2023 (2) TMI 626 - AT - Income Tax

Addition u/s 68 - assessee has not produced documentary evidences in support of cash deposits made into the bank account during the demonetisation period - HELD THAT - When the ld. AO has accepted the said cash book and part of cash deposited in the bank account out of the cash available in the cash book maintained by the assessee and books of account have not been rejected, then in such circumstances fail to find any justification at the end of the revenue authorities of not accepting the source of alleged cash sum, which is out of the cash in hand available with the assessee. It is also worth noting that even on 30-11-2016 and 31- 12-2016 cash in hand available with the assessee is at Rs. 29,15,918/- and Rs.31.81,449/- respectively. Therefore, under the given facts and circumstances, since the assessee has successfully/satisfactorily explained the source of sum of Rs. 10 lakhs, we fail to find any justification in the addition being made u/s. 68 - therefore we reverse the findings of the ld. CIT(A) and delete the addition made u/s. 68 - Decided in favour of assessee.

Summary

Issues:
Appeal against addition made under section 68 of the Income Tax Act for the assessment year 2017-18.

Analysis:

1. Background of the Case:
The appellant, a partnership firm engaged in the business of a rice mill, declared an income of Rs. 7,00,300/- in the return filed for the assessment year 2017-18. The case was selected for scrutiny due to cash deposits during the demonetization period. The Assessing Officer (AO) questioned the source of a cash deposit of Rs. 27,50,000/-, leading to an addition of Rs. 10,00,000/- under section 68 of the Income Tax Act.

2. Appeal Before CIT(A):
The appellant appealed before the Commissioner of Income Tax (Appeals) [CIT(A)] against the addition of Rs. 10 lakhs. The CIT(A) confirmed the addition, stating that the appellant failed to produce documentary evidence supporting the cash deposits during the demonetization period.

3. Arguments Before ITAT:
The appellant argued before the Income Tax Appellate Tribunal (ITAT) that the cash deposits were explained through regular withdrawals for business purposes, supported by the cash book and audited balance sheet. The Departmental Representative contended that the appellant's submissions regarding the source of cash deposit were inconsistent.

4. ITAT's Decision:
The ITAT analyzed the cash book and cash deposits during the relevant period. It noted that the AO accepted the explanation for part of the cash deposit. Upon further examination of the cash flow and available cash in hand, the ITAT found that the appellant adequately explained the source of the Rs. 10 lakhs deposited. Consequently, the ITAT reversed the CIT(A)'s findings and deleted the addition of Rs. 10 lakhs under section 68 of the Income Tax Act.

5. Conclusion:
In conclusion, the ITAT allowed the appellant's appeal, ruling in favor of the appellant and deleting the addition made under section 68 of the Income Tax Act. The ITAT's decision was based on the satisfactory explanation provided by the appellant regarding the source of the cash deposit, as evidenced by the cash flow and available cash in hand.