Cash Deposit with Substantial Proof of Source Not to be treated as Unexplained Cash Credit u/s 68 of Income Tax Act: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, has held that the cash deposit made by the assessee with substantial proof of source shall not be treated as Unexplained Cash Credit under Section 68 of the Income Tax Act, 1961.

The Assessing Officer (AO) had noticed cash deposits in various bank accounts held by M/s. Kundan Jewellers Private Limited, a wholesale and retail trader of gold, diamond jewellery, silver articles, and precious stones during the demonetisation period. The AO issued notices to the assessee seeking an explanation for the source of these cash deposits. Despite the assessee's submissions along with supporting documents, the AO deemed the cash deposits as unexplained cash credits under Section 68 of the Income Tax Act, 1961.

The assessee, M/s. Kundan Jewellers Private Limited challenged the AO's decision before the CIT(A). After considering the facts, submissions, and relevant judicial precedents, CIT(A) ruled in favor of the assessee. The CIT(A) held that the assessee had adequately substantiated its claims and thus deleted the addition made by the AO.

Aggrieved by the order of CIT(A), the revenue, Deputy Commissioner of Income Tax (DCIT), Mumbai filed an appeal before the ITAT against the assessee.

The revenue, represented by Mr. Nihar Ranjan Samal argued that the CIT(A) has erred in granting relief to the assessee without considering various facts, evidences, and findings of the AO.

The revenue contended that the assessee had failed to provide satisfactory explanations and maintain proper books of accounts.

The assessee, being the respondent, was represented by Mr. Siddharth Kothari. The assessee highlighted that the extensive documentary evidence submitted by it shall be considered in merits.

The assessee also contended that it had consistently maintained branch-wise cash books, details of sales, stock registers, filed VAT returns and had provided a summary of cash availability and turnover.

The assessee also pointed out that it had obtained customer details, including their Permanent Account Number (PAN) and Form No. 60, for transactions exceeding Rs. 2 lakhs, as per the provisions of the Income Tax Rules, 1961.

The bench observed that the assessee had provided substantial information, including quantitative stock details, bank statements, and forms related to the Pradhan Mantri Garib Kalyan Yojana.

The bench further noted that the AO had not conducted sufficient inquiries or addressed the specific issues raised by the assessee in its submissions.

The bench emphasized that CIT(A) had considered the facts, provisions of the law, relevant judicial decisions, and the documentary evidence provided by the assessee.

The bench found no infirmity in CIT(A)'s order and dismissed the revenue's grounds of appeal.

The two-member bench consisting of Shri Prashant Maharishi (Accountant Member) and Shri Pavan Kumar Gadale (Judicial Member), having found no merit in the revenue's appeal, upheld the order of CIT(A) and dismissed the appeal filed by the revenue against the assessee.

To Read the full text of the Order CLICK HERE

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