PARAM GOLD,MUMBAI vs. THE INCOME TAX OFFICER WARD 42(1)(4), MUMBAI

Facts

The assessee, a partnership firm engaged in retail gold and jewellery business, deposited Rs. 5,72,90,000/- in Specified Bank Notes post-demonetization. The assessee claimed these deposits as proceeds from cash sales in October 2016. The Assessing Officer (AO) doubted this explanation due to a manifold increase in sales compared to the previous year and an abnormally high cash balance.

Held

The Tribunal held that the AO's action of partially rejecting the book results, specifically disbelieving sales proceeds deposited during the demonetization period, was improper. The Tribunal noted that the stock movement and purchases were not in doubt, and the sales were accounted for and offered to tax. The lack of detailed customer KYC was excused based on the nature of retail sales and relevant rules.

Key Issues

Whether the deposit of Rs. 5,72,90,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961, was justified, despite the assessee explaining it as proceeds from cash sales of gold and jewellery.