2017 (8) TMI 333 - AT - Income Tax

Addition u/s 68 - Held that - Neither the Assessing Officer nor the CIT (Appeals) have examined the cash book stated to be maintained by the assessee on day to day basis along with regular books of account. If the cash withdrawals from bank account or cash received from two aforesaid concerns are tallied with the deposits made in the bank account on the various dates, then the same stands explained. But this matter needs proper examination by the Assessing Officer. The entire matter of cash deposits should go back to the file of the Assessing Officer who shall verify and examine the total availability of cash from various sources as stated by the assessee and to see whether these cash are recorded in the regular books of account on day to day basis in the cash book and also whether the cash as reflected in the cash book have been deposited in the bank account of the assessee. Grounds raised by the assessee allowed for statistical purposes.

Summary

Issues:
1. Addition of cash deposits in bank account as unexplained income under section 68.
2. Rejection of assessee's explanation regarding the source of cash deposits.
3. Failure to consider the regular books of account and cash book maintained by the assessee.
4. Need for proper examination of cash withdrawals and deposits by the Assessing Officer.

Analysis:
1. The appellant contested the addition of ?21,25,000 made by the Assessing Officer as unexplained income. The Assessing Officer noted cash deposits without corresponding withdrawals, leading to suspicions about the source of funds. The appellant's explanation that the cash deposits were funded from withdrawals was deemed incorrect. The Assessing Officer treated the unexplained cash credit as income under section 68.

2. Before the CIT (Appeals), the appellant maintained that all cash transactions were recorded in regular books of account and cash book, providing a clear source for the deposits. However, the CIT (Appeals) rejected the explanation, stating that the appellant lacked other sources for the cash deposits. The CIT (Appeals) dismissed the appellant's claims of receiving cash from associated entities as self-serving evidence.

3. The appellant's counsel argued that the entire source of deposits was explained through the cash book, emphasizing the maintenance of regular books of account. The counsel contended that without rejecting the books of account, no addition should have been made. The Assessing Officer and the CIT (Appeals) did not adequately consider the day-to-day cash book maintained by the appellant.

4. The Tribunal found that a thorough examination of the cash transactions was necessary. While the appellant presented cash flow statements and bank account records, the Assessing Officer had not scrutinized the day-to-day cash book. The Tribunal directed the matter back to the Assessing Officer for a fresh examination. The Assessing Officer was instructed to verify the cash availability from various sources, cross-check with the cash book, and determine if the cash deposits aligned with the recorded transactions.

In conclusion, the Tribunal allowed the appeal for statistical purposes, highlighting the need for a detailed assessment by the Assessing Officer regarding the cash deposits in the bank account. The decision emphasized the importance of considering the regular books of account and cash book in determining the source of funds, directing a reevaluation of the case with proper opportunity for the appellant to present explanations.