ACIT CORPORATE CIRCLE, KOCHI V. M/S A. GEERI PAI GOLD AND DIAMONDS, ERNAKULAM

ITA 940/COCH/2022

AI Insights

The case involves the ACIT, Corporate Circle-1(1), Kochi as the appellant and M/s. A. Geeri Pai Gold & Diamonds as the respondent. The dispute arose from the assessment year 2017-18, where the AO added a total income of Rs. 5,56,02,000 to the assessee's income, treating it as unexplained money from cash deposits made during the demonetization period. The CIT(A) later deleted this addition, finding that the AO's conclusions were based on mere surmises and assumptions. However, the Revenue appealed against this decision, leading to the current judgment which set aside the CIT(A)'s order and restored the matter for re-evaluation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 714324 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: DCIT vs. Viswa and Devji Diamonds (P) Ltd., ITO vs. M/s. Surabi Gold, DCIT vs. M/s. DAR Paradise Pvt. Ltd., ITO vs. Sahana Jewellery Exports (P) Ltd., Mohammad Ashraf War vs. ITO, Fine Gujaranwal Jewellers vs. ITO, ACIT vs. Anand's Gold Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VENI RAJ
• Assessee Lawyers: GOPI K
• Keywords: Set aside
• Section: 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI SONJOY SARMA, JM ITA No. 940/Coch/2022 Assessment Year: 2017-18 ACIT, Corporate Circle-1(1), .......... Appellant Kochi vs. M/s. A. Geeri Pai Gold & Diamonds, .......... Respondent 40/1180A, Civil Line Road, Thrikkakara North (Part), Ernakulam. C.O.No. 04/Coch/2023 (Arising out of ITA No. 940/Coch/2022) Assessment Year: 2017-18 M/s. A. Geeri Pai Gold & Diamonds, .......... Applicant 40/1180A, Civil Line Road, Thrikkakara North (Part), Ernakulam. vs. ACIT, Corporate Circle-1(1), .......... Non-applicant Kochi. Assessee by: Shri Gopi K, CA Revenue by: Smt. Veni Raj, CIT-DR Date of Hearing: 10.06.2025 Date of Pronouncement: 06.08.2025 Printed from counselvise.com 2 ITA No. 940/Coch/2022 & C.O.No. 04/Coch/2023 M/s. A. Geeri Pai Gold & Diamonds O R D E R Per: Inturi Rama Rao, AM This appeal filed by the Revenue and the cross objection filed by the assessee are directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 25.08.2022 for Assessment Year (AY) 2017-18. 2. Brief facts of the case are that assessee is a partnership firm, engaged in the business of manufacture and retail trade of gold, diamond jewellery and silver articles. The return of income for the A.Y.2017-18 was filed on 30/10/2017 disclosing loss of Rs.4,13,30,105/-. Against the said return of income, the assessment was completed by the ACIT, Non-Corp Circle-1(1), Kochi (for short, 'AO')at a total income of Rs. 5,56,02,000/-. While doing so, the AO brought to tax the cash deposits made in specified bank notes (SBNs) made on 11/11/2016 of Rs. 1,50,00,000/-; on 12/11/2016 of Rs. 1,68,52,000/- and on 13/11/2016 of Rs. 2,37,50,000/-, totalling to Rs.5,56,02,000/- as unexplained money, disbelieving the explanation of the assessee that cash deposits were made out of sale proceeds of gold and other jewelery items. While rejecting the explanation of the assessee, the AO made the following observations:- Printed from counselvise.com 3 ITA No. 940/Coch/2022 & C.O.No. 04/Coch/2023 M/s. A. Geeri Pai Gold & Diamonds “1. The inventory of gold jewellery available with the assessee is 120 to 130 kgs on an average and the sales made on 08.12016 was 13 kgs which is only 10% of the inventory. 2. As stated in para II, the assessee is showing substantial purchases of old gold jewellery which is not verifiable by the Statutory Auditors themselves. 3. The authenticity of the inward and outward vouchers for the old gold is doubtful in view of the affirmations given by the gold smiths. TMEN 4. There is huge variance in the amount of old gold said to be issued to the gold smiths according to their statements and as per the records of the assessee. 