Bangalore bench of Income Tax Appellate Tribunal ( ITAT ) partially upholds the addition in the absence of statement of affairs for justifying the closing cash balance.
The assessee filed a return of income, declaring income of Rs.3,02,600/-. From the record the Assessing officer observed that during the demonetization period the assessee deposited cash of Rs.14.76 lakhs but on the documents available with the Department cash balance as on 31.03.2016 was shown as Nil. Information was called for from the assessee and it was also called from the Bank under Section 136(6) of the Income Tax Act, 1961 (the Act).
It was noticed that the assessee received a loan of Rs.25,00,000/- on 23.03,2013 and the said loan was utilized for repayment of loan also exists in the name of Shri D. Murthy, Shri G.V. Krishnaiah and Shri N. Narayanasetty – Rs.5,00,000/-, Rs. 10,00,000/- and Rs.10,00,000/- respectively. A copy of the material gathered were forwarded to the assessee and summons under Section 131 of the Income Tax Act were issued to the above three parties but they did not appear.
Assessing officer noted that the cash deposited was not supported by cogent material and allowed a basic threshold limit of Rs.2,00,000/- and the balance amount of Rs.12,75,802/- was treated as unexplained expenditure and brought to tax under the Income Tax Act.
The assessee could not establish the source of cash available on the date of cash deposit into his bank account during the demonetization period. He also submitted that cash was withdrawn from the bank in the year 2013; nobody can keep cash for such a long period whereas he has maintained two saving bank accounts.
The Accountant Member Shri Laxmi Prasad Sahu Observed that the AO has made the addition under Section 69 of the Act of Rs.12,75,802/- for want of proper explanation of cash deposited during demonetisation period.
During the course of assessment proceedings as well as during the first appellate proceedings the assessee did not file any cash flow statement or any statement of affairs for justifying the cash lying with him in the past years. Though he was not required to maintain books of accounts as per section 44AA(2) but can prepare a statement of affairs for justifying his closing cash balance at the end of year. the appeal filed by the assessee is partly allowed.
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