Sadhwani Wood Products Private Limited Vs PCIT (ITAT Jaipur)
The Income Tax Appellate Tribunal (ITAT) in Jaipur recently heard the case involving Sadhwani Wood Products Private Limited and the Principal Commissioner of Income Tax (PCIT). The core issue in dispute was the application of Section 115BBE of the Income Tax Act, which relates to the taxation of undisclosed income, specifically unaccounted cash sales.
Case Background
Sadhwani Wood Products Private Limited operates in the retail and wholesale sale of wood, timber, laminates, adhesives, and related activities. On August 1, 2019, a search and seizure operation was conducted under Section 132(1) of the Income Tax Act at various premises of the Sadhwani & Rohada Group, which includes the assessee.
During the search, several documents, cash, and jewelry were seized, including WhatsApp chats on a mobile phone belonging to Shri Jitendra Sadhwani. These chats revealed details of transactions involving sales of plywood, some of which were conducted through cheques, and others in cash. The Income Tax Department used this data to assess unaccounted cash sales and alleged that a significant portion of the transactions was not reflected in the company’s books of accounts.
The Assessee Company filed its income tax returns for the relevant years, with no discrepancies between the returns filed before and after the search. However, based on the WhatsApp chats and further investigations, the Assessing Officer (AO) concluded that the company was engaged in out-of-book sales involving unaccounted cash transactions.
Key Findings
During the course of assessment proceedings, the AO found that while the sales conducted through cheques were duly recorded in the company’s books, the cash components were not. This discrepancy led to an addition of ₹141.80 crores, representing unaccounted sales between FY 2012-13 and 2019. For the year under consideration, ₹22.40 crores were added to the total income of the company as unaccounted cash sales. Additionally, a disallowance of ₹9.41 lakhs was made under Section 40A(3) of the Income Tax Act, which limits cash transactions.