5. The purpose of these voucher books is self serving, since the signatures of the recipient and the supplier in these vouchers are not genuine. 6. The possibility of the book adjustments of a small quantity of 13 kgs of stock to suit the purported sales on 08.11.2016 is thus very high and cannot be ruled out in order to make the total inventory position as genuine. 7. Only the total inventory has been presented by the assessee to the Bank and the Bank is not concerned about the micro details like quantity given to Goldsmiths, quantity received as old gold and quantity available with the Hall marking Firms. 8. As stated earlier, the sales of gold jewellery to 401 different individuals on one single day and each sales being below Rs. 2 lakh is against all human probability. 9. The genuineness of the sales invoices is highly disputable, because there is no verifiable information on these invoices and the signatures adhere to certain patterns. Printed from counselvise.com 4 ITA No. 940/Coch/2022 & C.O.No. 04/Coch/2023 M/s. A. Geeri Pai Gold & Diamonds 10. The contention of the assessee that though there is a spurt in sales, all the purchasers chose to buy jewellery below Rs. 1,95,000/- is very hard to believe. 11. Assuming but not accepting that the sales were genuine, the logical conclusion is that the value of the invoices were kept below Rs. 2,00,000/- so that the identity of the buyer need not be revealed and the assessee is not under obligation to collect their PANS.” 3. The substantial purchase of gold jewellery by the assessee is not verifiable and the authenticity of inward and outward vouchers prepared, were doubted in view of the denial of Goldsmiths. Sales of gold jewellery to 401 different individuals on one single day and each sales being below Rs.2 lack is also doubted by the AO. According to the AO, it is impossible that each sale is below Rs. 2 lakh and the identity of the buyers is not revealed. Based on the above observations, the AO disbelieved the explanation of the assessee that cash deposits were made out of sale proceeds of the jewellery articles. Accordingly, brought to tax as unexplained money and taxed the income as prescribed u/s. 115BBE of the Income Tax Act, 1961 (for short, 'the Act'). 4. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order deleted the addition by holding that the additions were made on mere surmises and assumptions and the provisions of section 68 have no application. 5. Being aggrieved, the Revenue is in appeal before us in the present appeal. Printed from counselvise.com 5 ITA No. 940/Coch/2022 & C.O.No. 04/Coch/2023 M/s. A. Geeri Pai Gold & Diamonds 6. Learned CIT-DR contended that Ld. CIT(A) had failed to record a finding of genuineness of sales recorded on 08/11/2016 in view of the fact that all the sales recorded in cash and each invoice is less than Rs. 2 lakh. It is further submitted that Ld. CIT(A) also failed to address the discrepancies in the quantity of gold and the discrepancies in the statements given by the Goldsmiths during the course of enquiry. It is further argued that Ld. CIT(A) had not given any finding about the availability of stock as on 07/11/2016. The Ld. CIT(A) had also ignored the abnormal increase in the sale on 08/11/2016 alone. 7. On the other hand, ld. counsel for the assessee submitted that there was no basis for arbitrary addition made by the AO as 80% of the purchases of new ornaments, manufacture of new ornaments using standard gold and manufacture of new ornaments using old gold purchase by exchange/bank payments. Thus, the allegation of the AO disputing the purchases of assessee is baseless and wrong on facts. The ornaments which are manufactured by the assessee are also subjected to hall marking by a third party external agency licensed by the regulatory authority. He placed reliance on the following judgments:- (i) DCIT vs. Viswa and Devji Diamonts (P) Ltd. [2025] 171 taxmann.com 474 (Chennai – Trib.) (ii) ITO vs. M/s. Surabi Gold ( ITA No. 372/Chny/2023 dt. 