ITO Vs Bimal Jewellers (ITAT Delhi)
ITAT Dismisses Algorithm-Based Tax Addition on Demonetisation Cash Deposits for Jeweller
New Delhi: The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has rejected an income tax addition of over Rs. 1.63 crore made by the Assessing Officer (AO) against a jeweller based on an algorithm and comparative analysis of cash deposits during the demonetisation period. The Tribunal upheld the decision of the National Faceless Appeal Centre (NFAC) which had deleted the addition.
The case, titled ITO Vs Bimal Jewellers, involved an appeal filed by the Revenue against the order of the NFAC for the Assessment Year 2017-18. The central dispute revolved around cash deposits made by the assessee, a firm engaged in the business of buying and selling gold, during the demonetisation period.
According to the information available to the tax authorities through ITBA applications, the assessee had deposited a total of Rs. 2,19,60,000/- in cash in its bank accounts. Out of this amount, a significant sum of Rs. 1,97,00,000/- was deposited during the demonetisation period in two bank accounts maintained with HDFC Bank and Bank of Baroda.
The AO, in the assessment order, had observed a substantial increase in cash deposits during the period immediately preceding and during demonetisation compared to the financial years 2015-16 and the period after November 8, 2016. The AO conducted a comparative analysis of cash sales, noting that the cash sales before the commencement of demonetisation were “significantly high,” which raised doubts regarding their legitimate sources.
