2023 (4) TMI 735 - AT - Income Tax

Addition towards the cash deposited during demonetization period - HELD THAT - Detailed copies of partner s current and fixed capital accounts have been annexed to the balance sheet which shows that the partners had made substantial capital contributions to the firm. Closing cash in hand also shown. The above narration of the factual panorama reveals that the assessee was having sufficient capital balance of partners and opening cash in hand. After meeting certain expenses incurred in cash, the assessee deposited Rs.16.81 lakh in its bank account, still leaving balance of cash in hand on 30-12-2016, being, the last day of demonetization scheme at Rs.3,86,991/- and such balance at the end of the year came to Rs.3.74 lakh. This depicts the amount of cash deposited in the bank account during demonetization period was from the assessee s business operations only, which was properly accounted for in the books of account.Therefore, order to delete the addition sustained in the first appeal. Appeal is allowed.

Summary

Issues involved: Confirmation of addition of Rs.9,81,000/- towards cash deposited during demonetization period.

Summary:

Issue 1: Addition of cash deposits during demonetization period

The appeal was against the order passed by CIT(A) confirming the addition of Rs.9,81,000/- towards cash deposited during demonetization period. The assessee, a partnership firm, explained that the cash deposits were made from normal business operations. The Assessing Officer (AO) accepted the availability of cash to the tune of Rs.2.00 lakh and made an addition of Rs.14,81,000/-. The CIT(A) allowed further relief of Rs.3.00 lakh, resulting in sustaining the addition at Rs.9,81,000/-. The Tribunal heard the submissions and examined the relevant material on record.

Issue 1 Details:

The assessee deposited Rs.16.81 lakh in two bank accounts during the demonetization period, explaining the source as normal business operations. The opening cash in hand as on 01-04-2016 was Rs.13,64,991/-. The return for the preceding assessment year 2016-17 was filed before the demonetization scheme came into effect, accompanied by audited financial accounts. The cash book from 01-04-2016 showed proper reflection of cash transactions, with no negative cash balance on any day. The closing cash in hand stood at Rs.3,74,580/-. The Tribunal observed that the cash deposited during demonetization was from the assessee's business operations and properly accounted for in the books. Consequently, the addition sustained in the first appeal was ordered to be deleted.

Conclusion:

The Tribunal allowed the appeal, pronouncing the order on 16th March, 2023.