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November 17, 2022

Cash deposits and cash withdrawn shall be as per cash book maintained by taxpayers and cannot be disregarded by the Tax Authorities

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

Cash deposits and cash withdrawn shall be as per cash book maintained by taxpayers and cannot be disregarded by the Tax Authorities

Facts and Issue of the case :

The assessee filed return of income on 27.06.2017 declaring income at Rs. 7,92,900/–. The assessee disclosed rental income and income from other sources. The return of income was selected for scrutiny assessment for scrutiny of cash deposit during demonetization period and, accordingly, the assessee was show caused to furnish explanation regarding cash deposit during demonetization period. In response, the assessee submitted that cash deposit was out of opening cash in hand and cash withdrawals during the year under consideration prior to demonetization.

Reply of the assessee was duly considered by the Assessing Officer who was of the opinion 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/–. The Assessing Officer completed assessment proceedings by accepting the opening cash in hand of Rs. 8,34,821/– and made addition of Rs.11,90, 179/– under section 69A r.w.s 115BBE of the Act. The assessee carried the matter before the ld. CIT(A) and once again furnished all the details explaining the source of cash deposit in the bank account.

It was once again explained that other than the opening cash in hand of Rs. 8,34,821/–, all other deposits have been made out of cash withdrawals from the bank during the financial year. In support, cash flow statement along with statement of affairs was also filed by the assessee.

After considering the facts and submissions, 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. Out of the total cash withdrawals available with the assessee, the ld. CIT(A) deducted monthly expenses at Rs.30,000/– per month and estimated availability of cash as under:

PARTICUALRSAMOUNT [Rs.]
Cash deposited20,25,000/-
Cash withdrawal15,20,000/-
Less: Drawings for house expenses3,60,000/-
Balance remains to be explained8,65,000/-

Giving the benefit of Rs.1 lakh, as opening cash in hand, addition of Rs.7.65 lakhs was confirmed by the CIT(A).

Observation by the Tribunal :

Before the Tribunal, the counsel for the assessee reiterated what has been stated before the lower authorities and once again drew our attention to all the documents filed before the lower authorities containing cash flow statement, cashbook, statement of affairs etc. Per contract, the ld. DR strongly supported the findings of the ld. CIT(A) and read the operative part. Tribunal have carefully perused the orders of the authorities below and have given thoughtful consideration to the relevant documentary evidences brought on record in light of Rule 18(6) of ITAT Rules. Cashbook clearly shows the opening balance as on 01.04.2016 at Rs. 8,34,821/– which has been duly verified and accepted by the Assessing Officer. Cash flow statement exhibited at page 4 of the Paper Book clearly explains the cash deposit in the impugned bank account. Exhibit 13 is the statement of affairs as on 31.03.2017.

The Tribunal fail to understand as to when availability of opening cash in hand amounting to Rs. 8,34,821/- has been verified and accepted by the Assessing Officer, then, why the ld. CIT(A) estimated the same at Rs.1 lakh. Further, when cash withdrawals have been duly reflected in the cash book, vis a vis, bank statement for the FY under consideration, why the same was not accepted by the ld. CIT(A) when no defect has been pointed out in cash books, cash flow statement and statement of affairs filed by the assessee?

In Tribunal opinion, once cash flow statement is not controverted by the Assessing Officer as well as the ld. CIT[A], when it was specifically submitted that the same is based on the entries made in the cashbook, then the source of cash deposit in the bank account cannot be discarded by the authorities below. Tribunal view is fortified by the decision of the Hon’ble High Court of Delhi in the case of Omni info in ITA No. 364/2016 order dated 29.07.2016.Considering the facts of the case in totality, we do not find any merit in the addition sustained by the ld. CITA. Tribunal direct the Assessing Officer to delete the impugned addition of Rs.7,65,000/-.

Conclusion :

In the result, the appeal of the assessee is partly allowed. And the Tribunal direct the Assessing Officer to delete the impugned addition of Rs.7,65,000/-.

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