The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the decision of the Commissioner of Income Tax(Appeals) [ CIT(A) ] in deleting the addition of Rs. 12.83 Crores made by the Assessing Officer ( AO ) under Section 68 of Income Tax Act,1961 concerning unexplained cash credits.
The revenue-appellant, appealed against the order dated 12.05.2023 for Assessment Year 2017-18 passed by the CIT(A).In this case,Damodardas Mohanlal Chokshi,respondent-assessee, filed a return declaring income of Rs. 7,95,73,300/- on 16.10.2017. The return was processed under Section 143(1) and selected for scrutiny. A notice under Section 143(2) was issued on 11.09.2018, followed by another notice with a questionnaire on 04.09.2019.
A survey under Section 133A was conducted on 20.12.2016. The AO noted discrepancies, including demonetized cash deposits in several bank accounts. The statement of Shri Piyush Choksi, a partner, was recorded during the survey.
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The AO found a stock discrepancy of Rs. 26,77,800/- and added it to the income. He also added Rs. 12,83,75,566/- as unexplained cash credits under Section 68 and Rs. 2,92,90,122/- for incorrect valuation under Section 69B of the Act.
The assessee appealed to the CIT(A) against the assessment, and the CIT(A) partly allowed the appeal.
The Departmental Representative (DR) argued that the CIT(A) wrongly deleted the addition of Rs. 12,83,75,566/- made by the AO under Section 68, not considering the facts presented. The counsel pointed out that the assessee admitted to a sale turnover of Rs. 13 crores on 08.11.2016, after the demonetization announcement, with cash sales under Rs. 2 lakh. Forensic analysis of digital data showed that most bills from 08.11.2016 were printed after the date, and the partner failed to provide item-wise sales details. The AO had also noted no sales-free stock.
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The Authorised Representative(AR) stated that the entire sale receipt from 08.11.2016 was recorded and offered for taxation, and relied on the CIT(A)’s order.
The two member bench comprising Suchitra Kamble (Judicial Member) and Makarand V.Mahadeokar (Accountant Member) reviewed the case and found that the CIT(A) had stated the AO did not dispute the purchases or stock made before the sale, nor the closing stock. All sales were made from available stock, and no backdated or bogus purchases were shown.
The partner’s statement explained the sales process after demonetization, including the packing of jewelry under Rs. 2 lakh. The AR argued that the claim of free stock was unjustified, and the CIT(A) rightly deleted the addition.
In short,the appeal filed by the Revenue was dismissed.
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