ITAT deletes addition under section 68 for demonetization cash deposits from jewelry business sales

ITAT Mumbai ruled in favor of the assessee regarding cash deposits made during demonetization period. The assessee explained that cash credited in books and deposited in bank account comprised sale proceeds from gold and precious jewelry business. Despite AO's concerns about missing narrations and daily cash balances in cashbook, ITAT found the source adequately explained as business revenue receipts. No adverse material was discovered during survey under section 133A. The addition under section 68 for unexplained cash credit was deleted and appeal allowed.

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Issues Involved: Appeal against addition u/s 68 of the Income Tax Act, 1961.

Issue 1: Addition u/s 68 of the Income Tax Act

The appellant, a partnership firm engaged in retailing gold and precious jewelry, appealed against the addition of Rs. 5,72,90,000/- u/s 68 of the Income Tax Act, 1961. The Assessing Officer (AO) doubted the explanation provided by the appellant regarding cash deposits post-demonetization, citing abnormal increase in sales without supporting evidence. The AO rejected the books of accounts, accepted part results, and added the cash deposits u/s 68, assessing the total income at Rs. 5,83,75,640/-. The Commissioner of Income Tax (Appeals) upheld the AO's decision. The appellant contended that the sales turnover was genuine, recorded in various registers, and offered for taxation. The Tribunal found the AO's selective rejection of sales proceeds deposited during demonetization unjustified, as the sales were reconciled with stock movement and purchases. The Tribunal held that the AO's doubts on sales turnover lacked merit, as the stock movement and purchases were accepted. The Tribunal also dismissed the AO's objection regarding lack of customer details, citing the nature of retail trade and legal requirements. The Tribunal concluded that the addition u/s 68 was unwarranted, deleting the Rs. 5,72,90,000/- addition and allowing the appeal.

Separate Judgement by Judges: Not Applicable.

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