2014 (1) TMI 232 - AT - Income Tax

Unexplained cash credit - Held that - There was no physical cash available with the assessee on the date of survey - Various payments and remittances, including bank deposits were not incorporated in such books, resulting in the abnormal cash balance - Assessee had filed reconciliation and documents in support of cash balance - Assessing Officer had offered no comments on the reconciliation given by the assessee - Section 68 can be roped in to fasten a tax liability on an assessee, only when no explanation regarding source of the credits has been offered - Even if it is presumed that cash balance of Rs.3,79,65,399/- was indeed there on 04.03.2008 there is no case for the Revenue that the said amount, appearing in the books was not explained - That the balance cash was appearing in the books, itself is sufficient evidence to show that it stood explained - Assessing Officer has not been able to point out why any of the entries in such cash book resulting in such cash balance could not have been believed - Decided against Revenue.

Summary

Issues:
1. Addition for unexplained cash credit under section 68 of the Income Tax Act, 1961.

Analysis:
- The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals) for the assessment year 2008-09, challenging the deletion of the addition for unexplained cash credit.
- The assessee, a dealer in Indian made foreign liquor, had a survey conducted under section 133A of the Income Tax Act, 1961, where no physical cash was found, but the computer printout showed a cash balance of Rs.3,79,85,384.91 on 04.03.2008.
- The Assessing Officer treated the entire cash balance as unexplained cash credit under section 68 of the Act, as the assessee failed to explain the balance.
- The assessee contended that many payments for excise duty and bank transactions were not recorded in the printout taken on 04.03.2008, leading to the inflated cash balance.
- The Commissioner of Income Tax (Appeals) examined the case and found that the excise duty payments were not accounted for on 04.03.2008, resulting in the abnormal cash balance, and deleted the addition under section 68.
- The Revenue challenged the decision, arguing that the substantial cash balance was unexplained and should be considered as unexplained income.
- The Tribunal observed that the accounts were maintained under Tally Software, and the reconciliation submitted by the assessee showed the flow of cash transactions, including excise duty payments, withdrawals, and deposits.
- Section 68 of the Act requires no explanation about the nature and source of the credited sum for the tax liability to be imposed, and as the balance cash was explained by the entries in the books, the section was not applicable.
- The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to delete the addition for unexplained cash credit under section 68, as the assessee had provided a satisfactory explanation for the cash balance.

In conclusion, the Tribunal dismissed the appeal filed by the Revenue, upholding the decision to delete the addition for unexplained cash credit under section 68 of the Income Tax Act, 1961.