ITO Vs Asal Jewellery (ITAT Ahmedabad)
Ahmedabad ITAT: ₹13.68 Crore Demonetisation Cash Deposits Cannot Be Added u/s 69A Merely on Suspicion – Genuine Purchases Support Consequent Cash Sales
The assessee, a jewellery/bullion dealer, deposited ₹13.68 crore in cash during the demonetisation period. The AO questioned the substantial cash sales immediately preceding demonetisation, particularly because individual sale bills were below ₹2 lakh, and added the entire cash deposits under Section 69A.
The CIT(A) deleted the addition, noting that the assessee had produced purchase bills, suppliers’ ITRs, bank statements and other supporting documents. Responses/confirmations to notices under Section 133(6) were also received, and the AO had failed to establish that either the purchases or corresponding cash sales were non-genuine.
The ITAT upheld the deletion. Significantly, the AO had not rejected the books of account. Once the assessee furnished the relevant documents and the Section 133(6) enquiries supported the genuineness of purchases, the assessee had discharged its primary onus.
The Tribunal rejected the Revenue’s objection that sales were deliberately kept below ₹2 lakh to avoid furnishing customer details. Under Rule 114B, PAN of the purchaser was required only where the transaction exceeded ₹2 lakh; therefore, no adverse inference could be drawn merely because the individual cash sale invoices were below that threshold.
Most importantly, the ITAT held that when purchases are found genuine, the consequent sales cannot be treated as non-genuine merely on suspicion or presumption. The AO had brought no concrete evidence to disprove the sales bills or establish that the cash sales were bogus. “Suspicion, howsoever strong, cannot take the place of evidence.”
Accordingly, the deletion of the ₹13.68 crore addition under Section 69A was upheld and the Revenue’s appeal dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the Revenue against the order dated 20.10.2022 passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2017-18.
2. The grounds raised in the present appeal are as follows:
“(1) Whether the CIT(A) has erred in facts and law in deleting the addition made u/s.69A of Rs. 13,68,05,000/- without appreciating the facts of the case.
(2) The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.
(3) It is, therefore, prayed that the order of Ld.CIT(A) may be set aside and that the assessing officer be restored.”
3. Brief facts of the case are that the case of the Assessee was selected for scrutiny on account of “large value of cash deposit during demonetization” reported and abnormal increase in cash deposits during demonetization as compared to pre-demonetization. The Assessee had made cash deposits in the bank accounts; the details of which are as under:
| Name of the Bank | Account No. | Amount |
|---|---|---|
| Dena Bank | 015111021213 | Rs. 20,00,000/- |
| Punjab National Bank | 33005900000015 | Rs. 8,65,00,000/ |
| Jaya Bank | 730200301000576 | Rs. 4,83,05,000/ |
| Total | Rs. 13,68,05,000/- | |
3.1 The total purchase of the Assessee for the relevant Assessment Year 2017-18 was amounting to Rs. 21,14,41,250/-. The sale for the month of September 2016 was Rs. 3,31,52,441/- and Rs. 10,43,63,040/- for October 2016. The Assessing Officer (hereinafter referred to as “the AO”) observed that the sale bills were below Rs. 2,00,000/-. The AO further observed that though the Assessee was having huge cash in hand, the cash deposits were made only after the announcement of demonetization. During the assessment proceedings, the AO issued notice u/s 133(6) of the Act to the supplier of the Assessee with respect to purchases made by the Assessee. As per AO, out of 22, 6 suppliers did not file the reply. The responses of Section 133(6) of the Act inquiry are recorded at para 4.7 of the Assessment Order dated 26.12.2019. The response was received in respect of the notices, however, the AO observed that the same purchasers have not furnished the required details in “prescribed format in supporting details invited”. The AO further observed that though it was proved that the Assessee had purchased the bullion/jewellery before the demonetization, however, the payment was made after the demonetization. On the above premises, the AO made addition of the entire cash deposit of Rs. 13,68,05,000/-.
4. Aggrieved by the Assessment Order, the Assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A) allowed the appeal of the Assessee, observing that the AO failed to prove the purchases made by the Assessee to be non-genuine. The notices, which were issued u/s 133(6) of the Act were also complied with and confirmation from the said parties were also received. It was observed that the AO had not responded to the claim of the Assessee in its letter dated 21.12.2019, wherein it was claimed that all the suppliers have responded and that the suppliers of the Assessee were the same as the last year. Ld. CIT(A) further observed that the Assessee had produced all the relevant documents including the purchase bills, ITRs of the suppliers, bank statements proving the payments made by the Assessee, etc. The AO has not controverted the veracity of these documents to prove the genuineness of purchases and also the cash sales.
5. Aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us.
6. Ld. CIT-DR submitted that the CIT(A) erred in not appreciating that the cash sales made by the Assessee were all below Rs. 2,00,000/- and, therefore, the Assessee was not required to provide the details of the customers who purchased the jewellery in cash. In such circumstances, the genuineness of the cash sales made and cash received by the Assessee in the month of September and October, 2016 could not be verified by the AO.
7. Per contra, learned AR has supported the order passed by the learned CIT(A).
8. We have heard the parties and perused the material on record.
9. The AO in this case has made additions of the entire amount of cash deposits made during the demonetization by the Assessee without rejecting the books of accounts of the Assessee. Enquiry made by the AO u/s 133(6) of the Act were also complied with, establishing the genuineness of the purchases made by the Assessee. Once the Assessee has provided all the relevant materials sought for by the learned AO, the Assessee has discharged his primary onus by providing all the relevant documents proving genuineness of its purchase.
10. The submission of Ld. CIT-DR that the Assessee knowingly sold jewellery/bullion by issuing sales without details of its customers for amounts less than Rs. 2,00,000/- is bereft of any merit. The law mandates (vide Sl. No. 18, Rule 114B of the Income Tax Rules) mention of PAN of the buyer only if the amount of transaction is more than Rs. 2,00,000/-. Therefore, on this count, no adverse inference can be drawn against the Assessee. In any case, the AO had verified the purchases made by the Assessee and no discrepancy could be noticed by the AO regarding the veracity and genuineness of the purchases made by the Assessee. When purchase was found to be genuine, consequent sales made by the Assessee cannot be held to be non-genuine only on the suspicion or presumption of learned AO. The Assessee in this case has provided its sales bills to the AO and nothing has been brought on record by the AO to suggest that the cash sales transaction made by the Assessee were not genuine. The veracity of the documents submitted by the Assessee could not be controverted or proven to be wrong by the AO in the Assessment Order. In such circumstances, the addition made by the AO is based on surmises and conjectures and no concrete evidence has been brought on record to establish that either the purchase or the cash sales made by the Assessee were not genuine. Suspicion, howsoever strong, cannot take the place of evidence.
11. In view of the above facts and the legal position, the order of the Ld. CIT(A), deleting the addition made by the AO of Rs. 13,68,05,000/- u/s 69A of the Act is upheld and hence, the grounds taken by the Revenue are dismissed.
12. In the result, the appeal of the Revenue is dismissed.
The order pronounced in the open Court on 14.08.2026.
