Kulbhushan Sahtani Vs ITO (ITAT Delhi)
Section 68 can’t apply to recorded sales- No Double Taxation on cash sales – Books Audited, Stock Tallied – ITAT deletes Demonetisation cash deposit addition
Delhi ITAT deleted an addition of ₹43.50 lakh made on account of cash deposits during the demonetisation period, holding that where cash sales are duly recorded in audited books & supported by stock records, the same cannot be treated as unexplained cash credits under section 68.
Assessee , proprietor engaged in jewellery trading, had filed his return declaring income of ₹9.26 lakh. During demonetisation, he deposited ₹1.74 crore in Specified Bank Notes (SBN). AO, noticing what he termed an “abnormal increase” in cash sales in October 2016, treated 25% of the cash deposits (₹43.50 lakh) as unexplained u/s 68, invoking section 115BBE. This was despite accepting the trading results & treating the remaining 75% of deposits as genuine. CIT(A) upheld the addition.
Before Tribunal, Assessee submitted that complete books of account, stock registers, purchase & sales ledgers, VAT/GST returns & other records were maintained & produced before AO. It was explained that the sales spike was due to genuine business reasons-obtaining registration as a Government-approved valuer in October 2016, participation in the prestigious Hong Kong International Gem & Pearl Fair & enhanced advertising & product variety -all of which boosted sales in October & early November 2016. Historical data showed that cash sales formed between 31% & 60% of total sales in earlier years, whereas in AY 2017-18 the ratio was only 46%.
