Cash sales during demonetisation cannot be treated as unexplained merely on estimation without verifying stock, quantity, and supporting invoices
Meetu Kumari | Jan 3, 2026 |
ITAT Remands Jeweller’s Demonetisation Additions for Fresh Verification of Sales Evidence
The assessee, an individual proprietor engaged in the business of jewellery trading, filed his return for AY 2017-18 declaring business income along with agricultural income. The case was selected for scrutiny.
During assessment, the Assessing Officer made multiple additions, including an addition for alleged unexplained cash deposits during the demonetisation period, an addition for the difference between turnover reported in monthly VAT returns and higher turnover recorded in books for September 2016, an addition towards the alleged excess turnover for October to December 2016 based on the estimated average sales, and addition of agricultural income as unexplained.
The CIT(A) partly allowed the appeal by deleting the addition relating to agricultural income and part of demonetisation cash deposits but sustained additions relating to turnover differences and estimated excess sales. Aggrieved, the assessee approached the Tribunal.
Main Issue: Whether additions towards difference in turnover reported in VAT returns and books, and estimated excess turnover during demonetisation, could be sustained without proper verification of sales invoices, buyers’ details, stock availability, and after ignoring gross profit already offered in the books.
ITAT’s Decision: The ITAT held that mere difference between VAT returns and books, or an abnormal increase in sales during demonetisation, cannot automatically justify additions under sections 68 or 69A of the Act.
However, since the sales invoices produced were cash invoices lacking buyer identification and quantity reconciliation, and the lower authorities had not properly examined stock availability and genuineness of sales, the Tribunal restored both issues for fresh examination. The AO was directed to verify buyer details, quantity of goods sold vis-à-vis stock, genuineness of sales, and also consider the gross profit already declared on such sales. The appeal was partly allowed.
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