Kashi Nath Seth Sarraf Private Limited Vs ACIT (ITAT Lucknow)
ITAT Lucknow held that cash deposits during demonetization period cannot be treated as unexplained credit since the same is made out of cash sales. Accordingly, addition merely on suspicion, doubt, conjecture and guess work cannot be sustained.
Facts- The assessee is in the business of ornaments and jewellery (of gold, silver & diamond) and other items of gold, silver and diamond. The assessee made a total deposit of Rs.10,28,38,468/- in the bank out of cash sales made on 08/11/2016. The aforesaid cash deposits in bank were made out of Specified Bank Notes in the denomination of 1000 and 500, which were demonetized with effect from 09/11/2016. Out of the aforesaid total amount of Rs.10,34,06,468/-, AO treated cash sale of Rs.75,99,348/- as genuine and added the remaining amount of Rs.9,24,71,130/- to the income of the assessee u/s 68 of the Act.
CIT(A) dismissed the appeal of the assessee. Being aggrieved, the present appeal is filed.
Conclusion- Held that the allegation of Revenue holding that the cash sales of aforesaid amount of Rs.9,24,71,130/-, claimed by the assessee to have been made on 08/11/2016 to be untrue; is without convincing materials. The aforesaid addition of Rs.9,24,71,130/- has been made by Revenue based merely on suspicion, doubt, conjecture and guess work. In the special facts and circumstances prevailing on 08/11/2016, after announcement of demonetization and the desperate situation that arose because of announcement of demonetization, it is quite understandable that customers rushed to use SBNs for making purchases without exercising selection and choice. The assessee side has provided convincing material to show that it had sufficient stock, sufficient man power and sufficient time to make the aforesaid sale of Rs.9,24,71,130/- even after announcement of demonetization. Therefore, the claim of cash sales of aforesaid amount of Rs.9,24,71,130/- is found to be acceptable.
