NAKODA TRADERS,CHENNAI vs. ACIT/DCIT, NON CORPORATE CIRCLE-5(1), CHENNAI

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ITA 2455/CHNY/2025Status: DisposedITAT Chennai30 June 2026AY 2017-1811 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that additions under Section 68 for cash sales are not applicable to business sale proceeds and deleted the addition. It also found that the discrepancy in purchases was due to fluctuation differences on gold loans, not bogus purchases, and set aside the addition.

What were the facts?

The assessee firm's assessment year 2017-18 saw additions made by the AO under Section 68 for unexplained cash credit and for discrepancy in purchases. The CIT(A) confirmed these additions. The assessee appealed against these confirmations.

What were the issues?

Whether cash sales during demonetization can be treated as unexplained cash credit under Section 68, and whether fluctuations in gold loan valuations constitute bogus purchases.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Before: Shri S.S. Viswanethra Ravi & Shri S.R. Raghunatha

Hearing: 16.04.2026Pronounced: 30.06.2026

per gram, whereas for the year under consideration as on 31.03.2017, the

quantity of gold was valued at Rs.16,17,70,561/- @ Rs.2,896 per grams

showing the difference of Rs.2,78,289/- (Rs.16,17,70,561/- as on

31.03.2017 – Rs.16,14,92,272/- as on 31.03.2016).

12.

Further, with reference to loan from Shri Arun Kumar Jain on

04.01.2016, we find the agreement at page nos.1 to 3 of the paper book,

wherein it was agreed vide para no 2, the party of the first part i.e.

assessee shall give Rs.5 per annum per gram of gold in consideration on

loan from the party of the second part who is Shri Arun Kumar Jain as

long as the assessee retain the same. We find the assessee availed

quantity of 5,411 grams of gold from Arun Kumar Jain in pursuance of

10 I.T.A. No. 2455/Chny/2 I.T.A. No. 2455/Chny/2025 I.T.A. No. 2455/Chny/2 I.T.A. No. 2455/Chny/2 025 025 025

agreement dated 04.01.2016 being valued on 31.03.2016 at

Rs.1,32,95,615/- @ Rs.2,457 per gram. We find the value of said gold

quantity at Rs.1,56,67,360/- as on 31.03.2017 @ Rs.2,896 per gram,

which shows increase of Rs.23,71,745/- (at Rs.1,56,67,360/- as on

31.03.2017 - Rs.1,32,95,615/- as on 31.03.2016). Therefore, we find as

rightly pointed out by the ld.AR that the ld.CIT(A) completely ignored the

contractual obligation to repay the gold loan availed from the assessee in

pursuance of two agreements which are at page nos. 1 to 7 of the paper

book and we find there is no difference to be treated as bogus purchases

as held by the ld.CIT(A). Thus, the order of the ld.CIT(A) is not justified in

confirming the order of the AO in treating the difference as per bills and

purchases shown in the profit and loss account and is set aside. Thus,

ground nos. 6 to 8 raised by the assessee are allowed.

13.

Ground no.10 raised by the assessee challenging the action of the

ld.CIT(A) in sustaining the denial of set off of brought forward losses in

the facts and circumstances of the case.

14.

The ld.AR submits that the assessee is legally entitled to set off of

brought forward losses and the ld.CIT(A) sustained the denial of set off of

brought forwards losses basing on the earlier assessment for AY 2016-

11 I.T.A. No. 2455/Chny/2 I.T.A. No. 2455/Chny/2025 I.T.A. No. 2455/Chny/2 I.T.A. No. 2455/Chny/2 025 025 025

17.

He submits the said assessment for AY 2016-17 is already been set aside to the file of the ld.CIT(A) and it is pending for adjudication. The ld.DR, did not dispute the same. Having heard both the parties, we are of

the considered opinion, until the issue of set off of brought forward losses is decided by the ld.CIT(A), the issue before us is premature and therefore, we remand the matter to the file of the AO to await and decide taking into consideration the order of the ld.CIT(A) for AY 2016-17. Thus, ground no.10 raised by the assessee is allowed for statistical purposes.

15.

In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced on 30th June, 2026 at Chennai.

Sd/- Sd/- (S.R. RAGHUNATHA) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated: 30.06.2026 JPV आदेश की *ितिलिप अ1ेिषत/Copy to: 1. अपीलाथ)/Appellant, 2.*+थ)/ Respondent, 3. आयकर आयु2/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय *ितिनिध/DR & 5. गाड' फाईल/GF

PRASANNA Digitally signed by PRASANNA VANI JETTY VANI JETTY Date: 2026.07.16 14:19:01 +05'30'

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