Santhosh Thanmal Mutha Vs ITO (ITAT Mumbai)
Cash Sales Cannot Become Unexplained Cash Merely Because They Were Deposited After Demonetisation: Mumbai ITAT Deletes ₹61.44 Lakh Addition
Summary: The deposit of cash during the demonetisation period may invite scrutiny, particularly when the amount is substantial. But can the same receipts be treated as recorded business sales for computing profit and also as unexplained cash credits under section 68? The Mumbai Bench of the Income Tax Appellate Tribunal answered this question in favour of a jewellery trader and deleted an addition of ₹61,44,000.
The cash deposits and the Assessing Officer’s objection
Santhosh Thanmal Mutha carried on the business of trading in gold, gold bars and jewellery as proprietor of Sai Santosh Jewellers. He had taken over the business previously run by his father and filed his return for assessment year 2017–18 declaring income of ₹7,25,850.
During scrutiny, the Assessing Officer questioned cash deposits of ₹61.44 lakh made in November 2016, shortly after the demonetisation announcement. The assessee explained that the deposits came from jewellery sales recorded in his books before 8 November 2016. In particular, he pointed to cash sales of ₹65,21,850 between 25 October and 7 November 2016, which, according to him, had generated sufficient cash for the deposits.
