Windlas Jewellers Vs ITO (ITAT Chandigarh)
The assessee, a partnership firm engaged in trading silver, gold and diamond jewellery, filed its return for AY 2017-18 declaring income of Rs.5,56,474/-. The case was selected for scrutiny because of cash deposits during the demonetization period. The Assessing Officer noted that the assessee deposited Rs.1,94,30,000/- in its Punjab National Bank account between the evening of 08.11.2016 and 31.12.2016 in demonetized old currency notes.
The assessee explained that the deposits represented cash sales and furnished its cash account and details of cash sales. The Assessing Officer observed that cash sales in October 2016, bank deposits in November 2016 and cash in hand during November 2016 were disproportionately higher compared with other months in FYs 2015-16 and 2016-17. The assessee, however, submitted that it had sufficient stock, purchases had been made through banking channels, its books were audited, VAT returns had been filed and accepted, and the higher sales were attributable to festivals, Diwali and the wedding season. It also pointed to increased demand for designer jewellery.
The Assessing Officer accepted estimated genuine cash sales and cash in hand aggregating to Rs.48,22,474/- and, after deducting that amount from the cash deposits of Rs.1,94,30,000/-, made an addition of Rs.1,46,07,526/- under Section 68 of the Income Tax Act.
