No Income Tax Addition can be made if Assessee Successfully Demonstrated Source of Cash Deposits in Bank Account during Demonitization Period: ITAT [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT), held that the assessee has successfully demonstrated source of cash deposit to its bank account during demonetization period thus no income tax addition can be made under Section 68 of Income Tax Act, 1961.

The assessee in the present case is M/s. Bhanu Infrabuild Pvt. Ltd. The Assessing Officer (AO) made addition of Rs. 1,24,50,000 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 contention of AO were precisely 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 noted 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 Commissioner of Income Tax (Appeals)[CIT(A)], which allowed the appeal of the assessee.

Being aggrieved Revenue filed an appeal before the Tribunal. The Departmental representative (DR) Amit Katoch, submitted that the CIT(A) has erred on the facts and in the circumstances of the case ignoring the impounded documents seized from the registered address of M/s Omaxe Limited which brought into light the fact that the company M/s Bhanu Infrabuild Private Limited was having Cash-in-hand.

Further he contended that the CIT(A) has also erred in ignoring glaring factual position against the assessee and granted relief to the assessee without discussing the cash in hand as per impounded documents in the first appellate order rather accepted the explanation of assessee without any verification and examination.

The Authorised Representative of the assessee (AR) Akshat Jain, submitted that the CIT(A) rightly concluded that the assessee has explained source of cash deposit by showing cash balance  which was created and build up out of opening cash and cash withdrawals from the bank accounts of assessee which were clearly discernable from the audited books, bank statements return of income for AY (Assessment Year) 2016-17 and side cash book as well as main cash book maintained in the central office of assessee.

The Bench comprising of Chandra Mohan Garg, Judicial Member and Dr. B.R.R. Kumar, Accountant Member noted that the sole basis for making addition in the hands of assessee under Section 68 of the Income Tax  Act taken by the AO was that the cash balance is available was Rs. 7,055 and the assessee had deposited cash amount of Rs. 1,24,50,000 post demonetization period.

It was observed that the financial statements of assessee clearly show that the assessee was consistently maintaining huge cash balance as per his business prudence and there was opening cash balance as well as huge cash withdrawals from 01.04.2016 till declaration of demonetization period amounting to Rs. 2,63,10,000/- which are much higher than the amounts of Rs. 1,24,50,000/- i.e. cash deposited by the assessee to its bank account during pre & post demonetization period.

The Tribunal further noted that the assessee has duly given the site cash books as well as main cash book showing cash balance of Rs. 1,24,68,418 and the cash deposited to its bank account was created due to huge opening cash balance of Rs. 10,95,290, which was enhanced to Rs. 60,02,427/- after inclusion of cash withdrawal Rs. 50,50,000/- and deduction of some expenses.

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. 2,63,10,000  which was higher than the cash withdrawals during immediately preceding FY 2015-16 amounting to Rs. 55,50,000.

Thus the Bench held that the assessee has successfully demonstrated source of cash deposit of Rs. 1,24,50,000/- to its bank account during demonetization period and hence not addition is called for, thus upheld the decision of CIT(A).

Hence appeal filed by the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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