Bhaumik Jewellers Private Limited Vs ITO (ITAT Ahmedabad)
Summary: The Ahmedabad Bench of the Income Tax Appellate Tribunal allowed the appeal filed by Bhaumik Jewellers Private Limited against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 26.07.2024, arising from the assessment order passed under section 143(3) of the Income-tax Act, 1961 for Assessment Year 2017-18. The dispute concerned the addition of Rs. 9,65,97,834/- made by the Assessing Officer under section 68 of the Act on account of unexplained cash deposits during the demonetisation period.
The assessee, a private limited company engaged in trading in bullion and jewellery, had deposited Specified Bank Notes (SBNs) aggregating to Rs. 10,69,00,000/- in its RBL Bank and Axis Bank accounts during 09.11.2016 to 30.12.2016. The assessee explained that the deposits represented cash advances received from customers against cash sales of jewellery/bullion, with such advances having been received shortly before the demonetisation announcement on 08.11.2016 and subsequently invoiced as sales. According to the assessee, the receipts were duly recorded in its regular books of account.
The AO rejected this explanation, principally relying upon the receipt of approximately Rs. 9.65 crore in cash advances on 05.11.2016, 07.11.2016 and 08.11.2016 from 573 persons. The AO considered the entries to be an accommodation of unaccounted cash in the guise of trade advances and also noted that complete PAN and address details were not furnished for all customers. The AO further relied upon notices issued under section 133(6), some of which were returned unserved or remained unanswered, and upon the cash balance maintained immediately before demonetisation. The books were rejected under section 145(3), and Rs. 9,65,97,834/- was treated as unexplained cash credits under section 68 read with section 115BBE.
The CIT(A) confirmed the addition, relying substantially upon Vaishnavi Bullion Private Limited Vs ACIT (ITAT Hyderabad), in which the CIT(A) considered the identity and creditworthiness of the persons from whom the cash advances were allegedly received and treated the transactions as beyond human probabilities.
Before the Tribunal, the assessee contended that the AO had rejected the books merely on suspicion without identifying any specific defect in the audited books or stock register. The assessee relied upon its cash book, bank statements, purchase and sales records, stock book, VAT returns and other supporting material. It also submitted comparative sales and cash-deposit figures for Financial Years 2015-16 and 2016-17 to demonstrate that the relevant cash sales were not abnormal. For FY 2015-16, total sales were Rs. 204,25,13,732/-, including cash sales of Rs. 104,90,13,843/-, whereas for FY 2016-17 total sales were Rs. 228,20,26,672/- and cash sales were Rs. 38,88,52,629/-. The assessee therefore argued that cash sales in the year under consideration were substantially lower than in the preceding year.
The assessee further pointed out that purchases had been made through banking channels and that requisite stock was available. It contended that where the corresponding sales were recorded in the books and the related profit had been offered to tax, the entire sales receipts could not again be treated as unexplained income; at most, only the profit element embedded in such sales could be brought to tax.
The Revenue maintained that the pattern of cash advances immediately before demonetisation was suspicious and justified rejection of the books. It also contended, without prejudice, that acceptance of SBNs after the demonetisation announcement was contrary to the RBI notification and therefore could not constitute a legally valid transaction.
The Tribunal found that the Revenue’s case was essentially based on suspicion arising from the spike in cash advances on three dates. It held that the comparative data furnished by the assessee contradicted the allegation of abnormal cash sales during the demonetisation period. The Tribunal noted that cash sales during the relevant year were significantly lower than during the corresponding period of the preceding year and held that the AO’s suspicion was not supported by reliable material.
The Tribunal also noted that the AO had not identified any discrepancy in the stock register and that the assessee possessed the requisite stock for the impugned sales. Purchases had been made through banking channels out of accounted receipts/income, while notices issued under section 133(6) had largely been complied with. The fact that one party had become bankrupt, according to the Tribunal, did not render the entire purchases bogus. Since the purchases were not shown to have been made out of unexplained income and the stock was not disputed, the sales flowing from such stock could not be treated as non-genuine.
