2017 (3) TMI 800 - AT - Income Tax

Addition u/s 68 - cash deposits in the bank account - deposit of amount withdrawn earlier - Held that - As gone through all the bank statements together with the cash book and the cash flow statement clearly depicting the available cash balance on each day of deposit and we find that the assessee has got sufficient sources for cash deposits made in the bank accounts and no part of the same is unexplained. The cash flow statement is admittedly prepared taking assistance from the bank statements. It is not the case of the revenue that the cash withdrawals made by the assessee were utilized for some other purpose so as to prove that the said cash is not available to meet the subsequent deposits. We find that the explanation offered by the assessee that he had resorted to circulation in bank transactions only to reflect the higher banking turnover in order to avail higher credit facilities from banks is acceptable. In any case, there is no element of income involved therein as the cash deposits are duly explained. Hence we hold that the lower authorities had erroneously invoked the provisions of section 68 in the instant case and we hold that the additions made in this regard are hereby directed to be deleted - Decided in favour of assessee TDS u/s 194J - non deduction of tds on accounting charges - Held that - We find lot of force in the argument advanced by the ld AR that the payment made for accounting charges does not fall under the ambit of fee for professional services u/s 194J of the Act as the said person rendering accounting services does not possess any professional qualification for rendering the said accounting services. Accordingly, we direct the ld AO to delete the disallowance made in this regard u/s 40(a)(ia) of the Act. - Decided in favour of assessee

Summary

Issues:
1. Justification of upholding addition towards cash deposits in bank account for AYs 2006-07 and 2007-08.
2. Justification of upholding disallowance of accounting charges under section 40(a)(ia) for AY 2007-08.

Issue 1: Cash Deposits in Bank Account

Analysis:
The appeals arose from separate orders of CIT(A)-XXX for AYs 2006-07 and 2007-08 regarding cash deposits in a bank account. The AO added the cash deposits as unexplained credit under section 68 of the Income Tax Act. The assessee explained that the deposits were from business cash surplus and withdrawals. The CITA upheld the additions, stating the deposits were in the personal savings account, not disclosed in the business balance sheet. The CITA found the cash flow statement unsupported and concluded the deposits were personal, not business-related. However, the ITAT found the explanations satisfactory. The ITAT noted the circulation of cash for banking turnover and credit limits, with all transactions disclosed in the balance sheet. The ITAT ruled the additions for both AYs should be deleted.

Issue 2: Disallowance of Accounting Charges

Analysis:
Regarding accounting charges disallowed under section 40(a)(ia) for AY 2007-08, the AO disallowed the amount for non-deduction of TDS under section 194J. The assessee argued the charges were not for professional services under 194J. The CITA upheld the disallowance, but the ITAT agreed with the assessee that accounting charges did not fall under professional services. The ITAT directed the AO to delete the disallowance. As a result, the appeal for AY 2006-07 was partly allowed, and the appeal for AY 2007-08 was allowed.

This judgment clarifies the treatment of cash deposits in bank accounts and the disallowance of accounting charges under specific sections of the Income Tax Act. The ITAT's detailed analysis and reasoning provide valuable insights into the interpretation and application of tax laws in these scenarios.