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details of P&L Account, Balance Sheet, stock register, list of customers who purchased the jewellery on 08.11.2016, VAT returns, cash book, details of cash deposited during the demonetization and other related documents. In the course of assessment, from perusal of these documents, Ld. AO noted certain discrepancies and issued a show cause notice dated 21.12.2019 which was replied by the assessee vide its submission dated 26.12.2019, both reproduced in the impugned order.

3.1 Crux of the contention of the Ld. AO are that assessee had sold ornaments of Rs.3,33,28,234/- on 08.11.2016 and it also sold 24 ct. standard bar/fine gold of Rs.42,40,042/-. Ld. AO noted that assessee had deposited old currency notes of Rs. 500/- and Rs. 1000/- denomination during the demonetization period from 10.11.2016 to 30.11.2016 totaling to Rs.3,87,69,800/-. Ld. AO show caused the assessee as to why should not these deposits of cash of Rs.3,87,69,800/- during the demonetization period be added to the total income u/s. 69A of the Act.

3.2 Further, Ld. AO arrived at average cash sale figure of first seven days of November, 2016 at Rs.3,66,509/- and assumed on this basis that normal cash sale likely to have taken place on 08.11.2016, be an amount of Rs.3,66,509/-. Ld. AO made certain assumptions on the logistics and conduct of business operations of the assessee on the date of announcement of demonetization i.e. 08.11.2016 to compute the probable value of sale vis-à-vis the actual sale of Rs.3,75,68,276/- reported and accounted by the assessee. For the said computation, Ld. AO assumed that after the announcement of demonetization at 8PM on 08.11.2016, there were 210 minutes available from 8.30 PM to 12 midnight. Ld. AO considered that a cash counter can handle a customer

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for at least five minutes to ten minutes considering the time required for preparation of bills, counting and checking of currency etc. On these considerations, Ld. AO arrived at a figure of maximum 42 customers which a cash counter could have handled till midnight by estimating minimum five minutes per customer. Further, ld. AO assumed a fixed bill value per customer of Rs.1.5 lacs since all the invoices raised during this time by the assessee were below Rs. 2 lacs. Ld. AO arrived at the implied effect of these two numbers i.e. the 42 customers in the time window available and Rs. 1.5 Lacs of sale value per customer during this time window that a cash counter could have generated maximum sale of Rs. 63 lacs and since there were three cash counters, the total sale value of jewellery from the time window from 8.30PM to 12 midnight on 08.11.2016 could have been of Rs.1,89,00,000/- [i.e. Rs.63,00,000 x 3 (cash counters)]. With this hypothesis, estimation and calculation, Ld. AO arrived at the maximum sale of Rs.1,92,66,509/- (Rs.1.89 Cr. + Rs.3,66,509/-) and compared this with the actual sale of Rs.3,75,68,276/- reported by the assessee. The difference of these two figures i.e. Rs.3,75,68,276 - Rs.1,92,66,509 = Rs.1,95,03,291 was treated as deemed income of the assessee by holding that no satisfactory explanation regarding the nature and source of cash deposit was furnished by the assessee.

3.3 In the course of assessment proceedings, Ld. AO also show caused the assessee for rejecting the books of account by applying the provisions of section 145(3) of the Act. Assessee submitted its explanation but all in vain. Books of account were rejected u/s. 145(3) of the Act. Aggrieved, the assessee preferred an appeal before the Ld.

CIT(A).

