Khimani Watch Company Pvt. Ltd. Vs DCIT (ITAT Mumbai)
ITAT Mumbai Deletes ₹5.10 Crore Demonetisation Addition – Addition Based on Mere Suspicion – Books Not Rejected, Sales Duly Audited- No Double Taxation on Recorded Turnover – Once Profit Offered, No Further GP Addition Permissible
Issue
Whether cash deposits of ₹5.10 crore during demonetisation (Nov–Dec 2016) represented unexplained money u/s 69A, or were genuine sales proceeds duly recorded in books.
Facts
Assessee, a retailer of branded watches, filed return declaring income of ₹51.07 lakh. Based on a Tax Evasion Petition (TEP) alleging misuse of a PAN in an invoice, the AO reopened assessment. AO found cash deposits of ₹5.10 crore in old currency notes during 9.11.2016–31.12.2016. Notices u/s 133(6) issued to 48 customers: 13 denied or failed to confirm transactions. AO concluded the cash book was fabricated & treated the entire ₹5.10 crore as unexplained u/s 69A, without rejecting books u/s 145.
Assessee’s Stand
- All sales were booked & subjected to VAT & audit.
- Purchases were through banking channels, with TCS duly collected.
- Only 12 of 48 buyers denied transactions; others confirmed or sought time.
- Ratio of cash sales to total sales (≈71%) was consistent with prior years.
- Cash balance as on 8.11.2016 was adequate to explain deposits.
- Section 69A cannot apply when transactions are recorded & taxed; Section 115BBE cannot enlarge its scope.
CIT(A) Findings
- AO had no basis for figure of ₹5.10 crore.
- Accepted genuineness of purchases & general cash sales trend.
- However, sustained addition of ₹19.93 lakh (20% GP on ₹99.67 lakh sales to 13 buyers who denied transactions).
Tribunal’s Findings
