2024 (8) TMI 464 - AT - Income Tax

Unexplained cash deposits u/s 69A r.w.s 115BBE - no source of cash deposit explained during demonetization period - assessee is covered by presumptive taxation scheme and filed return of income as per provisions of Section 44AD - HELD THAT - It is unbelievable that the assessee would keep large cash in hand and continue to keep the cash generated from sales in its custody without any corresponding payments for purchases in the intervening period on deposit in Bank. The explanation offered towards source of cash deposit, when the facts are seen in perspective, do not inspire any confidence. The assessee has done nothing to dispel the perception of the Revenue towards propriety of source of deposits. In the same breath however, it is difficult to assign a particular degree or standard of proof to establish the holding of cash in a conclusive manner with precision. The assessment towards source of cash deposits involves a process of evaluation of facts which involves guess and estimation. It is difficult to test the reliability of explanation towards cash deposit to the hilt in the circumstances existing in the case. We, thus, in fitness of things, would consider it appropriate to grant some benefit of doubt to the assessee. The possibilities of part of cases deposits out of cash withdrawals in the past and cash sales during the year cannot be wholly ruled out. In the balance of things, we consider it appropriate to grant partial relief to the extent of Rs. 25,00,000/- over and above the relief granted by the CIT(A). The First Appellate order is, thus, modified by such further relief over and above relief granted by him. Appeal of the assessee is partly allowed.

Summary

Issues:
Challenge of addition of unexplained cash deposits under section 69A r.w.s 115BBE of the Income Tax Act, 1961 for Assessment Year 2017-18.

Detailed Analysis:

1. Opening Cash in Hand Explanation:
The assessee claimed the source of cash deposit of Rs. 65,00,000/- during demonetization included Rs. 13,81,187/- from opening cash in hand as on 01.04.2016. However, the AO disbelieved the content of the cash book provided by the assessee. The CIT(A) partially accepted the claim, restricting the addition to Rs. 5,00,000/- and treating the balance as cash over and above the withdrawal amount.

2. Cash Withdrawal Explanation:
Regarding the cash withdrawal between 01.04.2016 to 31.10.2016, the AO treated the entire amount of Rs. 12,00,000/- as unexplained. The CIT(A) allowed the benefit of withdrawals on 29.9.2016 and 7.10.2016, restricting the addition to Rs. 8,00,000/-.

3. Cash Sales Explanation:
The assessee presented a purportedly unrealistic picture of cash sales during the year, which the AO found to be inflated. The CIT(A) agreed with the AO's assessment, highlighting serious discrepancies in the confirmations furnished by the suppliers. The CIT(A) granted partial relief of Rs. 5,81,187/- out of the total addition.

4. Judgment and Decision:
The Tribunal observed the nuances in the CIT(A)'s analysis and partially accepted the explanations provided by the assessee. Acknowledging the difficulty in establishing the holding of cash conclusively, the Tribunal granted further relief of Rs. 25,00,000/- to the assessee, modifying the First Appellate order. The Tribunal considered it appropriate to grant some benefit of doubt to the assessee, recognizing the complexities involved in evaluating the source of cash deposits.

This detailed analysis covers the issues raised in the legal judgment, providing a comprehensive understanding of the arguments presented by both parties and the Tribunal's decision in the matter.