Mukesh Soni Vs ITO (ITAT Jaipur)
The ITAT Jaipur allowed the assessee’s appeal against the order of the National Faceless Appeal Centre (NFAC) for Assessment Year 2017-18 arising from an assessment completed under Section 143(3). The Assessing Officer had made an addition of ₹32,71,000 under Section 69A and applied Section 115BBE in respect of cash deposited during the demonetisation period. The assessee, engaged in the business of jewellery and bullion trading, challenged the addition, contending that the cash deposits represented recorded business receipts and other explained sources.
During assessment, the Assessing Officer noted that the assessee had deposited cash aggregating to ₹33,71,000 in three bank accounts during the demonetisation period. According to the Assessing Officer, cash sales of ₹29,65,226 recorded between 1 October 2016 and 8 November 2016 were abnormally high compared to cash sales before and after that period. The Assessing Officer observed that there were negligible cash sales before October 2016 and very limited cash sales after demonetisation, treated the increase as manipulation to convert undisclosed income into disclosed income, and added ₹32,71,000 as unexplained income under Section 69A.
The assessee explained that the increase in cash sales was attributable to the Diwali season and customer demand, factors beyond the assessee’s control. It submitted that the cash deposits originated from sale proceeds of gold ornaments and bullion, opening cash balance, income from job work and cash withdrawn from banks. The assessee furnished the cash book, stock register, sale bills, purchase bills, purchase and sales registers, bank statements, VAT assessment order and VAT returns, details of month-wise cash sales and deposits, opening and closing stock inventory, quantitative stock records and other supporting documents. It also contended that its books of account were duly audited, no defects had been pointed out in the books, stock register or supporting records, and the sales recorded in the books had already been offered to tax.
