ITAT Flags Mismatch Between Stock & Sales Of Jewellery Firm During Demonetisation Period, Orders Fresh Examination

The Lucknow Bench of the Income Tax Appellate Tribunal (ITAT) has set aside an appellate order deleting a ₹2.75 crore addition made on account of cash deposits during the demonetisation period and has remanded the matter back to the Assessing Officer for a fresh assessment. A Bench comprising Vice President Kul Bharat and Accountant Member Anadee Nath Mishra was hearing the Revenue's appeal against an order passed by the National Faceless Appeal Centre, which had earlier deleted the addition made under Section 68 of the Income Tax Act in the case of a jewellery firm for Assessment Year 2017–18. The Assessing Officer had treated cash deposits of ₹2.75 crore, made during the demonetisation period in November 2016, as unexplained cash credits, holding that the assessee failed to justify the source of such deposits. The assessee claimed that the deposits were attributable to cash sales of jewellery during the relevant period, which explanation had been accepted by the first appellate authority. During proceedings before the Tribunal, the Revenue argued that the assessee did not have sufficient stock to support the quantum of sales claimed on a single day during demonetisation. It was contended that the sales exceeded available stock and were therefore not genuine. The assessee, on the other hand, admitted that it did not have adequate own stock but claimed that the sales were made out of “display items” belonging to its franchisor, which were lying in its showroom. The Tribunal noted that this claim regarding sale of franchisor-owned display stock was not supported by verifiable material on record and required factual examination. Agreeing with the Revenue, the Bench held that the issue could not be conclusively decided without proper verification by the Assessing Officer. In view of the above, the ITAT set aside the order of the first appellate authority and restored the issue of ₹2.75 crore addition to the file of the Assessing Officer, directing a de novo assessment after granting reasonable opportunity to the assessee. The Revenue's appeal was partly allowed for statistical purposes . Case Title: ACIT Vs. Mallics Jewels Case No.: I.T.A No. 312/Lkw/2023 A.Y. 2017-2018 Appearance for Appellant: Shri G.S. Walia, CA Appearance for Respondent: Shri Amit Kumar, D.R. Click Here To Read/Downloading Order

ITAT Flags Mismatch Between Stock & Sales Of Jewellery Firm During Demonetisation Period, Orders Fresh Examination

Rajnandini Dutta

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