Relying on the principle arising from Windlas Jewellers vs. ITO (ITA No. 821/Chandi/2023, order dated 01.04.2024), the Tribunal held that sales could not be rejected merely on suspicion where stock was available and the assessee had furnished supporting documentation and books of account. The Tribunal also distinguished the reliance placed upon Vaishnavi Bullion, observing that the latter case involved a finding regarding non-availability of stock, whereas stock availability was not in dispute in the present case.
The Tribunal further considered the Revenue’s contention concerning receipt of SBNs after demonetisation. Referring to Vidyasagar Samabay Krishi Unnayan Samity Ltd. vs. ACIT (ITA No. 06/Kol/2024, order dated 03.07.2024) and Sri Bhageeratha Pattina Sahakara Sangha Niyamitha vs. ITO (ITA No. 646/Bang/2021, order dated 18.02.2022), it held that even an alleged violation of an RBI notification does not, by itself, convert explained sales receipts into unexplained income for purposes of section 68. Any contravention of the applicable notification could be dealt with by the competent authority under the relevant law, but it did not justify treating the explained deposits as unexplained income under the Income-tax Act.
The Tribunal also referred to Girish Karamshi Dedhia vs. DCIT (ITA No. 4553/Mum/2025, order dated 10.10.2025), where the Mumbai Bench had held that cash deposits sourced through recorded cash sales could not be treated as unexplained under section 68 merely because SBNs were accepted in violation of the RBI notification. The Tribunal noted that the Mumbai Bench had followed ITO vs. Ashapura Petrochem Marketing Pvt. Ltd. (ITA No. 511/Ahd/2020 dated 18.10.2023) and ITO vs. Manasa Medicals (ITA No. 552/Bang/2022 dated 31.10.2022) on the same principle.
Accordingly, the Tribunal held that the assessee had explained the source of the cash deposits as sales/advances duly recorded in its books. The AO’s suspicion regarding the genuineness of the sales was not supported by concrete evidence and was contradicted by the comparative sales data. The Tribunal held that the books had been wrongly rejected merely on suspicion and that even an alleged violation of the RBI notification, if any, did not attract section 68. The addition of Rs. 9,65,97,834/- was therefore held to be unsustainable and was ordered to be deleted.
The appeal of the assessee was accordingly allowed. The order was pronounced in the Open Court on 03.02.2026.
Cases Discussed
- Vaishnavi Bullion Private Limited Vs ACIT, (2022) 145 taxmann.com 197 — distinguished because the Tribunal noted that the cited case involved a finding of non-availability of stock, whereas stock availability was not disputed in the present case.
- Windlas Jewellers vs. ITO, ITA No. 821/Chandi/2023, order dated 01.04.2024 — relied upon for the principle that sales supported by stock and documentation cannot be treated as ingenuine merely on suspicion.
- ACIT vs. Goel Jewellers Overseas Corp, ITA No.1597/Del/2022 — referred to in Windlas Jewellers as a Coordinate Bench decision concerning genuineness of sales.
- DCIT Central Circle-1, Ludhiana vs. M/s Roop Fashion, [2022] 98 ITR (Trib) 419 [ITAT Chandigarh] — referred to in Windlas Jewellers in support of the proposition concerning sales supported by documentation.
- Gulshan Kumar vs. DCIT, ITA No.488/Chd/2022 — referred to in Windlas Jewellers among the Coordinate Bench decisions relied upon.
- Smt. Tripta Rani vs. ACIT, Ludhiana, ITA No.135/Chd/2021 — referred to in Windlas Jewellers among the Coordinate Bench decisions concerning the treatment of sales and related cash deposits.
- Madan Lal Aggarwal HUF vs. DCIT, ITA No.28/CHANDI/2023, order dated 18.12.2023 — referred to in Windlas Jewellers among the Coordinate Bench decisions relied upon.
- Vidyasagar Samabay Krishi Unnayan Samity Ltd. vs. ACIT, ITA No. 06/Kol/2024, order dated 03.07.2024 — relied upon for the distinction between violation of an RBI notification and the taxability of explained deposits as unexplained income under sections 68/69.
- Sri Bhageeratha Pattina Sahakara Sangha Niyamitha vs. ITO, ITA No.646/Bang/2021 order dated 18.02.2022 — relied upon for holding that alleged contravention of RBI directions concerning demonetised notes does not, by itself, attract section 68 where the source of deposits is explained.
