2023 (8) TMI 1454 - AT - Income Tax

Addition u/s 68 - assessee has failed to explain the source of cash deposited during demonetization period - contention of AO are precisely that the cash withdrawals by the assessee are not near to the dates of cash deposits and when the cash was withdrawal for wages payments other purposes then there is no reason why such expenses were not incurred and a running concern could not have huge cash for long period - CIT(A) deleted addition - HELD THAT - As comparison and figures clearly show that the assessee was consistently maintaining huge cash balance as per his business prudence and there was huge cash withdrawals which are much higher than the amounts of cash deposited by the assessee to its bank account during pre post demonetization period and we are unable to see any discrepancy defect or perversity therein. As pertinent to mention that the ld. Senior DR did not dispute above noted factual position noted by the ld. CIT(A) before granting relief to the assessee. CIT(A) after considering the cash withdrawals from the banks as per bank statements and cash book noted that the same cannot be manipulated in any manner. We are in agreement with the conclusion drawn by the ld. CIT(A) that the appellant has duly given the site cash books as well as main cash book showing cash balance and the cash deposited to its bank account was created due to huge opening cash balance as per audited books and return of income filed by the assessee before demonetization declaration and amount of cash withdrawals from 01.04.2016 to till demonetization period which was higher during immediately preceding FY 2015-16. Thus we are inclined to agree with the conclusion drawn by the ld. CIT(A) that the assessee has successfully demonstrated source of cash deposit to its bank account during demonetization period and hence not addition is called for. We are unable to see any ambiguity perversity or any valid reason to interfere with the findings arrived by the ld. CIT(A) and thus we uphold the same. Accordingly grounds of revenue are dismissed.

Summary

Issues Involved:

1. Whether the CIT(A) erred in law and on facts by ignoring the lack of documentary evidence for cash payments.
2. Whether the CIT(A) erred by ignoring Section 68 of the Income-tax Act, 1961, regarding the burden of proof.
3. Whether the CIT(A) erred by not considering the impounded documents showing cash-in-hand.
4. Whether the CIT(A) erred by ignoring the pattern of cash deposits and the lack of documentary evidence for cash balances at site offices.
5. Whether the CIT(A) erred by not discussing the cash in hand as per impounded documents.
6. Whether the CIT(A)'s order is perverse, erroneous, and untenable on facts and in law.

Summary:

1. Lack of Documentary Evidence for Cash Payments:
The Revenue argued that the assessee did not produce any documentary evidence for payments made for wages, despite claiming the need for cash in hand as a construction contractor. The CIT(A) was alleged to have ignored this fact.

2. Burden of Proof Under Section 68:
The Revenue contended that the CIT(A) ignored Section 68 of the Income-tax Act, 1961, which places the primary burden of proof on the assessee to prove the genuineness of transactions. The CIT(A) was accused of shifting this burden to the Revenue.

3. Impounded Documents Showing Cash-in-Hand:
The Revenue pointed out that impounded documents from M/s Omaxe Limited showed cash-in-hand figures that did not match the assessee's claims. The CIT(A) allegedly ignored these documents.

4. Pattern of Cash Deposits and Lack of Evidence for Site Office Balances:
The Revenue argued that there was no pattern of such huge cash deposits in previous years and that the assessee did not produce documentary evidence to support cash balances at site offices. The CIT(A) was said to have ignored these facts.

5. Discussion on Cash in Hand as per Impounded Documents:
The Revenue claimed that the CIT(A) did not discuss the cash in hand as per impounded documents and focused only on the data provided by the assessee.

6. Perversity and Erroneous Nature of CIT(A)'s Order:
The Revenue asserted that the CIT(A)'s order was perverse, erroneous, and untenable on facts and in law.

Findings:

1. Explanation of Cash Deposits:
The CIT(A) found that the cash deposited pre- and post-demonetization was duly explained by the assessee. The cash balance as on 08.11.2016 was created by opening cash balance as on 01.04.2016 and cash withdrawals from the bank account till 08.11.2016.

2. High Cash Balance and Business Prudence:
The CIT(A) noted that the assessee usually maintained a high cash balance, which was evident from the opening cash balance as on 01.04.2016 of Rs. 1,70,45,310/-. This practice was considered a matter of business prudence, not to be questioned by the Assessing Officer.

3. Comparison of Cash Withdrawals and Deposits:
The CIT(A) compared cash withdrawals and deposits for FY 2015-16 and FY 2016-17, finding that the assessee consistently maintained huge cash balances. The cash withdrawals were higher than the cash deposits, supporting the assessee's claims.

4. Acceptance of Cash Books:
The CIT(A) accepted the site cash books and main cash book provided by the assessee, showing a total cash balance of Rs. 2,45,41,259/-. The cash deposited in the bank was explained by the opening cash balance and cash withdrawals, which were undisputed.

Conclusion:
The Tribunal upheld the CIT(A)'s findings, agreeing that the assessee successfully demonstrated the source of cash deposits during the demonetization period. The appeal of the Revenue was dismissed, and the CIT(A)'s order was upheld. The Tribunal found no ambiguity, perversity, or valid reason to interfere with the CIT(A)'s findings.