ITAT Deletes ₹3 Crore Addition Made on Cash Deposits During Demonetization: Upholds Gold Jewellery Firm’s Sales as Genuine [Read Order]
The tribunal upheld the deletion of ₹3.02 crore added as unexplained cash deposits during demonetization, ruling that cash sales were genuine, documented, and already taxed, making further addition impermissible
![ITAT Deletes ₹3 Crore Addition Made on Cash Deposits During Demonetization: Upholds Gold Jewellery Firm’s Sales as Genuine [Read Order]](https://images.taxscan.in/h-upload/2025/07/31/2071228-itat-cash-deposit-income-tax-act-taxscan.webp "ITAT Deletes ₹3 Crore Addition Made on Cash Deposits During Demonetization: Upholds Gold Jewellery Firm’s Sales as Genuine [Read Order]")
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the deletion of a ₹3.02 crore addition made under Section 68 of the Income Tax Act. The case involved Ankit Gold Ltd., a gold jewellery manufacturer and wholesaler, whose cash sales during the demonetization period were initially treated by the Assessing Officer (AO) as unexplained cash credits. The Tribunal,...
The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has upheld the deletion of a ₹3.02 crore addition made under Section 68 of the Income Tax Act. The case involved Ankit Gold Ltd., a gold jewellery manufacturer and wholesaler, whose cash sales during the demonetization period were initially treated by the Assessing Officer (AO) as unexplained cash credits. The Tribunal, after carefully reviewing the facts and the documentary evidence, found that the cash deposits were duly recorded in the books, backed by legitimate sales, and thus could not be treated as unaccounted income.
The issue arose during the assessment for the Assessment Year 2017–18, when the AO noticed that Ankit Gold Ltd. had deposited ₹3.02 crore in cash during the 50-day demonetization window (9 November to 30 December 2016). The company claimed the cash came from genuine sales of jewellery, properly reflected in its books.
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The AO was not convinced. He flagged multiple concerns such as, the sales invoices lacked full customer details such as PAN, addresses, or phone numbers. Most sales were just below ₹2 lakh, leading the AO to suspect the bills were split to avoid mandatory reporting thresholds. There were alleged discrepancies in stock and production data.It was held that electricity and gas usage had dropped despite the claimed manufacturing spike.
Payments to a supplier, M.S. Jewellers, made post-demonetization, raised questions, especially since a notice to that supplier was returned as "left." Citing these issues, the AO invoked Section 145 to reject the books of account and proceeded to add the entire cash deposit amount under Section 68, treating it as unexplained income.
The assessee submitted that under existing tax laws, customer PAN and address details are not mandatory for transactions below ₹2 lakh. It was also submitted that all cash sales were supported by audit reports, VAT returns, purchase and stock registers, and were part of regular business. Labour costs and inventory buildup were explained as part of seasonal business activity ahead of Diwali and wedding seasons. The assessee further submitted that, AO had not pointed to any bogus purchases or sales; no discrepancy was found in audited VAT returns. The comparison to prior year’s cash deposits was irrelevant due to seasonal and market-based demand fluctuations.
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The Commissioner of Income Tax (Appeals), NFAC, accepted the assessee's explanation and found the AO’s action arbitrary. The CIT(A) held that books of account were maintained properly and had been audited and that stock and purchase records were intact and matched the cash sales. The AO failed to prove that any specific transaction was bogus or fictitious. Accordingly, the addition of ₹3,02,51,598 was deleted.
The ITAT Bench comprising Dr. B.R.R.Kumar (Vice President) and Siddhartha Nautiyal (Judicial Member) upheld the CIT(A)’s decision. The Tribunal observed that the AO failed to show any material inconsistency or defect in the books that justified invoking Section 68.The sales had already been recorded and profit taxed,adding the same amount under Section 68 would be tantamount to double taxation. The ITAT ruled that the cash sales were genuine and supported by credible evidence. As a result, the appeal by the Revenue was dismissed.
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