TaxTMI 
TaxTMI 
2026 (3) TMI 1097
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....in the business of trading in Bullion and Jewellery. The assessee filed its return of income for the year under consideration which was selected for scrutiny through CASS with the specific reason "large cash deposits during demonetisation period". During the course of assessment proceedings, the AO observed that the assessee had deposited Specified Bank Notes (SBNs) in its bank accounts during the period of demonetisation. The total cash deposited during the period 09.11.2016 to 30.12.2016 amounted to Rs. 10,69,00,000/- in its accounts with RBL Bank and Axis Bank. The assessee explained that the said cash deposits were out of the cash advances received from customers against cash sales of jewellery/bullion. The assessee submitted that these advances were received shortly before the announcement of demonetisation on 08.11.2016 and the sales were subsequently invoiced. The assessee claimed that the cash deposits were business receipts duly recorded in the books of account maintained in the regular course of business. 3. The AO, however, did not accept the explanation of the assessee. The AO observed that the assessee had shown receipt of huge cash advances aggregating to Rs. 9.65 ....
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....g the evidences furnished during the assessment proceedings, which included the Copy of Audit Report alongwith Annexures including Audited Balance Sheet, Profit & Loss Account; Copy of Cash Book; Copy of Bank Statements; Copy of Purchase Bills made from 01.10.2016 to 31.12.2016; Summary of Purchase with Name of Parties, PAN, VAT No., Details of Goods Purchased and Amount in case of Parties having cumulative transactions of Rs. 10 lakh or more; Copy of cash Sales; Copy of Sales Bills along with Summary of Sales Exceeding Rs. 2 Lacs with Date, Name, Goods Sold and PAN of parties to the extent available with the assessee; Copy of Stock Book; Confirmation from certain parties obtained by AO by issuing notice u/s 133(6) of the Act; Explanation for increase in sales prior to demonetization period; Method of Stock Valuation and working of Stock Valuation; Copy of Monthly VAT Returns and Annual VAT Returns; and Copy of Reply submitted for Cash Transactions 2016. 7. The Ld. AR of the assessee submitted that all the purchases were made by the assessee through Cheque/Banking channel. The Ld. AR placed on record the copy of the cash book and has referred to pages 184 and 186 of the paper bo....
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....s total sales as well as cash sales during the year under consideration including the relevant demonetization period were comparatively very less than the preceding financial year. That the assessee's cash sales were not abnormal during the relevant period and AO's suspicion of cash sales was not based on any reliable material. 9. The Ld. AR has further submitted that even the assessee had made purchases by cheque/banking channel out of its duly accounted for receipts/income. The assessee was also possessed of the requisite stock. That though, the AO has doubted the purchases, however, it is not the case of the AO that the assessee had not debited the amount of purchases from its books or that the assessee had made purchases out of its unexplained income. He therefore, has contended that the entire receipts from the corresponding sales can not be treated as unaccounted income of the assessee, only the profit element embedded in such sales can be taxed, which the assessee has duly offered for taxation. 10. The Ld. DR, on the other hand, relied on the orders of the authorities below. He submitted that the pattern of advances just before demonetization was highly suspicious and ....
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.... stock is not disputed, the sales flowing out of such stock cannot be treated as non-genuine. The sales have been recorded in the books of account and the profit arising therefrom has been offered to tax. Therefore, the entire receipts from the corresponding sales cannot be treated as unaccounted income of the assessee; only the profit element embedded in such sales can be taxed, which the assessee has duly offered for taxation. Taxing the gross receipts again u/s 68 would amount to double taxation of the same amount.. 13. The reliance placed by the CIT(A) on the case of Vaishnavi Bullion (supra) is misplaced as in that case there was a finding of non-availability of stock. In the present case, the availability of stock is not in dispute. The issue is squarely covered by the decision of the Coordinate Bench of the Tribunal in the case of Windlas Jewellers vs. ITO (ITA No. 821/Chandi/2023) order dated 01.04.2024. In that case, though the books of account were not rejected, the principle laid down regarding the acceptance of sales when stock is available is applicable here as well. The Tribunal held: "The burden is upon the Assessing Officer in this respect who alleges sa....
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....s also been accepted by the Assessing Officer... The only contention of the Assessing Officer is that the assessee has violated the notification of the Central Government dated 08.11.2016 and accepted the Specified Bank Notes in lieu of sales made. For that, it is for the competent authority who may take action against the assessee as may be provided/applicable in relevant law. However, for the purpose of either section 68 or 69 of the Act, the said deposits cannot be treated as unexplained income of the assessee. Our above view is fortified by the decision of the Coordinate Bangalore Bench of the Tribunal in the case of 'Sri Bhageeratha Pattina Sahakara Sangha Niyamitha vs. ITO' in ITA No.646/Bang/2021 order dated 18.02.2022. The relevant part of the order is reproduced as under: "15. The case of the A.O is that the assessee has collected the demonetized notes after 8.11.2016 in violation of the notifications issued by RBI. Accordingly, he has taken the view that the above said amounts represents unexplained money of the assessee. I am unable to understand the rationale in the view taken by A.O. I noticed that the AO has invoked the provisions of sec.68 of the Act for mak....