BUDHAMAL & SONS JEWELLERS,PALAMPUR vs. DCIT, SHIMLA

ITA 1569/CHANDI/2025Status: DisposedITAT Chandigarh05 October 2026AY 2018-193 pages
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What did the Tribunal hold?

The Tribunal acknowledged that the discrepancy in recording cash deposits occurred at the assessee's end. Since the assessee had no other source of income, the Tribunal considered the shortfall to be attributable to sales. The Tribunal directed the AO to estimate a Gross Profit (GP) of 10% on the addition of Rs. 4.70 Lacs, treating this estimated GP as business income. This decision was based on the principle that where a discrepancy arises from an accounting error and the funds are demonstrably linked to business activity, an estimation of profit is more appropriate than adding the entire unexplained amount. The Tribunal did not expressly leave any issue undecided. The operative direction was to re-estimate the addition based on a GP rate.

What were the facts?

The assessee, M/s Budhamal & Sons Jewellers, engaged in jewellery trading, filed an appeal for Assessment Year 2018-19. The appeal challenges an order by the Commissioner of Income Tax (Appeals)-3, Gurgaon, which upheld an addition made by the Assessing Officer (AO) under Section 147 read with Section 143(3) of the Income Tax Act, 1961. The AO had added Rs. 4.70 Lacs to the assessee's income, representing a cash deposit discrepancy. The AO noted that the assessee deposited Rs. 656.86 Lacs in its IDBI bank account, while its recorded cash sales were Rs. 652.16 Lacs, leaving a shortfall of Rs. 4.70 Lacs. The assessee's first appeal to the CIT(A) was unsuccessful.

What were the issues?

1. Whether the Tribunal can direct the AO to estimate Gross Profit (GP) on a cash deposit discrepancy treated as unexplained income, rather than confirming the addition of the entire amount? (Question of law and fact, turning on Section 69A). Assessee's contention: The assessee argued that the discrepancy of Rs. 4.70 Lacs arose due to a clerical error by the accountant in recording cash deposits. The assessee submitted audited financial statements and a comparative chart of sales, purchases, and net profit. It proposed that the shortfall be treated as sales and an appropriate GP rate be applied. Revenue's contention: The judgment records no specific argument from the revenue regarding the method of addition or the applicability of a GP rate. The revenue's position, as reflected in the AO's action and the CIT(A)'s order, was to treat the entire Rs. 4.70 Lacs as unexplained cash deposit and add it to the income.

Which sections of the Income-tax Act were involved?

Section 69A,Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH

Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI RAJESH DAMODARLAL SHARMA, JM

For Respondent: Shri Vivek Vardhan (Addl.CIT) – Ld. Sr. DR
Pronounced: 05.10.2026

RAJESH DAMODARLAL SHARMA (Judicial Member)

1.

Aforesaid appeal by assessee for Assessment Year (AY) 2018-19 arises out of an order passed by the learned Commissioner of Income Tax (Appeals)-3 Gurgaon on 04.09.2025 in the matter of an assessment as framed by Ld. AO u/s 147 r.w.s. 143(3) of the Act on 31.03.2023. The sole grievance of the assessee is confirmation of addition u/s 69A for Rs.4.70 Lacs which represent cash deposit in assessee’s bank account. Having hear

The order continues below.

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