2023 (5) TMI 113 - AT - Income Tax

Cash deposit in the bank - additions as the unexplained income - AR submitted that as the cash book has not been disturbed and as the assessee has adequate opening cash balance as on the beginning of the relevant assessment year and to make the cash deposit in the bank account, the addition cannot be made as unexplained income of the assessee - HELD THAT - What is to be considered and clearly understood is that when preparing the income and expenditure account, receipts of the assessee has been fully considered in preparing the income and expenditure account. Consequently, amount deposited in the bank account has also been considered by the assessee when preparing the income and expenditure account for the relevant assessment year. When the amount has already been considered when preparing its return of income for the relevant assessment year, to treat the cash deposit in the bank as unexplained income of the assessee is nothing but double addition, which is not also permissible. In these circumstances, on account of both the above mentioned reasons, it is held that the addition as made by the AO and confirmed by the CIT(A) is unsustainable and consequently, same stands deleted. Appeal of the assessee stands allowed.

Summary

Issues involved:
The appeal filed by the assessee against the order of the ld CIT(A), NFAC, Delhi dated 30.6.2022 for the assessment year 2017-18.

Issue 1: Treatment of cash deposit as unexplained income

The assessee, a Jain temple, did not have registration u/s.12A of the Act. During demonetization, the temple deposited Rs.46,50,000 in the bank. The Assessing Officer treated this deposit as unexplained income. The assessee argued that the cash deposit was from its existing cash balance, which was not disturbed by the authorities. The cash flow statement was based on entries in the cash book, and similar findings in other cases led to deletion of additions. The Tribunal held that the cash deposit was not unexplained income, as it was already considered in the income and expenditure account for the relevant assessment year, preventing double addition.

Issue 2: Deemed income and explanations provided

The Assessing Officer and ld CIT(A) considered the cash deposit as deemed income, challenging the assessee's explanations. The total Hundi collection was detailed, with discrepancies in the submissions made by the assessee. The ld CIT(A) called for returns of income for surrounding years, but only two were produced. The revenue argued that the circumstances of the cash deposit warranted upholding the addition made by the AO. However, the Tribunal found that the assessee's income was primarily from Hundi collection and interest from the bank, with no other sources evident. The cash balances and income and expenditure accounts supported the assessee's explanation, leading to the deletion of the addition.

Result:
The Tribunal allowed the appeal of the assessee, holding that the addition made by the AO and confirmed by the ld CIT(A) was unsustainable and therefore deleted.

Order dictated and pronounced in the open court on 26/04/2023.