- Girish Karamshi Dedhia vs. DCIT (ITA No. 4553/Mum/2025), order dated 10.10.2025 — relied upon for the proposition that cash deposits sourced through recorded cash sales cannot be treated as unexplained merely because SBNs were accepted contrary to RBI guidelines.
- ITO vs. Ashapura Petrochem Marketing Pvt. Ltd., ITA No. 511/Ahd/2020, order dated 18.10.2023 — followed by the Mumbai Bench in Girish Karamshi Dedhia and referred to in the present order concerning the treatment of cash sales and SBN deposits.
- ITO vs. Manasa Medicals, ITA No. 552/Bang/2022, order dated 31.10.2022 — followed by the Mumbai Bench in Girish Karamshi Dedhia and referred to in the present order on the applicability of sections 68/69A to explained cash sales deposited in SBNs.
- FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC), Delhi [in short “the CIT(A)”] passed under section 250 of the Income Tax Act, 1961 (in short “the Act”), dated 26/07/2024 arising out of the assessment order passed by the Assessing Officer (in short “the AO”) under section 143(3) of the Act for the Assessment Year 2017-18. The assessee in this appeal has agitated the confirmation of the addition of Rs. 9,65,97,834/- made by the AO under section 68 of the Act on account of unexplained cash deposits during the demonetisation period.
2. The brief facts of the case are that the assessee is a private limited company engaged 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 crores approximately on three specific dates i.e., 05.11.2016, 07.11.2016 and 08.11.2016 from 573 persons. The AO held that the assessee had manipulated its books of account to accommodate its unaccounted cash in the guise of trade advances. The AO further observed that the assessee failed to furnish the complete details such as PAN and addresses of all the customers from whom such advances were received. The AO also noted that in many cases the notices issued under section 133(6) of the Act to verify the genuineness of the transactions were either returned unserved or no reply was received. The AO further observed that the cash book showed heavy cash balance just before demonetisation which was not deposited in the bank account immediately, which was contrary to the normal business practice of the assessee where cash was usually deposited on a day-to-day basis. Consequently, the AO rejected the books of account of the assessee under section 145(3) of the Act and treated the amount of Rs. 9,65,97,834/- as unexplained cash credits under section 68 of the Act read with section 115BBE of the Act, treating the same as income from undisclosed sources.
4. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A). The CIT(A), however, confirmed the action of the AO. The CIT(A) relied heavily upon the decision of the Hyderabad Bench of the Tribunal in the case of Vaishnavi Bullion Pvt. Ltd. vs. ACIT (2022) 145 taxmann.com 197, holding that the assessee failed to prove the identity and creditworthiness of the persons from whom the cash advances were allegedly received. The CIT(A) held that the huge cash advances received just before demonetisation were beyond human probabilities and upheld the addition.
5. Being aggrieved by the order of the Ld. CIT(A), the assessee has come in appeal before us. The Ld. Counsel for the assessee submitted that the authorities below have failed to appreciate the facts of the case in right perspective. He submitted that the AO had wrongly rejected the books of account of the assessee merely on suspicion of advance received on sales, without any justification. He submitted that the books of account were duly audited and the AO had not pointed out any specific defect in the maintenance of books or stock register.
6. The Ld. AR drew our attention to the chart placed at page 62 of the paper book, detailing 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 book to demonstrate that the assessee had made cash sales of Rs. 22.51 crores and odd as on 31.10.2016 and that the assessee had deposited a sum of Rs. 1.90 crores in its bank accounts on 28.10.2016. This clearly showed that the assessee was having huge turnover and cash receipts even prior to the demonetisation period and there was nothing abnormal in the cash receipts recorded in early November. Further, regarding the objection of the AO that complete details of customers were not provided, the Ld. AR submitted that for sales/advances of less than Rs. 2 lakh, the assessee was not supposed to keep/mention the PAN number etc. as per the relevant statutory provisions existing at that time. Therefore, no adverse inference could be drawn for not maintaining such details which were not required by law. Further, the Ld. AR referred to page 45 of the Paper Book to submit that the AO had issued notices u/s 133(6) of the Act to various parties to verify the purchases of the assessee, who duly responded and filed confirmations affirming the purchases made by the assessee except one party who had become bankrupt.
