DCIT Vs Radhika Diamonds (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) Ahmedabad dismissed the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], who had deleted an addition of ₹1,00,00,000 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961, for the assessment year 2017-18 in the case of DCIT vs. Radhika Diamonds. The AO had made the addition, treating a cash deposit of ₹1,00,00,000 during the demonetization period as unexplained income from undisclosed sources, invoking Section 115BBE. The AO’s primary contention was that the assessee, engaged in the wholesale trading and manufacturing of diamond jewelry, loose diamonds, and silver, had shown a substantial increase in cash sales just before demonetization in October and November 2016, which was significantly higher compared to the corresponding period in the previous year. The AO also questioned the assessee’s failure to deposit the accumulated cash in hand until the declaration of demonetization.
However, the CIT(A) had allowed the assessee’s appeal, a decision that the Revenue challenged before the ITAT. The Learned Departmental Representative (D.R.) argued that the cash deposit during the demonetization period was from unexplained sources and represented old currency earned but not disclosed before demonetization. The Learned Authorised Representative (A.R.) for the assessee countered by stating that the CIT(A) had already partly confirmed an addition of ₹3,65,000 related to a specific cash sale where the customer’s PAN was not available, and the assessee had not appealed against this partial confirmation. More importantly, the A.R. emphasized that the Assessing Officer had not doubted the assessee’s core business activities, including the opening stock, purchases, sales, or closing stock. Furthermore, the AO did not find any discrepancies in the cash book and did not reject the books of accounts under Section 145(3) of the Act. The assessee had provided details of the cash generated from sales during the festival period and both before and after demonetization. The A.R. relied on several judicial precedents supporting their case where cash sales duly recorded were not treated as unexplained income.
