2023 (2) TMI 416 - AT - Income Tax

Addition u/s 69A - addition on account of peak cash shortage - cash deposits made during the year under consideration - benefit of amount received from family members and opening cash in hand - HELD THAT - Where the assessee being a regular income tax assessee in the earlier years has disclosed sources of income and where there are savings from the earlier years and which are available at the beginning of the year, we find merit in the contention of assessee be allowed an opportunity to demonstrate the availability of savings in form of cash and bank deposits at the beginning of the year through appropriate documentation in support of cash deposits made during the year under consideration. Such availability of cash in hand at the beginning of the year should be from assessee s own past income and savings and should not include any transactions with the relatives and family members. Where there are deposits in her bank account, the onus is on the assessee to provide explanation and substantiate the same through appropriate documentation. Where the assessee claims that the deposits during the year are out of opening cash in hand from her past savings and income, the assessee cannot be denied an opportunity to put forth her explanation. It is only the real income in the hands of the assessee which can be brought to tax and it is incumbent on part of the Revenue to allow such an opportunity to the assessee and let s the explanation so submitted and documentation in support so furnished be tested and examined and basis such examination, the AO can take an appropriate view in the matter as per law. In light of aforesaid, the contention of the ld DR regarding concession made by Assessee during the appellate proceedings cannot be accepted and the prayer of the assessee is allowed. The matter is accordingly set-aside to the file of the AO for the limited purposes of examination the quantum and availability of opening cash-in-hand in the assessee and to consider the same for the purposes of drawing the cash flow statement and determining the peak cash balance in the hands of the assessee and decide the matter as per law after providing reasonable opportunity to the assessee. In the result, ground no. 1 and 2 are allowed for statistical purposes.

Summary

Issues Involved:
1. Addition of Rs. 2,11,505/- on account of peak cash shortage.
2. Disallowance of exemption claimed under section 10(14)(i) in respect of conveyance allowance.

Detailed Analysis:

1. Addition of Rs. 2,11,505/- on Account of Peak Cash Shortage:
Facts and Background:
A search operation under section 132 of the Income Tax Act was conducted at the premises of the Aggarwal group, leading to the issuance of a notice under section 153A to the assessee. The assessee filed a return declaring a total income of Rs. 2,34,570/-. The Assessing Officer (AO) made an addition of Rs. 2,88,000/- as unexplained money under section 69A, based on discrepancies in cash deposits and the absence of documentary evidence supporting the availability of cash.

CIT(A) Findings:
The CIT(A) rejected the claim of cash gifts received/taken among family members and directed the assessee to file a revised cash flow statement, ignoring such gifts and taking the opening cash balance as NIL. The revised statement showed a negative peak cash balance of Rs. 2,11,505/-, which was conceded by the assessee's representative during appellate proceedings. Consequently, the CIT(A) confirmed the addition of Rs. 2,11,505/- and deleted the remaining addition.

Tribunal's Decision:
The Tribunal noted that the assessee, being a regular taxpayer, should be allowed to demonstrate the availability of opening cash in hand through appropriate documentation. It emphasized that only real income should be taxed and remanded the matter back to the AO to examine the quantum and availability of opening cash-in-hand. The AO was directed to consider the same for drawing the cash flow statement and determining the peak cash balance, providing reasonable opportunity to the assessee. Thus, ground nos. 1 and 2 were allowed for statistical purposes, while ground no. 3 was dismissed as infructuous due to lack of arguments.

2. Disallowance of Exemption Claimed Under Section 10(14)(i) in Respect of Conveyance Allowance:
Facts and Background:
In ITA Nos. 326/Chd/2022, the AO disallowed the exemption claimed under section 10(14)(i) for conveyance allowance amounting to Rs. 7,00,000/-, due to the absence of evidence showing actual expenses incurred for the performance of duties as a Director.

CIT(A) Findings:
The CIT(A) upheld the AO's decision, noting that the assessee failed to provide evidence of actual expenses incurred. The claim was not supported by any withdrawal or detailed documentation of duties performed, such as dates, places visited, activities carried out, or persons contacted.

Tribunal's Decision:
During the hearing, the assessee's representative requested another opportunity to present documents supporting the claim of expenditure. The Tribunal set aside the matter to the AO to re-examine the claim afresh, considering the submissions and documentation provided by the assessee. The AO was directed to decide the matter as per law after providing a reasonable opportunity to the assessee. Hence, ground no. 01 of the assessee's appeal was allowed for statistical purposes.

Conclusion:
The Tribunal consolidated the appeals and applied its findings and directions from ITA No. 321/Chd/2022 and ITA No. 326/Chd/2022 to the other appeals, noting that the issues were identical except for differences in amounts involved. All appeals were disposed of in light of the directions provided.

Order Pronouncement:
The order was pronounced in the open Court on 09/02/2023.