Facts of the Case

The assessee, Kross Diamonds Pvt. Ltd., filed appeals under Section 260A of the Income-tax Act challenging a common order dated 18.12.2024 passed by the Income Tax Appellate Tribunal. The Tribunal had decided cross appeals relating to Assessment Years 2013–14 and 2014–15. The Revenue had challenged the orders of the Commissioner of Income Tax (Appeals) deleting additions made by the Assessing Officer on account of unverifiable purchases under Section 69C and restricting additions by estimating commission or profit at 0.25% on alleged cash sales. The core dispute pertained to excess cash deposits of ₹58,09,830 for AY 2013–14 and ₹1,97,45,038 for AY 2014–15.

Issues Involved

Whether the assessee satisfactorily explained excess cash deposits over and above declared cash sales, whether the findings of the Tribunal allowing the Revenue’s appeals involved any perversity or substantial question of law, and whether such issues were amenable to appellate jurisdiction under Section 260A of the Act.

Petitioner’s Arguments

The assessee contended that the excess cash deposits were sourced from opening cash balance and regular cash receipts during the year and relied upon entries appearing in pages 36–37 of the paper book. It was argued that the Tribunal failed to properly appreciate the material placed on record and erred in sustaining additions relating to excess cash deposits.

Respondent’s Arguments

The Revenue submitted that the assessee failed to correlate the excess cash deposits with any identifiable source such as opening cash balance or cash generated from sales. It was argued that despite specific queries raised by the Tribunal, no cogent evidence was produced to establish that the excess cash was carried forward from the previous financial year or otherwise explained.

Court Order / Findings

The Delhi High Court examined the findings recorded by the Tribunal and noted that the assessee was repeatedly unable to explain the source of excess cash deposits despite being granted opportunity. The Court observed that even before the High Court, the assessee could not demonstrate from the paper book that the alleged opening cash balance or carry-forward amounts were reflected in the relevant records. The Court held that the Tribunal’s conclusion that the excess cash deposits remained unexplained was based on appreciation of facts and evidence. It was further held that the issues raised by the assessee were purely questions of fact and did not give rise to any substantial question of law warranting interference under Section 260A.

Important Clarification

The Court clarified that findings relating to explanation of cash deposits and correlation with cash sales or opening balances are factual determinations. Unless perversity or legal infirmity is demonstrated, such findings cannot be interfered with in an appeal under Section 260A of the Income-tax Act.

Final Outcome

Both appeals filed by the assessee were dismissed. The Delhi High Court held that no substantial question of law arose for consideration, and the findings of the Income Tax Appellate Tribunal sustaining additions on account of unexplained excess cash deposits were upheld.

Link to Download order- https://mytaxexpert.co.in/uploads/1769502926_KROSSDIAMONDSPVT.LTDVsINCOMETAXOFFICERWARD143.pdf

 

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