The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that Income Tax Addition for cash deposits duly explained with cash flow statements is not permissible.
Smt. Perminder Kaur Matharoo, the assessee filed her return of income on 27.06.2017 declaring income at Rs. 7,92,90/–. The assessee returned rental income and income from other sources. The return of income was selected for scrutiny assessment for scrutiny of cash deposits during the demonetization period and the assessee was shown caused to furnish an explanation regarding cash deposits during the demonetization period.
It was submitted by the assessee that cash deposit was out of opening cash in hand and cash withdrawals during the year under consideration before demonetization. The Assessing Officer thought that other than the opening cash in hand of Rs. 8,34,821/–, the assessee could not explain satisfactorily the source of cash deposit of Rs.11,90,179/– and made an addition of Rs.11,90, 79/– under section 69A r.w.s 115BBE of the Income Tax Act,1961.
The CIT(A) completely disregarded the findings of the Assessing Officer and gave a different colour to the entire proceedings by stating that the opening cash balance of Rs. 8,34,821/– has not been declared in the return of income filed online.
It was viewed that the cashbook clearly shows the opening balance as of 01.04.2016 at Rs. 8,34,821/– which has been duly verified and accepted by the Assessing Officer. The cash flow statement exhibited explains the cash deposit in the impugned bank account.
The ITAT bench of Shri N K Billaiya, Accountant Member and Shri Kul Bharat, Judicial member observed that once the cash flow statement is not controverted by the Assessing Officer as well as the CIT[A] when it was specifically submitted that the same is based on the entries made in the cashbook, then the source of a cash deposit in the bank account cannot be discarded by the authorities below.
While allowing the appeal, the ITAT directed the Assessing Officer to delete the impugned addition under the Income Tax Act,1961. Shri Kapil Goel appeared for the assessee and Shri Sanjai Kumar Yadav appeared for the department.
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