DCIT Vs Chawla Jewellers (ITAT Delhi)
ITAT Delhi dismissed the Revenue’s appeal for AY 2017-18 in Chawla Jewellers, affirming CIT(A)’s deletion of a massive ₹15.35 crore addition u/s 68 made on alleged bogus cash sales during demonetisation.
The AO treated cash deposits as unexplained, relying on employee statements, assumptions about shop size, billing capacity, and the theory that it was humanly impossible to generate such volume of sales on 08-11-2016. The Tribunal found this approach entirely conjectural.
Key factual findings upheld by ITAT:
– The assessee is a long-established jeweller (since 1995) with three showrooms;
– Cash sales in AY 2017-18 were actually lower than in AY 2016-17 (44.12% vs 50.18%);
– Stock availability was never disputed (₹50.27 crore opening stock on 07-11-2016);
– Audited books, VAT returns, sales & stock registers were never rejected;
– No evidence of back-dating of invoices or manipulation of computer logs was found during survey;
– Showrooms were open till midnight on 08-11-2016, supported by multiple employee statements;
– Cash sales up to ₹2 lakh per customer are legally permissible and identity proof cannot be insisted upon.
The Tribunal reiterated that unusual or high sales, by itself, is not evidence of bogus sales. Once books are accepted and stock is reconciled, cash deposited out of recorded sales cannot be taxed again as unexplained income. Statements recorded during survey cannot override contemporaneous documentary evidence.
Result:
– Revenue appeal dismissed
– ₹15.35 crore addition deleted in full
– Cash sales during demonetisation accepted
Suspicion, however strong, cannot replace proof—when books, stock and VAT records are intact, demonetisation-period cash sales cannot be branded as bogus.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is preferred by the revenue against the order dated 09.01.2023 of the Ld. Commissioner of Income-tax (Appeals)-27 (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No.CIT(A), Delhi-27/10133/2019-20arising out of the order dated 31.12.2019 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the DCIT, Central Circle-19, New Delhi for AY: 2017-18.
