2021 (12) TMI 1201 - AT - Income Tax

Addition being 40% of cash balance shown in the balance sheet as income of the assessee - HELD THAT - Assessee is maintaining the books of accounts and the same were audited u/s. 44-AB - turnover of the assessee for the year under consideration as submitted by the assessee before the Ld. CIT(A) is at ₹ 2.5 crores and the major sales are cash sales only and obviously generates cash in hand. When the assessee has submitted the same before the A.O as well as Ld. CIT(A) they have not pointed out any defect in the books of accounts and only says that the cash in hand shown by the assessee is excessive. A.O without any basis, simply says that the cash in hand is excessive and therefore, estimated 40% of the cash in hand as an income and subsequently, partial relief granted by the Ld. CIT(A) and when the assessee is explaining in detail without considering the same estimation made by the A.O without giving any reasons, in my opinion, it is not correct. Even, the Ld. CIT(A) has granted partial relief without giving any reasons why entire addition cannot be deleted. Further, the Ld. CIT(A) also failed to consider the explanation of the assessee. In view of the above, the addition made by the A.O cannot be survived. Accordingly, the addition made by the A.O is deleted. - Decided in favour of assessee.

Summary

Issues Involved:
Delay in filing appeals, Condonation of delay, Addition of cash in hand as income, Assessment of cash balance, Explanation by assessee, Relief granted by CIT(A), Appeal before Tribunal, Adjudication of appeals.

Analysis:
1. Delay in filing appeals and Condonation of delay:
The appeals filed by the assessee were delayed by 57 days. The assessee submitted separate affidavits for condonation of the delay, citing circumstances beyond their control. The Judicial Member found a sufficient cause for the delay and decided to condone it, admitting the appeals for adjudication.

2. Addition of cash in hand as income:
The Assessing Officer (AO) noted a significant amount of cash in hand in the assessee's and his wife's business concerns, totaling to ?88,16,916. The AO disallowed 40% of this cash in hand as it was not explained with documentary proof. The CIT(A) partially sustained the addition after considering the assessee's explanation. However, on appeal before the Tribunal, the Judicial Member found that the assessee maintained audited books of accounts, had a turnover of ?2.5 crores with major cash sales, and had valid explanations for the cash balance. The Judicial Member concluded that the addition made by the AO was not justified and deleted it.

3. Relief granted by CIT(A) and Tribunal's decision:
The CIT(A) had granted partial relief by sustaining an addition of ?7,87,500. However, the Tribunal, after hearing both parties and reviewing the material on record, found that the AO's estimation of 40% of the cash balance as income was unjustified. The Judicial Member observed that the CIT(A) failed to consider the detailed explanation provided by the assessee. Consequently, the Tribunal allowed both appeals filed by the assessee for the Assessment Year 2016-17, as the additions made by the AO were deemed unjustified.

4. Adjudication of appeals:
Both appeals filed by the assessee for the Assessment Year 2016-17 were allowed by the Tribunal. The Tribunal's decision was pronounced on 24th November 2021 in Chennai, emphasizing the deletion of the additions made by the AO regarding the cash in hand as income.

This comprehensive analysis covers the issues of delay in filing appeals, the addition of cash in hand as income, the explanation provided by the assessee, the relief granted by the CIT(A), the Tribunal's decision, and the final adjudication of the appeals.