ITAT Remands Case for Proper Verification of Cash Sales and Deposits
Income Tax Appellate Tribunal (ITAT), Ahmedabad, has recently remanded a case to the assessing officer for detailed review in a case involving discrepancies in the reported cash sales and the cash deposits.
The assessee, Narayan Jewellers, filed its return on 07.06.2018 and declared an income of Rs 82,18,510. The assessee’s case was selected for complete scrutiny, and the assessee was served a notice under section 143(2) of the Income Tax Act, 1961. The Assessing Officer (AO) noted that the assessee deposited Rs. 7,15,00,000 in demonetised currency during the demonetisation period. The assessment informed the cash sale of Rs.7,29,43,460 along with Rs 82,97,917 on 06.11.2016, Rs. 2,66,27,122 on 07.11.2016 and Rs. 3,72,53,504 on 08.11.2016. However, the AO claimed that the assessee deposited Rs 3 lakh on 08.11.2016.
The AO found discrepancies and manipulation in the cash sale and the cash in hand of the assessee for the AY 2017-18. Due to this, the AO treated this as an unexplained cash credit and made an addition of Rs 3,42,64,621 under section 68 of the Act. To challenge this addition, the assessee filed an appeal before the CIT(A), which partly allowed the appeal. Being aggrieved by this order of CIT(A), the Revenue filed an appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad.
The revenue argued that CIT(A) wrongly deleted the addition of Rs 3,42,64,621 even though the assessee did not submit any documentary evidence. The revenue also argued that the assessee did not substantiate the claim of a sudden and extreme increase in the cash sales from 06.11.2016 tο 08.11.2016 right before the demonetisation period. The revenue said that the CIT(A) should have confirmed the addition under section 69A of the Act.
The assessment submitted that the hike in cash was due to the busy business period and the unavailability of key partners, and the cash was subsequently deposited on 10.11.2016 and 11.11.2016.
The ITAT examined the case and found that there were mismatches in the reported cash deposits and sales. However, the tribunal believed that the issue required further verification of whether these sales were offered for tax. The tribunal concluded that neither the AO nor the CIT(A) verified the case in detail. Therefore, the case was remanded to the Assessing Officer for proper verification.
Case Citation: Dy. CIT Vs Narayan Jewellers (ITAT Ahmedabad); ITA No. 1216/Ahd/2025; 04/11/2025; 2017-18