8. During the course of hearing, the Ld. AR of the assessee has also furnished a chart showing the comparative sales/cash deposit data of Financial Year 2015-16 and 2016-17, a perusal of which reveals that the assessee’s total sales during F.Y. 2015-16 were of Rs. 204,25,13,732/- out of which total cash sales were of Rs. 104,90,13,843/- out of which the cash sales during the period 8.11.2015 to 31.12.2015 (corresponding period of the earlier year 2015 as compared to demonetization period of 2016) were of Rs. 32,41,67,164/-. Even there were cash sales of 3.13 crores post demonetization period. However, during the relevant year F.Y. 2016-17, the total sales of the assessee were of Rs. 228,20,26,672/- which were slightly more than the preceding year, whereas the total cash sales were of Rs. 38,88,52,629/- which were very less as compared to the preceding assessment year (almost 1/3rd of the immediately preceding year). Even the cash deposited during demonetization period was of Rs. 11,69,00,000/- only, which was comparatively very less than the preceding year. Even the cash deposited prior to demonetization period was commensurate with that was deposited during the demonetisation period. The Ld. AR therefore has contended that this data shows that the assessee’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 justified the rejection of books. He contended that the assessee inflated its cash sales/advances to launder its unaccounted cash and failed to prove the identity and creditworthiness of the creditors. Without prejudice to the above submissions, he submitted that, even otherwise, the receipt of SBNs after the demonetisation announcement was in violation of the RBI notification and that the same was not a legally valid tender and hence such receipts otherwise would constitute unaccounted income of the assessee.
11. We have heard the rival contentions and gone through the record. The entire case of the revenue is built upon the basis of suspicion regarding the sales booked by the assessee prior to the start of demonetization period. The AO has rejected the books of account merely because there was a spike in cash advances on three dates. However, the comparative data furnished by the assessee clearly dispels this suspicion. A perusal of the chart reveals that the cash sales in the year under consideration were in fact significantly lower than the preceding year. When the assessee has demonstrated that in the previous year, during the corresponding period, the cash sales were much higher, the allegation of “abnormal” sales during the demonetization period falls flat. The data furnished by the Ld. AR shows that the assessee’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. This data shows that the assessee’s cash sales were not abnormal during the relevant period and AO’s suspicion of cash sales is not based on any reliable material.
12. Further, the AO has not pointed out any discrepancy in the stock register, and the assessee was evidently possessed of the requisite stock to effect the impugned sales. It is a matter of record that the purchases have been made through banking channels out of duly accounted for receipts/income. The notices issued u/s 133(6) were largely complied with, and the mere fact that one party went into bankruptcy does not make the entire purchases bogus. Though the AO has doubted the purchases, 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. Once the purchases are accepted and the 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 sales to be ingenuine. The additions cannot be confirmed in this case merely on the basis of suspicion when the assessee proved his case and has furnished sufficient documents. The issue is squarely covered by various decisions of the Coordinate Benches of the Tribunal. The ld. Counsel for the assessee in this respect has relied upon the following case laws:
i) ACIT vs. Goel Jewellers Overseas Corp in ITA No.1597/Del/2022 (ITAT Delhi)
ii) DCIT Central Circle-1, Ludhiana vs. M/s Roop Fashion reported in [2022] 98 ITR (Trib) 419 [ITAT Chand)]
iii) Gulshan Kumar vs. DCIT in ITA No.488/Chd/2022 (ITAT Chandigarh)
iv) Smt. Tripta Rani vs. ACIT, Ludhiana in ITA No.135/Chd/2021 (ITAT Chandigarh)
v) Madan Lal Aggarwal HUF vs. DCIT in ITA No.28/CHANDI/2023 (ITAT Chandigarh) dated 18.12.23
……. In view of the same, we find the explanation of the assessee as genuine and reasonable duly supported by the documentation and books of accounts and the addition so made by the AO and confirmed by the ld. CITA is directed to be deleted.”
