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Facts
The Assessing Officer (AO) added Rs. 3,42,64,621/- under Section 68 of the Act to Narayan Jewellers for unexplained cash credit, alleging bogus cash sales during the demonetisation period (06-08 Nov 2016). The assessee claimed a significant increase in cash sales during this period. The CIT(A) subsequently deleted this addition, which led to the Revenue's appeal before the ITAT.
Held
The Tribunal noted an abnormal increase in cash in hand and questioned the veracity of the claimed cash sales and deposits during demonetisation. It found that the details of cash sales and cash in hand required proper verification, which had not been adequately conducted by the revenue authorities. Therefore, the matter was remanded back to the Assessing Officer for fresh verification and adjudication.
Key Issues
Whether the CIT(A) erred in deleting the addition made by the AO under Section 68 for unexplained cash credits, and whether the assessee could substantiate the sudden rise in cash sales immediately before the demonetisation period or if Section 69A should apply.
Sections Cited
68, 69A, 143(2), 142(1), 129, 131(1A)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 28-03- 2025 passed by CIT(A)-12, Ahmedabad for assessment year 2017-18.
The grounds of appeal
are as under:-
1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 3,42,64,621/- made by the Assessing Officer under the provisions Section 68 of the Act on account of the unexplained cash credit in the books of account, despite the fact that the Assessee could not substantiate the same with cogent documentary evidences.
2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 3,42,64,621/- made by the Assessing Officer under Section 68 of the Act on account of the unexplained cash credit in the books of account, despite the fact that assessee has failed to substantiate the claim of sudden and extreme rise in cash sales as on 06.11.2016 tο 08-11-2016 immediate before the demonetisation period.
3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 3,42,64,621/- made by the Assessing Officer under Section 68 of the Act holding that the Assessing Officer was not justified in making addition u/s 68 of the I.T. Act despite the fact that the Ld. CIT(A) should have confirmed the addition u/s 69A of the I.T. Act
The appellant craves to add, amend, alter, substitute, modify the above ground of appeal, raise any new ground of appeal, if necessary, either before or during the course of the hearing of the appeal on the basis of submissions to be made.”
3. The assessee is engaged in the business of retail sales of ornaments of gold and silver. The return of income declaring total income at Rs. 82,18,510/- was filed by the assessee on 07/06/2018. The case was selected under the category of Complete Scrutiny and notice u/s. 143(2) of the Income Tax Act was issued on 25/09/2018. Further, notice u/s.142(1) r.w.s 129 of the Income Tax Act 1961 dated 22/08/2019 along with questionnaire calling for required details/information was issued. The C.A. of the assessee furnished the relevant details. The Assessing Officer observed that the assessee has deposited demonetized currency amounting to Rs. 7,15,00,000/- during the demonetization period. The assessee claimed that the assessee firm has involved in cash sale of Rs.7,29,43,460/- in which the assessee further claimed that he has involved in cash sale of Rs. 82,97,917/- on 06.11.2016, Rs. 2,66,27,122/- on 07.11.2016 and Rs. 3,72,53,504/- on 08.11.2016. After going through the assessee’s details as well as the statement of Mr. Narayan Jewellers, A.Y. 2017-18 Ketan Narendrakumar Chokshi recorded u/s. 131(1A) of the Act, the Assessing Officer held that assessee has deposited only Rs. 3,00,000/- on 08-11-2016. This trend raising the cash in hand shows clear discrepancy and manipulation in cash sale as well as cash in hand by the assessee for assessment year 2017-18 which has clear reflection in manipulation of books of account of the assessee for assessment year 2017-18. After giving the detailed finding the Assessing Officer made addition of Rs. 3,42,64,621/- u/s. 68 of the Act being unexplained cash credit.
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The ld. D.R. submitted that the CIT(A) erred in deleting the addition of Rs. 3,42,64,621/- made by the Assessing Officer under the provisions of section 68 of the Act on account of unexplained cash credit in the books of account, despite the fact that the assessee could not substantiate the same with cogent documentary evidences. The assessee failed to substantiate the claim of sudden and extreme rise in cash sales as on 06-11-2016 to 08-11-2016 immediately before the demonetization period. The ld. D.R. further submitted that the CIT(A) should have confirmed the addition u/s. 69A of the Income Tax Act.
The ld. A.R. at the time of hearing submitted that the stock statement for the period of 01-11-2016 to 08-11-2016, sales register, cash and credit sales for the period of 28-10-2016 to 05-11-2016 as well as sales register, cash and credit sales for the period of 01-11-2016 to 08-11-2016. When asked about the sales bills, the assessee submitted that the details of cash and Narayan Jewellers, A.Y. 2017-18 credit sales comprising and demonstrates the details of cash and sells on the particular period of demonetization as well and in fact books were not rejected by the Assessing Officer at any point of time. The ld. A.R. relied upon the order of the CIT(A).
6. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee deposited demonetized currency of Rs. 7,15,00,000/- while cash book for assessment year 2017-18 showed an abnormal increase in cash in hand from Rs. 11,04,585/- on 05-11-2016 to Rs. 93,98,012/- on 06-11-2016 despite this hike in cash balance only Rs. 20 lakhs was deposited on 07-01-2016, even though the assessee claimed cash sales of Rs. 2,66,27,122/- on 07-11-2016. The assessee deposited just Rs. 3 crore on 08-11-2016 despite reporting the cash sale of Rs. 3,72,53,502/-. The CIT(A) observed that the sales pattern for assessment year 2016-17 and 2017-18. The assessee manipulated the cash and sales books as contemplated by the Assessing Officer to introduce unexplained money, the bogus cash sales. The Assessing Officer estimated the normal cash sales for 06-11-2016 and 07-11-2016 at Rs. 6,60,418/- based on the appellant’s average daily cash sales by subtracting this normal amount from the reported sales of Rs. 3,49,25,039/- by these two days. The Assessing Officer determined that Rs. 3,42,64,621/- represented the bogus cash sales. The Assessing Officer treated the cash sales of Rs. 3,42,64,621/- as unexplained cash credit u/s. 68 of the Act. The cash deposits reflected in the audited books were made as per the cash deposited in last bill Rs. 25 lakh for insurance purpose. The spurt in this cash i.e. 07-11-2016 was due to busy business period and the unavailability of key partners and cash was Narayan Jewellers, A.Y. 2017-18 subsequently deposited on 10-11-2016 and 11-11-2016 as per the sales generated on 06, 07 & 08 Nov, 2016. The assessee has consistently maintained cash sales evidenced by the 50% cash sales in Oct, 2016 and it was mandatory for the appellant to deposit the cash immediately. In para 6.5 of the CIT(A) order, the CIT(A) categorically motioned that there is no dispute in respect of VAT return where the sales were shown by the assessee including cash sales as on 06-07 Nov, 2016. But this aspect of accounted sales transactions amounting to Rs. 3,42,64,621/- in its books of account needs verification and whether the same was offered to tax while filing its return of income for the year under consideration is not put upon record. Further, the cash sales of the assessee firm during the year under consideration also needs verification by the Assessing Officer. Thus, the details given by assessee that of the cash sales and cash in hand requires verification which both the revenue authorities have not done. Therefore, the matter is remanded to the file of the Assessing Officer for proper verification of these issues and thereafter adjudicate the same as per Income Tax Act. Needless to say, the assessee be given opportunity of hearing.
In the result, the appeal of the Revenue is partly allowed for statistical purpose.