2025 (4) TMI 778 - AT - Income Tax

Unexplained cash credit u/s.68 - addition invoking provisions of section 115BBE of the Act - HELD THAT - The reasons for not accepting the claim is that assessee had withdrawn very small amounts which could not justify accumulation of such huge cash in hand. Such outright rejection is not proper because the opening cash balance for AY.2014-15 and 2015-16 are duly supported by the returns filed by the assessee to the Department. In absence of any evidence to the contrary that the said cash balance was invested or spent for some other purpose availability of cash in the hands of the assessee cannot be rejected. Assessee has given copy of the bank account statement for the period 01.04.2015 to 31.03.2017 which reveals that assessee had also withdrawn Rs.1, 00, 000/- in cash on 17.06.2016. Therefore the claim of the assessee that the deposit was made out of opening cash balance and cash withdrawal is supported by the ITRs and other documentary evidences furnished by the assessee.The Co-ordinate Bench of ITAT Surat in case of Nileshkumar Maganlal Shah 2024 (2) TMI 832 - ITAT SURAT after relying on various decisions deleted the addition made by the AO. Levy of tax u/s 115BBE - We have already deleted the addition made by AO u/s 68 of the Act. Hence question of applying rate u/s 115BBE of the Act does not arise.

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment are:

1. Whether the addition of Rs.6,00,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961, was justified.

2. Whether the application of Section 115BBE for levying a surcharge at 25% on the above addition was appropriate.

3. Whether the assessee was afforded adequate opportunity to present his case before the Commissioner of Income Tax (Appeals) (CIT(A)).

ISSUE-WISE DETAILED ANALYSIS

1. Addition of Rs.6,00,000/- as Unexplained Cash Credit under Section 68

Relevant legal framework and precedents: Section 68 of the Income Tax Act, 1961, allows the Assessing Officer (AO) to add unexplained cash credits to the income of the assessee. The burden of proof lies on the assessee to explain the nature and source of such credits.

Court's interpretation and reasoning: The Tribunal examined the cash flow statements and income tax returns (ITRs) submitted by the assessee for previous assessment years (AYs). The Tribunal noted that the assessee had shown substantial cash in hand for AYs 2014-15 and 2015-16, supported by ITR-4 forms. The Tribunal found that the AO and CIT(A) had rejected the opening cash balance for AY 2016-17 without sufficient justification.

Key evidence and findings: The Tribunal considered the cash book, bank statements, and ITRs provided by the assessee, which demonstrated cash balances of Rs.8,71,262/- and Rs.6,66,687/- for AYs 2015-16 and 2014-15, respectively. Additionally, the Tribunal noted a cash withdrawal of Rs.1,00,000/- on 17.06.2016, supporting the assessee's claim of cash availability.

Application of law to facts: The Tribunal applied the principles from similar cases decided by the ITAT Surat, where additions were deleted due to lack of contrary evidence against the opening cash balances. The Tribunal concluded that the AO's rejection of the opening cash balance was unjustified.

Treatment of competing arguments: The Tribunal considered the Revenue's argument that there was no large cash withdrawal and no reason to hold large cash amounts. However, the Tribunal found the assessee's documentary evidence sufficient to counter these claims.

Conclusions: The Tribunal set aside the order of the CIT(A) and directed the AO to delete the addition of Rs.6,00,000/-.

2. Application of Section 115BBE and Levy of Surcharge

Relevant legal framework: Section 115BBE of the Income Tax Act imposes a higher tax rate on income assessed under certain sections, including Section 68.

Court's interpretation and reasoning: Since the Tribunal deleted the addition under Section 68, the application of Section 115BBE was rendered moot.

Conclusions: The Tribunal allowed the ground challenging the levy of tax under Section 115BBE.

3. Adequate Opportunity to Present the Case

This issue was raised by the assessee but was not extensively analyzed in the judgment, as the Tribunal resolved the primary issues in favor of the assessee.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Such outright rejection is not proper because the opening cash balance for AY.2014-15 and 2015-16 are duly supported by the returns filed by the assessee to the Department."

Core principles established: The Tribunal reaffirmed that the opening cash balance supported by previous ITRs cannot be rejected without contrary evidence. The burden of proof shifts back to the Revenue once the assessee provides prima facie evidence.

Final determinations on each issue: The Tribunal allowed the appeal, directing the deletion of the Rs.6,00,000/- addition and negating the applicability of Section 115BBE for the surcharge.

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