Nirankari Sons Jewellers Private Limited Vs ITO (ITAT Delhi)
Summary: The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled in favor of Nirankari Sons Jewellers Pvt. Ltd., deleting an addition of ₹1.33 crores made under Section 68 of the Income Tax Act. The case involved scrutiny of high cash sales recorded just before the November 2016 demonetization. The Assessing Officer had questioned the genuineness of cash deposits of ₹71.87 lakhs between 01.11.2016 and 08.11.2016, and flagged October 2016’s sales of ₹2.09 crores as disproportionately high when compared to the preceding three months. The assessee explained that the sales spike aligned with the festive season (Diwali, Dhanteras, Karwa Chauth) and were supported by invoices, VAT returns, audited books, and detailed stock records. It was also highlighted that all transactions were traceable, purchases were from known vendors, and no inconsistencies were found in inventory records. Moreover, Section 269ST, which restricts cash transactions, was not in effect for the relevant period (A.Y. 2017–18). The Tribunal found that the cash sales were properly documented, consistent with past records, and accepted by VAT/GST authorities. The ITAT emphasized that inability to trace some buyers does not invalidate documented sales, especially when no discrepancies were found in financial or stock records. It noted that treating recorded business income as unexplained cash credit would lead to unjust double taxation. Concluding that the assessee had discharged the burden of proof under Section 68 and that the Revenue had not presented contrary evidence, the Tribunal deleted the entire addition. This decision confirms that legitimate sales, supported by comprehensive documentation, cannot be treated as unaccounted income merely due to timing or assumptions.
Introduction:
In a recent ruling, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) provided significant relief to Nirankari Sons Jewellers Pvt. Ltd., by deleting an addition of over ₹1.33 crores made u/s 68 , on account of cash sales made just prior to the demonetization announcement in November 2016.
Background:
The assessee, a jeweller, had deposited substantial cash during the period 01.11.2016 to 08.11.2016, amounting to ₹71.87 lakhs. The Assessing Officer (AO) questioned the genuineness of cash sales reported during this period, as well as the unusually high sales for October 2016 (₹2.09 crores), which were substantially higher than the average of the previous three months.
The AO, comparing the October sales to double the average of July–September 2016, concluded that the difference of ₹1.33 crores represented unexplained income, and taxed it u/s 68 as cash credit. This view was upheld by the NFAC, prompting the assessee to appeal to the Tribunal.
Assessee’s Arguments:
The assessee contended that:
