ITRs, Cash Books & Bank Records Proved Income: Delhi HC Upholds Income Tax Deletion of ₹2.8 Cr Demonetization Cash Addition [Read Order]
The Delhi High Court further noted that the issue surrounded a ‘Question of Fact’, which was not maintainable in an appeal under Section 260A of the Income Tax Act, 1961.
The Delhi High Court recently upheld the deletion of an income tax addition of ₹2.8 crore on cash deposits that were made during the demonetization period, holding that the assessee had satisfactorily explained the source of the deposit by producing requisite Income Tax Returns (ITR), cash books, comparative charts of balances and bank records.
The present income tax appeal, filed by the Pr. Commissioner Of Income Tax (Central), Gurugram against Pancham Realcon Pvt. Ltd., arose from an assessment for the assessment year 2017-18 in which the Assessing Officer (AO) treated cash deposits of ₹2,80,00,000 made post-demonetization as unexplained under Section 68 and added the sum to the total income of the assessee. Thus, the total income of the assessee was assessed at ₹3,98,30,950 on 23 December 2019.
The AO based their assessment on documents seized during a survey of a group company of the assessee; during the survey, it was shown that a cash balance of only ₹3,87,270 was held by the company as of 08.11.2016.
The assessee, however, produced comparative charts for financial years 2015-16 and 2016-17, the main and site cash books and bank statements to contend that the disputed deposit amount was built from prior withdrawals and consistently high cash balances were disclosed by them in ITRs filed before demonetization.
Prior to the institution of the present case, the Commissioner of Income Tax (Appeals) ( CIT(A) ) and the Income Tax Appellate Tribunal (ITAT) had concluded that the cash in hand was substantiated by evidence filed prior to demonetization.
The Revenue, represented by Puneet Rai, Ashvini Kumar, Rishabh Nangia and Girban Naushad contended that the ITAT had erred in affirming the order of the CIT(A) without considering that the seized records reflected only a negligible amount cash held in hand and that the deposit of ₹2.8 crore was left unjustified by the assessee.
No appearance was marked on behalf of Pancham Realcon Pvt. Ltd.
The Division Bench of Justice V. Kameswar Rao and Justice Vinod Kumar upheld the reasoning adduced by the CIT(A) that the assessee had consistently maintained high cash balances in earlier years; that withdrawals of large amounts in mid-2016 had been recorded, and that ITRs and audit reports filed prior to demonetization corroborated the cash held by them in hand.
Furthermore, the CIT(A) also found fault with the AO for ignoring the main cash book which accounted for major withdrawals and deposits, and instead relying only on site cash books.
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