2024 (1) TMI 992 - AT - Income Tax

Addition u/s 69A - cash balance on account of withdrawal from different bank accounts - lower authorities to disbelieve the theory of cash flow as to why the cash remained in hand for long period - Assessee submits source of cash withdrawal is mainly from the loan availed by assessee and once AO accepted that assessee has made withdrawal from his bank accounts and has not brought any evidence that withdrawal of amount was invested elsewhere or incurred on any expense, the cash balance available with the assessee was to be believed - HELD THAT - From the documents filed before the lower authorities as well as before me the assessee has also proved the cash withdrawal, even such fact is accepted by assessing officer. The only reason for making addition is as to why such cash was kept by the assessee for a longer period. DR also opposed the submissions of the assessee that despite having bank account, as to why the assessee kept such huge cash in hand. As assessee argued that there is no limit or restriction of keeping the cash at home, we find merit in his submissions that there is no such restriction in law - cash in hand shown by the assessee is duly explained and recorded in his cash book and source of which is known, which is clearly seen form the withdrawal from the bank on various dates. AO has not brought any adverse material or evidence on record that the cash in hand was beyond the withdrawal from bank - once the assessee explained the source of cash in hand, the assessing officer was not justified in doubting the availability of such cash in hand for the sole ground of long period of holding, without brining rebutting such contention. Decided in favour of assessee.

Summary

Issues Involved:
The primary issue in this case is whether the assessee was able to justify the source of the closing cash balance available with him, leading to the addition made by the Assessing Officer under section 68 of the Income Tax Act.

Assessment by Assessing Officer:
The Assessing Officer noted a significant increase in the cash-in-hand of the assessee from the previous year, raising concerns about the source of such funds. The assessee was asked to provide details regarding the cash balance, but the explanation provided was not accepted by the Assessing Officer. Consequently, an addition of Rs. 38,61,083/- was made as unexplained cash credit under section 68 in the assessment order.

Appeal before Ld. CIT(A):
The assessee, in the appeal before the Ld. CIT(A), contended that the conditions for the application of section 68 were not met as there was a clear explanation for the source of the cash balance. The assessee argued that the cash was withdrawn from bank accounts for specific purposes, such as the intended purchase of agricultural land, and provided supporting documentation to substantiate the claim.

Decision of Ld. CIT(A):
The Ld. CIT(A) agreed with the Assessing Officer regarding the unexplained nature of the cash balance but differed in the application of the relevant section. The Ld. CIT(A) upheld the addition under section 69A instead of section 68, thereby confirming the addition of Rs. 38,61,083/-. The assessee, still dissatisfied, proceeded to appeal before the Tribunal.

Tribunal's Decision:
After hearing arguments from both sides, the Tribunal found merit in the submissions made by the assessee. The Tribunal observed that the source of the cash balance was adequately explained by the assessee through bank withdrawals and intended transactions, despite the prolonged holding period of the cash. The Tribunal emphasized that there is no legal restriction on keeping cash at home and concluded that the assessing officer's doubts regarding the cash availability were unjustified. Consequently, the grounds of appeal raised by the assessee were allowed, and the appeal was upheld in favor of the assessee.

Final Verdict:
The Tribunal allowed the appeal of the assessee, overturning the addition made by the Assessing Officer and upheld by the Ld. CIT(A), based on the satisfactory explanation provided by the assessee regarding the source of the cash balance. The decision was pronounced on 13th November 2023 in open court.