The present appeal was filed by the Revenue against the appellate order dated 03.08.2023 passed by the National Faceless Appeal Centre for the Assessment Year 2017-18. The appeal arises out of an assessment framed under section 143(3) of the Income-tax Act, 1961, wherein the total income of the assessee, Mallics Jewels, was assessed at ₹2,98,83,240 as against the returned income of ₹23,83,240.

During the assessment proceedings, the Assessing Officer made an addition of ₹2,75,00,000 under section 68 of the Act on account of cash deposits of specified bank notes of ₹500 and ₹1,000 during the demonetisation period, holding the same to be unexplained cash credits. The learned CIT(A) deleted the said addition, against which the Revenue preferred the present appeal.

Before the Tribunal, the Revenue contended that the assessee failed to establish the genuineness of the cash sales claimed during the demonetisation period, particularly in view of the stock position available with the assessee. The Department relied upon a detailed analysis of stock records, purchase vouchers, and sales figures, contending that the volume of sales reported on 08.11.2016 exceeded the stock available with the assessee. It was further argued that the alleged sales were a colourable attempt to introduce unaccounted cash into the books in the garb of sales, especially considering the assessee’s declaration under the Pradhan Mantri Garib Kalyan Yojana.

In response, the assessee submitted that although it did not possess sufficient own stock, it had display items belonging to a franchisor, M/s Gitanjali Jewellery Retail Ltd., which were sold during the demonetisation period. However, it was conceded that this claim was not fully supported by documentary evidence on record.

After considering the rival submissions and examining the material available, the Tribunal observed that the assessee’s claim regarding sale of display items supplied by the franchisor required factual verification. The Tribunal held that such verification could only be undertaken at the level of the Assessing Officer, as the existing record did not conclusively establish the availability and ownership of the stock allegedly sold.

Accordingly, the Tribunal set aside the impugned appellate order and restored the matter to the file of the Assessing Officer with a direction to pass a de novo assessment order after conducting necessary factual verification and after providing reasonable opportunity of being heard to the assessee. The appeal of the Revenue was thus partly allowed for statistical purposes.

Sources: https://itat.gov.in/public/files/upload/1766403898-SvqaxJ-1-TO.pdf


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