Alka Khandaka Vs ITO (ITAT Jaipur)
ITAT Jaipur deletes ₹44.61 lakh addition – Cash deposits during demonetization held as explained through recorded sales
Assessee, proprietor of M/s Alka Gems, engaged in jewellery trade, filed ITR u/s 44AD declaring income of ₹12.53 lakh on sales of ₹80.54 lakh. During scrutiny, AO noticed cash deposits of ₹44.61 lakh in United Bank of India between 9.11.2016 & 30.12.2016 (demonetization period). AO held that Assessee failed to prove the genuineness of purchases & sales, as one of the suppliers, M/s Parijat International, was found non-existent. Statement of Shri Rambabu Sambharia recorded u/s 131 revealed he was merely a delivery worker earning ₹13,500 per month & had no jewellery business. VAT authorities also confirmed that the firm was closed since 2013. AO treated the purchases & consequent sales as bogus, invoking s.68 r.w.s 115BBE, & made addition of ₹44.61 lakh.
CIT(A)/NFAC upheld the addition, observing that demonetization was an extraordinary event & that abnormal spikes in sales & deposits during October–November 2016 could not be believed. CIT(A) held that Assessee indulged in a “sham transaction” to convert unaccounted money into declared sales, relying on Durga Prasad More (SC) & Sumati Dayal (SC) for applying the “test of human probabilities.”
