Arvindbhai Jewellers Pvt. Ltd. Vs ITO (ITAT Ahmedabad)
AO Smelled Something Fishy, ITAT Found Only Jewellery- 9.37 Crore Deposits-Tribunal Says ‘Business, Not Black Money
Assessee, a gold jewellery trader, deposited ₹9.37 crore in cash during the demonetisation period (9 Nov – 30 Dec 2016). AO found that ₹9.78 crore of cash sales (85% of total yearly cash sales) were shown only in October 2016, compared to ₹48 lakh in October 2015, with most invoices below ₹2 lakh to avoid PAN requirement. Books were audited, but AO felt sales were “fabricated” to launder cash. Books were rejected u/s 145(3) & the entire deposits were added u/s 68 r.w.s. 115BBE as unexplained cash credits. Another ₹1.93 lakh was disallowed as personal expenses. Assessment was completed at ₹9.42 crore vs returned income of ₹2.94 lakh.
Assessee’s defence before CIT(A):
All cash sales were recorded in regular books, supported by day-to-day stock register, quantitative tally, VAT returns, audited statements & sales/purchase registers. No defects in books or stock were pointed out. The spike in sales was due to Diwali & wedding season, common in jewellery trade. Suspicion cannot replace evidence.
CIT(A) agreed & deleted the ₹9.37 crore addition, holding:
- Books were audited & supported by stock register.
- AO did not find a single defect in books or stock.
- Merely high sales in one month isn’t enough to reject books.
- Missing signatures, delivery challans, or buyer details on invoices are not mandatory by law.
- VAT returns corroborate sales.
- Rejection of books under 145(3) was invalid.
Revenue appealed before ITAT. DR argued sales were abnormal, invoices incomplete, profit lower despite high sales, PAN avoided, so books unreliable. CIT(A) ignored AO’s findings & gave relief without remand.
