2024 (11) TMI 1114 - AT - Income Tax

Addition u/s 68 - source and genuineness of the cash deposited was held to be unexplained - cash book produced was rejected by AO -appellant had deposited an amount in old demonetized currency, Partly out of which an amount had been declared by the appellant in PMGKY 2016 scheme and balance old currency was claimed to be deposited out of the cash in hand HELD THAT - AO was not justified in rejecting the cash book produced before him as fabricated and unreliable without pointing any specific defect therein. He has completely overlooked the comparative figures of sales vis- -vis cash sales as also the percentage of cash sales going down during the year. There appears no abrupt jump in the quantum of cash sales during the year under consideration. The reasons for keeping sufficient cash in hand by a widow lady running a retail liquor business cannot be brushed aside without any cogent reason. Moreover, the assessee was fair enough to disclose almost 50% of the impugned sum under PMGKY rather than squabbling over it also. The amount of cash kept at home which is also to be evident from one seized paper during survey could not be considered unreasonable considering the nature of business. It is also not disputed that the accounts of the assessee have been consistently audited by qualified Chartered Accountant over the years. Besides, there being no other evidence of any other undisclosed source of income, the cash deposits were evidently business receipts which could not be considered as unexplained cash credit liable to be added u/s 68 - Thus, no hesitation in concluding that the impugned amount was incorrectly added to the income without appreciation of all relevant facts of the case and the Ld. CIT(A) was not justified in upholding the addition. The addition made is, therefore, deleted. Assessee appeal allowed.

Summary

Issues:
1. Addition of Rs. 29,15,468/- under section 68 of the Income Tax Act.

Analysis:

The case involved an appeal by the assessee against the assessment order passed under section 143(3) of the Income Tax Act 1961. The primary issue was the addition of Rs. 29,15,468/- made by the Assessing Officer under section 68 of the Act. The Assessing Officer found that the assessee had deposited cash during the demonetization period, and during a survey, it was revealed that a significant amount was deposited in old demonetized currency. The assessee claimed that the cash was from the cash in hand, but failed to provide adequate documentation to support this claim. The Assessing Officer deemed the cash book submitted during scrutiny proceedings as fabricated and unreliable, leading to the addition in question. The Commissioner of Income Tax (Appeals) upheld this addition based on the assessment order's contents.

The assessee argued that the cash deposits were duly accounted for in the books of accounts, and the cash was deposited out of the cash balance as on the eve of demonetization. The assessee contended that the cash deposits were from cash sales and cash in hand, primarily from the retail sale of liquor. The assessee highlighted the reduction in cash deposits proportionate to annual sales in the relevant financial year due to the demonetization effect. The assessee also emphasized the widow's policy of keeping cash for business needs and urgent payments. The assessee's representative argued that the authorities failed to consider the detailed submissions and evidence provided. The assessee maintained that the cash deposits were not unexplained income but reflected legitimate business proceeds.

The Tribunal analyzed the facts and circumstances of the case and found that the Assessing Officer erred in rejecting the cash book as fabricated without specific defects pointed out. The Tribunal considered the comparative figures of sales, the nature of the business, and the consistent audit of accounts by a Chartered Accountant. The Tribunal noted the disclosure of a significant portion of the deposited sum under the PMGKY scheme and the absence of evidence of undisclosed income. Ultimately, the Tribunal concluded that the addition made by the Assessing Officer was incorrect and unjustified, leading to the deletion of the impugned amount from the income. The Tribunal allowed the appeal of the assessee, emphasizing the importance of appreciating all relevant facts before making additions under the Income Tax Act.

In conclusion, the Tribunal's decision favored the assessee, highlighting the need for a thorough consideration of all facts and evidence before adding amounts to income under the Income Tax Act. The Tribunal emphasized the importance of assessing the nature of business, accounting practices, and legitimate sources of income to avoid unjustified additions.