Unexplained Opening Cash Balance of Rs. 22.19 Lakh u/s 69: ITAT Remands Matter to AO [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)remanded the matter to the Assessing Officer(AO) for further verification of the unexplained opening cash balance of Rs. 22.19 lakh under Section 69 of Income Tax Act,1961.

Dushyantsinh Yadvendrasinh Chudasama,appellant-assessee,was engaged in trading petrol, diesel, and oil through his proprietorship M/s Rudra Petroleum and was also a partner in M/s Rudra Minerals and M/s Rudra Construction. The assessments for both years were completed under Section 143(3) of the Act.

For Assessment Year 2015-16, the AO included Rs. 2,902 for missing interest income from fixed deposits. A disallowance of Rs. 9,234 was made under Section 40(a)(ia) for failing to deduct TDS on fleet card charges and late payment interest. The AO also added Rs. 22,19,000 under Section 69, considering the opening balance as unexplained due to lack of supporting documents.

The Commissioner of Income Tax(Appeals)[CIT(A)] upheld these additions, stating that the assessee did not provide adequate proof for the opening balance or the Tax Deducted at Source( TDS ) issue.

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Read More: Violation of Natural Justice: ITAT restores Addition on Demonitization Sales for Fresh Adjudication

The assessee's counsel stated during the hearing that the opening cash balance of Rs. 22,19,000/- was shown in the personal balance sheet as of 31-03-2014, certified by a Chartered Accountant. The counsel explained that the balance sheet, included in the paper-book (page No. 34), confirmed the cash at the start of the year.

It was argued that since the cash was carried forward from the previous year, it should not have been treated as unexplained. The counsel also offered to provide the complete cash book for verification if needed.

The tribunal noted that the AO had determined the unexplained opening balance of Rs. 22,19,000/- based on cash flow analysis for the relevant assessment year.

The two member bench comprising Siddhartha Nautiyal(Judicial Member) and Makarand V.Mahadeokar(Accountant Member) found that the assessee had relied on the certified balance sheet from 31-03-2014, which showed the opening cash balance. The assessee argued that this balance was carried over from the previous year and did not represent new credits.

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The ITAT stated that the cash balance needed to be verified to decide if the addition under Section 69 was correct. The assessee also offered to provide the cash book for verification, which the lower authorities had not considered.

In the interest of justice, the appellate tribunal sent the matter back to the AO for further verification. The AO was instructed to review the balance sheet, cash book, and other documents to confirm the genuineness of the cash balance. If the balance was carried over from previous years and reflected in the books, the addition under Section 69 would be removed. The AO was asked to decide the matter again, giving the assessee a fair chance to be heard.

In short,the appeal was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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