Long-Time Retention of Cash in Hand from Declared Sources not Grounds for Doubts: ITAT Deletes Income Tax Addition [Read Order]
The Bench noted that the only ground for the addition was the alleged improbability of the assessee having kept the cash for such a long duration.
Cash in Hand - ITAT - Income Tax Addition - taxscan
Cash in Hand - ITAT - Income Tax Addition - taxscan
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) recently clarified that mere retention of cash in hand for a long time, where the source is explained and documented does not, by itself, give rise to suspicions of income tax evasion.
The assessee HUF had filed its return for Assessment Year (A.Y.) 2017-18, declaring a total income of ₹2,98,310. During scrutiny, the Revenue noted that the Assessee held deposits totalling ₹14 lakh in their account with the Central Bank of India during the demonetization period.
During assessment proceedings, the assessee maintained that the deposits were sourced from earlier receipts and cash savings, with the majority amount of ₹12,61,880 arising from a cash refund of share application money received from Pratap Tea Company Pvt. Ltd. in F.Y. 2013-14. The Assessee continued to hold this cash, which was reflected year after year in its books of the assessee, until they deposited it during the demonetisation period in November 2016.
The Assessing Officer (AO), however, doubted the claim on the ground that it was improbable to hold such cash for over three years and treated the entire amount as unexplained money under Section 69A. In appeal, the Commissioner of Income Taxes (Appeals ( CIT(A) ) confirmed this view, stating that the assessee had failed to substantiate the claim satisfactorily, leading to this present appeal.
Nikhil Pathak, appearing for the Assessee submitted that the assessee is maintaining details of cash book from past many years and that the major source of alleged cash deposit is from the refund of share application money received from Pratap Tea Company and accumulated income of past many years.
He further submitted that the details of Pratap Tea Company filed before the lower authorities are duly supported by documentary evidence and that there was no discrepancy in those details and prayed that impugned addition be deleted.
Sanjay K. Dhivare represented the Revenue and prayed for sustaining the impugned addition.
The Bench of Accountant Member Manish Borad observed that the refund by Pratap Tea Company had been verified in response to a notice issued under Section 133(6) by the AO and that the cash books clearly depicted the availability and continuity of cash from earlier years.
The Bench noted that the only ground for the addition was the alleged improbability of the assessee having kept the cash for such a long duration. The Tribunal categorically rejected this reasoning, observing that “unless and until the assessee is unable to explain the source of income, doubts cannot be raised for keeping cash in hand from declared sources for long time.”
Accordingly, The ITAT held that the assessee had successfully explained the source of the deposits as cash in hand from genuine and declared sources and concluded that the addition under Section 69A read with Section 115BBE was unsustainable, proceeding to allow the appeal and delete the income tax addition fo ₹14.
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