2023 (12) TMI 272 - AT - Income Tax

Unexplained money u/s 69A - cash deposits in bank account - HELD THAT - We find that the assessee itself has admitted shortage of source in their cash flow statement filed before the AO. Therefore, from the above, it is undoubtedly clear that the assessee could not explain source for cash deposits to the extent of Rs. 6,62,783/- and thus, we are of the considered view that, there is no error in the reasons given by the CIT(A) to sustain this additions made towards cash deposits. Addition towards advance received from group concerns , it was an argument of the appellant that group concerns have paid advance in cash during demonetization period and deposited into IDBI bank account. In this regard, the appellant has filed necessary details including PAN nos. and confirmation letters from the group concerns to prove receipt of trade advance. AO has not disputed these facts, however made additions only on the ground that the assessee should not have accepted cash in specified bank notes after 08.11.2016. We find that this issue is covered in favour of the assessee by the decision of ITAT, Chennai Benches in the case of M/s. Micky Fireworks Industries vs ACIT 2023 (8) TMI 217 - ITAT CHENNAI where the Tribunal under identical set of facts deleted additions made by the Assessing Officer, asheld that cash so received by the assessee is backed by sales carried out by the assessee as recorded in the books of accounts. Therefore, the source of cash is duly explained. The provisions of Sec.68 could be invoked only in cases when there was unexplained cash credit in the books of accounts maintained by the assessee. However, the assessee has duly identified the debtors from whom the cash was received and the same could not be disputed by lower authorities. The PAN of respective debtors as well as quantum of cash realized from each of them has duly been detailed by the assessee before Ld. AO during assessment proceedings. No defect has been pointed out in the books of accounts. In such a case, the credit could not be held to be unexplained cash credit. Appeal filed by the assessee is partly allowed.

Summary

Issues involved:
- Adding of Rs. 662783 as unexplained money u/s 69A of Income Tax Act, 1961.
- Adding cash credits Rs. 20,40,000 in appellant's bank accounts after 08/11/2016 in the form of SBN to the total income u/s.69 of Income Tax Act, 1961.

Issue 1:
The appellant contested the addition of Rs. 662783 as unexplained money under section 69A of the Income Tax Act, 1961. The appellant explained the source for cash deposits in bank accounts and provided a detailed cash flow statement. However, the AO found a shortage of sources for cash deposits amounting to Rs. 662783. The CIT(A) upheld this addition as the appellant could not justify the source for this specific amount.

Issue 2:
Regarding the addition of cash credits amounting to Rs. 20,40,000 in the appellant's bank accounts after 08/11/2016, the appellant argued that these credits were advances received from group concerns for the supply of fireworks. The AO rejected this explanation citing that the advances were received in specified bank notes after the specified date. However, the appellant provided detailed evidence, including PAN numbers and confirmation letters from the group concerns, to prove the receipt of trade advances. The ITAT Chennai Benches had previously ruled in a similar case that such deposits backed by legitimate business transactions should not be treated as unexplained cash credits under section 68 of the Act. Following this precedent, the ITAT directed the AO to delete the additions made towards the cash deposits of Rs. 20,40,000.