Gujarat HC Rejects Revenue’s Appeal Over Jeweller’s ₹12.5 Lakh Growth Capital Receipt, Already Booked As Sales

Oasis Jewels, engaged in bullion trading and ornament manufacture, filed its return for A.Y. 2012–13 declaring income of ₹13,42,000.

Following reassessment under Sections 147 and 143(3) of the Income Tax Act, the Assessing Officer added ₹12,50,000 under Section 68 as an unexplained accommodation entry from Growth Capital and disallowed commission expenditure under Section 69C.

The CIT(A) upheld the additions.

The ITAT deleted them, finding that the receipt was recorded as sales in the audited books and that the profit element had been offered to tax.

The Revenue appealed under Section 260A.

1. Whether the ITAT erred in deleting the ₹12,50,000 addition under Section 68, alleged to represent an accommodation entry from Growth Capital

2. Whether the ITAT erred in deleting the addition for unexplained commission expenditure under Section 69C

Section 68 of the Income Tax Act concerns unexplained credits in an assessee’s books, while Section 69C concerns unexplained expenditure.

Section 260A permits a High Court appeal on a substantial question of law.

The Court applied these provisions to the Tribunal’s factual findings that the disputed receipt was recorded as sales, the related profit element was offered to tax, and the Assessing Officer had not disputed the sales or corresponding purchase and quantitative details.

The High Court accepted the Tribunal’s findings that the ₹12,50,000 receipt formed part of recorded sales and that the assessee had furnished supporting sales details.

Because the sales and the income arising from them had been accepted by the Assessing Officer, the same amount could not also be treated as an unexplained credit under Section 68.

Once that addition did not survive, the related commission-expense addition under Section 69C also had no basis.

The Court found no legal infirmity in the Tribunal’s order and no substantial question of law arose.