2023 (2) TMI 113 - AT - Income Tax

Addition in respect of cash deposits in his bank account - Onus to prove - HELD THAT - In the instant case, CIT(A) has thus rightly taken cognizance of current year cash flow statement and considered the explanation of the assessee and has determined the peak cash balance of Rs. 31,38,050/- and the addition to that extent has been sustained and the remaining addition of Rs. 28,85,000/- has been directed to be deleted. While doing so, cash flow statement for the previous financial year 2007-08 and availability of opening cash in hand of Rs. 24,33,000/- at the beginning of current financial year 2008-09 has not been considered. We find that there is no justifiable basis in not considering the cash flow statement for the previous financial year 2007-08 where cash flow statement for the current financial year has been considered by the CIT(A). As submitted by the AR, the withdrawals and deposits are supported by the assessee's bank account statements which are available on record. Therefore, we set-aside the matter to the file of the AO for the limited purposes of examining the cash flow statement for the previous financial year 2007-08 and the related explanation of the assessee in order to determine cash-in-hand at the beginning of the current financial year. AO is also directed to consider and take into consideration the cash-in-hand so determined at the beginning of the year to re-determine the peak cash balance during the year, which has been currently determined and stood and peak cash balance so finally determined be brought to tax. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved:
Appeal against addition of cash deposits in bank account.

Analysis:
1. Delay in filing appeal: The appeal was filed with a delay, which was condoned by the tribunal after considering the reasons provided by the assessee, finding no mala fide intent. The appeal was admitted for adjudication.

2. Assessment and addition: The assessee initially declared income under section 44AF of the Act. However, during scrutiny, the assessing officer made an addition of Rs. 60,23,050 on account of cash deposits in the bank account. The assessee then approached the CIT(A) seeking relief.

3. CIT(A) decision: The CIT(A) partially allowed the appeal and sustained the addition of Rs. 31,38,050. The CIT(A) considered the cash flow statement submitted by the assessee for the current year but did not take into account the cash flow statement for the previous financial year 2007-08 and the opening cash in hand of Rs. 24,33,000 at the beginning of the relevant year.

4. Tribunal's decision: The tribunal observed that the assessee, not required to maintain regular books of accounts, relied on the cash flow statement to explain the cash deposits. The tribunal set aside the matter to the AO to consider the cash flow statement for the previous financial year and the opening cash in hand to re-determine the peak cash balance during the year. The AO was directed to bring the peak cash balance to tax after reevaluation.

5. Conclusion: The appeal of the assessee was allowed for statistical purposes, emphasizing the importance of considering all relevant financial statements and balances to arrive at a fair determination of taxable income. The tribunal's decision aimed at ensuring a comprehensive assessment based on all available financial information provided by the assessee.