ITAT Delhi Deletes Rs. 24 Lakh Addition, due to Absence of AO’s Justification for Rejecting Assessee’s Explanation [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) deleted Rs. 24 lakhs addition made on cash deposits, as the assessing officer failed to provide justification as to why the assessee’s explanation was rejected.

In this case, the assessee, Cumin Infotech Private Limited, had appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]  for the assessment year (AY) 2017-18 in sustaining the addition of Rs. 24.06 lakhs being cash deposits as unexplained money of the assessee. 

Coming into the facts of the present case, the assessee declared nil income while filing Income Tax Returns (ITR) for the AY  2017-18. The assessment was completed under Section 143(3) of the Income Tax Act, 1961, determining the income of the assessee at  Rs. 24.06 lakhs as the assessing officer (AO)  cash deposits of Rs. 24.06 lakhs out of Rs. 33 lakhs as unexplained money of the assessee.

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The AO did not accept the explanation of the assessee that the cash deposits were made out of sale proceeds during the period 01.10.2016 to 05.03.2016.

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The assessee’s counsel vehemently contended that the AO made the additions without considering the explanation given by the assessee. The counsel further submitted that the did not doubt the audited books of accounts or the purchases, sales, cash in hand, or opening stock, and the AO did not point out any defects in the books of accounts, nor were the books of accounts rejected to treat the cash deposits as unexplained money of the assessee.

Interestingly, the assessee’s counsel submitted that the AO made an addition under Section 68 of the Income Act, but the CIT(A), who has no power to change the same into Section 69A of the Income Tax Act, changed the addition from Section 68 to Section 69 of the Income Tax Act, 1961. 

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The bench noted that the AO did not give any reasons for rejecting the explanation of the assessee that the cash deposits were made out of sale proceeds. It was observed by the bench that the AO neither disputed the purchases, sales, or stocks nor pointed out any defects in the audited books of accounts.

The bench directed the AO to delete the addition of Rs. 24.06 lakhs made towards unexplained money and concluded that the addition made by the AO under Section 68, which was later treated by the CIT(A) under Section 69A of the Income Tax Act, 1961, cannot be sustained. The Judicial Member C.N. Prasad allowed the assessee’s appeal. 

To Read the full text of the Order CLICK HERE

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