According to sources, in Mumbai alone, the I-T department
has sent orders to around 500 jewellers, raising tax demand. The figure is higher for New Delhi. There are over 300,000 jewellers in the country and many of them were quite active in accepting old currencies for gold sales.
When Prime Minister Narendra Modi announced demonetisation
of Rs 500 and Rs 1,000 notes on November 8, 2016, traders were allowed to accept old currency notes against cash sales only till midnight. However, many jewellers continued to accept the banned notes for several days, selling gold at a 30-40 per cent premium, and making a quick buck.
For jewellers, the current I-T orders come as a double whammy — the demand order includes tax, penalty and interest to date, which works to almost 100 per cent of the cash deposited, said a source. Besides this, the value of the gold that was sold will also be a loss for the jeweller.
Facing the heat
Around 500 recovery orders issued to Mumbai jewellers
In New Delhi, the number of such orders is even more
Trade body issues advisory to wholesalers, jewellery makers
20 per cent of demand should be deposited to appeal against the order
I-T demand including interest and penalty equals cash deposited
There is no information on the total number of orders issued across the country and the amount of recovery, though sources maintain that several thousands of jewellers have received these demand orders, and the recovery amount along with penalty and interest is very high.
An industry veteran said that after demonetisation, there were reports that some jewellers in Jaipur and Gujarat had deposited over Rs 100 crore each in cash.
Jewellers who have received such orders will have to cough up at least 20 per cent of the demand before they can file an appeal. Dilip Lakhani, a senior chartered accountant, said, “The demand raised by the tax department against jewellers, rejecting their claim of cash deposits, can be contested by filing an appeal before the Commissioner of I-T – Appeal. In such cases, they have to deposit 20 per cent of the levy of tax and interest.”
The assessee can also file a writ petition in a high court, seeking a waiver for not depositing the 20 per cent with the I-T department
to file the appeal. Legal experts say the court will grant the waiver only if it is convinced that the grounds for the cash deposits were genuine and supported with stock records and others circumstantial evidence.
Soon after demonetisation, I-T officials in major cities including Mumbai and New Delhi had carried out several raids and surveys. The department had also issued notices to jewellers, seeking clarifications on such cash deposits when their returns came under scrutiny.
The jewellers had responded that their sales were genuine and they sold from the stock they had. However, tax officials had found that the sales in the note-ban period were significantly higher than previous periods and were also not in tandem with the overall demand trend. Hence, in most cases, I-T officials had rejected their explanations.