ITAT Treats ₹1.50 Crore Cash Addition as Business Turnover in Bullion Trader’s Case [Read Order]
The Tribunal relied upon documentary evidence verifying the claim that the seized cash represented sale proceeds from legitimate trading activities rather than undisclosed income.
ITAT - Cash Addition - Bullion Trader Case - taxscan
ITAT - Cash Addition - Bullion Trader Case - taxscan
The Bench of the Income Tax Appellate Tribunal (ITAT), Delhi, held that the ₹1.50 crore cash addition made under Section 69A of the Income Tax Act, 1961 represented part of his business turnover rather than unexplained income. The Tribunal, thus restricted the addition to a gross profit rate of 10 percent,.
The appellant, Pawan Kumar Agarwal, is a proprietor of M/s Supreme Gold, engaged in gold and silver bullion trading, filed his return for the Assessment Year (A.Y.) 2016-17 declaring a loss of ₹3.24 crore. A survey conducted on 20 July 2015 at his business premises revealed a partnership firm, M/s H.P. & Sons, managed by his sons, operating from the same premises.
During the search, cash amounting to ₹4.78 crore and other materials were seized. The Assessing Officer (AO), after converting the survey into a search, passed an assessment order under Section 143(3) read with Section 153A of the Act on 31 December 2017, making additions on account of unexplained cash, unaccounted stock, and hedging losses.
The Commissioner of Income Tax (Appeals) [CIT(A)] granted part relief to the assessee. Aggrieved by this, both the parties filed their cross appeals before the tribunal.
Represented by Satish Agarwal and Anju Sharma, the appellant contended that the seized cash was part of recorded business transactions. It was submitted that ₹2.05 crore constituted the cash-in-hand of M/s Supreme Gold, generated from sale proceeds of gold prior to the date of search; ₹1.27 crore belonged to M/s H.P. & Sons; and ₹1.50 crore was temporarily held by one Mr. Vinod for safe custody, representing sales from the Jaipur branch of M/s H.P. & Sons.
It was further submitted stock registers, cash books, VAT records, and purchase invoices from government agencies like HHEC to substantiate the genuineness of transactions.
Represented by Jitender Singh, the Revenue argued that the appellant failed to provide adequate evidence regarding the alleged ₹1.50 crore held by Mr. Vinod, who was neither produced nor identifiable. It was contended that the seized cash and gold stock were unaccounted, and the hedging losses claimed were speculative in nature, ineligible for deduction against regular business profits.
The Bench comprising Judicial Member Satbeer Singh Godara and Accountant Member Naveen Chandra held that the ₹1.50 crore addition under Section 69A could not be treated wholly as unexplained income, as it formed part of the appellant’s trading activity.
The Bench applied a lump-sum gross profit rate of 10% amounting to ₹15 lakh and deleted the remaining ₹1.35 crore addition. The Tribunal further upheld the CIT(A)’s finding that the alleged unexplained stock of ₹1.27 crore and 6 kg of gold valued at ₹1.54 crore pertained to M/s H.P. & Sons and were therefore not taxable in the hands of the appellant.
The Tribunal also dismissed the Revenue’s appeal, which sought to revive the deleted additions, observing that the CIT(A) had rightly considered the evidence showing genuine purchase and sale of 37 kg of gold.
ITAT accepted the hedging loss of ₹22.48 lakh was as a valid non-speculative transaction under Section 43(5) of the Act, supported by contract notes and verified in remand proceedings.
Accordingly, the assessee’s appeal was partly allowed with grant of substantial relief.
Consequently, the Revenue’s cross appeal was dismissed.
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