out any defects in the books of accounts furnished by the assessee. The books of accounts were accepted by both Assessing Officer as well as the learned Commissioner (Appeals).Learned counsel submits that the assessee has explained the source for cash deposits as sale of jewellery, opening cash balance and also past savings.
- The learned counsel strongly placed reliance on the decision of the Mumbai Bench of the Tribunal in the case of ACIT vs. M/s. Ram Lal Jewellers Pvt. Ltd. in ITA No.1600/Mum/2023 dated 26.07.2023. Referring to the decision, learned counsel submits that on identical facts, Mumbai Bench of the Tribunal deleted the addition made on account of cash deposits.
- Reliance was also placed on the decision of the Coordinate Benches in the case of DCIT vs. Bala Jewelers Ltd. in ITA No.352/Del/2021 dated 09.06.2023 and also the decision of the Delhi High Court in the case of PCIT vs Agson Global Pvt. Ltd. 441 ITR 550.
- The Assessing Officer did not point out any defects in the books of accounts and the information furnished. The only apprehension of the Assessing Officer in treating the cash deposits as undisclosed was abnormal increase in cash sales made during the year and with comparison to the cash sales made by the assessee in the previous assessment year.
- The Assessing Officer did not point out any discrepancy in the purchases, sales and stocks recorded by the assessee in the books of accounts. In the circumstances, only an assumption that there could be some cash deposits based on the higher turnover in cash sales when compared to the cash sales made by the assessee in the immediately preceding assessment year is not correct.
- Thus, in the absence of any adverse finding by the Assessing Officer that the purchases, sales and stock are not genuine and in the absence of rejection of books of account, there is no justification in assuming that the assessee has made cash deposits outside the books of accounts. Thus, the addition made by the Assessing Officer under Section 68 of the Act is deleted.