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4. Before the ld. CIT(A), each of the issues raised by the Ld. AO were addressed by the assessee which is evident from the perusal of the impugned order wherein AO's comment and the submission of the assessee are reproduced and each ground of appeal has been dealt meritoriously by the ld. CIT(A). On the moot point of explanation relating to deposit of cash of Rs.3,87,69,800/- in the bank accounts during the demonetization period to explain its nature and source, the assessee had submitted its break up wherein opening cash in hand on 08.11.2016 was Rs.5,29,815/- and Rs.3,86,27,800/- was generated by the cash sales recorded in the cash book vide sales made during the time window of 8.30PM to 12 midnight on the same day. Also, there were customers advance of Rs.4,58,576/-. Thus, assessee explained that total deposit of cash of Rs.3,87,69,800/- was out of the cash so available. In respect of the estimated probable sales calculation done by the ld. AO to arrive at the figure of Rs.1,95,03,291/- for the purpose of making an addition, assessee had countered the assertions of the Ld. AO by stating that books of account, stock registers and all other details as asked by the AO from time to time were submitted with proper explanation. There was nothing specific which was pointed out in respect of any defect in the books of account and the details furnished. It was also submitted that purchases made by the assessee which were duly recorded in the books of accounts have not been doubted in the assessment proceedings. However, the Ld. AO has not accepted the sales figure which is based purely on his subjective estimation and hypothesis. Ld. CIT(A) gave meritorious consideration to the submissions made by the assessee and noted that business cannot be run on such hypothetical arithmetical proposition which have been arrived at, out of own imagination of the Ld. AO. Several judicial precedents were relied upon to buttress the contentions of the assessee and the findings given by the Ld. CIT(A) after which the addition of

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Rs.1,95,03,291/- made by the ld. AO was deleted by the Ld. CIT(A). Observations and findings of Ld. CIT(A) captured in para 5 are reproduced hereunder for ease of ready reference:-

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7

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4.1 Aggrieved, the department is in appeal before the Tribunal by raising the sole ground in respect of deposit of cash during the demonetization period amounting to Rs.1,95,03,291/- by treating it as unexplained money u/s. 69A of the Act.

5. Ld. Sr. DR Smt. Ranu Biswas argued the matter and supported the theory of human probability relied on by the Ld. AO in arriving at the estimation of probable sales value during the time window available on the date of commencement of demonetization. She supported the order of Ld. AO and stated that all the aspects for the purpose of making the additions have been dealt by the Ld. AO including the rejection of books of accounts, credibility of sale with respect to list of bills of 275 customers, abnormality of sale and manipulation of accounts.

6. Ld. Counsel Shri Subhas Agarwal, appeared on behalf of the assessee who strongly supported the well reasoned meritorious findings given by the Ld. CIT(A) on each aspect of the addition made by the Ld.

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AO. Ld. Counsel took us through the factual matrix of the case and the modus operandi of the business transactions of the assessee which are not repeated here for the sake of brevity as they have been elaborately narrated above.

7. We have heard the rival submissions and carefully considered the material placed on record and gone through various judicial precedents relied upon by both the parties. At the outset, we find that the moot point for consideration is in respect of explanation furnished by the assessee regarding nature and source of cash deposit to the tune of Rs.1,95,03,291/- (Rs.3,87,69,800 - Rs.1,92,66,509) during the demonetization period which has been treated as deemed income of the assessee and added to the total income u/s. 69A of the Act as unexplained money. We find that written submissions and all the relevant documentary evidences were placed on record.

7.1 The foremost point which invites our attention is the computation method adopted by the AO in arriving at this figure of Rs.1,95,03,291/- which is nothing but based on a hypothesis to arrive at estimated probable sales value that could have been made on 08.11.2016 between the time window from 8.30PM to 12 midnight and the entire day. As discussed above, Ld. AO has made certain assumptions on the logistics and the conduct of business transactions/operations to arrive at this probable sale value estimation. We find that the assumptions so made by the Ld. AO are devoid of any scientific basis and third party comparable which gives credibility to such an estimation. All these assumptions and calculations carry AO's own figment of imagination. We note that the assessee has countered all the assertions and assumptions made by the AO by submitting the details from its audited books of accounts and stock registers by providing all the relevant

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details from time to time. We note that the assessee had given all the explanations which are reasonable and there is no other material except for the estimation of probable sales value done by the Ld. AO for the purpose of treating the deemed income as unexplained money in the hands of the assessee. We also note that assessee has duly recorded in its books of accounts all the sales made on the date of announcement of demonetization in the time window available on that day which has been credited in the P&L Account. It is also noted that the assessee had stock in hand to meet the sales demand, all of which is duly recorded in the stock register furnished before the authorities below. It is also noted that there is no specific discrepancy pointed out in respect of the books of account, more particularly when the purchases have not been doubted in the assessment. Ld. AO has noted that details of customers on the invoices raised during the time window on the date of announcement of demonetization were not recorded on the invoices for some of the instances wherein the details were recorded, summons were issued to those customers, most of which remained unreplied. We note that all the sales were cash sales and in case of cash transactions of sale, delivery of goods is taken against the cash payment and it is hardly necessary for the seller to bother about the name and address of the purchaser.

