LI Network
Published on: January 1, 2024 at 11:00 IST
The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled in favor of the taxpayer by deleting additions made under Section 68 of the Income Tax Act for cash receipts that were subsequently converted into the sale of jewellery.
The bench, comprising Mahavir Singh (Vice President) and Manjunatha. G (Accountant Member), stated that uniform sales on all days, months, or years are not a requisite, and variations can be attributed to factors such as festival sales, clearing sales, year-end sales, etc.
The tribunal found the assessee’s explanation that cash was received from various customers for jewellery sales, and subsequently, advances were converted into sales, to be bona fide and reasonable.
The assessee, engaged in the gold and jewellery trading business, filed its income tax return, admitting total income.
The Assessing Officer (AO) treated total cash receipts as unexplained cash credits and brought them to tax, asserting that the assessee failed to establish the identity of investors, their creditworthiness, and the genuineness of the transactions.
The CIT(A) observed that the AO wrongly presumed the advances claimed by the assessee as cash credits, directing the AO to delete the additions made towards cash deposits.
The department argued that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. However, the tribunal upheld the CIT(A)’s decision, emphasizing that trade advances fall outside the purview of Section 68.
The tribunal concluded that the AO erred in treating cash receipts for jewellery sales as unexplained cash credits taxable under Section 68, and the CIT(A) rightly deleted the additions made by the AO.
