Chand Jewellers Vs ITO (ITAT Amritsar)
The appeal before the Income Tax Appellate Tribunal (ITAT), Amritsar, arose from a reassessment framed under section 147 read with section 144B of the Income-tax Act, 1961, and affirmed by the Commissioner of Income Tax (Appeals), NFAC. The assessee, a partnership firm engaged in the business of gold jewellery and ornaments, had deposited cash of ₹1.03 crore in its bank account during the demonetisation period. Its regular return for Assessment Year 2017–18 was filed on 30 August 2017, declaring total income of ₹1,52,910.
Reassessment proceedings were initiated through a notice under section 148 dated 29 March 2021. During scrutiny, the assessee produced books of account, including cash book, ledger, and stock register, and explained that the cash deposits represented sale proceeds from jewellery sold out of existing stock. The assessee contended that it maintained day-to-day stock records and that the cash was available as per books prior to demonetisation.
The Assessing Officer (AO), however, observed that cash sales for October 2016 amounted to ₹95.15 lakh, whereas the average monthly sales from April to September 2016 were about ₹2 lakh. According to the AO, sales in October 2016 were disproportionately high—around 47 times the average of earlier months. The AO further noted that the assessee failed to substantiate these sales with supporting evidence such as sale invoices, purchase bills, or customer details, despite requisitions. In the absence of verifiable documentation, the AO rejected the explanation regarding the source of cash and treated the bank deposits of ₹1.03 crore as unexplained money under section 69A. The assessment was completed by taxing the amount under section 115BBE.
