2004 (12) TMI 340 - AT - Income Tax

Unexplained opening cash balance - additional ground - Interest charged under ss. 234A and 234B - HELD THAT - As seen from the assessment order the AO issued notice u/s 143(3) on 23rd Feb. 1993 u/s 143(3) for the AY 1991-92 and the order was passed on 31st March 1994. From this it is evident that the return for the AY 1990-91 was also before the AO. The AO could have examined the availability of cash balance as on 1st April 1990 along with the return for 1990-91. Instead of adding the opening balance of cash as unexplained the AO could have dealt with this issue in the asst. yr. 1990-91. Therefore the CIT(A) is justified in holding that the action of the AO is not correct. The AO has failed to take cognizance of the return for 1990-91 while deciding the issue of 1991-92 as the return was before him. The opening balance of cash cannot be treated as unexplained in the AY 1991-92. Thus we have no hesitation in confirming the order of the CIT(A) and reject the ground taken by the Revenue. Interest under ss. 234A and 234B as charged while processing the return u/s 143(1)(a) of the Act for the reason that the subsequent clarificatory amendment to s. 234B by the Finance Act 1995 with retrospective effect from 1st April 1989 supports the action of the AO in charging interest upto the date of regular assessment and the insertion of ss. 140A(1A) and 140A(1B) and the omission of Expln. 4 to s. 234A(1) and substitution of Expln. 1 in s. 234B(1) by the Finance Act 2001 w.e.f. 1st April 1989 would justify the action of the AO in charging the interest till the date of regular assessment. Accordingly we reverse the order of the CIT(A) on this issue and allow the additional ground taken by the Revenue. In the result the appeal filed by the Revenue is partly allowed.

Summary

Issues:
The appeal involves the deletion of an addition made towards unexplained opening cash balance by the CIT(A) and the subsequent challenge by the Revenue before the Appellate Tribunal ITAT MADRAS-A.

Issue 1: Unexplained Opening Cash Balance
The assessee showed an opening cash balance of Rs. 6,57,642.60 for the assessment year 1991-92, which the AO doubted due to the significant amount held in physical cash. The AO treated Rs. 6,50,000 as income from other sources, questioning the necessity of holding such a large amount in cash despite having bank accounts. The CIT(A) held that it is the assessee's discretion to keep cash in any form and criticized the AO's approach, deeming it unnecessary to tax money kept in physical possession. The Tribunal upheld the CIT(A)'s decision, noting that the AO failed to consider the return for the previous assessment year 1990-91, where the opening balance issue could have been addressed, thus confirming the deletion of the addition.

Issue 2: Interest under Sections 234A and 234B
The Revenue raised an additional ground challenging the CIT(A)'s direction to charge interest under sections 234A and 234B once a return is processed under section 143(1)(a). The Tribunal disagreed with the CIT(A) and supported the AO's action of charging interest until the date of regular assessment, citing clarificatory amendments by the Finance Acts of 1995 and 2001. Consequently, the Tribunal allowed the Revenue's additional ground, reversing the CIT(A)'s decision on this matter.

In conclusion, the Appellate Tribunal ITAT MADRAS-A partially allowed the Revenue's appeal, upholding the deletion of the addition related to the unexplained opening cash balance while reversing the CIT(A)'s decision regarding the charging of interest under sections 234A and 234B.