7.2 We further observe that the assertion of the ld. AO on the mere possibility of assessee earning considerable amount out of cash sales on the date of announcement of demonetization is a pure conjecture on the part of the AO and is based on surmises, speculating on the approach adopted by the assessee. Rather, the estimation approach of arriving at probable sales value by the Ld. AO cannot be rationally inferred to justify the addition so made. Thus, we find that the Ld. AO indulged in suspicion, conjecture and surmises and acted without any evidence and

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upon a view of facts which cannot reasonably be entertained. It is a settled position of law that in making the assessment, the AO is not entitled to make a pure guess and make an assumption without reference to any evidence or any material at all. It has been consistently held by various Hon'ble Courts that there must be some matter more than their suspicion to support the assumption made u/s. 143(3) of the Act. We find force from the decision of Hon'ble Apex Court in the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) wherein it was held as under -

"The mere possibility of the appellant earning considerable amounts in the year under consideration was a pure conjecture on the part of the Income-tax Officer and the fact that the appellant indulged in speculation (in Kalai account) could not legitimately lead to the inference that the profit in a single transaction or in a chain of transactions could exceed the amounts, involved in the high denomination noted, - this also was a pure conjecture or surmise on the part of the Income-tax Officer. It is, therefore, clear that the Tribunal in arriving at the conclusion it did in the present case indulged in suspicion, conjectures and surmises and acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and this court is entitled to interfere."

7.3 Ld. Counsel pointed out that assessee had all the capabilities, infrastructure, manpower, process and procedures to handle and deal with high volume of customers during small time window available to it. For comparability of the circumstances which existed on the day of demonetization announcement, he pointed to the occasion of Dhanteras which is a festival wherein similar kind of high traffic volume of customers happens for the purchase and sale of gold/bullion/jewellery,

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it being an auspicious day for making such investments. It was placed on record that on the day of Dhanteras which fell on 28.10.2016 i.e. prior to the day of announcement of demonetization, sales bills to the tune of 229 numbers were generated while dealing with those many customers which was also during the smaller time window available on that day depending on the muhurats. It was also pointed out that the VAT returns filed by the assessee for the year under consideration have not been revised in any manner so as to reflect any kind of adjustment or accommodation made in the accounted data of the assessee. All these facts and explanations were placed before the lower authorities, copies of which are placed in the paper book at page 19 to 28 and 52 to

75.

8. Keeping in view the above mentioned peculiar facts and circumstances of the case, the guess work adopted by the ld. AO in arriving at probable sales value and the judicial precedents relied upon, we find no reason to interfere with the factual findings given by the Ld. CIT(A) in deleting the addition of Rs.1,95,03,291/- made by the ld. AO. Accordingly, the appeal of the revenue stands dismissed.

9. In the result, the appeal of revenue is dismissed. Order pronounced in the open court on 27.06.2022. Sd/- Sd/-

(SANJAY GARG) (GIRISH AGRAWAL)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Kolkata, Dated: 27.06.2022 JD, Sr. P.S.

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Copy to:

1. The Appellant: ITO, Ward-50(1), Kolkata.

2. The Respondent: M/s. Senco Alankar, Uttarapan Complex, DS-IV, 2^ndfloor, Manicktala Civic Centre, Scm. VIIM, Kolkata-700 054.

3. The CIT-15 Kolkata

4. The CIT (A) - , Kolkata

5. The DR, ITAT, Kolkata Bench, Kolkata / / T r u e C o p y / / [

By Order

Assistant Registrar

ITAT, Kolkata Benches, Kolkata