VIJAY RATAN SONI,DIDWANA, NAGAUR vs. INCOME TAX OFFICER, WARD-2, NAGAUR
Facts
The assessee, engaged in the wholesale gold and bullion business, filed a return for AY 2017-18. The case was selected for scrutiny due to large cash deposits during demonetization and an increase in sales with decreased profitability. The AO disallowed Rs.1,50,583/- as 10% of ornament making charges and added Rs.2,00,000/- under Section 69A for unexplained cash deposits.
Held
The Tribunal found the flat 10% disallowance of ornament making charges excessive, restricting it to Rs.75,000/- as reasonable, considering it a routine business expenditure. Regarding the unexplained cash deposit, while acknowledging the assessee had a sufficient cash balance, the nondisclosure of one deposit and lack of satisfactory explanation led to an adverse inference, but the addition was reduced to Rs.50,000/-.
Key Issues
Disallowance of ornament making charges and addition of unexplained cash deposits during demonetization.
Sections Cited
69A, 143(3)
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Per contra, the Ld. DR strongly relied on the orders of the Assessing Officer 7. and the Ld. CIT(A). It was contended that the disallowance out of ornament making charges was made on the basis of non-availability of full supporting vouchers and lack of proper justification of the expenses. 7.1 With regard to the addition under section 69A, the Ld. DR submitted that the assessee failed to disclose one of the cash deposits of Rs.4,50,000/- in the ITR, and the explanation offered subsequently during assessment proceedings lacked documentary support. In view of this discrepancy and unexplained nature of deposit, the addition of Rs.2,00,000/- u/s 69A was justified and ought to be sustained in full. 8. We have considered the rival contentions and perused the material available on record. We shall first consider the issue regarding the Disallowance of Rs.1,50,583/- out of Ornament Making Charges. In this regard, it is noted that the Assessing Officer made a disallowance of 10% out of ornament making charges of Rs.15,05,830/- for want of complete vouchers and verifiable records. The Ld. CIT(A) confirmed the disallowance. We are of the considered view that while some disallowance is warranted owing to deficiencies in documentation, a flat 10% disallowance appears excessive, particularly in a business where such expenditures are routine and necessary. In the interest of justice, we restrict the disallowance to Rs.75,000/- as reasonable. 8.1 Now we will deal with the other issue,i.e addition of Rs.2,00,000/- u/s 69A – Unexplained Cash Deposit. In this regard, the Assessing Officer made an addition of Rs.2,00,000/- u/s 69A of the Act on account of unexplained cash deposit during the demonetization period. The assessee claimed to have deposited cash out of the available balance of Rs.41,52,840 as of 08.11.2016, but failed to disclose a deposit of Rs.4,50,000 in the ITR. The explanation is that no
documentary evidence substantiates the said deposit related to an OD account. Although there appears to be a cash balance in the books, the nondisclosure of one bank deposit and the absence of a satisfactory explanation thereof justify an adverse inference. However, we find the addition of Rs.2,00,000/- to be on the higher side considering the overall facts. In our view, an addition of Rs.50,000/- would meet the ends of justice. 9. In the result, appeal of the Assessee is partly allowed.
(Order pronounced in the open Court on 18/08/2025 )
Sd/- Sd/- (DR. MITHA LAL MEENA) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER AG Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, JODHPUR 6. Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar