Zinzuwadia & Sons Vs ACIT (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has ruled in favor of Zinzuwadia & Sons, a jeweler, by deleting a significant addition of ₹7.88 crore to its income, which the Assessing Officer (AO) had treated as “bogus sales” during the 2016 demonetization period. The ITAT upheld the decision of the Commissioner of Income-tax (Appeals) [CIT(A)] on this primary issue, while also addressing other related additions.
The case emerged from a survey action conducted on Zinzuwadia & Sons following the demonetization announcement on November 8, 2016. The Revenue suspected that the assessee, like many jewelers, had adopted a modus operandi of recording backdated sales to justify large cash deposits of unaccounted income. The AO specifically identified ₹7,88,85,082/- as alleged backdated sales. Additionally, the survey found excess stock (₹1,14,24,765/-) and excess cash (₹13,33,961/-), leading to further additions by the AO.
The CIT(A) had previously deleted the entire addition related to bogus sales, concluding that the Revenue failed to establish its case. However, the CIT(A) rejected the assessee’s books of accounts due to other discrepancies, making a separate addition of ₹96 lakhs for low gross profit. The addition for excess stock was restricted to ₹95,41,057/-, and this amount was “telescoped” against the gross profit addition, meaning no separate addition was effectively made for excess stock beyond the gross profit. The addition for excess cash was entirely deleted by the CIT(A).
