2019 (4) TMI 2013 - AT - Income Tax

Addition u/s 68 - availability of sufficient cash at the hands of the assessee to make the deposits in the saving bank account - HELD THAT - Though no substantive evidence has been submitted by the assessee to conclusively co relate withdrawals with the deposits, however it is observed, the fact that the assessee has made sufficient cash withdrawals from the current account has not been disputed by the AO and Commissioner (Appeals). This fact is very much evident from the observations of the learned Commissioner (Appeals) in Para 5.3 of his order. Therefore, the availability of sufficient cash at the hands of the assessee to make the deposits in the saving bank account cannot be doubted. More so, when the Departmental Authorities have not been able to identify the utilization of cash withdrawals from the current account in any other assets/ mode or manner. That being the case, the explanation of the assessee that being a contractor he required sufficient cash and the unutilized cash is again re deposited to savings bank account cannot be disbelieved on mere presumption and surmises. That being the case, since assessee s contention has not been proved to be false through proper reasoning and supporting material, the addition made under section 68 of the Act cannot be sustained. Disallowance of expenditure claimed - inability to produce any evidence to justify the expenditure claimed the assessee - HELD THAT - Undisputedly, before the Assessing Officer, the assessee has failed to fully justify the claim of expenditure with supporting evidence. The aforesaid factual position remains unaltered even before me. That being the case, disallowance of 10% out of the expenditure claimed deserves to be sustained. This ground is dismissed.

Summary

Issues:
1. Validity of re-opening of assessment under section 147 of the Income-tax Act, 1961.
2. Addition of ?10,16,300 under section 68 of the Act.
3. Disallowance of ?1,77,218 out of the expenditure claimed.

Issue 1:
The appellant challenged the re-opening of assessment under section 147 of the Income-tax Act, 1961. However, during the hearing, the appellant decided not to press this ground. Consequently, ground no.1 was dismissed as not pressed.

Issue 2:
The appellant contested the addition of ?10,16,300 under section 68 of the Act. The Assessing Officer re-opened the assessment due to cash deposits exceeding ?10 lakh in the bank account. The appellant explained that these deposits were from cash withdrawals made for daily labor payments and purchase of raw materials. The Assessing Officer deemed the deposits as unexplained cash credit under section 68. The first appellate authority upheld this addition. The appellant argued that the deposits were from cash withdrawals, supported by bank book and cash flow statement. The Tribunal noted that the appellant had sufficient cash withdrawals from the current account, which was not disputed. As the authorities couldn't identify the use of withdrawn cash elsewhere, the explanation that the cash was redeposited for business purposes was accepted. Consequently, the addition under section 68 was deleted.

Issue 3:
The appellant disputed the disallowance of ?1,77,218 from the claimed expenditure. The Assessing Officer disallowed 10% of the expenditure due to lack of supporting evidence. The appellant failed to justify the expenditure before the authorities. The Tribunal upheld the disallowance, stating that the appellant couldn't provide sufficient evidence to support the claimed expenditure. Therefore, the disallowance of 10% was deemed justified, and this ground was dismissed.

In conclusion, the appeal was partly allowed, with the addition under section 68 being deleted while the disallowance of expenditure was upheld.