Treatment of cash deposited out of sales as income u/s 68 unjustified as sales not disputed

DCIT Vs Manuvel Malabar Jewellers Pvt. Ltd. (ITAT Delhi)

ITAT Delhi held that the cash deposited out of sales cannot be treated as income u/s 68 of the Income Tax Act once the sales are not disputed by the revenue.

Facts- The assessee is a private limited company engaged in retail trading of gold and diamond jewellery operating from rented premises at Sarojini Nagar Market, New Delhi during the year under consideration. The modus operandi adopted by the assessee in its business is that it used to buy stock for trading from registered dealers and make payments through account payee cheques. It also used to buy used old jewellery from its customers mostly as exchange against sale and also against outright payment.

AO observed that the assessee could not provide complete details of purchasers and sellers i.e name, address, PAN etc in respect of parties from whom old gold was purchased and new gold was sold. The AO also observed that the assessee had cash purchases of old gold to the tune of Rs 2,51,70,461 and disallowed the same u/s. 40A(3) of the Act.

Further, during demonetization period, the assessee made cash deposits of Rs. 3,43,50,000. AO disbelieved the explanations offered by the assessee and proceeded to treat the cash deposits of Rs 3,43,50,000/- as unexplained cash credit u/s 68 read with section 115BBE of the Act. 2016.

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