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.
Conclusion- Hon’ble Jurisdictional High Court in the case of CIT vs Kailash Jewellery House held that the cash deposited out of sales cannot be treated as income u/s 68 of the Act once the sales are not disputed by the revenue.
Held that as long as existence of stocks with the assessee is not doubted by the ld. AO and cash sales made by the assessee is accepted by the ld. AO, in our considered opinion, the entire cash deposits made during the period 09.11.2016 to 31.12.2016 in the sum of Rs 3,43,50,000/-stands duly explained and there is no case for making any addition u/s 68 read with section 115BBE of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal in ITA No.1011/Del/2022 for AY 2017-18, arises out of the order of the Commissioner of Income Tax (Appeals)-30, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No.10907/2019-20 dated 18.01.2022 against the order of assessment passed u/s 143(3) of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 21.12.2019 by the Income-tax Officer, Ward 16(3), Delhi (hereinafter referred to as ‘ld. AO’).
2. At the outset, there is a delay in filing of appeal by the revenue by 2 days. Considering the smallness of the delay , we are inclined to condone the delay and admit the appeal of the revenue for adjudication.
3. The revenue has raised the following grounds of appeal before us :-
“1. The order of Ld. CIT(A) is not correct in law and facts.
2. That on the facts and circumstances of the case, Ld. CIT(A) has erred in deleting addition of Rs. 3,43,50,000/- made by AO on account o f unexplained cash credit u/s 68 r.w.s. 115 BBE of the Income Tax Act, 1961.
3. That the Ld CIT(A) has erred in ignoring the analysis of month-wise sales during the period F Y 2015-16 and F Y 2016-17. During the month o f November, 2016, the assessee has declared Cash Sales of Rs.3,44,86,905/-whereas in the corresponding period of November, 2015, the assessee declared Cash Sales of Rs 60,32,556/-. The steep jump in sales within a little span of time i.e. just before demonetization period stands unexplained. Moreover, customer details to whom such sales were made also stand unverified.
4. Whether the learned CIT(A) erred in holding, that he purchases of old gold was adjusted against sales made to the very same person, when neither the name and address of the parties from whom old gold was purchased was produced nor any evidence to show how the same was set off against any disclosed sales.
5. Whether the Ld. CIT(A) erred in accepting the genuineness of the purchases of old gold when neither the identity of the parties was established nor any stock records were maintained wrt the old gold purchases.
6. That the appellant craves leave to add, alter, amend or vary any o f the ground either at or before the hearing ”
4. We have heard the rival submissions and perused the materials available on record. The assessee is a private limited company engaged in retail trading of gold and diamond jewellery operating from a 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. The return of income for the Asst Year 2017-18 was filed by the assessee company on 30.10.2017 declaring total income of Rs 9,40,380/-. The ld. 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 ld. 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 in the assessment. The list of parties from to whom those payments are made are listed out in pages 4 to 14 of the assessment order.
5. During the demonetization period between 09.11.2016 to 31.12.2016, the assessee made cash deposits of Rs 3,43,50,000/- as follows:-
