2018 (3) TMI 41 - AT - Income Tax

Addition on shortfall / deficit in cash deposits with the firm - Held that - The assessee had declared a sum of ₹ 3,14,950 by way of cash under the VDIS pertaining to assessment years 1993-94 to 1996-97. In the absence of the year-wise bifurcation of the declaration under the VDIS, it is not possible to give entire credit of ₹ 3,14,950 to the deficit cash deposit worked out by the Assessing Officer. There had been cash withdrawals by the assessee from the firm on various dates totaling to ₹ 4,00,000. Though the narration for such withdrawals is given as building construction, the entire amount withdrawn on the same day would not have been utilized for the purpose of building construction. The cash withdrawals are on dates which are more or less near to the dates of cash deposits made by the assessee in the firm M/s.Muthoot M.George Financiers. Therefore, taking into account the declaration of VDIS and cash withdrawals by the assessee from the firm, the assessee should be granted credit for a sum of ₹ 2,00,000. - Decided in favour of assessee partly.

Summary

Issues:
1. Ignoring VDIS declared cash available with the appellant and deficiency set off.
2. Disregarding drawings from a firm for construction purposes.
3. Non-consideration of Cash Flow Statement & Certificates filed during the hearing.

Analysis:
1. The appellant contested the addition of ?5,50,360 by the Assessing Officer due to a deficit in cash deposits with a firm where the appellant was a partner. The CIT(A) upheld the addition, stating that the appellant failed to provide credible evidence to support claims related to VDIS disclosures and cash withdrawals. The CIT(A) found discrepancies in the appellant's explanations regarding fund sources and cash transactions, leading to the affirmation of the addition.

2. The appellant, dissatisfied with the CIT(A) order, appealed to the Tribunal. The appellant presented various documents, including cash flow statements and confirmations, to support their contentions. The appellant argued that VDIS declarations and cash withdrawals from the firm should offset the deficit amount. The Departmental Representative supported the lower authorities' decisions.

3. The Tribunal analyzed the cash deposits and withdrawals with the firm, noting specific dates and amounts. Considering the VDIS declaration and cash withdrawals, the Tribunal partially allowed the appeal. It granted credit for ?2,00,000 to the appellant, reducing the total addition to ?3,50,360 from the initial ?5,50,360. The Tribunal's decision was based on a detailed assessment of the VDIS disclosures and cash transactions presented by the appellant.

In conclusion, the Tribunal partially allowed the appeal, acknowledging the VDIS declaration and cash withdrawals to adjust the deficit in cash deposits with the firm. The Tribunal's decision highlighted the importance of providing credible evidence to support claims and the need for accurate documentation in tax assessments.