2023 (9) TMI 433 - AT - Income Tax

Cash deposited as unexplained cash - DR submitted that the cash received was not mentioned in the books - HELD THAT - It is pertinent to note that no books were rejected in assessee s case and in fact the cash books as well as cash deposited during the demonetisation period was on the basis of heavy cash sales during those days. The contention of the Ld. AR that due to heavy cash sales on those days, it was not practicable for the Accountant to enter the cash entries immediately in the books of accounts. The cash received from the debtors were deposited in the bank account on the same date, but the entries for the same were made on combined basis. This has led to negative cash balance in the books of accounts for 2-3 days but the assessee had sufficient cash balance to deposit cash of Rs. 6,56,000/- on 16.11.2019 as cash sales on that day itself was of Rs. 7,16,325/- and, therefore, the difference was explained to the AO as well as the CIT(A) which was totally ignored by both the Authorities. Thus, the addition made by the AO u/s 69A of the Act does not survive. Hence, appeal of the assessee is allowed.

Summary

Issues involved:
The appeal filed by the Assessee against the order passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2017-18.

Details of the Judgment:

Issue 1: Consideration of cash deposit as unexplained cash

The assessee filed its return of income declaring income of Rs. 10,43,660/-. The Assessing Officer observed that the assessee, a retail dealer of Bharat Petroleum, deposited cash of Rs. 29,57,480/- on specific dates which exceeded its sales amount. The Assessing Officer requested justification for the excess cash deposit, and upon not receiving a satisfactory reply, made an addition of Rs. 9,00,000/- under Section 69A of the Act. The CIT(A) upheld this addition.

Issue 1 Decision:
The Ld. AR argued that the cash deposits were made during the demonetization period against cash sales and payments received from debtors. The AR submitted relevant details and contended that the source of cash deposit in the bank account should not be rejected without rejecting the books of accounts. The Ld. AR's explanation regarding heavy cash sales during the demonetization period and delayed entries in the books of accounts was accepted. It was noted that the cash received from debtors was deposited in the bank account on the same day, leading to a temporary negative cash balance in the books. The addition made by the Assessing Officer was deemed unjustified, and the appeal of the assessee was allowed.

In conclusion, the appeal filed by the Assessee was allowed by the Appellate Tribunal ITAT Ahmedabad, with the decision favoring the Assessee regarding the consideration of cash deposit as unexplained cash.