G. N. Adgaonkar Jewels Vs ITO (ITAT Pune)
In a significant ruling for a jewellery business, the Income Tax Appellate Tribunal (ITAT) Pune has deleted an ad-hoc addition of Rs. 22,05,077/- made by the Assessing Officer (AO) to G. N. Adgaonkar Jewels for the Assessment Year 2017-18. The Tribunal found the disallowance, which pertained to 50% of cash purchases made from unregistered dealers (URDs), unsustainable due to a flawed verification process and the consistent nature of the assessee’s business practices.
The case originated from an assessment under Section 143(3) of the Income-tax Act, 1961, where the assessee’s income was assessed at Rs. 23,52,967/- against a returned income of Rs. 1,48,890/-. The scrutiny was triggered by an “Abnormal increase in cash deposit during the demonetization period.” The AO focused on cash purchases of raw gold amounting to Rs. 44,10,154/- from approximately 762 unregistered dealers, with individual transaction amounts ranging from Rs. 66/- to Rs. 19,940/-.
The AO, after a test-check of some URD details, concluded that due to “No reply/No positive reply,” a 50% ad-hoc disallowance was warranted, leading to the addition under Section 69C of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this addition.
Condonation of Delay
