PCIT-1 Vs Merrygold Gems Pvt. Ltd. (Gujarat High Court)
The Gujarat High Court dismissed the Revenue’s appeal challenging the ITAT Surat order for AY 2016-17, which had upheld deletion of an addition of ₹11.57 crore under Section 68 of the Income Tax Act, 1961.
The assessee, engaged in trading rough and polished diamonds, had declared income of ₹56.54 lakh on turnover of ₹83.61 crore. During assessment under Section 143(3), the Assessing Officer made an addition of ₹11.57 crore towards unsecured loans, treating them as unexplained cash credits under Section 68, and applied the special tax rate under Section 115BBE.
The CIT(A) deleted the addition, observing that the impugned advances had been repaid by the assessee during the same financial year, mostly within 30 days. The repayments were supported by ledger accounts, bank statements and affidavits furnished by the lenders. The Tribunal affirmed the deletion, noting that the deposits had either been refunded within a day or a week in seven transactions and within a maximum period of five months in six transactions. No amount remained outstanding at the end of the financial year, and the repayments were not disputed by the Assessing Officer.
Before the High Court, the Revenue proposed questions concerning whether the Tribunal was justified in deleting the Section 68 addition despite an inquiry allegedly revealing the non-existence of the creditor.
