2020 (1) TMI 1354 - AT - Income Tax

Unexplained cash deposited in the bank account - HELD THAT - Addition sustained by the CIT(A) deserves to be deleted and therefore the question of allowing telescoping benefit does not arise for consideration at all. As rightly submitted by the learned counsel for Assessee, the AO having accepted the correctness of the cash book in paragraph-6 of his remand report was not justified in expressing some doubts on the genuineness of the cash book maintained by the Assessee. As argued by him, the fact that there was low cash balance during the opening and closing days of the financial year and maintenance of huge balance in a particular period cannot be the basis to doubt the genuineness of the cash book. Cash was withdrawn from bank despite cash balances being available in the cash book, cannot be the basis to doubt the genuineness of the cash book. The presence of sundry creditors and the fact that the Assessee could have discharged sundry creditors instead of having cash in hand cannot also be the basis to doubt the genuineness of the cash availability as per cash book. Therefore the addition deserves to be deleted as the source of funds for cash deposit in the bank account stands duly explained and therefore the addition sustained by the CIT(A) deserves to be deleted and is hereby directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
Assessment under Income Tax Act, 1961 - Best Judgment Assessment - Discrepancy in contract receipts - Disallowance of deduction for Contractors Benevolent Fund - Addition of unexplained cash deposits in bank account.

Analysis:
1. The Assessee, an individual PWD Contractor, filed an appeal against the Assessment Order for AY 2015-16, where the AO completed a Best Judgment Assessment due to non-response to notices. Discrepancies were found in contract receipts, leading to additions in income, disallowance of deduction for Contractors Benevolent Fund, and addition of unexplained cash deposits totaling to &8377; 25,67,000.

2. The CIT(A) deleted the disallowance of contribution to CBF and reduced the addition on interest income. However, regarding the discrepancy in contract receipts, the AO rejected the books of accounts, estimating income at 8% of contract receipts. The CIT(A) upheld this estimation, resulting in an increase in business income and deletion of other additions under the business income head.

3. The AO added &8377; 25,67,000 as unexplained cash deposits, which the Assessee claimed originated from cash received in business. The AO, in a remand report, acknowledged the source but doubted the genuineness of cash balances in the books. The CIT(A) accepted the remand report, sustaining a reduced addition of &8377; 14,46,416, allowing set-off benefits against increased business income.

4. The Assessee appealed to the Tribunal, arguing against doubts on the cash book's genuineness. The Tribunal concurred, stating the doubts were unjustified based on the cash book's accuracy and various financial aspects. Consequently, the addition of &8377; 26,57,000 was directed to be deleted, and the appeal by the Assessee was allowed on January 10, 2020.