Additions Merely Based on Presumptions not Maintainable, When no Defects Found in the Books of Accounts: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai Bench, has recently, in an appeal filed before it, held that additions merely based on presumptions are not maintainable when no defects can be found in the books of accounts of the assesse.

The aforesaid observation was made by the Tribunal, when an appeal, for Assessment Year (AY) 2018- 19, was filed before it by an assessee, as against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)], dated 23.06.2021, in the matter of an assessment framed by  Assessing Officer [AO] u/s. 143(3) of the Act on 15.11.2019.

The facts of the case being the assessee’s assessement u/s. 143(3) to examine the cash deposits made by the him, followed by the assessee transpiring that the he had made cash deposits of Rs.13.30 Lacs post demonetization as tabulated in page-4 of the assessment order, the assessee was directed to substantiate the source of the same.

Consequently, theassessee who was stated to be engaged in poultry farm business and trading of eggs, furnished cash book for theyear along with bank statements, with the cash balance as on 08.11.2016 reflected as Rs.14,56,542/, claiming the same to be a source of deposit of SBN notes into the bank account during demonetization period.

And with theAO holding that there was significant increase in the monthly cash balance as on 01.11.2016 as compared to the earlier month during the year, and that the increase in such cash balance was mainly from cash sales / recovery from debtors, the amount of Rs.3.15 Lacs as deposited by the assessee on 14.11.2016 & 16.11.2016, was added u/s. 69A r.w.s. 115BBE of the Act and the assessment was framed, partly accepting the claim.

However, the Ld. CIT(A) was of the opinion that mere production of cash book would not mean that the source has been explained and that the onus lies on the assessee to prove the source, and one account of the assessee’s failure to prove the same, he justified the impugned addittions, thereby leaving the aggrieved assesse with the no other option but to prefer an appeal before the Tribunal.

The sole grievance of the assessee being the confirmation of the addition of Rs.3.15 Lacs u/s 69A, Manoj Kumar Agarwal, the Accountant Member of the Tribunal observed as follows:

“Upon perusal of documents on record, I find that the assessee’s financial statements have duly been audited u/s 44AB, and that the assessee has reflected turnover of Rs.431.11 Lacs”.

“In the year-end Balance Sheet, the assessee has reflected cash balance of Rs.11.07 Lacs. The bank accounts have duly been disclosed in the Balance Sheet and the assesseehas also produced cash book for this year, wherein the cash balance as on 08.11.2016 was shown to be Rs.14.56 Lacs,which was sufficient enough to cover the deposit Rs.13.30 Lacs. Further, no defects have been pointed out in the books of accounts”, he added.

“Therefore, the additions are based merely on presumptions and therefore, not sustainable in law”, the Tribunal ruled.

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