The Indian Bullion and Jewellers Association (IBJA) has requested a stay on Income Tax department's recovery orders, saying it could lead to frauds and bankruptcies in jewellery industry. The jewellers' body said that assessments were made without proper opportunities of being heard and even all evidences and records were shown to explain cash sales were rejected. The I-T department had issued revovery orders to thousands of jewellers across the country at the end of last month over cash sales.
I-T department had alleged in orders that sale of jewellery against cash post note ban announcement was not genuine. When notes were banned, a few hour window was given to all traders to sell till 12 in midnight against old currencies notes. I-T has, however, not recognised these sales by jewellers and said the cash deposits by them were actually unaccounted money and that deposits in banks should be treated as black money.
IBJA in letters sent to finance minister and chairman CBDT claim that these recovery orders with “huge tax demands have raised fears in the trade that if these orders are exercised, could lead to serious consequences.”
Major consequences are insolvencies or bankruptcies, mental stress and cash crunch. The letter also hinted at bank fraud cases, “as they (jewellers who received such orders) will be forced to bring fictitious inventories on books if this cash deposits against sales proceeds (after note ban) is presumed as unexplained cash credits.”
IBJA said that IT had rejected claims of jewellers, despite the fact that audited books and filings for VAT were shown.
The letters sent also argue that jewellers had shown cash sales and paid Income Tax on profit on those transactions. However, I-T treated cash deposits after demonetisation as unexplained cash and asked for tax, which resulted in double taxation as in first stage tax on profit of cash sales was paid by jewellers.