05/04/2024) Printed from counselvise.com 6 ITA No. 940/Coch/2022 & C.O.No. 04/Coch/2023 M/s. A. Geeri Pai Gold & Diamonds (iii) DCIT vs. M/s. DAR Paradise Pvt. Ltd. (ITA No. 1106/Chny/2023, dt. 21/03/2024) (iv) ITO vs. Sahana Jewellery Exports (P) Ltd. [2023] 157 taxmann.com 680 (Chennai – Trib.) (v) Mohammad Ashraf War vs. ITO [2024] 161 taxmann.com 293 (Amritsar – Trib.) (vi) Fine Gujaranwal Jewellers vs. ITO [2023] 151 taxmann.com 340 (Delhi – Trib.); and, (vii) ACIT vs. Anand’s Gold Pvt. Ltd. (ITA 100/Hyd/2021, dt. 13/11/2024) 8. We have heard the rival submissions of the parties and perused the material on record. 9. The issue that arises for our consideration is whether the Ld.CIT(A) was justified in deleting the addition of Rs. 5,56,02,000/- or not, treating the cash deposits in SBNs made during the demonetization period as unexplained money of the assessee. During the course of assessment proceedings, when the AO called upon the assessee to explain the source of cash deposits, the assessee firm offered an explanation stating that the cash deposits were made out the sale proceeds of gold, diamond jewellery and silver articles on 08/11/2016. It is further submitted that sales of jewellery were made out of purchase of old jewellery etc. The AO doubted the genuineness of the explanation primarily on the ground that the entire sales represent less than 2 lakh to each person and in cash, and also the availability of stock as on 08/11/2016. The AO also doubted the veracity of the explanation that the assessee firm Printed from counselvise.com 7 ITA No. 940/Coch/2022 & C.O.No. 04/Coch/2023 M/s. A. Geeri Pai Gold & Diamonds purchased old gold. The veracity of explanationis in question, as the assessee had failed to furnish the details of the purchases and also in view of the discrepancies in the statements of goldsmiths. On appeal, Ld.CIT(A) merely accepted the explanation of the assessee by holding that the addition was made by the AO on surmises and assumptions without addressing reasoning of the AO and issues flagged by the AO during the course of assessment proceedings. In our considered opinion, the Ld. CIT(A)-NFAC fell in serious error in not taking into consideration, the following aspects which are relevant to decide the genuineness of the explanation offered by the assessee in support of source of cash deposits made during demonetization period in SBNs:- (1) The claim of the appellant should be verified with Central Excise GST returns. (2) Whether the parties to whom the sales were made were disclosed their identity, creditworthiness and genuineness of the transactions are not? (3) The source of the payments made to purchase of old gold was not verified and the comparative figures or the trend of sales for last preceding three years was not analysed. 10. In view of these facts, we are of the considered opinion that the order passed by the Ld. CIT(A) suffers from illegality and therefore the order of the Ld. CIT(A) is set aside and matter is restored to the file of the Ld. CIT(A)-NFAC for denovo adjudication in accordance with law after affording reasonable opportunity of Printed from counselvise.com 8 ITA No. 940/Coch/2022 & C.O.No. 04/Coch/2023 M/s. A. Geeri Pai Gold & Diamonds being heard to the assessee. Thus, the appeal filed by the Revenue is partly allowed for statistical purposes. 11. CO filed by the assessee is in support of the order of the Ld. CIT(A). As there is no grievance against the order of the Ld. CIT(A), the same has become infructuous and is dismissed accordingly. 12. In the result, appeal filed by the Revenue is partly allowed for statistical purposes and that of CO is dismissed. Order pronounced in the open court on 06th August, 2025. Sd/- Sd/- (SONJOY SARMA) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 06th August, 2025 Vr/- Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File By Order Assistant Registrar ITAT, Cochin Printed from counselvise.com "