14. Even, at the most, it can be alleged, though not proved, by the AO that the assessee had made certain sales and accepted SBN/demonetized currency during the relevant period. Even assuming so, the assessee may have breached or violated the relevant circular/notification of the RBI/Demonetization Scheme, however, even then it can not be held a case of income from unexplained sources. Reliance in this respect is placed on the decision of the co-ordinate Kolkata Bench of the Tribunal in the case of Vidyasagar Samabay Krishi Unnayan Samity Ltd. vs. ACIT in ITA No. 06/Kol/2024 order dated 03.07.2024 wherein the co-ordinate Bench of the Tribunal in this respect has observed as under:
“No doubt, the Specified Bank Notes as per the Reserve Bank of India’s notification ceased to be legal tender w.e.f. 09.11.2016, the assessee made the cash sales accepting the Specified Bank Notes in in violation of the said circular of Reserve Bank of India. The action of violation of the said circular can be taken by the competent authority in this respect. However, for the purpose of Income tax Act, what is to be examined is as to whether the said amount received by the assessee was unexplained income of the assessee u/s 69A of the Act? The assessee has duly explained the source of deposits, which has 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 BhageerathaPattinaSahakara 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 making this addition. I also noticed that the assessee has also complied with the requirements of sec.68 of the Act. The AO has also not stated that the assessee has not discharged the responsibility placed on it u/s 68 of the Act. Peculiarly, the AO is taking the view that the assessee was not entitled to collect the demonized notes and accordingly invoked sec.68 of the Act. I am unable to understand as to how the contraventions, if any, of the notification issued by RBI would attract the provisions of sec. 68 of the Income tax Act. In any case, I notice that the assessee has also explained as to why it has collected demonetized notes after the prescribed date of 8.11.2016. The assessee has explained that it has stopped collection after the receipt of notification dated 14.11.2016 issued by RBI, which has clearly clarified that the assessee society should not collect the demonetized notes. Accordingly, I am of the view that the deposit of demonetized notes collected by the assessee from its members would not be hit by the provisions of section 68 of the Act in the facts and circumstances of the case. Accordingly, I set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to delete this disallowance.
16. In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.”
6. In view of the above discussion, the addition made/confirmed by the lower authorities in the case of the assessee on this issue is not sustained and the same is accordingly ordered to be deleted.”
15. Furthermore, in the case of Girish Karamshi Dedhia vs. DCIT (ITA No. 4553/Mum/2025), the Mumbai Bench of the Tribunal, vide order dated 10.10.2025, has held that “treating the cash deposit which the assessee has sourced through cash sales as unexplained under section 68 is not sustainable.” In that case also, the AO had invoked section 69A on the ground that the assessee (a petrol pump owner) had accepted SBNs in violation of the RBI notification. The Tribunal, following the decision of the Ahmedabad Bench in the case of ITO vs. Ashapura Petrochem Marketing Pvt. Ltd. (ITA No. 511/Ahd/2020 dated 18.10.2023) and the decision of the Bangalore Bench in the case of ITO vs. Manasa Medicals (ITA No. 552/Bang/2022 dated 31.10.2022), held that once sales are recorded in books and offered to tax, section 68/69A cannot be invoked merely for violation of RBI guidelines. The Tribunal observed:
“It is a settled legal position that when the cash sales which is the source for deposit of cash has been accepted, then no addition can be made under section 68 of the Act… In our considered view, it is not correct on the part of the revenue to treat the cash deposited as unexplained having accepted the cash sales and the books of accounts, only for the reason that receipt of SBN is in violation of circular issued by Government of India.”
16. In view of the above discussion, we hold that the addition made by the AO is not sustainable. The assessee has successfully explained the source of cash deposits as sales/advances which are duly recorded in the books of account. The suspicion of the AO regarding the genuineness of sales is not supported by any concrete evidence and is contradicted by the comparative sales data. The AO had wrongly rejected the books of accounts of the assessee merely on suspicion of advance received on sales, without any justification. Even the violation of RBI notification, if any, does not attract the provisions of section 68 of the Act. Accordingly, the impugned addition is ordered to be deleted.
17. In the result, the appeal of the assessee stands allowed.
Order pronounced in the Open Court on 03/02/2026.
