The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that reasonable opportunity is to be provided to the assessee to substantiate source of cash deposit in favor of natural justice.
The sole grievance of the assessee in thisappeal for Assessment Year (AY) 2017-18 is confirmation of addition of cash deposits of Rs.99.50 Lacs. The impugned order has been passed by learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] on 21-07-2022 in the matter of an assessment framed by learned Assessing Officer (AO) under section 143(3) on 18- 12-2019. The assessee being resident corporate assessee is stated to be engaged in manufacturing of fire crackers which are used during festival seasons.
The AR advanced arguments and submitted that the cash in hand as on 08-11-2016 was duly supported by the cash book as maintained by the assessee. The AR drew attention to the summary of cash in hand as noted in the impugned order. It was further submitted that no fault was found in the books of accounts. The Sr. DR, on the other hand, supported the orders of lower authorities and submitted that the assessee did not furnish requisite evidences to establish the source of cash deposit.
After hearing both the parties, the tribunal noted that the aforesaid explanation was not supported by any documentary evidences. The bank loan account became NPA in subsequent year i.e., on 12.08.2018 and notice under SARFESI Act was issued by bank on 14.08.2018. The assessee, instead of paying-off interest bearing bank loan, accumulated huge cash balance in the books of accounts starting from financial year 2016-17 which cou not be said to be a prudent decision.
No reasonable/plausible explanation cou be furnished by the assessee to support the same. The assessee is unable to explain the source of this cash accumulation. The day-wise cash book was not furnished by the assessee before any of the lower authorities. The notice issued by the bank merely supports the fact that the loan account became NPA on 12.08.2018 and nothing else.
The two member bench consisting of Mahavir Singh (Vice President) and Manoj Kumar Aggarwal (Accountant Member) keeping in mind the principle of natural justice and considering the facts of the case, deemed it fit to provide another opportunity to the assessee to substantiate the source of cash deposit. Therefore, the impugned order was set aside and the matter of assessment was restored back to the file of AO for de novo assessment with a direction to the assessee to substantiate its case with evidences. Thus the appeal was allowed.
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