Mere Assumption that Withdrawn Amount Spent for Other Purposes Without any Adverse Positive Material cannot be the Reason for Disputing Source of Cash Deposits: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that The Assessing Officer (AO) has ignored main cash book while disputing the source of cash and making addition and the Commissioner of Income Tax (Appeals) [CIT(A)] considered entire facts and circumstances in the right prospective and thereafter granted relief to the assessee, upholding the decision of CIT(A).

The assessee in this case is M/s. Omaxe Forest SPA And Hills Developers Ltd., during the assessment proceeding  the AO made addition under Section 68 of the Income Tax Act, 1961 by observing that the assessee has failed to furnished any satisfactory explanation of the source of cash deposited during demonetization period.

Aggrieved by the order the assessee filed an appeal before the CIT(A) which deleted the addition and granted relief to the assessee.

The Revenue filed an appeal before the Tribunal and the Departmental representative submitted that in the circumstances of the case and in law the CIT(A) has deleted the addition of Rs. 2 Cr. made under Section 68 of the Income Tax Act ignoring the impounded documents seized from the business premises of M/s Omaxe Limited.

Further he submitted that the CIT(A) has erred in appreciating the facts that the assessee company failed to produce documentary evidence regarding amount payable on account of wages etc for which cash withdrawal was made and the fact that the assessee could not explain the reason for hording such cash for a long time despite the fact that company is a running concern and requires frequent cash payment.

The Authorised Representative (AR) of the assessee submitted that the AO made addition on the basis of his own whims and fancies without any relevant and reliable positive material against the assessee and the CIT(A) after appreciating the entire facts and circumstances of the case deleted the baseless addition.

The Bench observed that it is not the case of the AO that the assessee did not file details and documentary evidence before him and the same was filed before the CIT(A) which was relied by him while granting relief to the assessee. Thus the Bench presume that entire evidence which was before the CIT(A) was also produced before the AO during assessment proceedings.

It was further observed that the CIT(A) went in detail and further noted that the cash withdrawals during April 2016 was Rs. 1,00,20,000, in August 2016 was Rs. 2,81,00,000/- and in September 2016 was Rs. 68 lakh and in October 2016 was Rs. 53 lakh. Thus, noted that during FY(Financial Year) 2016-17 cash withdrawals were Rs. 6,30,90,000/- out of which Rs. 5,71,40,000/- were withdrawn during April to October 2016 i.e. prior to demonetization declaration.

The CIT(A) further observed that the assesseee has prepared cash book in the manner showing that nearby cash withdrawals can be seem shown or seem as cash deposited during demonetization period and the fact that the bank withdrawals or deposits duly reflected in the bank accounts, statements as well as cash book which cannot be manipulated by the assessee in any manner.

The Tribunal reffered the case of Kulwant Rai and Jaya Aggarwal where it was held that in absence of any material in support of the view that withdrawals were spent for some other purpose, the conclusion of Tribunal has to be held has right in treating the cash withdrawals from the bank as source of cash found.

Therefore, the Two Member Bench comprising of Chandra Mohan Garg, Judicial Member and Dr. B.R.R. Kumar, Accountant Member held that the source of cash deposited during demonetization period by the assessee was opening cash balance and cash withdrawals during pre demonetization period which are higher than the amount of cash deposited by the assessee.

The AO has ignored main cash book while disputing the source of cash and making addition and the CIT(A) considered entire facts and circumstances in the right prospective and thereafter considering the totality of facts and circumstances and prepositions granted relief to the assessee.

Thus, the Tribunal found no ambiguity, perversity or any valid reason to interfere with the findings arrived by the CIT(A) and hence upheld the same and the appeal of the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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