2021 (9) TMI 627 - AT - Income Tax

Addition of high cash in hand - high cash on hand disclosed in the balance sheet as compared to the preceding year - HELD THAT - Revenue has not brought any material suggesting that the withdrawal made by the assessee were utilized for making payments. It is also not brought on record that the amounts so withdrawn from the bank account was utilized for any other undisclosed purposes - CIT(A) observed that despite having sufficient cash in hand, the assessee withdraw the amount. It is correct that the assessee has withdrawn higher amounts than the immediate preceding years but that cannot be sole reason for making addition purely on the basis of suspicion. We failed to understand the reasoning of the Assessing Officer that the amount was withdrawn to justify the cash deposits during demonetization period i.e. between 09.11.2016 to 30.12.2016. It is also seen that the cash was withdrawn much prior to such event. So far observation regarding sharp increase in payable expenses is concerned, there is no finding by the Assessing Officer that such expenses are bogus - addition has been made purely on the basis of suspicion. Such action of authorities below cannot be affirmed - Decided in favour of assessee.

Summary

Issues:
Challenge to addition made by Assessing Officer on account of high cash in hand.

Analysis:
The appellant challenged the addition made by the Assessing Officer regarding high cash in hand for the assessment year 2016-17. The Assessing Officer selected the case for limited scrutiny due to the high cash on hand disclosed in the balance sheet compared to the preceding year. The appellant explained that the cash withdrawn from the bank account was not utilized for any other purposes, but the Assessing Officer did not find this explanation acceptable. Consequently, an addition of ?26,66,380 was made, alleging that the appellant suppressed payments made in cash during the demonetization period of 2016. The CIT(A) upheld the findings of the Assessing Officer, leading the appellant to appeal to the Tribunal.

The appellant argued that the addition was made without any material evidence and solely based on conjectures. The appellant demonstrated through bank statements that the cash withdrawals were legitimate and not used for undisclosed purposes. However, both the Assessing Officer and the CIT(A) did not consider this evidence. The Senior DR supported the decisions of the lower authorities.

The Tribunal analyzed the case and observed that the Assessing Officer's reasoning for the addition was based on suspicion and lacked concrete evidence. The Tribunal noted that there was no proof that the withdrawn amounts were used for undisclosed purposes or to justify cash deposits during demonetization. The Tribunal also found no indication that the expenses shown by the appellant were bogus. Therefore, the Tribunal directed the Assessing Officer to delete the addition, stating that it was made purely on suspicion without proper grounds. As a result, the appellant's appeal was allowed, and the addition was removed.

In conclusion, the Tribunal found that the addition made by the Assessing Officer based on high cash in hand was unjustified and lacked proper evidence. The Tribunal emphasized the importance of concrete proof before making such additions and ruled in favor of the appellant, directing the deletion of the disputed amount.