ITAT Sets Aside Additions on ₹1.46 Cr Demonetisation Cash Deposits and Derivative Losses, Remands for Fresh Adjudication [Read Order]
ITAT sets aside ₹1.46 Cr demonetisation cash and derivative loss additions, remands the matter for fresh verification of sales and transactions.
ITAT - Demonetisation - Cash Deposits - Derivative Losses - Fresh Adjudication - Taxscan
ITAT - Demonetisation - Cash Deposits - Derivative Losses - Fresh Adjudication - Taxscan
The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has set aside the additions made on account of cash deposits during the demonetisation period and disallowance of loss on the derivative transactions, and remanded the matter for fresh adjudication after the verification of sales records and transaction nature.
The assessee-appellant, APR Jewellers (P) Ltd., is engaged in the retail trade of gold bars and jewellery, filed its return of income for Assessment Year (AY) 2017-18 declaring an amount of ₹1,78,860.
During scrutiny, the Assessing Officer (AO) noted cash deposits of ₹1,46,00,000 in other bank accounts not disclosed in the return bank, during the period of November–December 2016, and treated them as unexplained under section 69A. The AO also disallowed ₹2,25,092, which was claimed as business loss on commodity derivative transactions in bullion at Multi Commodity Exchange (MCX), entered into for hedging, by treating it as capital loss on shares.
On appeal, the Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the AO’s additions and held that the assessee failed to produce adequate supporting evidence, such as stock register, cash book, and bills.
Before the ITAT, the assessee argued that all sales were duly recorded, supported by invoices and VAT returns, and that the derivative transactions were hedging contracts in bullion and therefore business in nature.
The Bench comprising Vijay Pal Rao (Vice President) and G. Manjunatha (Accountant Member) observed that the authorities below failed to properly verify bills, vouchers, and sales records, and also mischaracterised derivative transactions as share dealings.
Accordingly, the Tribunal set aside the orders of the AO and CIT(A) and remanded the matter back to the AO for fresh adjudication after due verification.
The assessee was represented by M. Bhupal Gowd, while Srinath Sadanala represented the revenue.
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