Deletion of Income Tax Addition on successful Demonstration of Source of Cash Deposits to bank during Demonitization: ITAT dismisses Revenue Appeal [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the assessee has successfully demonstrated source of cash deposit of Rs. 2,40,00,000 to its bank account during demonetization period thus upheld the order of Commissioner of Income Tax (Appeals) [CIT(A)], in deleting the addition made by Assessing Officer (AO) on account of unexplained cash deposits under Section 68 of the Income Tax Act,1961.

The assessee in this case is M/s. Atulah Contractors and Construction Pvt. Ltd. In the post-demonetization period, the Police intercepted two vehicles carrying cash amounting to Rs. 2,22,76,000/- which was belonging to M/s Omaxe Ltd. The said cash was requisitioned under Section 132A of the Income Tax Act by the Income Tax Authority and a survey under Section 133A of the Income Tax Act was also conducted at the office premises M/s Omaxe Ltd, wherein certain documents were impounded.

The AO has stated that these impounded pages contain notings of cash balances of various group companies belonging to the Omaxe Group, to which the assessee company also belongs. He asked the assessee for justification/ source of the excess cash so deposited after demonetization. In response, the assessee submitted that the said deposit had been made out of cash available as per cash book balance.

The AO made addition of Rs. 2,40,00,000 on account of unexplained cash deposits under Section 68 of the Income Tax Act by observing that the assessee has failed to explain the source of cash deposited during demonetization period. The AO precisely stated that the cash withdrawals by the assessee are not near to the dates of cash deposits and when the cash was withdrawal for wages payments & other purposes then there is no reason why such expenses were not incurred and a running concern could not have huge cash for long period.

The AO also alleged that the assessee has prepared cash book in such a way showing cash withdrawals and cash deposits during demonetization period which is after thought and self serving, and further contended that comparative figure of earlier to preceding year are not matching with the cash deposit and there is no question of accepting cash generation through sales.

Aggrieved by the order the assessee filed an appeal before the CIT (A), which granted relief to the assessee by deleting the addition. The CIT(A) observed that the assessee usually maintain high cash balance which is evident from the opening cash balance of Rs. 1,70,45,310 which is also shown in the audit report and Income tax return for Assessment Year (AY) 2016-17 filed  before declaring of demonetization order.

The CIT (A) further noted that maintaining high cash balance is a subject matter of business prudence of assessee which cannot be disputed by the AO.

The Departmental Representative(DR) Amit Katoch, submitted that CIT(A) has ignored and did not discussed the issue of cash in hand as per impounded documents in its whole order rather only considered the data supplied by the assessee for granting relief to the assessee.

Akshat Jain appeared as Authorised Representative (AR) of the assessee.

The ITAT Bench observed that the appellant has duly given the site cash books as well as main cash book showing cash balance of Rs. 2,45,41,259 and the cash deposited to its bank account was created due to huge opening cash balance of Rs. 1,70,45,310 as on 01.04.2016, as per audited books and return of income filed by the assessee before demonetization declaration, and amount of cash withdrawals  till demonetization period amounting to Rs. 5,20,46,260 which was higher during immediately preceding FY 2015-16 amounting to Rs. 5,84,79,000 .

The Two member Bench comprising of Chandra Mohan Garg, Judicial Member and Dr. B.R.R. Kumar, Accountant Member held that the assessee has successfully demonstrated source of cash deposit of Rs. 2,40,00,000/- to its bank account during demonetization period and hence no addition can be made.

The Tribunal upheld the decision of CIT(A) and dismissed the appeal of the Revenue.

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