2024 (5) TMI 32 - AT - Income Tax

Addition u/s 69A r.w.s. 115BBE - assessee failed to establish that the cash deposited during demonetisation period - non rejection of books of accounts - assessee explained that assessee was engaged in one of the businesses of running of a petrol pump which was the main source of cash sales that were deposited in the bank from time to time throughout the year - HELD THAT - It is a matter of fact that the all figures were taken from the table on the basis of statement of profit and loss by the assessee. The statements were duly verified by independent auditors report. Hon ble Supreme Court in the case of Lalchand Bhagat Ambica Ram 1959 (5) TMI 12 - SUPREME COURT has held that when entries in books of account in regard to cash balances were held to be genuine, there was no escape from conclusion that assessee had offered reasonable explanation as to source of all high denomination notes which it encashed on 19th January 1946 and it was not open to ITAT to accept genuineness of those books and accept assessee s explanation in part and reject same in regard to balance sum. It was observed that the ITAT in arriving its conclusion indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained or finding was perverse which could not be sustained and Supreme Court was entitled to interfere with such findings and therefore the addition was deleted. Thus from perusal of above material fact especially treating the cash deposit as unexplained cash on basis of books of account without rejecting the same is legally not permissible as per ratio of judgment in Lalchand Bhagat Ambica Ram s case (supra) - Appeal of assessee allowed.

Summary

Issues:
The judgment involves the assessment of total income for the assessment year 2017-18, specifically focusing on the disallowance made under section 69A read with section 115BBE of the Act regarding cash deposits during the demonetization period.

Assessment Order and Appeal:
The appellant assessee filed an income tax return for the assessment year 2017-18, which was selected for scrutiny. The Assessing Officer (AO) made a disallowance under section 69A read with section 115BBE of the Act, alleging that the cash deposited during the demonetization period was unexplained. The appeal against this assessment order was dismissed by the Learned Commissioner of Income Tax (Appeals).

Grounds of Appeal:
The appellant argued that the cash deposits were from the normal business receipts of running a petrol pump, which included increased sales volume and per unit price during the relevant period. The appellant contended that the Assessing Officer was unjustified in holding the cash deposits as unexplained, citing relevant legal precedents.

Legal Precedents:
The appellant relied on the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 77 ITR 288, which emphasized the importance of genuine entries in books of account regarding cash balances to explain the source of high denomination notes. The Supreme Court's decision in this case highlighted the need for a reasonable explanation for cash transactions.

Judgment and Conclusion:
Upon examination of the facts and submissions, it was found that the Assessing Officer's reliance on the cash deposit figures without rejecting the explanation provided by the appellant was legally impermissible. Referring to the precedent set by Lalchand Bhagat Ambica Ram's case, the impugned orders were deemed not legal and sustainable, leading to the setting aside of the assessment order and the appeal being allowed.

Result:
The appeal of the assessee was allowed, and both the assessment order and the appeal decision were set aside, emphasizing the importance of providing a reasonable explanation for cash transactions in line with legal precedents.